A recent post on CryptoQuant Quicktake highlights that the Network Value to Transactions (NVT) Golden Cross indicates Bitcoin (BTC) has a significant market capitalization despite low network transaction volumes. This has led to worries that BTC’s price could be overstated.
Is Bitcoin Overvalued at Its Current Price?
In the last week, BTC has seen a decline of 5.5%, trading in the vicinity of $80,000 as of this writing. Earlier in the month, the leading cryptocurrency approached a potential local bottom around $76,000, which ignited optimism for a forthcoming price rally.
Nevertheless, CryptoQuant analyst BorisVest cautions that BTC might still face challenges. In a Quicktake article, the analyst noted that the NVT Golden Cross suggests the price decline for Bitcoin may persist.
For those unfamiliar, the NVT Golden Cross is determined by dividing an asset’s market capitalization by its network transaction volume. The article states:
A substantial market cap coupled with minimal transaction volume indicates that Bitcoin’s price may be inflated, possibly due to speculative behavior. This can often foreshadow or result in market pullbacks.
BorisVest elaborated that the NVT metric can be beneficial for both short- and long-term assessments. The analyst provided a chart suggesting that investors should refrain from making purchases until the indicator transitions into the green zone.
Once the NVT indicator shifts into the green zone, it would indicate that BTC’s market capitalization is lower while network transaction volume is on the rise—representing a favorable buying opportunity for investors and traders.
That being said, the current position of the NVT indicator indicates that Bitcoin’s price pullback is likely to persist. Furthermore, the analysis suggests that the recent price increase of Bitcoin may be the result of market manipulation.
For BTC to retain its upward trajectory in the long term, there needs to be a sustainable increase in network transaction volume. Meanwhile, crypto analyst Ali Martinez presents a different viewpoint regarding Bitcoin’s short-term price dynamics.
BTC Traders Unlikely to Sell at Current Prices
In a post on X earlier today, Martinez highlighted that BTC traders currently face an average unrealized loss of 14.57%. This might dissuade them from selling at current price levels and realizing a loss.
Multiple macroeconomic indicators indicate a potential trend reversal for BTC in the near weeks or months. For example, crypto analyst Master of Crypto recently emphasized that BTC may be poised for a bullish reversal, fueled by an anticipated increase in the M2 money supply.
Additionally, technical indicators are also suggesting a price rally. A well-known crypto trader has pointed out that BTC is exhibiting a bullish ‘megaphone pattern’. At the time of writing, BTC is trading at $83,444, reflecting a 0.8% increase over the past 24 hours.
Featured Image from Unsplash.com, charts from CryptoQuant, X, and TradingView.com
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