Bitcoin Returns Mirror Late-2022 Levels Seen Before 67% Rally: Santiment

On-chain analytics firm Santiment has highlighted how the average Bitcoin returns of the buyers from the past year are looking similar to late 2022.

In a new post on X, Santiment has talked about the latest trend in the Bitcoin Market Value to Realized Value (MVRV) Ratio. This on-chain indicator measures the ratio between the market cap of the asset and its Realized Cap.

The Realized Cap here refers to a capitalization model that calculates the total value of the cryptocurrency by assuming that the ‘real’ value of each token in circulation is equal to the price at which it was last transacted on the blockchain. In short, this metric represents the sum of the capital stored in the asset by all investors.

Since the market cap is the amount held by investors in the present, its comparison with the Realized Cap in the MVRV Ratio tells us about the profit-loss status of the overall network.

When the value of the metric is greater than 1, it means the investors are in a state of net unrealized loss. On the other hand, it being under the mark suggests the dominance of losses.

In the context of the current topic, the MVRV Ratio of the entire market isn’t of interest, but rather that of two specific investor cohorts: 30-day and 365-day buyers. The MVRV Ratios of these groups naturally tell us about the average returns for coins purchased over the past month and past year, respectively.

Now, here is the chart shared by Santiment that shows the trend in the 30-day and 365-day MVRV Ratios for Bitcoin over the last few years:

As displayed in the above graph, the 30-day Bitcoin MVRV Ratio is currently sitting at the +2.8% mark, suggesting short-term buyers are in a state of slight profit. This could raise the chances of a profit-taking selloff occurring, but perhaps not by much as these returns aren’t significant enough to fall inside what the analytics firm defines as the “Danger Zone.”

The picture is a bit different when it comes to the profitability of the 1-year investors. From the chart, it’s visible that the MVRV Ratio has plunged to the -26.6% mark for this group, which is well past the boundary for the “Opportunity Zone.”

Interestingly, the last time that the indicator fell to such a low level was at the end of the 2022 Bitcoin bear market. “When the 365-day MVRV was severely negative following the FTX collapse, $BTC proceeded to rise +67% in the following 3 months,” noted Santiment.

That said, while the current value is similar to back then, the structure itself more resembles that of mid-2022, since the metric has only recently plummeted to these levels, while in late 2022, it was on the way back up.

At the time of writing, Bitcoin is floating around $70,500, down nearly 1% over the last seven days.