What is the MVRV Z-score?

The MVRV Z-score is an on-chain indicator that measures how far bitcoin's market cap has moved away from its realized cap, adjusted for how volatile market cap has been. Analysts use it to judge whether price is stretched far above, or sitting below, the average price holders paid. It is a way to read market history, not a timing tool.

What does MVRV mean?

MVRV is short for market value to realized value. Market value is the familiar market cap: current price times circulating supply. Realized value, usually called realized cap, values each coin at the price it had when it last moved on-chain instead of today's price.

According to Glassnode, realized cap was coined by Antoine Le Calvez in September 2018. It works by taking every unspent output (see what is a UTXO), multiplying it by the price when it was created, and adding them up. The result is often treated as a rough estimate of the network's total cost basis.

How is the MVRV ratio different from the MVRV Z-score?

The MVRV ratio is simply market cap divided by realized cap. Glassnode credits it to Murad Mahmudov and David Puell in October 2018. A ratio above 1 means the average holder is in unrealized profit; below 1 means many coins are held near break-even or at a loss.

The Z-score goes a step further. Glassnode gives the formula as market cap minus realized cap, divided by the standard deviation of market cap, and credits the idea to an analyst known as Awe_andWonder, also from October 2018. Amberdata notes the standard deviation is calculated over the full history of the data, so the scaling changes slowly as new data arrives. This makes extreme readings easier to compare across cycles of very different size.

How do you read the MVRV Z-score for bitcoin?

Charts usually shade a high band and a low band. Glassnode says readings deep in the high zone have historically marked market tops, while readings in the low zone have marked bottoms. CryptoQuant similarly describes MVRV ratio readings below 1 as past bottom areas and very high readings as past top areas.

People often view it alongside other long-range tools such as the 200-week moving average and ideas about the bitcoin four-year cycle.

What are the limits of MVRV and realized cap?

Realized cap is an estimate, not an exact measure of what people paid. Coins that have not moved since before bitcoin had a price count at zero, and lost coins stay frozen at old values. When long-dormant coins move, realized cap can jump without much change in wider market activity.

The signal zones also rest on a small number of past cycles judged in hindsight. Different data providers may calculate the inputs slightly differently, so readings can vary between charts. The metric is built around bitcoin's UTXO model and is less standard for account-based chains.