MVRV Ratio [Alpha Extract]

The MVRV Ratio Indicator provides valuable insights into Bitcoin market cycles by tracking the relationship between market value and realized value. This powerful on-chain metric helps traders identify potential market tops and bottoms, offering clear buy and sell signals based on historical patterns of Bitcoin valuation.

🔶 CALCULATION The indicator processes MVRV ratio data through several analytical methods:

• Raw MVRV Data: Collects MVRV data directly from INTOTHEBLOCK for Bitcoin
  
• Optional Smoothing: Applies simple moving average (SMA) to reduce noise
  
• Status Classification: Categorizes market conditions into four distinct states
  
• Signal Generation: Produces trading signals based on MVRV thresholds
  
• Price Estimation: Calculates estimated realized price (Current price / MVRV ratio)
  
• Historical Context: Compares current values to historical extremes
  

Formula:

• MVRV Ratio = Market Value / Realized Value
  
• Smoothed MVRV = SMA(MVRV Ratio, Smoothing Length)
  
• Estimated Realized Price = Current Price / MVRV Ratio
  
• Distance to Top = ((3.5 / MVRV Ratio) - 1) * 100
  
• Distance to Bottom = ((MVRV Ratio / 0.8) - 1) * 100
  

🔶 DETAILS Visual Features:

• MVRV Plot: Color-coded line showing current MVRV value (red for overvalued, orange for moderately overvalued, blue for fair value, teal for undervalued)
  
• Reference Levels: Horizontal lines indicating key MVRV thresholds (3.5, 2.5, 1.0, 0.8)
  
• Zone Highlighting: Background color changes to highlight extreme market conditions (red for potentially overvalued, blue for potentially undervalued)
  
• Information Table: Comprehensive dashboard showing current MVRV value, market status, trading signal, price information, and historical context
  

Interpretation:

• MVRV ≥ 3.5: Potential market top, strong sell signal
  
• MVRV ≥ 2.5: Overvalued market, consider selling
  
• MVRV 1.5-2.5: Neutral market conditions
  
• MVRV 1.0-1.5: Fair value, consider buying
  
• MVRV < 1.0: Potential market bottom, strong buy signal
  

🔶 EXAMPLES

Market Top Identification: When MVRV ratio exceeds 3.5, the indicator signals potential market tops, highlighting periods where Bitcoin may be significantly overvalued.

Example: During bull market peaks, MVRV exceeding 3.5 has historically preceded major corrections, helping traders time their exits.
Bottom Detection: MVRV values below 1.0, especially approaching 0.8, have historically marked excellent buying opportunities.

Example: During bear market bottoms, MVRV falling below 1.0 has identified the most profitable entry points for long-term Bitcoin accumulation.
Tracking Market Cycles: The indicator provides a clear visualization of Bitcoin's market cycles from undervalued to overvalued states.



Example: Following the progression of MVRV from below 1.0 through fair value and eventually to overvalued territory helps traders position themselves appropriately throughout Bitcoin's market cycle.

Realized Price Support: The estimated realized price often acts as a significant
support/resistance level during market transitions.

Example: During corrections, price often finds support near the realized price level calculated by the indicator, providing potential entry points.

🔶 SETTINGS
Customization Options:

• Smoothing: Toggle smoothing option and adjust smoothing length (1-50)
  
• Table Display: Show/hide the information table
  
• Table Position: Choose between top right, top left, bottom right, or bottom left positions
  
• Visual Elements: All plots, lines, and background highlights can be customized for color and style
  

The MVRV Ratio Indicator provides traders with a powerful on-chain metric to identify potential market tops and bottoms in Bitcoin. By tracking the relationship between market value and realized value, this indicator helps identify periods of overvaluation and undervaluation, offering clear buy and sell signals based on historical patterns. The comprehensive information table delivers valuable context about current market conditions, helping traders make more informed decisions about market positioning throughout Bitcoin's cyclical patterns.