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On-Chain Analysis: MVRVT Indicates Extreme Cooling of BTC Market

4 mins
Updated by Paolo Besabella
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In Brief

  • The MVRVT indicator signals extreme market cooling, which historically occurs at the end of a bear market.
  • 31 months after each halving, MVRVT reached the same low level.
  • If the cryptocurrency market were extremely overheated today, the BTC price would be $165,200.
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The Bitcoin market remains deeply immersed in 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 sector of digital assets. An on-chain indicator that visually captures the frosty time for crypto is MVRVT.

In a previous on-chain analysis, BeInCrypto looked at 5 indicators that signal the end of a cryptocurrency bear market. In addition, we looked at the 65% time period since the previous halving in another analysis. Today we combine these two perspectives. We use the MVRVT indicator to analyze the current market cycle, specifically in relation 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 of market capitalization to 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 ongoing market cycle on November 9, 2022. On that day, the BTC price reached a low of $15,863.

MVRV chart by Glassnode

An addition that the MVRVT indicator introduces relative to its native metric is colors that mimic the temperature of the BTC market. They are determined by a standard deviation from 0. This is identical to the level 1 for the MVRV indicator – that is, the “fair value” of Bitcoin.

Well-known on-chain analyst @dilutionproof posted on Twitter a series of charts of the MVRVT indicator in perspective of historical halving. On a long-term chart of Bitcoin’s entire trading history, we see a colored graph of MVRV according to successive standard deviations and the dates of 3 historical halves marked.

market-value-to-realized value temperature Bitcoin

Source: Twitter

The greater the deviation, the MVRVT indicator reached colors closer to red. This happened during the historical bull market peaks in 2011, 2014, 2017 and 2021. Interestingly, in the last bull market, the indicator did not reach red colors, and the bull market stopped at orange.

On the other hand, when MVRVT fell below the 0 level, the colors became colder and colder toward 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 signals an extreme cooling of the Bitcoin market.

MVRVT in the context of BTC halving

Another way to compare the current bear market with its historical counterparts is to plot the charts of the MVRVT indicator each time starting from the halving date. This is how @dilutionproof presented a comparison of 3 post-halving cycles of Bitcoin.

Source: Twitter

We see that at the beginning of each cycle there were periods of exceptionally high MVRVT deviations for the first 12-18 months after each halving. However, thereafter, all 3 cycles of Bitcoin led to the index dropping below 0 in the 25-35 months after halving.

Currently, Bitcoin is in its 31st post-halving month, and MVRVT is still below 0. Interestingly, in all previous cycles, the indicator has been in virtually exactly the same place (red arrow) during this period. In a comment to his post, the analyst calls this convergence “completely nuts”.

Our analysis suggests that the bottom in Bitcoin price may have already been reached, based on comparisons with historical market cooling data. Additionally, depending on which cycle the current price action resembles, a bullish reversal of the trend and a move above the 0 level could occur in as little as two months (cycle 2 – green) or as long as four months (cycle 1 – blue).

“Fair value” is $20,000 and the peak is $165,200

In the last of the published charts, we see how the MVRVT indicator can be used to create a trading band/channel for the long-term Bitcoin price. This trick provides clear suggestions for buying opportunities (blue colors below the lower line) and selling opportunities (yellow and orange colors above the upper line).

MVRVT Gradient

Source: Twitter

In addition, this chart provides an estimate of what the BTC price should currently be if the market pricing reflected the “fair value” of Bitcoin. The deviation at 0 today is $20,000. Meanwhile, anything below that indicates an extreme cooling of the market.

On the other hand, if Bitcoin were extremely overheated today – as at the peak of historical 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 give any indication of future price action, one can conclude that Bitcoin will be able to reach this price in the future, or even surpass it. However, this will happen no sooner than about a dozen months after the next halving, which is currently estimated at April 10, 2024.For BeInCrypto’s latest crypto market analysis, click here.

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In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.

Jakub Dziadkowiec
PhD and an assistant professor at an international university in Lublin, Poland. Spent 10 years studying philosophy of nature and sport science. An author of 4 books and two dozens of scientific articles. Now, he is using his mind for the benefits of the cryptocommunity. Technical analysis enthusiast, Bitcoin warrior, and a strong supporter of the idea of decentralization. Duc in altum!