A quant has broken down how the Bitcoin MVRV MACD oscillator could be used to look for signals in price.
Bitcoin MVRV MACD oscillator as a price indicator
As explained by an analyst in a CryptoQuant post, this metric can help spot both the bottoms and tops of the price, as well as the larger trends. The “Bitcoin MVRV” is an indicator that shows the ratio between the market capitalization and the realized upper limit.
Here, the “realized cap” is a capitalization model for BTC that values each coin in circulation at the price it was last moved at, rather than taking the same current BTC price as the value of all coins, as normal market cap does the case is.
Since the realized cap is a kind of “true” value model for the coins, a comparison to the market capitalization (in the MVRV) can tell us whether the coin is currently under- or overvalued. If the MVRV is greater than 1, it means that BTC is currently overpriced, while values below the threshold indicate that it is undervalued.
Now, to use MVRV as a trading tool, the quant took the indicator’s MACD oscillator. A MACD oscillator is just the difference between the short-term and long-term exponential moving averages (EMA) of the measure in question. Here these EMAs are the 50-day and 100-day versions.
The chart below shows how the Bitcoin MVRV MACD can be used to find highs and lows in price:
The metric seems to have recently approached 0 | Source: CryptoQuant
According to Quant, whenever the MVRV MACD was higher than 0.3, it was a signal that BTC is currently overbought. On the other hand, readings below -0.3 have signaled underbought conditions.
As can be seen from the chart, while these signals did not coincide with the cycle highs and lows, they did correctly mark some local highs and lows.
Now here is another chart where the analyst has highlighted how deviations between the price and the MVRV MACD can signal future trends:
Various divergences between BTC and the MVRV MACD | Source: CryptoQuant
“Divergence occurs when the direction of a technical indicator and the direction of the price trend move in opposite directions,” explains the analyst. As can be seen in the chart, bullish divergence has formed for Bitcoin whenever the MVRV MACD has moved into negative territory while the price is consolidating or falling sideways.
Similarly, a bearish divergence has formed when the value of the crypto has increased but the indicator has fallen into the above-zero territory. Currently has in current bear market so far none of these signals formed.
At the time of writing, Bitcoin is trading around $16,800, up 1% over the past week.
Looks Like BTC Is Flat After Yesterday’s Surge | Source: BTCUSD on TradingView Featured image by André François McKenzie on Unsplash.com, Charts by TradingView.com, CryptoQuant.com
Source: Crypto News Deutsch