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- Bitcoin’s MVRV ratio remains low due to a drastically increased realized cap resetting the network’s cost basis.
- Market shows fewer signs of euphoria as more BTC holders seem comfortable at higher valuation levels.
Amid the spotlight because Bitcoin’s price has just broken its all-time high (ATH), there is one metric that has not broken any records: the MVRV ratio. For those who are not familiar, MVRV is a comparison between market cap and realized cap, a way to see how much profit is “unrealized” by current BTC holders.
Well, strangely enough, according to Bilal Huseynov from CryptoQuant, even though BTC prices have touched the sky, MVRV has not returned to its old peaks as seen in 2013, 2017, and 2021. In the past, this number could explode to above 3.5 and even close to 4. Now? It hasn’t even touched that number.
Why the Bitcoin MVRV Isn’t Spiking Like Before
What makes it different this time? One answer is in the realized cap, the number that is the denominator of the MVRV formula. The realized cap has increased drastically. This means that many coins have changed hands lately, and the transfers have occurred at high prices.
The average cost paid by new owners also increased. So, even though the market cap has increased, the increase in realized cap has kept the MVRV cool.
Just imagine if everyone bought Bitcoin at a high price and didn’t rush to sell. Automatically, their floating profits are not too high. That’s why the MVRV figure doesn’t increase. This can be said to describe a more “calm” market, or perhaps more stable than the euphoria we usually see when prices break records.
Not only that, there are indications that more Bitcoin is now in the hands of investors who don’t panic easily. They buy at a high price, and don’t seem to be in a hurry to sell. In the past, when the price went up, many immediately liquidated, and that was evident from the spike in MVRV. This time, the pattern is a bit different.
Binance, Short Squeeze, and Derivatives Behavior
On the other hand, there is an interesting story from the world of derivatives. CryptoQuant’s Joao Wedson noted that from April to May, Binance’s short squeeze metric detected several moments where short traders, aka those betting on the price going down, were suddenly forced to close their positions due to market pressure. The result? A rapid and fairly sharp price spike.
However, in the latest conditions, those signals have subsided. Now it’s calmer, there’s no short pressure that could explode at any time. This is important, because when there’s a short squeeze, the market can usually move up without warning. But this time, the atmosphere is more controlled.
Furthermore, CNF previously reported that Open Interest on Binance has actually jumped sharply in the past few days. This is a sign that the bullish spirit in the derivatives market is starting to return. The volume of futures and options contracts has also increased, which usually indicates that more market players are starting to gain confidence again.
So, even though MVRV hasn’t exploded like before, it doesn’t mean that Bitcoin is dying or running out of steam. Instead, it could be an indication that its market structure is now more mature. Investors are not in a hurry to take profits, pressure from the short side is reduced, and in the derivatives world, passion is starting to be felt again.
Meanwhile, as of writing time, BTC is trading at about $108,353.81, up 4.65% over the last 7 days and its market cap is about $2.5 trillion.
