What are MVRV and NUPL

MVRV, or Market-Value-to-Realized-Value Ratio, is the ratio of an asset’s nominal market value to its realized market value. It can be used to determine the cyclical changes in the crypto market.

NUPL, or Net Unrealized Profit/Loss, is an indicator that measures the net profit or loss in the crypto market. It can be used to assess the current market’s profitability/loss status.

Specific factors in the formula:

Both MVRV and NUPL are calculated based on an asset’s nominal market value and realized market value. Their respective formulas are as follows:

MVRV Ratio = Market Cap / Realized Cap

NUPL = (Market Cap - Realized Cap) / Market Cap

Where:

Market Capitalization = Nominal Market Value = Total Supply * Current Price

Realized Capitalization = Realized Market Value = Total Supply * Price at Last Activity

Realized Cap is estimated based on the last transaction price of the asset, not the current market price. For example, if a Bitcoin’s last movement was in 2013, then its valuation during calculation is the Bitcoin price in 2013. This method reduces the impact of lost or long-dormant assets and reflects the asset’s actual cost basis.

By comparing the difference between nominal market value and realized market value, MVRV and NUPL can help understand when an asset’s price is above or below its cost basis, thus evaluating market profitability. Additionally, extreme differences between nominal and realized market values can be used to identify market tops and bottoms, reflecting large cycle changes.

Specific analysis use: MVRV

The MVRV ratio is commonly used to analyze market profitability and provide signals for market cycle trends. Its value corresponds to market downturns and uptrends based on high or low levels.

High MVRV value: Bearish signal

A high MVRV indicates that the nominal market value exceeds the realized value. Most asset holders are in profit. In this scenario, people tend to sell assets to realize immediate gains. As a result, the number of sellers in the market sharply increases, leading to oversupply and increasing the likelihood of subsequent price declines.

Historically, an MVRV > 3.5 is an extreme value. It indicates a potential market cycle top and is a bearish signal. For example, on November 10, 2021, Bitcoin reached an ATH of $67,000, with an MVRV ratio of 2.72. Afterward, Bitcoin’s price rapidly declined, and the market gradually entered a cold winter.

Low MVRV value: Bullish signal

A low MVRV indicates that the nominal market value is below the realized value. Most asset holders are in loss. In this case, people generally choose to hold assets rather than sell at a discount. Consequently, the number of sellers in the market sharply decreases, leading to undersupply and increasing the probability of subsequent price increases.

Historically, an MVRV < 1.0 signals a market bottom in a bear phase and is a bullish indicator. For example, on November 10, 2022, Bitcoin’s price fell to about $16,000, the lowest since the ATH, affected by the FTX bankruptcy. The MVRV ratio dropped to 0.84. After the bottom, the price gradually recovered to the current $26,000.

NUPL

NUPL is typically used to determine whether the current market is in profit or loss. It can evaluate market cycle conditions and provide buy/sell signals for investors.

NUPL > 0 indicates the market is in net profit; < 0 indicates net loss. Generally, the further the NUPL value is from 0, the closer the market is to the top or bottom.

When NUPL is positive and relatively high, it means most Bitcoin holders are in profit. The market is approaching a top, signaling a sell.

When NUPL is negative and relatively low, it indicates most Bitcoin holders are in loss. The market is approaching a bottom, signaling a buy.

Historically, NUPL above 0.75 indicates a market top, while below -0.25 indicates a bottom. When NUPL is positive, market sentiment is optimistic and intensifies as the value increases; when negative, market sentiment is pessimistic. **$OSMO **$PNUT