9 August 2024
On-chain data shows that the Bitcoin Network Value to Transactions (NVT) Golden Cross has dipped into the bottom region, which may be bullish for the asset’s price.
Bitcoin NVT Golden Cross Has Seen A Sharp Decline Recently
As an analyst in a CryptoQuant Quicktake post explained, the Bitcoin NVT Golden Cross is giving a bottom signal for the third time in 2024. The “NVT ratio” is an on-chain metric that keeps track of the ratio between the Bitcoin market cap and transaction volume.
When the value of this metric is high, it means the asset’s value (that is, the market cap) is high when compared to the network’s ability to transact coins (the transaction volume). Such a trend could imply the BTC price is overvalued.
On the other hand, the low indicator suggests the market cap is low compared to the transfer volume, so the cryptocurrency’s price could have room for growth.
In the context of the current topic, a modified version of the NVT ratio is the actual indicator of relevance: the NVT Golden Cross. This metric compares the short-term trend of the metric with its long-term one to determine the appearances of local tops and bottoms in the NVT ratio.
More particularly, the 10-day moving average (MA) stands for the short-term trend and the 30-day MA for the long-term. Now, here is a chart that shows the trend in the Bitcoin NVT Golden Cross over the over the past few months:
In the graph, the quant has highlighted the two regions of the NVT Golden Cross that have historically been relevant for cryptocurrency. At values above 2.2, the asset can be assumed to be close to the top, as here, the short-term trend of the NVT ratio has significantly surpassed its long-term one. Similarly, the zone under -1.6 is where bottoms can probably form.
From the chart, it’s visible that the indicator has observed a plunge recently as the Bitcoin price itself has crashed down. The metric has entered the latter region, suggesting that the coin may have become underpriced.
This is the third time that the NVT Golden Cross has breached this territory this year, with the first instance occurring back in January, during the price drawdown that had followed the spot exchange-traded fund (ETF) approval. This period of the asset being undervalued was followed by a rally towards the new all-time high (ATH).
The second instance of the indicator entering the bottoming zone was last month, with the low paving the way for a rally toward $70,000. Given that both of these occurrences proved bullish for Bitcoin, it remains to be seen where this third one leads.
BTC Price
Bitcoin has furthered its recovery during the past day as its price has now broken back above the $58,200 mark.