Recent on-chain data from the Bitcoin network indicates that the Network Value to Transactions (NVT) Golden Cross is currently on a trajectory that may suggest a bearish outcome for the price of BTC.
Bitcoin NVT Golden Cross Approaching Overheated Territory
According to an analyst featured in a CryptoQuant Quicktake post, the NVT Golden Cross has reached a high value. The “NVT Ratio” serves as an on-chain indicator that tracks the ratio between the market capitalization of Bitcoin and its transaction volume.
To clarify, the market capitalization reflects the total value of Bitcoin’s circulating supply at its current market price, while transaction volume indicates the total amount of Bitcoin involved in transfer activities on the network.
A high NVT Ratio suggests that BTC’s market value is inflated relative to its transaction volume, indicating that the cryptocurrency might be overvalued. Conversely, a lower ratio implies that the price could rebound, as the market cap is not excessively high compared to the transaction volume.
In this context, the focus is on a modified version of the NVT Ratio known as the NVT Golden Cross. This particular indicator, akin to Bollinger Bands, compares the short-term trend of the NVT Ratio against its long-term trend to identify potential price tops or bottoms. It utilizes a 10-day moving average (MA) for short-term analysis and a 30-day MA for long-term evaluation.
The chart below illustrates the trend of the Bitcoin NVT Golden Cross over the past year:
The graph demonstrates that the Bitcoin NVT Golden Cross recently achieved a peak value, with the indicator sharply rising and surpassing the 2.2 mark. Historically, entering this zone has preceded price tops for the asset. This trend appears consistent with recent behavior, as BTC’s price has faced a bearish reversal.
Although the price of Bitcoin has pulled back in the past week, causing the NVT to cool off, its value remains relatively high. As the analyst noted:
“Currently, the NVT indicates that the pullback is likely to continue and that the recent price rise was driven by manipulation. For the upward trend to be sustainable, transaction volumes on the network must increase.”
Historically, bottoms in the Bitcoin market have generally occurred when the NVT Golden Cross descends below the -1.6 mark. Thus far, the indicator has only dropped to 1.8, indicating that it still has a significant way to go before entering a potential recovery zone.
Current Bitcoin Price Overview
As of the time of this writing, Bitcoin is trading at approximately $83,300, reflecting a decline of nearly 6% over the past seven days.
