A quantifier has broken down how the Bitcoin MVRV MACD oscillator could be used to verify signals in price.
Bitcoin MVRV MACD oscillator as a price indicator
As an analyst explains in a CryptoQuant to post, this metric can help detect both price lows and highs, as well as major trends. The “Bitcoin MVRV” is an indicator that measures the relationship between market capitalization and realized capitalization.
Here the “cap made” is a capitalization model for BTC that values each coin in circulation at the price it last moved at, rather than taking the same current BTC price as the value of all coins, as normal market capitalization does. .
Since the realized cap is a sort of “true” value model for the coin, its comparison with the market cap (at the MVRV) can tell us if the coin is undervalued or overvalued at the moment. When the MVRV is greater than 1, it means that BTC is currently overvalued, while having values below the threshold suggests that it is undervalued.
Now, to use MVRV as a trading tool, the quant has taken the MACD oscillator of the indicator. A MACD oscillator is just the difference between the short-term and long-term exponential moving averages (EMAs) of the metric in question. Here, these EMAs are the 50 and 100 day versions.
The chart below shows how the Bitcoin MVRV MACD can be used to find price highs and lows:
The metric seems to have approached a value of 0 recently | Source: CryptoQuant
According to the amount, any time the MVRV MACD has been above 0.3, it has been a sign that BTC is currently overbought. On the other hand, values below -0.3 have signaled underbought conditions.
From the chart, it is clear that while these signals have not coincided with cycle highs and lows, they have correctly indicated some local lows and highs.
Now here is another chart where the analyst has highlighted how divergences between price and MVRV MACD can signal future trends:
Various divergences between BTC and the MVRV MACD | Source: CryptoQuant
“A divergence occurs when the direction of a technical indicator and the direction of the price trend move in opposite directions,” explains the analyst. On the chart, it is visible that every time the MVRV MACD has risen within the negative region while the price consolidates sideways or declines, a bullish divergence has formed for Bitcoin.
Similarly, a bearish divergence has formed when the value of the crypto has been rising, but the indicator has been dipping in the zone above zero. At present, none of these signals have formed in the current bear market so far.
Bitcoin price
As of this writing, Bitcoin is trading around $16,800, up 1% over the past week.
Looks like BTC has stagnated after the rise yesterday | Source: BTCUSD on TradingView
Featured image by André François McKenzie on Unsplash.com, Charts from TradingView.com, CryptoQuant.com
