On-chain data shows the Ethereum MVRV Ratio has just given a signal that last took the cryptocurrency’s price from $3,300 to $1,400.
Since the last transaction of any token is likely to represent the last time it changed hands, the price at its time would denote its current cost basis. As such, the Realized Cap is a measure of the total cost basis of the ETH circulating supply. In other words, the model represents the amount of capital the investors as a whole have put into the asset.
The Market Cap, on the other hand, signifies the value that the investors are carrying in the present. Thus, its comparison with the Realized Cap in the MVRV Ratio tells us about the profit-loss situation of the holders.
When the value of the indicator is greater than 1, it means the investors are holding more value than they put in. On the other hand, it being under the cutoff suggests the overall market is underwater.
Now, here is the chart shared by Martinez that shows the trend in the Ethereum MVRV Ratio and its 160-day moving average (MA) over the past year:
As displayed in the above graph, the Ethereum MVRV Ratio has witnessed a decline recently as ETH’s price has gone down, implying holder profitability has been dropping.
With the latest drawdown, the indicator’s daily value has plunged below the 160-day MA. In the chart, Martinez has highlighted the previous instances of this crossover taking place. It would appear that the MVRV Ratio’s fall under this line in February led into a significant decrease in the ETH price from $3,300 to $1,400, a swing of almost 60%.
It now remains to be seen whether the latest break below the line is going to be a sustainable one like in February, or if it will be another quick dip.
At the time of writing, Ethereum is floating around $4,000, down 2% over the last week.
