ENTER & EXIT WITH MVRV !!!!

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K.J.LANPAUL
Oct 9, 2021

This is the first insight from myself - a retail Etherian boy - in sanbase to share my knowledge and understanding in on chain analysis using sanbase for the past 2 and a half months. Writing this to improve my skills in on chain analysis and to expose my understanding, knowledge & flaws if any among efficient on chain analysts of Santiment.


INTRODUCTION & OBJECTIVE : MVRV, especially MVRV Ratio intraday (365d) & MVRV Ratio intraday (30d) are found to be very valuable for me in on chain analysis. So I'm gonna share the way I use them to BUY THE DIP, SELL THE TOP, ENTER & EXIT A TRADE.


METRICS USED : MVRV Ratio intraday (365d) & MVRV Ratio intraday (30d).


MVRV Ratio intraday (365d) :

  • MVRV Ratio Intraday (365d) is useful to identify Macro Tops and Bottoms.
  • It identifies market euphoria where there is high propensity to take profits by smart money and market pain i.e. capitulation by weak hands & retailers.
  • It tells the average unclaimed ROI or otherwise unrealized Profit/Loss of all the addresses (participants) that (who) have acquired (say) BTC in the past 365 days.
  • Advisable to be applied to coins that are active for at least 2-3 years.
  • On chain Analysts use it to identify Danger zones (potential Top or otherwise near top) and Opportunity zones (potential Bottom or otherwise near bottom) by drawing lines that coincide with multiple past tops & bottoms.
  • It helps in predicting risk of a correction in an uptrend and possible recovery in an downtrend.
  • High values of MVRV Ratio Intraday (365d) indicates the asset is overvalued and needs a correction for further sustained price discoveries meanwhile very low values of MVRV Ratio Intraday (365D) indicates the asset is undervalued and it going to recover very soon.
  • Finally It must be used as a macro indicator.

MVRV Ratio Intraday (30d) :

  • MVRV Ratio Intraday (30d) shows the unclaimed average ROI or otherwise unrealized Profit/Loss of all the addresses (participants) that (who) have acquired say BTC in the past 30 days.
  • It tells the possibility of profit taking by the short term traders and high risk of a correction.
  • It is useful in guessing :

1. Potential correction of a particular asset in an uptrend.

2. Short term recovery of the particular asset in a downtrend.

  • Thus preparing the minds of the investors for possible :

1. Short term correction in the future whenever the metric's value increases.

2. Short term uptrend in the future whenever its value decreases.

Thus filtering the short term noise, avoiding unnecessary panic, providing alpha to short/long for the investors.

  • Helps in entering a position with less risk while :

1. Longing when the metric's value is low.

2. Shorting when the metric's value in high.


How to mark Danger and Opportunity Zones :


  • The lines that are drawn to figure out the Danger & Opportunity Zones should be drawn in such a way that the lines touch as many tops & bottoms as possible respectively.
  • The touch points of the lines should be near the tops (marking 90% move of MVRV from the base line as the coin approaches the top) and near to the bottoms (marking 90% move of MVRV from the base line as the coin approaches the bottom).
NOTE : LTHs HARVEST HIGH % OF PROFITS IN BULL SEASON AND THEY ARE UNLIKELY TO SELL FOR SMALLER PROFITS. IN BEAR SEASON CONSIDERABLE NUMBER OF PARTICIPANTS ARE IN LOSS, LESS PROFIT OR BREAK EVEN. ONLY FEW LTHs MANAGE TO BUY THE BOTTOM AND HENCE IN MINI RALLIES IN A BEAR SEASON THE OVERALL ROI OF LTHs WILL BE LOW AROUND 20 - 30 % WHICH IS WHY THE MVRV INTRADAY 365 GROWS LESS COMPARED TO BULL SEASON WHERE MOST OF THE PARTICIPANTS ARE PROFITABLE AND THE LTHs SEE HUGE PROFITS LEADING TO HUGE RISE IN MVRV INTRADAY (365d).

  • This way of marking increases the probability in catching the macro tops and macro bottoms.
  • Importance should be given to the recent historical ranges of Tops and Bottoms because MVRV Ratio Intraday (365d) averages out in time and the future peaks of tops of MVRV Ratio Intraday (365d) declines because the market participants mature in time and are risk averse which urges them to take profits earlier when compared to their previous satisfied profit taking levels (ROI profit percentage declines in time).

Use case of MVRV Ratio Intraday (365d) :


Identifying Bottoms and buying the Dip :

  • The MVRV Ratio Intraday (365d) need not go to the levels of previous bottoms, so the investors should not wait for the previous bottom levels to open a position or dip buy an asset.
  • Investors must be patient enough for the MVRV Ratio Intraday (365d) to Bottom out and start to change its direction so that they can open a Long position or Spot Buy.
LINES INTERCEPTING 90% MOVE OF MVRV TO TOP & BOTTOM.
  • This decreases the chance of coin moving further down after the purchase and a missed opportunity to buy the dip.

Identifying Tops and exiting :

  • Investors must not be greedy rather be satisfied when the MVRV Ratio Intraday (365d) approaches the danger, unsustainable, euphoric zone and be smart enough to reduce, rebalance or otherwise exit/sell their holdings for stable coins or better investments so that they can secure the gains that they made rather than seeing their portfolio value crash down earth and panic sell.
  • It is recommended to reduce exposure to an asset when its MVRV Ratio Intraday (365d) reaches near the Danger line (reaches near the line marking 90% move of MVRV from the base line as the coin approached the top in the past ) so that they can avoid the inevitable correction killing their portfolio (should not wait for MVRV Ratio Intraday (365d) to reach the same levels of profit percentage as previous tops since the market participants mature in time and are risk averse which urges them to take profits earlier when compared to their previous satisfied profit taking levels (ROI profit percentage declines in time)).
THE INEVITABLE CRASH IS AN EXAMPLE JUSTIFYING NOT TO BE GREEDY.

My ultimate use of MVRV Ratio Intraday (365d) :

  • I am very confident in using MVRV Ratio Intraday (365d) for recognizing macro bottom to buy the dip and macro top to sell my holdings into stable coins because when you look back the history you will find MVRV Ratio Intraday (365d) crashing to the earth at the Bottom & peaks at the Top.
This is the reason why the lines should be marked as illustrated to avoid missing Tops and incurring losses.

Use case of MVRV Ratio Intraday (30d) :

  • It gives the probability for risk of a correction in the near future whenever the metric value reaches the Danger zones or otherwise the zones that have not lasted long previously and the metric have changed its direction towards the baseline.
AS SOON AS THE DIRECTION STARTS CHANGING TOWARDS THE BASELINE FROM BOTTOM THE LOWER THE RISK TO ENTER A LONG. AS SOON AS THE DIRECTION STARTS CHANGING TOWARDS THE BASELINE FROM TOP THE LOWER THE RISK TO ENTER A SHORT.
  • More often than not metric's danger zone coincide with the start of a correction ( long correction or small correction ) and when the metric reaches the opportunity zone (bottom levels) the correction ends with a period of consolidation, steady uptrend or sometimes with a V shaped Recovery in price action.

Using MVRV Ratio Intraday (30d) with other on chain tools :

  • I personally like to use it as a indicator that tells me the increasing chance of risk of correction of a particular asset and when is the probability high for correction in price of an asset.
  • When the metric's value is in the danger zone I will go to my set of powerful metrics such as

1. Daily Active Addresses (1d).

2. Circulation (1d).

3. Exchange Sell Pressure: Inflow ,Active Deposits ,Deposit Transactions & Supply on Exchanges.

4. Weighted Social Sentiment.

5. Social Volume.

6. Social trends.

7. Whales Activity using Supply Distribution.

8. Funding Rates across large trading volume derivates exchanges.

  • Finding as many reasons as possible to exit the coin using these key metrics increases the probability of success in our favor.
  • Also less info more focus is the best strategy.
  • One must find their own set of powerful metrics in order to not get confused and perform better.

Conclusion :

  • Use MVRV Ratio Intraday (365d) for Buying the Dip & exiting or rebalancing the portfolio when it reaches unsustainable levels that are short lived.
  • Use MVRV Ratio Intraday (30d) and other time intervals such as MVRV Ratio Intraday (7d) along with your own set of powerful metrics to guess :

1. The corrections in the near future and enter a short with low risk (max 2x leverage imo).

2. The recovery during downtrend and enter a long with low risk (spot buy or long with max 2x leverage imo).



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K.J.LANPAUL
Oct 9, 2021

Thanks for reading!

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