Indicators

This indicator is derived from Market Value and Realized Value, which can be defined as:

Market Value: The current price of Bitcoin multiplied by the number of coins in circulation. This is like market cap in traditional markets i.e. share price multiplied by number of shares.Realized Value: Rather than taking the current price of Bitcoin, Realized Value takes the price of each Bitcoin when it was last moved i.e. the last time it was sent from one wallet to another wallet. It then adds up all those individual prices and takes an average of them. It then multiplies that average price by the total number of coins in circulation.

By subtracting Realized Value from Market Value we calculate Unrealized Profit/Loss.

Unrealized Profit/Loss estimates the total paper profits/losses in Bitcoin held by investors. This is interesting to know but of greater value is identifying how this changes relatively over time.

To do this we can divide Unrealized Profit/Loss by Market Cap. This creates Net Unrealized Profit/Loss, sometimes referred to as NUPL, which is very useful to track investor sentiment over time for Bitcoin.

Relative Unrealised Profit/Loss is another name used for this analysis.

How To View The Chart

The key principle of this tool is in the ratio between market cap and Bitcoin investors taking profit.

When market cap rises much faster than profit taking we see that the market is overheating, one could say due to investor greed (red band). For the strategic investor such times have historically been favourable to take profit.

We can break down different percentages of Bitcoin Relative Unrealized Profit/Loss to determine what stage of the market we are in. This can be advantageous for the long term strategic investor.

Bitcoin Price Prediction Using This Tool

Net Unrealised Profit/Loss (NUPL) is able to use market participant data to help predict Bitcoin price reaching major highs or lows. It uses on-chain data to demonstrate potential market participant emotions at a given moment in time which can be useful for forecasting Bitcoin price and where it may move next over time.

Created By

Tamas Blummer, Tuur Demeester and Michiel Lescrauwaet, February 2019

MVRV Z-Score is a bitcoin chart that uses blockchain analysis to identify periods where Bitcoin is extremely over or undervalued relative to its ‘fair value’.

It uses three metrics:

1. Market Value (black line): The current price of Bitcoin multiplied by the number of coins in circulation. This is like market cap in traditional markets i.e. share price multiplied by number of shares.

2. Realised Value (blue line): Rather than taking the current price of Bitcoin, Realised Value takes the price of each Bitcoin when it was last moved i.e. the last time it was sent from one wallet to another wallet. It then adds up all those individual prices and takes an average of them. It then multiplies that average price by the total number of coins in circulation.

In doing so, it strips out the short term market sentiment that we have within the Market Value metric. It can therefore be seen as a more ‘true’ long term measure of Bitcoin value which Market Value moves above and below depending on the market sentiment at the time.

3. Z-score (orange line): A standard deviation test that pulls out the extremes in the data between market value and realised value.

How It Can Be Used

The MVRV Z-score has historically been very effective in identifying periods where market value is moving unusually high above realised value. These periods are highlighted by the z-score (orange line) entering the pink box and indicates the top of market cycles. It has been able to pick the market high of each cycle to within two weeks.

It also shows when market value is far below realised value, highlighted by z-score entering the green box. Buying Bitcoin during these periods has historically produced outsized returns.

Bitcoin Price Prediction Using This Tool

MVRV Z-Score bitcoin chart is useful for predicting Bitcoin price at the extremes of market conditions. It is able to forecast where Bitcoin price may need to pull back when MVRV Z-score enters the upper red band, and also when $BTC price may rally after spending time in the lower green band.

Historically it has picked major Bitcoin price highs to within 2 weeks.

Created By

@aweandwonder who has unfortunately since deleted the original article and his online profile.

He built on the initial work to create MVRV by Murad Mahmudov and David Puell

Value Days Destroyed (VDD) multiple aims to recognise when the Bitcoin price is getting overconfident and is about to reach the highs of the main cycle.

Coin Days Destroyed is an output velocity proxy that gives extra weight to coins that have not moved on-chain for an extended period of time.

Value Days Destroyed multiplies Coin Days Destroyed by the $BTC price, allowing for a better comparison of spending activity over time as the price of $BTC fluctuates.

Value Days Destroyed Multiple then divides a 30-day average of VDD by a 365-day average to compare short-term spending velocity to an annual average of spending velocity.

This can be used to determine when older coins are coming onto the market and selling quickly. This tends to happen when longer-term market participants are looking to take profits as prices spike in major bull cycles.

This phenomenon of old coins coming onto the market eventually leads to a price collapse as supply outstrips demand and the bull market comes to an end.

How It Can Be Used

Days of extreme depreciation are highlighted by red candles in the chart when a VDD value of +2.9 is reached. Only 5% of Bitcoin’s history has traded above this value, which shows how extreme such periods are. These periods have historically aligned with the highs of the main Bitcoin cycle.

Created By

medium.com/@TXMC

Here you can read more about his approach: Article

This metric looks at the supply side of Bitcoin’s economy – bitcoin miners and their revenue.

It explores market cycles from a mining revenue perspective. Bitcoin miners are sometimes referred to as compulsory sellers due to their need to cover fixed costs of mining hardware in a market where price is extremely volatile. The revenue they generate can therefore influence price over time.

The Puell Multiple is calculated by dividing the daily issuance value of bitcoins (in USD) by the 365-day moving average of daily issuance value.

How It Can Be Used

There are periods of time where the value of bitcoins being mined and entering the ecosystem is too great or too little relative to historical norms.

Understanding these periods of time can be beneficial to the strategic Bitcoin investor.

The chart above highlights periods where the value of Bitcoin’s issued on a daily basis has historically been extremely low (Puell Multiple entering green box), which produced outsized returns for Bitcoin investors who bought Bitcoin here. It also shows periods where the daily issuance value was extremely high (Puell Multiple entering red box), providing advantageous profit-taking for Bitcoin investors who sold here.

Bitcoin Price Prediction Using This Tool

The Puell Multiple uses the upper red band on the chart to show when miner revenues in USD terms are significantly higher than historical norms (in this case the 365-day moving average). Over the majority of Bitcoins’ existence, these periods have been when the price of $BTC has also reached its major highs. So the Puell Multiple can be a useful Bitcoin forecasting tool to identify based on this metric whether price is too high and needs to drop (when the indicator is in the red zone), or whether it is too low and may need to bounce (indicator is in the green zone).

Created By

David Puell