The Bitcoin market remains deep in the cryptocurrency winter. The low prices of most cryptocurrencies and the drop in temperature outside the window in December go hand in hand with a cooling of the entire digital asset sector. One on-chain indicator that visually captures freezing weather for crypto is MVRVT.
In a previous on-chain analysis, BeInCrypto looked at 5 indicators that signal the end of a cryptocurrency bear market. Additionally, we looked at the 65% 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, especially as it relates to the upcoming Bitcoin halving event.
MVRVT Confirms Extreme Winter in the Bitcoin Market
We derive the chain analysis indicator of market value versus realized value temperature (MVRVT) from the measure of market value versus realized value (MVRV). 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 current market cycle on November 9, 2022. On that day, the BTC price hit a low of $15,863.
MVRV chart by Glassnode
One addition that the MVRVT indicator introduces over its native metric is colors that mimic BTC market temperature. They are determined by a standard deviation from 0. This is identical to level 1 for the MVRV indicator, that is to say the “fair value” of Bitcoin.
Well-known on-chain analyst @dilutionproof posted on Twitter a series of charts of the MVRVT indicator ahead of a historic halving. On a long-term chart of Bitcoin’s entire trading history, we see a colored chart of MVRV according to successive standard deviations and dates of 3 marked historical halves.
The greater the deviation, the more the MVRVT indicator reaches colors closer to red. This happened during the historical peaks of the bull market in 2011, 2014, 2017 and 2021. Interestingly, during the last bull market, the indicator did not reach the red colors and the bull market stopped at orange.
On the other hand, when MVRVT dropped below level 0, the colors became increasingly cooler towards blue. This happened at the end of every bear market in 2011, 2015, 2018. Additionally, it happened briefly during the COVID-19 crash in March 2020. Additionally, the levels currently at since June 2022 correspond blue color, which signals an extreme cooling of the Bitcoin market.
MVRVT in the context of the BTC halving
Another way to compare the current bear market with its historical counterparts is to plot the charts of the MVRVT indicator whenever from the date of the halving. This is how @dilutionproof presented a comparison of Bitcoin’s 3 post-halving cycles.
We see that at the start of each cycle, there were periods of exceptionally high MVRVT spreads for the first 12-18 months after each halving. However, subsequently Bitcoin’s 3 cycles caused the index to drop below 0 within 25-35 months after the halving.
Currently, Bitcoin is in its 31st month after the halving and the MVRVT is still below 0. Interestingly, in all previous cycles, the indicator has been in virtually the exact same spot (red arrow) during this time. In one comment on his postthe analyst describes this convergence as “completely crazy”.
Our analysis suggests that the Bitcoin price floor may have already been reached, based on comparisons to historical market cooling data. Additionally, depending on what cycle the current price action looks like, 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 month (cycle 1 – blue).
The “fair value” is $20,000 and the peak is $165,200
In the latest of the charts released, we see how the MVRVT indicator can be used to create a trading band/channel for the long-term Bitcoin price. This tip provides clear suggestions for buy opportunities (blue colors below the bottom line) and sell opportunities (yellow and orange colors above the top line).
Additionally, this chart provides an estimate of what the price of BTC should be right now if the market price reflected the “fair value” of Bitcoin. The gap at 0 today is $20,000. Meanwhile, anything below indicates extreme market cooling.
On the other hand, if Bitcoin were extremely overheated today – like at the top of historical bull markets – the price of BTC would be $165,200 today. This is the value of the level 10 standard deviation of the MVRVT report.
If history were to give any indication of future price action, it can be concluded that Bitcoin may reach this price in the future, or even surpass it. However, that will happen at the earliest about a dozen months after the next halving, which is currently estimated to be April 10, 2024.For the latest crypto market analysis from BeInCrypto, Click here.
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