The Bitcoin Network Value to Transaction (NVT) Golden Cross indicator has reached overheated values in line with recent regional highs in price.
Bitcoin NVT Golden Cross soars to recent peak of 3.17
In a CryptoQuant Quicktake post, analysts explained that the NVT Golden Cross may have served as an indicator of recent highs in crypto prices.
“NVT” refers to an on-chain metric that tracks the ratio of Bitcoin market capitalization to trading volume (both in USD). This ratio is typically used to determine whether an asset is fairly priced.
If the value of the indicator is high, the price of the asset (market capitalization) is high relative to its utility (trading volume). Such a trend could suggest that the coin may be currently overvalued.
On the other hand, a low index may suggest that the network is undervalued relative to its high capacity for capital transactions, and therefore its price may be due to inflated prices. there is.
In the context of the current discussion, it is not the NVT itself that is interesting, but the modified version called the NVT Golden Cross. This indicator compares the short-term trend (10-day moving average) and long-term trend (30-day moving average) of NVT.
Similar to NVT, this variant is also used to estimate the equity of assets. Historically, values above 2.2 indicate that BTC is overheating as at these levels the short-term trend significantly outweighs the long-term trend.
Similarly, values below the -1.6 level may indicate that the cryptocurrency is undervalued. Therefore, the price will likely form a bottom and may bounce back soon.
Here is a chart showing the trend of the Bitcoin NVT Golden Cross over the past few years.
The value of the metric seems to have been going up in recent days | Source: CryptoQuant
As shown in the graph above, the Bitcoin NVT Golden Cross has previously risen to relatively high levels. This growth occurred as asset prices rose towards his $71,000 level.
In this recent surge, the indicator reached a level of 3.17, suggesting that the coin’s price may have gotten too high. In fact, the asset observed a sharp drawdown following this, falling below the $65,000 level.
Similar patterns of NVT golden crosses reaching these high levels and resulting in price corrections have been observed at various points in the past few years as marked by quants on their charts.
Since the latest overheating signal, the indicator has cooled down along with Bitcoin price, but has not yet moved to the negative side.
BTC price
Bitcoin has rebounded over the past day, with the price currently rising 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 of Kanchanara on Unsplash.com, CryptoQuant.com, Charts on TradingView.com
