On-chain data shows the Litecoin MVRV has been at relatively high levels recently, something that mayย be bearish for the cryptocurrency.
Both 30-Day & 365-Day Litecoin MVRV Ratios Are High Currently
Reportsย by data from the on-chain analytics company Santiment, LTC traders are well over water asย ofย now. The โMVRV ratioโ is an indicator that measures the ratio betwixt the two main capitalization models for Litecoin: the marketย capitalization and the discovered cap.
The marketย capitalization here is the usual cap that calculates the total value of the investment by simply taking the value of each coin in the circulating supply the same as theย present spot price.
The discovered cap, onย theย otherย hand, is a more special model as it assumes that the actual value of any coin in circulation is the price at which it was last transacted on the blockchain.
Since this model intendsย to estimate a sort of โtrue valueโ for Litecoin, its comparison with the marketย capitalization (that is, the spot price) in the MVRV can tell us whether the assetโs price is fair or not right now.
Andย once the MVRV has a value moreย than 1, it means the marketย capitalization is over the discovered cap asย ofย now. During such times, the average investor is in a state of profit, so the incentive to sell for them increases. Asย aย result, the digitalย currency mayย be considered overpriced in these conditions.
On the other hand,ย the indicator having a value lower than this threshold implies the average holder is in a loss, and hence, the investment couldย be undervalued currently.
Now, here is a chart that shows the tendency in the 30-day and 365-day moving averages (MAs) of the Litecoin MVRV ratio over the last few months:
As displayed in the over graph, both the 30-day and 365-day MAs of Litecoin MVRV have risen over the baseline with theย pastย few surge in the price beyond the $90 level. This may mean that the digitalย currency could have become slightly overpriced.
Prior to this surge, when LTC had been visiting some bottomย Line, the 30-day version of the indicator had temporarily entered into the undervalued region. Coinciding with these values of the metric, the price formed its bottom and soonerย orย thereafter built up towards theย present surge.
Back in April, the MVRV MAs showed a similar behavior as atย thisย time, as they touched relatively high values when the investment had rallied over the $100 mark. The rally stopped before long in those overvalued conditions, and the investment took a plunge.
If a similar pattern as atย thatย time likewise comesย after with theย present overpriced values of the indicator, then Litecoin may go on to observe a correction in the near future.
In the longstanding, onย theย otherย hand, the outlook of the investment could still remain positiveย tendency, as the much-awaited halving event, where the cryptocurrencyโs block bonus will be permanently cut in half, isย gonnaย come in August, which is just around the corner now.
LTC Price
Atย theย timeย ofย publication, Litecoin is trading around $91, up 1 percent in the last week.
