Why These 5 Altcoins Are Overbought and Could Crash Soon

Astute investors carefully monitor market indicators to anticipate potential changes. One of these metrics, the MVRV (market-value-to-asset-value) ratio, recently showed a curious trend among five altcoins.

Currently exhibiting high MVRV values, these digital assets may be set for a price correction due to increased leverage activities.

Most bought Altcoins

The MVRV ratio provides a window into whether an altcoin's price is in line with its “fair value” by comparing the asset's market capitalization to its acquired capitalization.

When the market capitalization exceeds the realized cap, it indicates that unrealized profits are high. This situation usually indicates selling when investors are looking to take profits. Conversely, a lower market cap compared to the realized cap may indicate lower value or faster demand.

Read More: 10 Cheapest Cryptocurrencies to Invest in January 2024

Currently, these five altcoins are showing high 30-day MVRV values, suggesting they are trading in overbought territory:

These figures indicate that a significant portion of these assets are in profit, a known sign of market euphoria. This environment often leads investors to lose holdings in order to maximize profits.

Is It Time To Sell Crypto?

The decision to sell should not be taken lightly. Indeed, cryptocurrency markets are highly volatile, and what is currently seen as an overbought asset may continue to depreciate.

The MVRV ratio, while sensible, is not the only factor investors should consider. Broad market trends, global economic conditions and certain cryptocurrency news play a significant role in shaping the future value of an asset. For example, changes in technology, regulatory shifts or investor sentiment can cause dramatic changes in crypto prices.

Read more: 7 must-have cryptocurrencies for your portfolio before the next bull run

Ethereum Name Service, Arbitrum, Mantle, Maker, and Ethereum each have unique characteristics and narratives that influence their market place. For this reason, investors should weigh these against the MVRV ratio to form an overall market view. This balanced approach, tailored to one's personal investment strategy and risk tolerance, is critical to navigating the market.

The current situation marked by high MVRV values ​​of these altcoins signals a critical time for investors. Although it may seem reasonable to cash in on price gains, a hasty decision can lead to missed opportunities if the property's value rises further.

The intrinsic volatility of the crypto market requires a measured approach that combines analytical insights with an accurate understanding of market dynamics.