On-chain data shows that the Bitcoin Network Value to Transactions (NVT) Golden Cross has dipped into the lower region, which could 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 explainedThe Bitcoin NVT Golden Cross is giving a bottoming signal for the third time in 2024. The “NVT relationship”It is an on-chain metric that monitors the relationship between Bitcoin’s market cap and transaction volume.
When the value of this metric is high, it means that the value of the asset (i.e., the market cap) is high when compared to the network’s ability to transact coins (the transaction volume). Such a trend may imply that the price of BTC is overvalued.
On the other hand, the low indicator suggests that the market cap is low compared to the transfer volume, so the cryptocurrency price may have room for growth.
In the context of the current topic, a modified version of the NVT index is the true indicator of relevance: the Golden Cross NVT. This metric compares the short-term trend of the metric to the long-term trend to determine the appearance of local tops and bottoms in the NVT index.
More specifically, the 10-day moving average (MA) represents the short-term trend and the 30-day MA represents the long-term trend. Now, here is a chart that shows the Bitcoin NVT Golden Cross trend over the past few months:
On the chart, the quant highlighted the two regions of the NVT Golden Cross that have been historically relevant for the cryptocurrency. At values above 2.2, it can be assumed that the asset is close to the top, as here the short-term trend of the NVT ratio has significantly outperformed the long-term trend. Similarly, the zone below -1.6 is where bottoms can likely form.
From the chart, it is visible that the indicator has seen a decline recently as the price of Bitcoin itself has fallen. The metric has entered the latter region, suggesting that the coin may have become undervalued.
This is the third time the NVT Golden Cross has breached this territory this year, with the first occurrence occurring in January during the price reduction that followed the spot exchange traded fund (ETF) approval. This period of undervaluation of the asset was followed by a recovery towards the new all-time high (ATH).
The second instance of the indicator bottoming out occurred last month, with the low paving the way for a recovery towards the $70,000 entry. Given that both occurrences proved bullish for Bitcoin, it remains to be seen where this third one leads.
BTC Price
Bitcoin has been on a recovery over the past day as its price has surged past the $58,200 mark.