Bitcoin NVT Flashes Buy Signal, Bottom In?

Keshav Verma

1 year ago

3 mins read

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On-chain data shows the Bitcoin NVT ratio is currently flashing a buy signal, a sign that the bottom for the asset’s price might now be in.

Bitcoin NVT Golden Cross Is Showing A Green Signal

As pointed out by an analyst in a CryptoQuant post, the Network Value to Transactions (NVT) Golden Cross has now dipped below the -2 mark. The “Network Value to Transactions (NVT) ratio” is an indicator that measures the ratio between the Bitcoin market cap and transaction volume (both denominated in USD).

When the value of this metric is high, it means that the price of the asset (that is, its market cap) is high when compared to its ability to transact coins (the transaction volume). Such a trend may imply that BTC is overvalued right now.

On the other hand, low values can suggest that the market cap isn’t that much relative to the volume, so the cryptocurrency’s price may be undervalued at the moment.

In the context of the current discussion, the NVT ratio itself isn’t of interest, but rather a modified form of it called the “NVT Golden Cross” is. This new indicator aims to pinpoint tops and bottoms in the NVT ratio by comparing its 30-day moving average (MA) with the 10-day one.

Now, here is a chart that shows the trend in the Bitcoin NVT Golden Cross over the past year:

Looks like the value of the metric seems to have been heading down in recent days | Source: CryptoQuant

As displayed in the above graph, the Bitcoin NVT Golden Cross has plunged recently as the cryptocurrency’s price has gone through a crash. Following the latest drawdown, the indicator is now deep inside the negative territory, at a value below -2.

In the chart, the quant has marked two lines for the metric that have held some significance for the asset during the past. The first of these (marked in red) takes place at around 2.2, while the other one (green) is at -1.6.

Historically, whenever the NVT Golden Cross has crossed above the former line, the cryptocurrency has generally observed the formation of a local top. Similarly, a break below the latter level has resulted in bottoms for the coin.

From the chart, it’s clear that the indicator has now dipped firmly below the bottom line, implying that Bitcoin might be undervalued currently. In the past year, there have been three other instances of the indicator plunging below the line, each coinciding with some sort of low for the price.

The first two of these had reached bottom values similar to now, while the third occurrence (which is the latest one) saw the NVT Golden Cross dip much deeper towards the -3.1 mark before the bottom was hit.

It’s unclear which scenario might play out for Bitcoin this time, but one thing may be clear from this pattern: the bottom could be near for the cryptocurrency, or may even already be in.

BTC Price

At the time of writing, Bitcoin is trading at around $26,500, down 7% in the last week.

BTC hasn't made much recovery yet | Source: BTCUSD on TradingView

Featured image from Michael Förtsch 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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