This Bitcoin Indicator May Have Signaled Latest Market Downturn In Advance
April 04 2024 - 9:00PM
NEWSBTC
The Bitcoin Network Value to Transactions (NVT) Golden Cross
indicator attained overheated values coinciding with the recent
local top in the price. Bitcoin NVT Golden Cross Surged To 3.17
During Recent Peak An analyst in a CryptoQuant Quicktake post
explained that the NVT Golden Cross may have served as an indicator
of the recent top in cryptocurrency prices. The “NVT” refers to an
on-chain metric that tracks the ratio between Bitcoin’s market cap
and transaction volume (both in USD). This ratio is generally used
to determine whether the asset’s price is fair or not. Related
Reading: Bitcoin Short-Term Holders Capitulate: $5.2 Billion Sold
At Loss When the indicator has a high value, the asset’s price (the
market cap) is high compared to its utility (the transaction
volume). Such a trend may suggest that the coin could be overvalued
currently. On the other hand, the low metric could suggest the
network isn’t valued fairly compared to its high ability to
transact capital, and as such, its price may be due to an uplift.
In the context of the current discussion, the NVT itself isn’t
interesting, but rather, a modified version called the NVT Golden
Cross is. This metric compares the short-term trend of the NVT
(10-day moving average) against its long-term trend (30-day MA).
Like the NVT, this variant is also used to estimate the fairness of
the asset. Historically, values greater than 2.2 have been a signal
that BTC is overheated, as the short-term trend is notably
outpacing the long-term at these levels. Similarly, values under
the -1.6 level may indicate that the cryptocurrency is undervalued;
hence, its price may likely form a bottom and find a rebound soon.
Now, here is a chart that shows the trend in the Bitcoin NVT Golden
Cross over the last few years: The value of the metric seems to
have been going up in recent days | Source: CryptoQuant As
displayed in the above graph, the Bitcoin NVT Golden Cross rose to
relatively high levels earlier. This growth happened as the asset’s
price rallied towards the $71,000 level. The metric had touched the
3.17 mark in this surge, which suggests the coin may have become
too overpriced. Indeed, the asset followed this by observing a
sharp drawdown, which took it back under the $65,000 level. As the
quant has marked in the chart, a similar pattern of the NVT Golden
Cross hitting these high levels and resulting in a price correction
was observed at different points over the last few years. Related
Reading: Bitcoin Traders No Longer Extremely Greedy: Rebound
Signal? Since the latest overheated signal, the indicator has
cooled off alongside the Bitcoin price, although it hasn’t gone
towards the negative side yet. BTC Price Bitcoin has recovered over
the past day as its price has now climbed back to $67,800. Looks
like the price of the asset has seen some uplift over the last 24
hours | Source: BTCUSD on TradingView Featured image from
Kanchanara on Unsplash.com, CryptoQuant.com, chart from
TradingView.com
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