What is #MVRV Ratio of a cryptocurrency?

[Fidelia]

Still studying about crypto, I encountered a concept called Market Value to Realized Value (MVRV). They say it is a very important metric in understanding a particular cryptocurrency. What is MVRV for a layman like us and how can it be useful for crypto newbies like us?

@Suba and @Nomad can help us with this explanation.

 

[Suba]

MVRV is the ratio of marketcap to realcap, also as an on-chain indicator of a crypto especially Bitcoin. You will find it easier to read the MVRV ratio through the graph. Traders use the MVRV indicator to analyze investor behavior, where the bottom and top of the price etc. From the calculation of the MVRV ratio, if:
MVRV value> 3.6 indicates that the crypto has reached saturation/highest point, so that selling pressure will increase. But if the value
MVRV value <1, the crypto has reached its lowest point and selling pressure will also be low. So traders will open a Long position.