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MVRV-Z adjusted EN version (by ilyaevp95)

By ilyaevp95
Updated
Descriptions:

The MVRV Z-Score indicator is a powerful tool designed by original authors Murad Mahmudov and David Puell for BTC to help traders make informed decisions about their cryptocurrency investments. It is based on the MVRV (Market Value to Realized Value) metric, which measures the relationship between the market capitalization and the realized capitalization of a cryptocurrency. The indicator provides signals for accumulating or selling an asset based on deviations in market capitalization from realized capitalization.

How it works:

  • Market Capitalization: This is the total value of coins that have been issued at a given point in time. Market capitalization is calculated by multiplying the current price of the asset by the number of coins that have been issued.

  • Realized Capitalization (Realized Price): This is the amount of money that has been spent on purchasing a particular asset. In the context of cryptocurrencies, it represents the sum of all transaction values for a specific blockchain. Realized capitalization can be calculated using historical data on transaction prices.

  • MVRV Metric: The MVRV metric compares market capitalization with realized capitalization, providing a measure of how overvalued or undervalued a cryptocurrency is relative to its historical transaction data. A high MVRV value indicates that the market is overvaluing the asset, while a low MVRV suggests undervaluation.

  • Z-Score Calculation: The Z-score is a statistical measure that normalizes the deviation of market capitalization from its mean value (realized capitalization) to a standard deviation. This makes it possible to compare assets that have different values and time periods, as it takes into account the volatility of the market.
    Note: For accurate Z-score calculation, you need to use the indicator on a chart with a mostly complete historical data set for a specific cryptocurrency.
  • Signals: Based on the Z-score, the indicator generates signals for accumulation or sale. If the Z-score falls below a certain threshold (negative), it may indicate an opportunity to accumulate the asset. Conversely, if the Z-score rises above a positive threshold, it could suggest a potential sell signal.

    The indicator uses a color-coded system to provide traders with visual cues:

  • Green background indicates a signal to accumulate.
  • Orange (Red) background indicates a signal to sell.

    Deviations exceeding the specified thresholds by 1 and 2 Z (positive direction), 0.5 and 1 Z (negative direction) are highlighted in a brighter color, indicating more extreme deviations.


Note: The signals provided by this indicator should not be considered financial advice. Traders should conduct their own research (DYOR) before making any investment decisions.


Parameters: The indicator provides several parameters for customization:

  • Blockchain: The blockchain for which the analysis is performed. This allows the user to select the specific blockchain they are interested in analyzing. The default value is BTC.

  • Z threshold for positive deviations: This parameter sets the threshold above which the deviation will be considered positive. A higher value will result in fewer signals, while a lower value may generate more false signals. The default value is 3.0.

  • Z threshold for negative deviations: Similar to the previous parameter, this sets the threshold below which the deviation will be considered negative. The default value is 0.

  • Market Capitalization: There are two types of market capitalization available: Standard and Free float coin capitalization. Free float is calculated by multiplying its current price by the total number of units in free circulation - the number that are not locked in any contracts or other forms of restriction. For DASH, ZEC, BAT and ALGO available only Free float capitalization. The default value is "Standard"

  • Negative Deviation Filter Mode: When enabled, if the deviation has been positive for a certain number of previous weeks (the default value is 40 weeks), the indicator will not generate a signal to accumulate. This helps to avoid false signals during the start of a bearish market. This may be helpful for volatile coins, whose price can drastically fall below the realized price after the end of a bull market. The default setting is "disabled".


Display Options:

  • MVRV plot: Displays the MVRV metric for the selected blockchain.

  • Z-Score plot: Shows the Z-score calculated by the indicator.

  • Realized Price plot: Provides a visual representation of the realized price of the cryptocurrency on main chart.

  • Signal Display: Choose whether to display signals on the main chart or in a separate panel.

  • Historical mode: Choose whether to show signals for all historical data on the chart or for a certain number of periods. The default setting is "disabled".

Release Notes
Added option to display Z-bands for set thresholds on the main graph.
Example of using the indicator
snapshot
snapshot
blockchainmvrvonchainrealized_caprealized_pricestatisticsz-score

Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.

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Disclaimer

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