💡 The Plain-English Definition
Market cap values all Bitcoin at today’s price, including coins that have been lost or dormant for years. Realised cap values each Bitcoin at the price it last moved on-chain, giving a more accurate picture of actual capital invested in Bitcoin. The ratio between them is one of the most useful on-chain valuation signals.
🤔 But Why Though?
Market capitalisation — the standard measure for any asset — is calculated by multiplying the current price by the total circulating supply. For Bitcoin, this gives the total “market value” of all 21 million coins. The problem: this treats a Bitcoin that hasn’t moved since 2010 the same as one that was bought yesterday at the current price. It values lost coins, dormant coins, and coins whose owners died without leaving access instructions as if they were liquid and at today’s market price. This overstates the actual capital deployed into Bitcoin.
Realised capitalisation (developed by Coin Metrics) fixes this by instead valuing each UTXO (Unspent Transaction Output — a discrete chunk of Bitcoin) at the price it was worth when it last moved on-chain. A Bitcoin last moved in 2016 when the price was $500 contributes $500 to the realised cap, not $100,000. The sum of all these historical prices gives a measure closer to the actual cost basis — the aggregate price paid by current holders for their Bitcoin. The MVRV ratio (Market Value to Realised Value — the ratio of market cap to realised cap) is built from this. When MVRV is very high (market cap much larger than realised cap), coins are on average significantly above their cost basis — historically a signal of overheating and elevated sell pressure. When MVRV approaches 1 or below (market cap close to or below realised cap), coins are at or below cost basis on average — historically associated with market bottoms and accumulation zones.
🌍 The Real-World Analogy
Imagine trying to value a city’s housing stock. You could multiply all houses by today’s market price — but many houses were bought decades ago, some are derelict, some are in estates that haven’t been probated. A better approach: value each house at the price it last sold for. The result is closer to the actual capital invested — not a perfect measure, but more grounded than applying today’s prices to yesterday’s purchases. Realised cap does this for Bitcoin, using the last on-chain transaction price instead of today’s market price.
⚡ So What?
MVRV is most useful as a cycle positioning tool: extremely high readings (above 3–4) have historically coincided with market peaks, while readings near or below 1 have coincided with bottoms. It’s not a precise market timer — peaks and bottoms can persist — but it provides meaningful context for understanding whether the current price represents a market where most holders are significantly in profit (sell pressure risk) or where most are near breakeven or at a loss (potential accumulation zone).