A quant explained how Ethereum is now in its secondary bullish phase according to the trend of this popular on-chain indicator.
Ethereum MVRV ratio forms a similar pattern to the previous two cycles
In a CryptoQuant Quicktake article, an analyst talked about the latest market value to realized value (MVRV) ratio trend for Ethereum. The “MVRV ratio” is an on-chain metric that tracks the relationship between the asset’s market capitalization and its realized capitalization.
The realized cap here refers to a capitalization model that calculates the total value of ETH by assuming that the value of each token is equal to the price at which it was last traded on the network.
In effect, the model is a measure of the sum of the cost bases of all tokens in circulation or, more simply, a measure of the amount of capital that investors have invested in the asset. As such, the MVRV Ratio indicator compares market capitalization, which is simply the total value that holders currently carry, to this initial investment.
When the value of the measure is greater than 1, it means that the market capitalization exceeds the realized capitalization. Such a trend implies that investors as a whole are in a net profit situation. On the other hand, being below the threshold suggests the prevalence of losses in the market.
Now here is the chart shared by the analyst that shows how the value of the Ethereum MVRV ratio has changed over the past few years:
The value of the metric appears to have sharply been moving up in recent days | Source: CryptoQuant
As seen in the chart above, the Ethereum MVRV ratio reached a relatively high level during the first quarter of the year as prices increased. However, during the bearish consolidation that followed the rise, the indicator cooled, returning to neutral level 1.
With the latest rise in the cryptocurrency, the MVRV ratio once again saw an upward reversal. Interestingly, something similar was also seen during the last two bull markets, as the quantitative indicates on the chart.
It appears that these two runs involved two phases where the Ethereum MVRV ratio reached extreme levels, with a cooldown in between.
If the current cycle were to show something similar, then the rally earlier this year could have been the first of the phases, with the more recent rally potentially playing the role of the second.
In the previous two cycles, the secondary bull run took the price to significantly higher levels than the first, so Ethereum could soon surpass the high from earlier this year. Of course, this would only be possible if this trend were to continue during the current cycle.
ETH Price
At the time of writing, Ethereum is trading at around $3,600, up almost 8% over the past week.
Looks like the price of the coin has been on the rise recently | Source: ETHUSDT on TradingView
Featured image of Dall-E, CryptoQuant.com, chart from TradingView.com
