This analysis of the cryptocurrency market will be an opportunity to discuss an indicator with a somewhat barbaric name. MVRV Z-Score. It is to understand how it is constructed and what can be its effective utility and relevance. An explanation that is complementary Latest coin trading video on CBBI and its comparison with fear and greed index. Because a single indicator is never enough to build a solid analysis…
But this article will also be an opportunity to discuss other trading tools, e.g MVRV ratio where NUPL. This is to determine whether their use is necessary as part of a deeper study of the cryptocurrency market. Because choosing the right tools is the best way to do a clean and efficient job.
Full video of this analysis Business du coin At the end of the article.
Bitcoin – How does the MVRV indicator work?
It exists Two MVRV type indicators, with an early version of the name “ratio” and then “Z-score” which is definitely the best known. And the basic calculation is very simple as it is The market value (or market cap) divided by Value felt (you guessed it hat).
That is, in terms of market cap, The number of bitcoins multiplied by the value of BTC. To find out, its total market value is around $445 billion, according to the site. CoinGecko. And for the realized cap, the value of Bitcoin at the time of unexpended exit operations (UTXO) is also multiplied by the number of units of BTC.
An “unexpended transaction” is related The value of each BTC at the time of the last transfer from the wallet to another address. Before it is “spent” by another transfer that will cancel the previous one and change the value of this UTXO and therefore the total amount of cap received.
How to use Bitcoin – MVRV ratio indicator?
To get it all Oscillator called MVRV Ratio which aims to provide a rating between 0 and slightly less than 7. When it indicates a value of 1, it means that the market cap and the actual cap of the corresponding cryptocurrency have the same value. But as soon as this number goes above 1, it is a signal The price of Bitcoin is higher than its real value.
to summarize, If the value of MVRV is less than 1 then the value of Bitcoin is low. And if it goes above 3.5 points, it indicates that BTC market cap is 3.5 times bigger than its actual cap. That is, the price of Bitcoin is highly likely to be overvalued. The final threshold remains debatable, as it can be set to 2 or 4. but The real interest of this indicator is the lucky level of 1 To know when BTC is below its true cap.
Bitcoin – Calcul de son realized value
and The value of Bitcoin is received Which is already calculated and available on the site Look at Bitcoin. No need to pull out your calculator to know the price in real time. With the BTC price curve in black and this “realized value” in orange. And every time the black curve crosses above, it indicates good buying levels. Because This market configuration corresponds to an MVRV below 1 !
And for a few months now, the curve of Bitcoin’s gain has been clearly above its price. That is, historically, A good time to take a stand. Therefore, the MVRV ratio only serves to simplify this measurement by providing a value between 0 and 7. With this advantage of being able to Instantly determine whether investors are in profit or lossThanks for the inclusion of UTXOs.
Bitcoin – MVRV Z-Score Indicator
indicator MVRV Z-Score The “ratio” bears the same name as the version, but the calculation to obtain it is decidedly different. Because it’s no longer just a question of dividing market cap by actual cap. In fact, in this case the actual cap is subtracted from the market cap before dividing by the “standard deviation”. This is to get an oscillator that has nothing to do with the previous one.
But why does this indicator apply? a standard deviation Market cap? Because even though the delivered graph is quite easy to use, Getting the data at the source remains more interesting and more reliable. And other tools achieve similar results in a more logical way, as in the case of NUPL which will be discussed later in this article. the reason MVRV Z-Score is not necessarily relevant…
Bitcoin – Net Unrealized Gain/Loss (NUPL)
Cet NUPL indicator MVRV uses the same data as the ratio. ie the market cap from which the derived cap is subtracted, before dividing this result by the market cap. This is to get a value between -100% and 100%. and The zero limit which indicates very good buy levels when the number is negative (below zero) in the “surrender” area.. and a positive plateau (above zero) that depends on the direction of the market between hope/fear, optimism/concern, hope/denial and euphoria/greed.
With the value rising above zero for Bitcoin (about 14%). and Gradual levels that may allow resale at different levels, such as 50%, 70% and then 90% (this is just an example). It is important to know that it is repeated once again Indicators are never used alone To define an investment strategy. Because it is the cross-referencing of this data that can help better understand the cryptocurrency market.
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Trading cryptocurrencies carries a high level of risk, and may not be suitable for everyone. It is recommended that you fully inform yourself of the risks involved, and invest only what you can afford to lose.
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