ETHBTC MVRV Z-Score

ETHBTC MVRV Z-Score Indicator

This indicator is designed to help investors identify potential overbought or oversold conditions in the ETH/BTC ratio using the MVRV (Market Value to Realized Value) Z-Score. By analyzing the MVRV ratios of Ethereum (ETH) and Bitcoin (BTC), the indicator provides insights into when one cryptocurrency is likely to outperform the other based on the relative valuation.

Key Concepts

MVRV Ratio

The MVRV ratio compares the market value (current price) of an asset to its realized value (the price at which coins last moved on-chain). This indicator calculates the ratio of ETH’s MVRV to BTC’s MVRV, giving a relative valuation metric between the two assets.

Z-Score

The Z-Score measures how far the current ETH/BTC MVRV ratio deviates from its historical mean. This deviation is expressed in terms of standard deviations, helping to identify extreme conditions

• Z > 3: Strong indication to sell ETH for BTC (ETHBTC ratio is highly overbought).
  
• Z between 2 and 3: Moderate signal to sell ETH for BTC.
  
• Z between 1 and 2: Weak signal to sell ETH for BTC.
  
  
• Z < -3: Strong indication to sell BTC for ETH (ETHBTC ratio is highly oversold).
  
• Z between -3 and -2: Moderate signal to sell BTC for ETH.
  
• Z between -2 and -1: Weak signal to sell BTC for ETH.
  

This indicator is particularly useful for investors looking to shift between ETH and BTC based on relative market conditions. When the ETHBTC ratio is overbought (high Z-Score), it suggests BTC may soon outperform ETH, making it a good time to sell ETH for BTC. Conversely, when the ETHBTC ratio is oversold (low Z-Score), it suggests ETH may soon outperform BTC, signaling a good opportunity to sell BTC for ETH.