Bitcoin Bearish Signal: NVT Golden Cross Enters Overbought Zone

Keshav Verma

2 years ago

3 mins read

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On-chain data shows the Bitcoin NVT Golden Cross has entered into the overbought region, something that could be bearish for the price.

Bitcoin NVT Golden Cross Has Been Going Up Recently

As pointed out by an analyst in a CryptoQuant post, the most recent touch of this zone led to a drop in the price of the cryptocurrency. The “Network Value to Transactions” (NVT) is an indicator that measures the ratio between the market cap of Bitcoin and its transaction volume (both in USD).

What this metric tells is whether the asset is overpriced or underpriced right now, based on how the value of the network (the market cap) compares with its ability to transact coins (the transaction volume).

High values of the indicator suggest the cryptocurrency’s cap is inflated compared to its volume, and hence, the coin’s price may be overvalued currently. Similarly, low values can imply the asset may be undervalued at the moment.

Now, a metric derived from the NVT is the “NVT Golden Cross,” which compares the 30-day moving average (MA) of the NVT with its 10-day MA. By taking the ratio of the long-term and short-term trends like this, the indicator can help point out the tops and bottoms in the NVT.

Here is a chart that displays how the value of the Bitcoin NVT Golden Cross has changed over the past year:

The value of the metric seems to have been climbing in recent days | Source: CryptoQuant

As shown in the above graph, the quant has marked the historical regions where the Bitcoin NVT Golden Cross has signaled underbought and overbought conditions for the asset.

It looks like the values of the metric above 2.2 have been a sign that the cryptocurrency is undersold, while those below the -1.6 level have implied an oversold condition.

From the chart, it’s visible that the indicator touched the underpriced region last month, and the price reacted by observing some bullish momentum. Since then, the metric has seen an overall uptrend.

A week or so ago, when Bitcoin was floating around the $30,000 level, the NVT Golden Cross entered inside the overpriced region. Following this formation, the price faced some severe drawdown as it plunged to the low $27,000 level.

The metric cooled down for a while following this selloff, but in the past couple of days, it has once again risen to touch the red zone. This would mean that the asset may be becoming overbought again.

Over the past day, however, Bitcoin has actually only observed some strong upwards momentum, as the coin’s value has now recovered to levels above $29,000 again.

In the past, tops haven’t always been immediately formed whenever the NVT Golden Cross has surged to this area, so this wouldn’t exactly be unprecedented. However, considering that the surge may have only made the coin more overpriced, a local top may be hit soon for the asset, if this metric’s pattern is anything to go by.

BTC Price

At the time of writing, Bitcoin is trading around $29,400, up 1% in the last week.

Looks like BTC has sharply surged over the last 24 hours | Source: BTCUSD on TradingView

Featured image from mana5280 on Unsplash.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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