Bitcoin rose 6.6% this week and now trades just 4% below its August all-time high of $124,500. As the price approaches record levels, on-chain metrics may provide some useful perspective on market valuation and investor behaviour.
MVRV ratio
The Market Value to Realized Value (MVRV) ratio compares Bitcoin’s market cap with the “realized cap,” which values all coins based on the price when they last moved. The ratio measures how extended the market is relative to aggregate investor cost basis. Historically, readings above 2 have been stretched, while peaks above 3 have marked cycle tops. Today’s reading of 1.48 remains comfortably below these thresholds, suggesting the market is not yet overstretched.
(Source: Highcharts.com)
NVT ratio
The Network Value to Transactions (NVT) ratio, often compared to a P/E multiple that's used for stocks valuations, measures market cap relative to on-chain transaction volume. More reactive than MVRV, it often precedes shorter-term pullbacks. Historically, NVT readings above 100 have signaled short-term overvaluation. Yet, this cycle, the NVT ratio has consistently remained above 100, reflecting a market cap that has grown faster than on-chain transaction activity, likely due to ETF and institutional holding rather than transacting on-chain . The current NVT ratio stands at 174, which is elevated but still below the July peak of 209. This suggests caution, but not immediate alarm.
HODL waves
Let's look at another metric: HODL waves provide insight into Bitcoin’s supply dynamics by tracking the age of coins based on when they were last moved, effectively estimating investor holding periods. Over the past year, the share of short-term holders (less than 1 year) has increased by 4.9%, while long-term holders (over 1 year) have reduced their share by nearly 5%. This rotation indicates that veteran holders are taking profits, while a growing cohort of newer investors, who are generally more sensitive to price swings, are entering the market.
This shift is significant because long-term holders are typically more price-agnostic and resilient during market drawdowns, whereas newer investors are more likely to sell quickly if prices fall. As the proportion of short-term holders rises, the short-term realized cap becomes an increasingly important metric to monitor. This level, currently at $112,645, has consistently acted as a support band throughout this cycle. Sustained trading below the short-term realized cap could put pressure on recent entrants to exit their positions, potentially amplifying volatility as this investor cohort grows in influence.
Conclusion
While several on-chain metrics are elevated, none have reached the extreme levels that have historically marked market tops. This suggests that, by historical standards, the top may not be in yet. However, this does not guarantee that prices will not experience corrections in the near term. Investors should continue to monitor key on-chain indicators for signs of changing market dynamics.
