A quant explained how Ethereum is currently in its second bull phase following the trend of this popular on-chain indicator.
The Ethereum MVRV rate is forming a similar pattern to the last two cycles.
In a CryptoQuant Quicktake post, one analyst talked about the latest trends in Ethereum’s market value to realized value (MVRV) ratio. “MVRV Ratio” is an on-chain indicator that tracks the ratio between an asset’s market capitalization and its realized capitalization.
Realization limit here refers to a capitalization model that calculates the total value of ETH, assuming the value of each token is equal to the last traded price on the network.
In effect, this model is a measure of the sum of the cost basis of all tokens in circulation, or more simply, a measure of the amount of capital that investors have committed to the asset. In this way, the MVRV ratio indicator compares the market capitalization, which is the total value of the holder’s current holdings, with the initial investment.
If the value of the metric is greater than 1, it means that the market capitalization is greater than the realized capitalization. This trend means that investors as a whole are in a net profit situation. On the other hand, being below the threshold means that losses dominate the market.
Now, a chart shared by the analyst shows how the value of the Ethereum MVRV rate has changed over the past few years.
The value of the metric appears to have sharply been moving up in recent days | Source: CryptoQuant
As you can see in the graph above, the Ethereum MVRV ratio soared to relatively high levels during the first quarter of this year as the price continued to rise. However, after the downward trend, the indicator cooled again and returned to the neutral 1 level.
With the recent surge in cryptocurrencies, the MVRV rate has seen an upward reversal again. Interestingly, this same phenomenon has also been observed in the last two bull markets, as the quant charts.
Both of these runs appear to have involved two phases with the Ethereum MVRV rate rising to extreme levels and a cooldown occurring between the two phases.
If the current cycle looks similar, the rally earlier this year could be the first step, with the most recent rally likely to serve as the second step.
In both previous cycles, the second bull market pushed the price to noticeably higher levels than the first cycle, so Ethereum may soon surpass its early-year highs. Of course, this only applies if this pattern holds for the current cycle.
ETH price
As of this writing, Ethereum is trading at around $3,600, up nearly 8% over the past week.
Looks like the price of the coin has been on the rise recently | Source: ETHUSDT on TradingView
Dall-E, featured image from CryptoQuant.com, chart from TradingView.com