The Bitcoin market remains deeply dipped in the cryptocurrency winter. The low prices of most cryptocurrencies and the plummeting temperature outside the window in December go hand in hand with a cooling of the entire digital asset sector. An on-chain indicator that visually captures the freezing time for crypto is MVRVT.
In a previous on-chain analysis, BeInCrypto looked at 5 indicators signaling the end of a cryptocurrency bear market. In addition, in another analysis, we looked at the 65% time period since the previous halving. Today we combine these two perspectives. We use the MVRVT indicator to analyze the current market cycle, particularly with regard to the upcoming Bitcoin halving event.
MVRVT confirms extreme winter in Bitcoin market
We derive the Market Value to Realized Value Temperature (MVRVT) on-chain analysis indicator from the Market Value to Realized Value (MVRV) metric. MVRV is the ratio between market capitalization and realized capitalization. It indicates how far the Bitcoin price is above or below the so-called “fair value” (red line).
We recorded the lowest MVRV reading of 0.758 in the current market cycle on November 9, 2022. On that day, BTC price reached a low of $15,863.
MVRV card from Glassnode
An addition that introduces the MVRVT indicator to its original metric is colors that mimic the temperature of the BTC market. They are determined by a standard deviation of 0. This is identical to the level 1 for the MVRV indicator, i.e. the “fair value” of Bitcoin.
Well-known on-chain analyst @dilution resistant posted on Twitter a series of charts of the MVRVT indicator in historical halving perspective. On a long-term chart of Bitcoin’s entire trading history, we see a colored chart of MVRV according to consecutive standard deviations and the dates of 3 historical halves highlighted.
The greater the deviation, the MVRVT indicator reached colors closer to red. This happened during the historic bull market peaks in 2011, 2014, 2017 and 2021. Interestingly, during the last bull market, the indicator did not reach red colors and the bull market stopped at orange.
On the other hand, when MVRVT dropped below the 0 level, the colors got colder and colder towards blue. This happened at the end of every bear market in 2011, 2015, 2018. In addition, this happened briefly during the COVID-19 crash in March 2020. Also, the levels currently reached since June 2022 correspond to the blue color, which is an extreme cooling of the Bitcoin market.
MVRVT in the context of BTC halving
Another way to compare the current bear market to its historical counterparts is to plot the charts of the MVRVT indicator each time from the half date. This is how @dilutionproof presented a comparison of 3 Bitcoin post-halving cycles.
We see that at the beginning of each cycle there were periods of exceptionally high MVRVT deviations during the first 12-18 months after each halving. However, after that, all 3 cycles of Bitcoin led the index to drop below 0 in the 25-35 months after the halving.
Currently, Bitcoin is in its 31st month post-halving and MVRVT is still below 0. Interestingly, the indicator has been in almost exactly the same place (red arrow) in all previous cycles during this period. In a comment on his postthe analyst calls this convergence “completely crazy”.
Our analysis suggests that the bottom of the Bitcoin price may already have been reached, based on comparisons with historical market cooling data. Furthermore, depending on which cycle the current price action resembles, a bullish trend reversal and a move above the 0 level can occur in as little as two months (Cycle 2 – Green) or even four months (Cycle 1 – Blue). ).
“Fair Value” is $20,000 and the peak is $165,200
In the last of the charts published, we see how the MVRVT indicator can be used to create a trading band/channel for Bitcoin price over the long term. This trick gives clear suggestions for buy opportunities (blue colors below the bottom line) and sell opportunities (yellow and orange colors above the top line).
In addition, this chart provides an estimate of what the BTC price should currently be if the market price reflected the “fair value” of Bitcoin. The deviation at 0 today is $20,000. Meanwhile, anything below that points to an extreme cooling of the market.
On the other hand, if Bitcoin were to become extremely overheated today – as it did at the height of historic bull markets – the BTC price would be $165,200 today. This is the value for the level 10 standard deviation of the MVRVT ratio.
If history were to provide any indication of future price action, one can conclude that Bitcoin will be able to reach or even surpass this price in the future. However, this won’t happen until about a dozen months after the next halving, currently estimated to be April 10, 2024.For BeInCrypto’s latest crypto market analysis, click here.
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