Bitcoin NVT Flashes Buy Signal, Bottom In?
24 August 2023 - 8:00PM
NEWSBTC
On-chain data shows the Bitcoin NVT ratio is currently flashing a
buy signal, a sign that the bottom for the asset’s price might now
be in. Bitcoin NVT Golden Cross Is Showing A Green Signal As
pointed out by an analyst in a CryptoQuant post, the Network Value
to Transactions (NVT) Golden Cross has now dipped below the -2
mark. The “Network Value to Transactions (NVT) ratio” is an
indicator that measures the ratio between the Bitcoin market cap
and transaction volume (both denominated in USD). When the value of
this metric is high, it means that the price of the asset (that is,
its market cap) is high when compared to its ability to transact
coins (the transaction volume). Such a trend may imply that BTC is
overvalued right now. On the other hand, low values can suggest
that the market cap isn’t that much relative to the volume, so the
cryptocurrency’s price may be undervalued at the moment. In the
context of the current discussion, the NVT ratio itself isn’t of
interest, but rather a modified form of it called the “NVT Golden
Cross” is. This new indicator aims to pinpoint tops and bottoms in
the NVT ratio by comparing its 30-day moving average (MA) with the
10-day one. Now, here is a chart that shows the trend in the
Bitcoin NVT Golden Cross over the past year: Looks like the value
of the metric seems to have been heading down in recent days |
Source: CryptoQuant As displayed in the above graph, the Bitcoin
NVT Golden Cross has plunged recently as the cryptocurrency’s price
has gone through a crash. Following the latest drawdown, the
indicator is now deep inside the negative territory, at a value
below -2. In the chart, the quant has marked two lines for the
metric that have held some significance for the asset during the
past. The first of these (marked in red) takes place at around 2.2,
while the other one (green) is at -1.6. Related Reading: Bitcoin
Exchange Reserve Shoots Up, Pain Not Over Yet? Historically,
whenever the NVT Golden Cross has crossed above the former line,
the cryptocurrency has generally observed the formation of a local
top. Similarly, a break below the latter level has resulted in
bottoms for the coin. From the chart, it’s clear that the indicator
has now dipped firmly below the bottom line, implying that Bitcoin
might be undervalued currently. In the past year, there have been
three other instances of the indicator plunging below the line,
each coinciding with some sort of low for the price. The first two
of these had reached bottom values similar to now, while the third
occurrence (which is the latest one) saw the NVT Golden Cross dip
much deeper towards the -3.1 mark before the bottom was hit.
Related Reading: This Bitcoin Indicator Is On The Verge Of A
Bullish Breakout It’s unclear which scenario might play out for
Bitcoin this time, but one thing may be clear from this pattern:
the bottom could be near for the cryptocurrency, or may even
already be in. BTC Price At the time of writing, Bitcoin is trading
at around $26,500, down 7% in the last week. BTC hasn't made much
recovery yet | Source: BTCUSD on TradingView Featured image from
Michael Förtsch on Unsplash.com, charts from TradingView.com,
CryptoQuant.com
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