MVRV helps assess whether Bitcoin is over- or undervalued by comparing market cap to realized cap, reflecting the average cost basis of holders.
MVRV-Z standardizes this data to spot extreme valuation zones. Negative values often signal long-term buying opportunities, while values above 7 may indicate a top.
These metrics are best for long-term strategies, not short-term trading. Pairing MVRV with other indicators improves decision-making and risk management.
Learn what MVRV and MVRV-Z are, how they’re calculated, and how these on-chain metrics help assess Bitcoin’s valuation, identify market bottoms, and manage long-term risk.
WHAT IS MVRV?
MVRV (Market Value to Realized Value) is a long-term valuation metric introduced in 2018 by on-chain analysts Murad Mahmudov and David Puell. It helps assess whether Bitcoin is overvalued or undervalued based on the relationship between its market cap and realized cap.
In simple terms, when MVRV is high, it means Bitcoin’s market price is far above what holders originally paid—often signaling overheated market conditions. When MVRV drops to lower levels, it suggests bearish sentiment and fear in the market, which historically has aligned with potential accumulation zones.
This aligns with the famous investing principle: “Be greedy when others are fearful, and fearful when others are greedy.” MVRV isn’t a crystal ball, but it serves as a valuable tool for spotting extremes in market sentiment and identifying strategic entry or exit points over the long term.
>>> More to read: What is Moving Average (MA)? How Does It Work
HOW IS MVRV CALCULATED?
MVRV stands for Market Value to Realized Value. It’s a key on-chain metric used to assess whether Bitcoin is overvalued or undervalued based on investor cost basis and current market behavior.
The formula is straightforward: MVRV = MV / RV
📌 What Is MV (Market Value)?
Market Value (MV) refers to Bitcoin’s total market capitalization and is calculated as:
Market Value = Current BTC Price × Circulating Supply
This is the familiar figure we see quoted on exchanges and aggregators like CoinGecko or CoinMarketCap—it simply reflects the current market valuation of all circulating BTC.
📌 What Is RV (Realized Value)?
Realized Value (RV) is where things get more interesting. It calculates the value of all BTC based on the price at which each coin was last moved on-chain. Here’s the idea:
Realized Value = Price of Each BTC at Last On-Chain Movement × Circulating Supply
Instead of using the current market price, RV considers the last price each coin changed hands (on-chain), then aggregates and averages those values across all circulating BTC. The result is a rough estimate of the average “entry cost” for the market.
Put simply, RV reflects the aggregate cost basis of Bitcoin holders—it’s like estimating what most people paid for their coins.
🔍 What Does the MVRV Ratio Tell Us?
The MVRV ratio provides insight into unrealized gains or losses across the network and helps traders identify potential turning points in the market:
MVRV > 1: The market value is greater than the average realized value, meaning most investors are in profit. This can lead to increased sell pressure.
MVRV < 1: The market is trading below its realized value, indicating most investors are at a loss—historically a common feature near market bottoms.
In short, MVRV serves as a market sentiment gauge, capturing when greed or fear may be peaking.
Building on the foundation of MVRV, analysts later introduced the MVRV-Z Score. It measures how far MVRV deviates from its historical mean, adjusted by standard deviation. This helps pinpoint when Bitcoin is in extremely overvalued or undervalued territory—a popular tool for spotting major market tops and bottoms.
>>> More to read: What are Bollinger Bands & How to Use Them
WHAT IS MVRV-Z?
The MVRV-Z Score is a refined on-chain indicator used to detect extreme highs or lows in Bitcoin’s valuation. It is calculated as:
MVRV-Z = (Market Value – Realized Value) ÷ Standard Deviation of Market Value
The purpose of the MVRV-Z Score is to standardize the gap between Bitcoin’s current market value and its realized value, relative to historical volatility. By doing so, it helps identify when Bitcoin is severely overvalued or undervalued—especially in longer market cycles.
In plain English, MVRV-Z is less sensitive to short-term price swings and more effective at spotting macro-level tops and bottoms.
📌 Historical Insights from the MVRV-Z Score
Looking at Bitcoin’s past market cycles, certain patterns tend to repeat:
MVRV-Z > 7: The market is highly overheated. Historically signals a speculative top and a strong sell warning.
MVRV-Z < 0: Bitcoin is undervalued relative to its realized cost basis. Often aligned with deep fear and long-term buying opportunities.
📌 How to Use the MVRV-Z Score
You don’t need to fully understand the math to use MVRV-Z effectively. Many long-term investors and analysts use it with simple rules such as:
Begin accumulating Bitcoin when MVRV-Z < 1
Enter more aggressively when the value turns negative
Exit partially or fully when MVRV-Z > 7
The stricter your entry threshold, the better your margin of safety—but keep in mind, that also increases the chance of missing rallies.
🔍 Limitations of MVRV-Z
Currently, MVRV-Z is designed only for Bitcoin. It does not apply to altcoins or other crypto assets.
Like all indicators, it works best when used with other tools—especially for shorter timeframes.
>>> More to read: What is AMM & How Does It Work?
MVRV ADVANTAGES & LIMITATIONS
✅ Advantages
🔹 Low Trading Frequency
The MVRV-Z Score is ideal for long-term investors. Historically, whenever the score dips into negative territory, it tends to signal major market bottoms—typically during deep bear markets. This allows investors to buy and hold spot positions without the need to constantly monitor the market.
🔹 Contrarian by Design
When MVRV-Z is negative, market sentiment is usually at its worst—fear, panic, and despair dominate. Using this objective signal helps investors counteract emotional bias and buy when others are too afraid to act.
🔹 Simple and Accessible
Unlike many on-chain models, MVRV-Z is easy to understand and use. You don’t need to dive into complex mathematical models or advanced analytics—just a basic chart and historical context are enough.
🚨 Limitations
🔸 Requires Dollar-Cost Averaging (DCA)
Crypto prices tend to have strong momentum. Even after MVRV-Z turns negative, further downside is common. This makes lump-sum investing risky. Instead, it’s better suited for a DCA strategy, which helps maintain discipline and reduce psychological stress during drawdowns.
🔸 Cannot Predict Duration of Bear Markets
Historically, negative MVRV-Z periods have lasted anywhere from a few days to over a year. While the score signals undervaluation, it doesn’t tell you when the market will recover. However, spreading your entries over 6–12 months has historically produced favorable average entry prices.
🔸 Weaker at Predicting Bull Market Tops
While MVRV-Z is reliable for spotting bottoms, it’s less precise in calling cycle tops. It can signal overvaluation, but strong price momentum during euphoric phases may push prices higher for weeks or months before peaking.
>>> More to read: What is Fundamental Analysis? Key to Value Investing
MVRV SUMMARY
The concept of MVRV was first introduced in 2018. While it has successfully identified several major Bitcoin market bottoms, it is still relatively new by traditional financial standards and has yet to be tested across multiple full macroeconomic cycles.
MVRV is primarily useful for understanding the unrealized profit or loss of Bitcoin holders based on historical on-chain cost basis. While powerful, it is most effective as a long-term valuation tool and less useful for short-term trading or timing precise entries and exits.
It’s important to emphasize that no single indicator—MVRV included—should be used in isolation when making investment decisions. It’s best utilized alongside other tools such as technical analysis, macro trends, sentiment indicators, and on-chain flow metrics to build a more complete picture of market conditions.
Ultimately, whether you’re looking to buy the dip or exit near the top, risk management and emotional discipline matter far more than relying on any one data point.
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〈What is Bitcoin MVRV? How Does It Work?〉這篇文章最早發佈於《CoinRank》。
