Chainlink MVRV Archives

Chainlink 30-Day MVRV Ratio Has Plunged

In a new post on X, analyst Ali discussed the latest trend in Chainlink’s 30-day MVRV ratio. The “Market Value to Realized Value (MVRV) ratio” is a popular on-chain indicator that tracks the ratio between LINK’s market cap and realized cap.

The market cap naturally refers to the total valuation of the asset’s circulating supply at the current spot price. In contrast, the realized cap is a different type of capitalization model that calculates the total value of the cryptocurrency by instead taking the price at which each coin in circulation last moved on the network as its “true” value.

Since the last transaction of any coin was probably the last time it changed hands, the price at its time would signify its current cost basis. As such, the realized cap sums up the cost basis of every coin in circulation.

In this view, the realized cap would be nothing but a measure of the total capital the investors have used to purchase the asset. In contrast, the market cap represents the value that they are holding right now.

The MVRV ratio compares these two models, and its value can provide hints about whether the overall market holds more or less than it puts into Chainlink.

In the context of the current topic, the 30-day version of this indicator is of focus, which restricts itself to only the investors who bought within the past month. Here is the chart shared by the analyst that shows the trend in this LINK indicator over the past couple of years:

As displayed in the above graph, the Chainlink 30-day MVRV ratio has recently taken a sharp plunge and dipped under the 0% mark. The 0% mark is where the market cap and realized cap are exactly equal, so below it, the latter would be greater than the former.

When this is the case, the investors are carrying losses. This recent plunge into the negative has naturally come for the metric as the cryptocurrency’s price has plummeted, putting the 30-day buyers underwater.

In the chart, Ali has highlighted a specific pattern that Chainlink appears to have followed regarding this indicator, plunging deep into the negative territory. “Each time Chainlink MVRV 30-Day Ratio has dropped below -12.24% since August 2022, it’s signaled a prime buying opportunity, averaging 50% returns!” notes the analyst.

Recently, the indicator has declined towards 17.54%, meaning it’s below this level, which has historically led to profitable buying windows for the coin. It remains to be seen whether the pattern followed in the last two years will hold this time as well.

On-chain data shows the Chainlink MVRV ratio has shot up as LINK has rallied above $10, a sign that a steep correction may be due for the asset.

Chainlink 30-Day MVRV Ratio Has Crossed The Bearish 20% Mark

As explained by an analyst in a post on X, the last three times the LINK MVRV ratio hit similar levels as now, the cryptocurrency registered a sharp drawdown. The “MVRV ratio” (where MVRV stands for Market Value to Realized Value) is an indicator that measures the ratio between the Chainlink market cap and the realized cap.

The realized cap here refers to a LINK capitalization model that assumes the true value of each coin in circulation isn’t the same as the asset’s spot price, but rather the price at which the coin last moved on the blockchain.

This price at which the coin was last transferred could be imagined to be the value at which its holder bought it, so the realized cap takes into account the prices at which each investor in the market acquired their LINK.

Thus, the realized cap is essentially a measure of the total amount of capital the holders as a whole have invested into Chainlink. Since the MVRV ratio compares the market cap with this metric, it can provide us with info about the profit/loss situation of the investors.

Now, here is a chart that shows the trend in the 7-day moving average (MA) of the ChainlinK MVRV ratio over the past year and a half:

Chainlink MVRV ratio

Note that in the above graph, the MVRV ratio shown isn’t just the ordinary version, but rather the 30-day one. What this means is that this indicator only takes into account the data of coins that were moved within the past month.

From the chart, it’s visible that the Chainlink 30-day MVRV ratio has observed a strong rise recently as the price of the cryptocurrency has enjoyed sharp upward momentum.

The metric has crossed the 21% mark with this increase, suggesting that the investors who bought within the last 30 days are holding 21% more in value than what they put in.

Usually, the more the profits held by the investors, the greater their probability of giving in to the allure of profit-taking. As such, whenever the investors are carrying a high amount of profits, the risk of a correction taking place can become significant.

In the current case, the Chainlink investors are those who only bought within the past 30 days, which means that this cohort is bound to have fickle-minded hands who would easily be tempted to harvest their gains.

As the analyst has marked in the chart, it would appear that the last three times the MVRV ratio crossed above 20% for this group, the LINK price observed a sharp decline.

In the first two cases, this drawdown was 34% each, while in the third and latest one, it was about 14%, which is still quite a notable drop. If this pattern is anything to go by, Chainlink may see another such correction soon.