How to Master MVRV, Lessons from 2017, 2021 and 2024?

What's the first thing you see when you open your exchange wallet?

Your PnL (Profit and Loss)—in other words, how much you're up or down.

So, when do you start feeling the heat? When do you get the urge to sell your assets? Naturally, it's when your profit, your PnL, increases. The higher this ratio, the more likely you are to sell.

MVRV shows us the PnL for the entire market.

The calculation is simple. It's the Market Value divided by the Realized Value (the cost basis). For instance, let's say you bought Bitcoin last year at $50K. Now, assume the price of Bitcoin is $100K today. In this case, your PnL, or MVRV ratio, would be:

100 / 50 = 2.0

So, how does this help us?

What is MVRV Used For?

It helps us follow the trend correctly.

When the MVRV ratio is high, it means the average investor is holding a significant amount of "unrealized profit." This is like a party where everyone is happy, but it also increases the desire to realize those profits—in other words, to sell.

Conversely, when the MVRV drops very low, it indicates that most investors are at a loss, fear is dominant, and potential sellers have likely been exhausted. This often signals market bottoms and buying opportunities.

Let's look at a simple example from 2017, 2021, and 2024.

MVRV: Examples from 2017, 2021, and 2024

Chart showing how the MVRV ratio marked Bitcoin market tops and bottoms in 2017, 2021, and 2024.

The chart above shows us the following:

• At the 2017 peak, MVRV stayed above 4.0 for only 8 days. This means the market topped out when the average Bitcoin supply was at a 300% profit level.

• At the 2021 peak, MVRV stayed above 3.8 for only 4 days. This suggests that investors sold earlier compared to the 2017 peak. This is quite normal and expected for any asset in the early stages of adoption.

• In the first peak of 2024 (driven by ETFs), it stayed above 2.60 for only 10 days. In the new peak following the US elections, it remained above 2.60 for 19 days.

This shows us that as Bitcoin adoption increases, investors are starting to sell earlier. The new group of investors (who arrived with the ETFs) are quick to sell once they see a 160% profit, rather than waiting for the 3x-4x returns seen in previous cycles.

Conclusion

• As new investors enter, the MVRV falls. This is because new investors establish their cost basis at the current price.

• In a bull market, a falling MVRV is a good thing because it increases Bitcoin's upward potential.

• A rising MVRV increases the risk of a sell-off because an investor who sees their PnL increasing is more likely to sell.

In short, by monitoring the MVRV Ratio, one can track the distribution (high MVRV) and accumulation (low MVRV) periods in the Bitcoin market.