As a seasoned analyst with over a decade of experience in the financial markets, I have seen my fair share of market cycles and trends. When it comes to Bitcoin, I’ve been following its journey since its early days, and I must admit, it never ceases to amaze me.
The latest on-chain analysis indicates that the Bitcoin Network Value to Transactions (NVT) Ratio has dropped to a lower zone, possibly suggesting an upward trend in the cryptocurrency’s value.
Bitcoin NVT Golden Cross Has Seen A Sharp Decline Recently
In a recent analysis from CryptoQuant Quicktake, it’s been pointed out that the Bitcoin NVT Golden Cross has signaled a potential bottom for the third time this year 2024. The “NVT ratio” is an on-chain indicator which monitors the relationship between the market cap of Bitcoin and its transaction volume.
When the metric’s value is large relative to the network’s coin transaction volume, it often suggests that the asset’s market capitalization is also substantial. This pattern might indicate that Bitcoin’s price could be inflated.
From my perspective as a crypto investor, it’s intriguing to see such a low market capitalization relative to the high transfer volume. This discrepancy might be an indication that the price of this cryptocurrency has potential for growth.
In the given context, the NVT Golden Cross serves as a key measure of significance for our current discussion. This metric works by examining the relationship between the short-term fluctuations and long-term trends of the NVT ratio. By doing so, it helps identify potential local highs and lows within the NVT ratio.
Specifically, the 10-day Moving Average (MA) signifies the short-term direction, while the 30-day MA indicates the longer-term trend. Here’s a chart illustrating the trend of the Bitcoin NVT Golden Cross over the last couple of months:
On the provided graph, the analyst has marked two areas in the NVT Golden Cross that have significant historical relevance for cryptocurrencies. When the value exceeds 2.2, it suggests that the asset might be approaching its peak, as at this point, the short-term trend of the NVT ratio noticeably outperforms its long-term counterpart. Conversely, when the value falls below -1.6, potential bottom formations may occur.
According to the graph, it’s clear that the indicator has shown a significant drop lately because the value of Bitcoin has significantly decreased. This dip indicates that the metric is now in a lower range, hinting that the price of the coin might be undervalued.
As an analyst, I’ve noticed an interesting pattern this year: the NVT Golden Cross has crossed below its signal line three times. The first occurrence was back in January, right after the spot exchange-traded fund (ETF) approval when the price started to dip. Following that undervaluation phase, we saw a surge towards a new all-time high.
Last month, the indicator signaled a second time that it had entered the bottoming region, marking a low point. This low seemed to set the stage for an upward trend potentially reaching $70,000. Since both previous occurrences indicated bullishness in Bitcoin, we’ll have to wait and see what this third instance might bring.
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2024-08-09 10:16