This Bitcoin on-chain reading confirms that a rally is starting.

After 216 days, the Bitcoin Market Value to Realized Value (MVRV) ratio Finally broke above 1, making the rally the second-longest since the bear run of 2014-2015 when BTC prices took 300 days to bottom. It also signals the possibility of another refreshing BTC rally after last week’s gains.

Bitcoin’s MVRV breaks above 1.

The breakout coincided with BTC prices rising to $23,300 on Saturday, January 21, a positive development, especially for optimistic holders.

Bitcoin price on January 22
Bitcoin price on January 22 | Source: BTCUSDT on KuCoin Trading View

As of writing on January 22, prices have cooled, and the coin is trending at around $22,700, albeit with relatively low trading volume. Still, the retracement keeps BTC within a Rapid formation After impressive gains on January 20 when the coin overprinted, defying gravity and confirming demand.

The MVRV ratio changes depending on Bitcoin’s market forces. The prevailing sentiment is that BTC is going down. Bulls are gearing up for another leg up, injecting much-needed volatility and volatility into the crypto markets. However, the absence of confirmatory indicators presented problems.

Technical and fundamental analysts can use the MVRV ratio to time market entries and exits. Generally, whenever the MVRV ratio is below 1, it means prices are at their bottom.

Any reversal with a sub-1 to 1 upside valuation could signal bearish prices and possibly more room to the upside in the coming days. This signal could be a precursor to a swing and guide long-term traders to hold on to their long positions and wait for further gains before exiting once BTC is overvalued based on on-chain readings.

Conversely, historical values ​​show that whenever MVRV is above 3.7, there is a real possibility that the Bitcoin market will overheat. After that, it may be the perfect time to exit and take profits.

Bitcoin sentiment changes

The MVRV ratio is dynamic, depending on the fluctuating valuation of BTC. At any given time, the MVRV ratio is calculated by dividing the market value and the true value of Bitcoin. Market value measures the prevailing sentiment among holders, which history shows changes depending on the spot rate.

Meanwhile, the true value considers the true costs of each coin. Calculating the realized value takes into account the cost of acquiring each coin in question. If the MVRV ratio is less than 1, should the coins be sold, most holders will realize a loss.

The higher the MVRV ratio increases, the more holders and traders will be willing to sell because they will get more money. The ratio, then, is a good indicator of whether BTC is overvalued or undervalued in the short, medium, or long term.

Streams from IntoTheBlock show That, on average, 62% of BTC holders are making money, 36% are losing money.

Feature image by Freepick, Chart by TradingView

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