Bitcoin has continued its downward trend over the past 24 hours. Here’s what on-chain data suggests about the possibility of reaching a bottom soon.
Bitcoin NVT Golden Cross Enters Oversold Region
As highlighted by an analyst in a recent CryptoQuant post, the Bitcoin NVT Golden Cross has experienced a significant drop lately. The “Network Value to Transactions (NVT) Ratio” is an on-chain indicator that assesses the relationship between Bitcoin’s market capitalization and its transaction volume.
When this metric exceeds 1, it indicates that the asset’s market cap is disproportionately high compared to its transaction capacity. Such a trend may imply that BTC is overvalued.
Conversely, when the indicator falls below zero, it can suggest that the cryptocurrency might be poised for a rebound, as its transaction volume is high relative to its market cap.
In this context, the focus isn’t solely on the NVT Ratio itself but rather on a modified version known as the NVT Golden Cross. This indicator compares the short-term trend of the NVT Ratio to its long-term counterpart, helping to determine whether a top or bottom is imminent.
To analyze these trends, the metric utilizes the 10-day and 30-day moving averages (MAs) of the NVT Ratio. Below is a chart shared by the analyst illustrating the trend of the Bitcoin NVT Golden Cross over the past few years:
The value of the indicator appears to have sharply decreased recently | Source: CryptoQuant
Historically, there are two key zones for the Bitcoin NVT Golden Cross. The first zone is located above 2.2 (marked in red), where the metric’s peaks generally signify overvaluation of the cryptocurrency, potentially leading to bearish behavior.
The second zone is below -1.6 (marked in green), indicating where bottoms tend to form in the NVT Golden Cross. When the indicator enters this region, it has frequently signaled bullish potential for the asset.
The chart indicates that the Bitcoin NVT Golden Cross has recently dropped significantly due to the price crash of BTC. The metric is now situated within the bottoming zone, suggesting that the asset may be starting to be considered oversold.
Currently, the indicator’s value has fallen to -2.4, still higher than previous negative spikes marked by the analyst in the graph. Therefore, while BTC may be approaching a bottom, further decline could still occur before reaching it.
In terms of on-chain support, the market intelligence platform IntoTheBlock has noted that a significant support level lies just below $72,000. Thus, if BTC’s drop continues, there is a possibility that the asset might find temporary relief at this price point.
The distribution of costs for BTC addresses across different price ranges | Source: IntoTheBlock on X
BTC Price Update
After the latest round of declines within the last day, Bitcoin’s price has dropped to approximately $81,600.
It appears the price of the coin has been on a downward trajectory lately | Source: BTCUSDT on TradingView
Image from Dall-E, data from IntoTheBlock.com, chart from TradingView.com
