Crypto Assets Starting To Become “Overbought,” Santiment Says
February 23 2023 - 7:30AM
NEWSBTC
Data from Santiment shows that crypto market assets have now
started to enter into the “overbought” territory, but they aren’t
yet in the danger zone. Crypto Assets Are Slightly Overbought Right
Now, According To MVRV As per data from the on-chain analytics firm
Santiment, traders are currently slightly in the green. The
relevant indicator here is the “Market Value to Realized Value”
(MVRV) ratio, which measures the ratio between the market cap of an
asset and its realized cap. The “realized cap” here is a sort of
fair value model that can be applied to any crypto. Since the MVRV
ratio compares the value of the asset (the market cap) with this
“true value,” the indicator’s value can provide hints about whether
the given asset is overpriced or underpriced right now. When the
value of this metric is greater than 1, it means the market cap is
higher than the realized cap right now, meaning that traders are on
average in some profit. High values above this mark generally
suggest that the asset is currently overbought. On the other hand,
values below this mark imply the average holder is underwater at
the moment, and hence the crypto may be underpriced currently. Now,
Santiment has defined an “opportunity zone” and a “danger zone” for
the MVRV, which, as their names already imply, are zones inside
which the indicator gives buy or sell signals. Related Reading:
Bitcoin Rally Fueled By USD Coin (USDC) Rotating Into BTC:
Santiment Here is a graph that shows how far the MVRV is from these
zones (on different timeframes, like 1-day, 7-day, etc.) for
various assets in the crypto market: Looks like most of the values
are in the negative right now | Source: Santiment on Twitter As you
can see in the above graph, assets become overbought when the MVRV
divergence from the danger zone hits -1. Similarly, the underbought
condition takes place at +1. Note that this is reversed from how
the MVRV ratio works (where values above 1 indicate the overpriced
zone). Santiment says that the flipped polarity is intentional, as
it makes things more intuitive. Related Reading: Small Cap Altcoins
Still Crypto Market Kings, Massively Outperform Bitcoin From the
chart, it’s apparent that all the cryptos in the market are inside
the negative zone on at least some of the timeframes, suggesting
that their prices are slightly overpriced right now. However, most
of the assets haven’t yet hit the danger zone, as the likes of
Bitcoin, Ethereum, and XRP have current MVRV divergence values
standing at -0.27 or lower. This could mean that their prices may
not be at too much risk of a correction currently. Nonetheless, it
still implies that the market as a whole is still carrying some
profits at the moment. “Markets move up with the highest
probability when traders’ assets are underwater. Currently, they’re
mildly over,” explains the analytics firm. BTC Price At the time of
writing, Bitcoin is trading around $24,300, down 1% in the last
week. The value of the asset seems to have been consolidating in
the last few days | Source: BTCUSD on TradingView Featured image
from Kanchanara on Unsplash.com, charts from TradingView.com,
Santiment.net
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