Complete Gate Post tasks to upgrade your rank

Credit Ranking

[//]:content-type-MARKDOWN-DONOT-DELETE
![](https://gimg2.gateimg.com/image/article/1672904713交易指南.jpeg)

## TL; DR
The market value to realized value ratio indicates when an asset becomes undervalued or overvalued.

If the MVRV is below zero there is a market bottom. 

The peak of the market top, usually, occurs when the MVRV is between 7.0 and 9.0 

After a market bottom or top there will be a price reversal. 

## Introduction 
An important aspect of trading cryptocurrency is the ability to estimate the level of supply and demand in the market. The major ways to understand these components include analyzing the price action and technical analysis indicators. The Market Value to Realized Value (MVRV is an important indicator since it estimates the crypto market tops and bottoms. As such, it assists traders to find medium to long term entry and exit points.  

## Understanding Market Value to Realized Value (MVRZ)
Market Value to Realized Value, developed by Murad Mahmudov and David Puell in 2018, is a trading indicator which indicates if a cryptocurrency is undervalued or overvalued at a specific moment. 

A variation to the Market value to realized value indicator is the MVRV Z-score that adds the z-score to the original concept. Basically, the Z-score indicates the standard deviation below or above the mean value. The main function of the MVRV Z-score is to enable the investors to find the difference between the all-time average price and the current market price.

To understand what market value to realized value is, we should understand two key terms, market value and realized value.  
Market value, also called market capitalization, refers to the total value of a cryptocurrency at the current market price. We use the following formula to calculate it.

Market Value = Price x number of coins in circulation

On the other hand, realized value refers to the actual value of acquiring the cryptocurrency. In other words, it is the total amount which people who hold the asset have spent. Usually, we get this figure on-chain since it is difficult for an individual to calculate it. 

Let’s look at an example to make it easy to understand. In this case, we calculate the realized value of [Bitcoin](https://www.gate.io/trade/BTC_USDT) which an investor purchased on three different occasions.

12 BTC at $15,000 each
13 BTC at $12,000 each
5 BTC at $20,000

We obtained the realized value by calculating the cost of acquisition of the BTC. 

12 X $15,000 + 13 X $12,000 + 5 X $20,000 = $436,000
In this case, the realized value of BTC is $436,000 and its average price is $14,533.33.

## What is MVRV? 
Simply stated, the MVRV is the ratio between the market value and realized value of an asset such as [Bitcoin](https://www.gate.io/trade/BTC_USDT). Therefore, it indicates the relationship between the current price of an asset and its average price.

The investors are willing to buy more [Bitcoin](https://www.gate.io/trade/BTC_USDT), for example, when the MVRV value is high. This is because if the MVRV is high the investors make high profits. Thus, this index helps to determine the level of profit or loss of an asset at a certain price. 

In addition, the difference between an asset’s market value and its realized value is called its fair value. It is the one that traders use to tell if the asset is overvalued or undervalued.  

## How to calculate the MVRV
As we said before, there are only two inputs required to calculate the MVRV. These are the market value and the realized value of an asset. 

Here is the formula for calculating the MVRV: 

MVRV = Market Value / Realized Value

## Significance of the MVRV Z-score
If the value of the MVRV Z-score is more than 1, it indicates that the market capitalization is greater than its realized value. When the value is less than 1 it means that the realized value is bigger than its market cap.

Analysts use the figure to gauge the profit level of [Bitcoin](https://www.gate.io/trade/BTC_USDT) or any other asset. For example, if the MVRV value is 2.0 it shows that the investors will make 100% profit if they sell their [Bitcoin](https://www.gate.io/trade/BTC_USDT) at the current market price.

A positive value shows that the investors can generate profit if they sell their assets while a negative one indicates that they will make a loss if they dispose of their cryptocurrency at the current market price. 

## Undervalued and overvalued asset
A cryptocurrency can be undervalued, neutral or overvalued. It is undervalued if its MVRV is between 0 and 1. What this means is that the traders will make a loss if they sell their assets at the market price. 

On the other hand, if the value is more than 3.7 the cryptocurrency is overvalued. Most investors accumulate [Bitcoin](https://www.gate.io/trade/BTC_USDT) when the MVRV value is less than 1.0 

## [Bitcoin](https://www.gate.io/trade/BTC_USDT) top and bottom
It is very easy to tell when [Bitcoin](https://www.gate.io/trade/BTC_USDT) is overvalued or undervalued using the MVRV. If the value of BTC is below 0, it is within a market bottom. On the contrary, a [Bitcoin](https://www.gate.io/trade/BTC_USDT) top can emerge when the MVRV is above 3.7. However, the peak of the market top is most likely to occur when the MVRV is between 7 and 9.

In the 2014 to 2015 bear market the MVRV for [Bitcoin](https://www.gate.io/trade/BTC_USDT) was below 1.0 for 300 days. In 2018 to 2019, it was in the market bottom zone for about 134 days. Already, in the current bear market [Bitcoin](https://www.gate.io/trade/BTC_USDT) has been in the market bottom for over 170 days. 

In addition, CryptoQuant shows that the MVRV ratio fell below 1.0 around mid June 2022, as the following diagram indicates.

![](https://gimg2.gateimg.com/image/article/1672905004MVRV 1.png)
MVRZ ratio- CryptoQuant 

As the image shows, the MVRV dropped below 1 around 13 June 2022 and has stayed there ever since. This means that BTC is in the market bottom. According to Macromicro, as of 16 December the BTC MVRV was -0.16. 

As you notice, on that chart there is a green zone, at the bottom. Therefore, once the MVRV is within the green zone the asset is in a market bottom. Although it is difficult to predict the number of days cryptocurrency can spend in the market bottom, in the end there will be an upward price reversal. 

The MVRV can also get into the pink or red zone, we find at the top of the chart. After spending time within this overvalued zone, there will be a downward price reversal at the end. Once the MVRV is above 5.0, the possibility of price reversal is extremely high.  The following diagram indicates BTC market bottoms between 2014 and 2022.

![](https://gimg2.gateimg.com/image/article/1672904983MVRV 2.png)
MVRV 2014 to 2022- Binance 

## Conclusion
The MVRV is an indicator which shows market bottoms and tops of an asset. If the MVRV spikes over 6.0 the asset is at a market top. However, if it drops below 1.0 the market gets into a bottom. The market top is a period of distribution while the low is a period of accumulation. 


<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

English

Français

What are market tops and bottoms?  When does the market get to a bottom? How long has BTC been in the bottom in the current bear market? What is the significance of the market bottom and top?

福利中心

铭文导航-铭文Launchpad

铭文-铭文导航

铭文-web3startup

新币挖矿

小红花-Exchange-Startup

交易-创新交易

交易-盘前交易

打新

小红花-Learn & Explore-博客

小红花-Learn & Explore-快讯

币圈-币圈-未来事件

小红花-Learn & Explore-聊天室

小红花-Learn & Explore-直播

小红花-Learn & Explore-动态

年度账单

币圈

Gate OTC

芝麻金融-更多-财富管理

机构-APIs

机构-大宗交易服务

机构-经纪商项目

全球做市商计划

机构-托管和资产管理

机构-借贷服务

机构-做市商项目

小红花-Promotions-机构和VIP服务

量化基金

机构-基础架构

机构-交易

机构-金融

结构化产品

机构-主页

衍生品-统一账户

芝麻金融-更多-抵押借币

机构

策略跟单

现货跟单

合约跟单

跟单

量化策略-探索

量化策略-进阶

量化策略-基础

机器人广场

创建机器人

探索机器人

杠杆网格

无限网格

期现套利

组合指标策略

智能调仓

现货马丁格尔

合约网格

现货网格

交易机器人

芝麻金融-更多-ETH2.0挖矿

芝麻金融-更多-法币借贷

USDE挖矿

链上赚币

芝麻金融-理财-双币宝

芝麻金融-理财-定期理财(屯币)

芝麻金融-理财-结构性理财

芝麻金融-理财-理财宝

芝麻金融-理财-余币宝

GT挖矿

芝麻金融-更多

芝麻金融-理财

赚币

衍生品-实盘跟单

衍生品-期权

衍生品-交割合约

衍生品-永续合约

衍生品-合约中心

新手引导(合约)

合约活动

衍生品

交易-量化策略

交易-杠杆ETF

交易-杠杆交易

交易-闪兑

交易-现货交易

交易

行情

买币-gateCard

买币-法币交易

买币-银行账号

买币-快捷交易

买币-信用卡

买币-paywith

买币

小红花-推广

新手指南

活动中心

小红花-Learn & Explore-学院

任务广场

小红花-Exchange-最新公告

小红花-Exchange-帮助中心

小红花-Exchange-交易所

gate商店

小红花-Promotions-推荐官计划

小红花-Promotions-邀请计划

小红花-promotions-代理商

cextg小程序

小红花

web3

Understanding supply and demand of cryptocurrency Using Market Value to Realized Value (MVRV)