Data from Glassnode shows that Ethereum is still experiencing negative momentum despite the rise the asset has seen this year.
Ethereum MVRV ratio has recently indicated negative momentum
This is evident from the latest weekly report Glass junctionthe MVRV ratio has recently fallen below the 180-day moving average (MA). The ‘Market Value to Realized Value (MVRV) ratio’ refers to an indicator that measures the ratio between Ethereum market capitalization and realized capitalization.
The “realized limit” here is a capitalization model for ETH that assumes the true value of each coin in circulation is the price at which it last moved on the blockchain. This is obviously different from market capitalization, where the total value of the asset is calculated based on the current spot price.
Since the price at which each coin last moved on the network can be assumed to be the price it was purchased at, the realized cap can be thought of as the sum of the total capital the investors used to purchase ETH.
Because the MVRV ratio compares the value that holders currently hold (the market capitalization) to the amount they have invested in the cryptocurrency, it can provide us with information about their profit/loss status.
Here is a chart showing the trend in the Ethereum MVRV ratio, as well as the 180-day MA, over the past few years:
The two metrics have gone through a cross in recent days | Source: Glassnode's The Week Onchain - Week 44, 2023
When the MVRV ratio exceeds 1, it means that the average investor is currently making some profit, while a lower MVRV ratio implies the dominance of losses in the market.
The chart shows that the Ethereum MVRV ratio showed some increase when the rally started early this year. During this period, the indicator remained above the 180-day MA.
“Periods when the MVRV ratio trades above this long-term average indicate that investor profitability is becoming increasingly meaningful and is often a signal of a rising market,” Glassnode explains.
But over the past few months, as Ethereum price has experienced some trouble, the benchmark has remained below the 180-day MA. The analytics firm notes: “despite the positive market performance for ETH YTD, the market is still experiencing negative momentum by this measure.”
As the chart shows, the Ethereum MVRV ratio has recently started to break just above this level, following the rally towards the $1,800 level. However, it is still very early in the outbreak, so it is unclear whether the outbreak will actually last there.
“It appears that the bear’s hangover from 2022 is still slowly wearing off,” the report said. It is not something new that ETH is going through a phase like this; As the chart shows, the asset has also faced similar periods of uncertainty in the past.
ETH price
At the time of writing, Ethereum is trading around $1,800, up 1% in the past week.
ETH has enjoyed some bullish momentum recently | Source: ETHUSD on TradingView
Featured image of Kanchanara on Unsplash.com, charts from TradingView.com, Glassnode.com
