On-chain data indicates that the Bitcoin Network Value to Transactions (NVT) Golden Cross is currently on a path that could hint at a bearish trend for the BTC price.
The Bitcoin NVT Golden Cross Is Approaching Overheated Levels Right Now
As noted by an analyst in a CryptoQuant Quicktake article, the NVT Golden Cross currently holds a high value. The “NVT Ratio” is an on-chain metric that tracks the ratio of the Bitcoin market capitalization to its transaction volume.
In this context, the market capitalization represents the total value of the cryptocurrency’s circulating supply at the current market price, while the transaction volume gauges the total amount of the asset participating in transfer activities within the network.
A high NVT Ratio signifies that BTC’s value (the market cap) is elevated relative to its transaction capacity (the transaction volume). Such a trend may indicate that the coin is overvalued.
In this discussion, the revised form of the NVT Ratio known as the NVT Golden Cross is our focus. The NVT Golden Cross is a metric akin to the Bollinger Bands, analyzing the short-term trend of the NVT Ratio against its long-term counterpart to assess if a peak or trough is near. This indicator utilizes a 10-day moving average (MA) for the short-term trend and a 30-day MA for the long-range trend.
Here is a chart that illustrates the trend of the Bitcoin NVT Golden Cross over the past year:
The chart above demonstrates that the Bitcoin NVT Golden Cross recently reached a high value. The rise of the indicator was so pronounced that it crossed into a special zone beyond the 2.2 mark.
Within this region, the asset’s price has frequently formed some type of peak. This trend also held true during the recent movement into this zone, as BTC’s price experienced a bearish reversal.
After a retracement in the coin’s price over the past week, the metric has also begun to cool off. Despite this decline, its value remains relatively elevated. As the analyst mentions,
Currently, the NVT suggests that the pullback is likely to continue and that the recent price increase was influenced by manipulation. For the upward trend to be sustainable, transaction volumes on the network must see an increase.
Historically, bottoms have generally occurred when the Bitcoin NVT Golden Cross drops below the -1.6 mark. So far, the indicator has only fallen to 1.8, indicating that it still has considerable ground to cover before reaching this area.
BTC Price
As of this writing, Bitcoin is trading around $83,300, down nearly 6% over the last seven days.
