MVRV compares what the market says the network is worth against what holders collectively paid. A reading of 3 means the average coin is worth three times its cost basis, which historically has coincided with late-cycle conditions; readings under 1 mean the average holder is under water.
Analysts use variants, including a Z-score that standardises the gap against its own history, and versions restricted to short-term holders to isolate recent buyers. They exist because the raw ratio's useful thresholds have drifted downward across cycles as the asset matured.
Treat it as a slow gauge of positioning, not a timing tool. It has spent months at extreme levels while price continued in the same direction, and the sample of completed cycles is small enough that any threshold is fitted to a handful of observations.
Related: realized-cap, nupl, sopr, supply-in-profit