Definition ∞ MVRV Ratio Analysis is an on-chain metric used to assess whether a digital asset is overvalued or undervalued relative to its historical cost basis. MVRV, or Market Value to Realized Value, compares an asset’s current market capitalization to the sum of its acquisition prices when each unit last moved on-chain. A high MVRV ratio suggests that many holders are in profit, potentially indicating an overheated market ripe for correction. Conversely, a low ratio may signal an undervalued asset with limited downside risk.
Context ∞ MVRV Ratio Analysis is a widely respected tool in cryptocurrency news and market commentary, providing a macro perspective on market cycles and investor behavior. Analysts frequently reference the MVRV ratio to identify potential market tops and bottoms, guiding investment strategies. The discussion often involves interpreting different thresholds of the ratio to determine optimal entry or exit points. This analysis offers valuable insight into the collective profitability of market participants and the overall health of an asset’s valuation.
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