This Ethereum Metric Is Retesting The Bear-Bull Junction, Will Break Happen?

Keshav Verma

1 year ago

3 mins read

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On-chain data shows the Ethereum MVRV ratio is currently testing a level that has historically served as the boundary between bear and bull markets.

Ethereum MVRV Ratio Is Retesting Its 180-Day SMA Right Now

The “Market Value to Realized Value (MVRV) ratio” is an indicator that measures the ratio between the Ethereum market cap and realized cap. The former is naturally just the total supply valuation at its spot price. At the same time, the latter is an on-chain capitalization model that calculates the value differently.

The realized cap assumes that the real value of any coin in circulation isn’t the spot price (which the market cap refers to) but the price at which it was last bought/transferred on the blockchain.

One way to look at the realized cap is that it represents the total amount of capital that the investors have put into the cryptocurrency, as it considers each holder’s cost basis or buying price.

Since the MVRV ratio compares these two capitalization models, it can tell us whether the investors hold more or less value than they initially invested in Ethereum.

The indicator’s usefulness is that it may serve as a way to determine whether the asset’s price is fair or not right now. When the investors hold a value significantly more than they put in (that is, they are in high profits), they would be more tempted to sell, and hence, the spot price could face a correction.

Similarly, the holders as a whole being in deep losses can instead be a signal that the bottom might be near for the cryptocurrency, as it’s becoming quite underpriced.

Now, here is a chart shared by analyst Ali on X, which shows the trend in the Ethereum MVRV ratio, as well as its 180-day simple moving average (SMA), over the past few years:

The value of the metric seems to have been going up in recent days | Source: @ali_charts on X

The 180-day SMA of the ETH MVRV ratio has interestingly held significance for the cryptocurrency. According to Ali, “Ethereum market cycles transition from bearish to bullish when the MVRV (blue line) breaks strongly above the MVRV 180-day SMA (red line).”

During the bear market last year, the ratio had been below the 180-day SMA line, but with the rally that began this year in January, the metric had managed to break above the level, and bullish winds supported the asset once more. During the recent struggle for the asset, however, the MVRV has again slipped under the level.

Nonetheless, in the past few days, the ETH MVRV has been trending up a bit and approaching another retest of this historical junction between bearish and bullish trends.

It remains to be seen whether a retest will happen in the coming days for Ethereum and if a break towards the bullish territory can be found.

ETH Price

Looks like ETH has been trending sideways in the past few days | Source: ETHUSD on TradingView

Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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