While Bitcoin recently set a new All-Time High (ATH) in price, its MVRV ratio hasn't hit the peaks seen in past cycles (2013, 2017, 2021). Previously, MVRV also peaked with prices, often exceeding 3.5-4, signifying high unrealized profit. This current disparity, where a price ATH doesn't coincide with an MVRV peak, can be explained by the tremendous rise in Bitcoin’s Realized Cap.
The MVRV ratio is Market Cap divided by Realized Cap. A significantly higher Realized Cap (the denominator) naturally lowers the MVRV ratio, even if Market Cap (the numerator) is at an ATH. This increased Realized Cap means more coins have moved and their cost basis reset at higher prices in this upcycle. In other words, the network's aggregate cost basis is now considerably higher than during previous ATHs. This suggests the current market situation is different: perhaps more coins are in stronger hands at these higher valuations, or the "froth" or overvaluation typical of past MVRV peaks hasn't occurred to the same degree. It might also indicate that significant profit-taking has been absorbed by new capital at these elevated prices, pushing the network's Realized Cap higher.
Written by BilalHuseynov
