According to a CryptoQuant Quicktake post published earlier today, the Network Value to Transactions (NVT) Golden Cross suggests that Bitcoin (BTC) currently holds a high market capitalization while network transaction volume remains low. This has raised concerns that BTC’s price may be inflated.
Bitcoin Overpriced At Current Value?
Over the past seven days, BTC has dropped 5.5%, trading in the low $80,000 range at the time of writing. Earlier this month, the top cryptocurrency hit a potential local bottom at around $76,000, sparking hopes of an ensuing price rally.
However, CryptoQuant analyst BorisVest warns that BTC’s troubles may not be over yet. In a Quicktake post, the analyst remarked that based on the NVT Golden Cross, Bitcoin’s price decline could continue.
For the uninitiated, the NVT Golden Cross is calculated by dividing the market capitalization of an asset by its network transaction volume. The post reads:
A high market cap with low transaction volume suggests that Bitcoin’s price may be inflated due to speculative activity. This often leads to or indicates potential pullbacks.
BorisVest explained that the NVT metric can be used for both short- and long-term analysis. The analyst shared the following chart, recommending that investors wait until the indicator moves into the green zone before making any buying decisions.
Once the NVT indicator enters green territory, it would suggest that BTC’s market capitalization is low, while network transaction volume is rising – a scenario that presents a strong buying opportunity for investors and traders.
That said, the current position of the NVT indicator suggests that BTC’s price pullback is likely to continue. Additionally, the analysis suggests that Bitcoin’s recent price surge may have been driven by market manipulation.
For BTC’s price to maintain its upward momentum in the long run, network transaction volume must increase sustainably. Meanwhile, fellow crypto analyst Ali Martinez has a different perspective on Bitcoin’s near-term price action.
BTC Traders Unlikely To Sell At Existing Prices
In an X post today, Martinez noted that BTC traders are currently sitting on an average unrealized loss of 14.57%. This could discourage them from selling at current prices and locking in a loss.
Several macroeconomic indicators suggest a potential trend reversal for BTC in the coming weeks or months. For instance, crypto analyst Master of Crypto recently highlighted that BTC could be on the verge of a bullish reversal, with the M2 money supply expected to increase.
Additionally, technical indicators also hint at a price rally. A noted crypto trader recently pointed out that BTC is following the bullish ‘megaphone pattern’. At press time, BTC trades at $83,444, up 0.8% in the last 24 hours.
Featured Image from Unsplash.com, charts from CryptoQuant, X and TradingView.com
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