MVRV Long/Short Difference: An Indicator of Potential Trend Reversals

The MVRV (Market Value to Realized Value) ratio is a measure of the market value of an asset compared to its realized value, which is the price at which the asset was last traded. A high MVRV ratio can indicate that an asset is overvalued, while a low MVRV ratio can indicate that it is undervalued.

Here is an example of MVRV 365 days at extreme lows:

Below is the MVRV 60 days at only -3% in loss for the short term traders:

If long-term traders are experiencing bigger losses than short-term traders, it is unlikely that they would sell their assets at current prices. This can lead to a lack of available sellers, or "exhaustion of net sellers," which can potentially result in upward pressure on the price of BTC.

It's also important to consider the context in which this MVRV ratio is being viewed. For example, if the MVRV ratio for the past 365 days is significantly higher, it could indicate that the asset has been in a long-term uptrend, and a -3% loss over the past 60 days may be relatively small in comparison.

The MVRV Long/Short Difference metric calculates the difference between the MVRV ratio for the past 365 days and the MVRV ratio for the past 60 days. This oscillating indicator reaches extreme negative values near the bottom of a bear market and can be a strong indication of a potential trend reversal. If the difference is positive, it indicates that the MVRV ratio for the past 365 days is higher than the MVRV ratio for the past 60 days, which could be a sign of bullish sentiment in the market. Conversely, if the difference is negative, it could be a sign of bearish sentiment.

According to the latest data(see below), the MVRV Long/Short Difference seems to have reached a bottom and is now increasing while the price of BTC drops lower. This could potentially be a strong indication of a trend reversal and a good opportunity to buy.

To confirm this potential trend reversal, it may be helpful to check other assets for similar indications. For example, if ETH, BNB, ADA, and LTC are also showing extreme MVRV Long/Short difference values and price divergence, this could be a sign that the trend is more widely present in the market. Checking for confluences and confirmations across multiple assets can help to provide a more complete picture of the market and increase the reliability of the trend.

Based on the confirmation from the other assets, it appears that the potential trend reversal indicated by the MVRV Long/Short Difference is more widely present in the market. This could be a good opportunity to buy, as the market may be showing signs of a trend reversal. However, it's important to remember that no single indicator is foolproof, and it is always a good idea to consider multiple indicators.

In the comments, please let me know what other indicators you would like me to analyze. Thank you.

Happy New Year!