Bitcoin Records $75,000 All-Time High: Here’s If BTC Is ‘Overheated’ Now

Bitcoin Records $75,000 All-Time High: Here‘s If BTC Is ’Overheated Now

Heres what the legendary Bitcoin Market Value to Realized Value (MRVRV) Ratio says about whether Bitcoin is currently overheated or not.

Bitcoin MVRV Ratio Has Risen Alongside The Latest Rally

In a CryptoQuant Quicktake post, an analyst has discussed about the MVRV Ratio of Bitcoin. The “MVRV Ratio” is an on-chain metric that keeps track of the ratio between the Bitcoin market cap and realized cap. The market cap here is just the total valuation of BTC‘s circulating supply at the current spot price. The other metric, the realized cap, is also a capitalization model for the asset, but it doesn’t work so simply.

Unlike the market cap, this model doesn‘t put the same price on every coin in circulation; rather, it assumes that the last price at which a token was transacted represents its ’true value.

The previous transaction of any coin is likely to represent the last point it switched hands, so the realized cap essentially takes the sum of the cost basis of all tokens in circulation.

One way to look at this model is as a measure of the amount of capital that the investors as a whole have put into the cryptocurrency. The market cap, in contrast, signifies the value that these holders are carrying in the present.

When the MVRV Ratio is greater than 1, it means that the market cap is above the realized cap right now. Such a trend suggests the investors as a whole are in a state of net profit.

On the other hand, the indicator being below this mark implies the average holder is currently underwater as they are holding their coins at a value below the price they bought them for.