Ethereum’s MVRV Ratio Indicates Negative Momentum
Recent data from Glassnode shows that Ethereum is still experiencing negative momentum despite its year-to-date increase.
The MVRV ratio
According to Glassnode’s latest weekly report, the MVRV ratio has recently been below its 180-day moving average (MA). The «market value to realized value (MVRV) ratio» is an indicator that measures the relationship between Ethereum’s market capitalization and its realized capitalization.
The «realized cap» here is a capitalization model for ETH that assumes the real value of any circulating currency is the price at which it last moved on the blockchain. This is different from market capitalization, which calculates the total asset value using the current spot price.
Since it can be assumed that the price at which each coin on the network last moved is the price at which it was bought, the realized cap can be considered as a sum of the total capital that investors have used to purchase ETH.
The significance of the MVRV ratio
As the MVRV ratio compares the value that holders currently have (market capitalization) with the amount they have invested in the cryptocurrency, it can provide us with information about their profit/loss status.
Here is a chart showing the trend in Ethereum’s MVRV ratio and its 180-day MA over the past few years:
The two metrics have gone through a cross in recent days | Source: Glassnode's The Week Onchain - Week 44, 2023
When the MVRV ratio is above the 1 mark, it means that the average investor is currently making some profits, while being below the level implies dominance of losses in the market.
In the chart, it can be seen that Ethereum’s MVRV ratio experienced a certain increase when the rally began earlier this year. During this period, the indicator remained above its 180-day moving average.
«Periods when the MVRV ratio trades above this long-term average indicate that investor profitability is becoming increasingly significant and often signal a bullish market,» explains Glassnode.
However, in recent months, as the price of Ethereum has faced some difficulties, the metric has fallen below its 180-day MA. The analytics firm points out that «despite ETH’s positive market performance to date, according to this metric, the market is still experiencing negative momentum.»
As shown in the chart, Ethereum’s MVRV ratio has just started to surpass this mark, following the rally towards the $1,800 level. However, it is still very early in the breakout, so it is unclear whether it will actually hold there.
«It seems that the hangover from the bearishness of 2022 is still slowly being overcome,» the report says. It is not new for ETH to go through a phase like this; as highlighted in the chart, the asset has also faced similar periods of uncertainty in the past.
ETH Price
At the time of writing this article, Ethereum is trading around $1,800, a 1% increase in the past week.
ETH has enjoyed some bullish momentum recently | Source: ETHUSD on TradingView
Featured image by Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com