Litecoin’s MVRV Has Surged, Why This Is Bearish
23 Maggio 2023 - 1:58PM
NEWSBTC
On-chain data shows the Litecoin MVRV has been at relatively high
levels recently, something that could be bearish for the
cryptocurrency. Both 30-Day & 365-Day Litecoin MVRV Ratios Are
High Currently According to data from the on-chain analytics firm
Santiment, LTC traders are well above water at the moment. The
“MVRV ratio” is an indicator that measures the ratio between the
two main capitalization models for Litecoin: the market cap and the
realized cap. The market cap here is the usual cap that calculates
the total value of the asset by simply taking the value of each
coin in the circulating supply the same as the current spot price.
The realized cap, however, is a more special model as it assumes
that the actual value of any coin in circulation is the price at
which it was last transacted on the blockchain. Since this model
aims to estimate a sort of “true value” for Litecoin, its
comparison with the market cap (that is, the spot price) in the
MVRV can tell us whether the asset’s price is fair or not right
now. When the MVRV has a value greater than 1, it means the market
cap is above the realized cap currently. During such times, the
average investor is in a state of profit, so the incentive to sell
for them increases. As such, the cryptocurrency could be considered
overpriced in these conditions. Related Reading: How Does Current
Bitcoin Rally Compare With Historical Ones? On the other
hand, the indicator having a value lower than this threshold
implies the average holder is in a loss, and hence, the asset may
be undervalued currently. Now, here is a chart that shows the trend
in the 30-day and 365-day moving averages (MAs) of the Litecoin
MVRV ratio over the last few months: Looks like the values of the
metrics have been high in recent days | Source: Santiment As
displayed in the above graph, both the 30-day and 365-day MAs of
Litecoin MVRV have risen above the baseline with the recent surge
in the price beyond the $90 level. This may mean that the
cryptocurrency could have become slightly overpriced. Prior to this
surge, when LTC had been visiting some lows, the 30-day version of
the indicator had temporarily entered into the undervalued region.
Coinciding with these values of the metric, the price formed its
bottom and eventually built up towards the current surge. Related
Reading: Former MicroStrategy CEO Says Bitcoin Rally Just Getting
Started Back in April, the MVRV MAs showed a similar behavior as
right now, as they touched relatively high values when the asset
had rallied above the $100 mark. The rally stopped before long in
those overvalued conditions, and the asset took a plunge. If a
similar pattern as back then also follows with the current
overpriced values of the indicator, then Litecoin may go on to
observe a correction in the near future. In the long term, however,
the outlook of the asset could still remain bullish, as the
much-awaited halving event, where the cryptocurrency’s block
rewards will be permanently cut in half, will take place in August,
which is just around the corner now. LTC Price At the time of
writing, Litecoin is trading around $91, up 1% in the last week.
LTC has seen some surge in the last few days | Source: LTCUSD on
TradingView Featured image from iStock.com, charts from
TradingView.com, Santiment.net
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