This Bitcoin indicator may have signaled the recent market downturn in advance – TradingView News

The Bitcoin Network Value to Transactions (NVT) Golden Cross indicator reached overheated values ​​that coincided with the price’s recent local peak.

Bitcoin NVT Golden Cross rose to 3.17 during the recent peak

An analyst explained in a CryptoQuant Quicktake post that the NVT Golden Cross may have served as an indicator of the recent peak in cryptocurrency prices.

The “NVT” refers to an on-chain metric that tracks the relationship between Bitcoin’s market capitalization and transaction volume (both in USD). This ratio is generally used to determine whether the asset's price is fair or not.

When the indicator has a high value, the price of the asset (the market capitalization) is high compared to its utility (the transaction volume). Such a trend could indicate that the coin may be currently overvalued.

On the other hand, the low ratio could indicate that the network is not properly valued compared to its high ability to transact capital and therefore its price may be due to an increase.

In the context of the current discussion, it is not the NVT itself that is interesting, but a modified version called NVT Golden Cross. This metric compares NVT's short-term trend (10-day moving average) with its long-term trend (30-day MA).

Like the NVT, this variant is also used to estimate the fairness of the asset. In the past, values ​​above 2.2 have been a signal that BTC is overheated, as the short-term trend at these levels is significantly faster than the long-term one.

Likewise, values ​​below the -1.6 level may indicate that the cryptocurrency is undervalued; Therefore, the price could likely form a bottom and see a recovery soon.

Here is a chart showing the trend of Bitcoin NVT Golden Cross over the past few years:

NewsBTC

As shown in the chart above, the Bitcoin NVT Golden Cross rose to relatively high levels earlier. This growth came as the asset’s price rose towards the $71,000 mark.

The indicator had reached the 3.17 level during this increase, suggesting that the coin may have been overpriced. In fact, the asset subsequently experienced a sharp decline that brought it back below the $65,000 mark.

As the Quant has marked on the chart, a similar pattern has been observed at various points over the past few years, with the NVT Golden Cross reaching these high levels and resulting in a price correction.

Since the last overheated signal, the indicator has cooled along with Bitcoin price, although it has not yet moved in the negative direction.

BTC price

Bitcoin has recovered over the last day as its price has now risen back to $67,800.

Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers