MVRV divides market cap by realised cap. It answers one question: how far above or below what they paid is the average holder?
An MVRV of 1 means the market is valued exactly at its cost. At 2, the average coin is worth twice what it last changed hands for. Under 1, the average holder has a paper loss.
Why extremes matter more than levels
MVRV above about 3.5 has historically been followed by large falls, and readings under 1 have marked the deepest parts of bear markets. But the peaks have got lower each cycle as the market has grown, so a fixed "sell at 3.5" rule would have missed recent tops entirely.
MVRV Z-Score
The Z-Score version measures how far market value sits from realised value in standard deviations of the history. It rescales the signal so different eras can be compared, though it inherits the same shrinking-peak problem and is sensitive to its own lookback.
Read MVRV as a measure of how much unrealised profit is in the market, and so how much incentive there is to sell. It says little about timing on its own.