According to the latest on-chain data, the Bitcoin Network Value to Transactions (NVT) Golden Cross has entered a crucial region. What could this mean for the price of the most important cryptocurrency?
What does the falling NVT Golden Cross mean for the price?
In a recent Quicktake post on the CryptoQuant platform, an analyst with the pseudonym Burakkesmeci revealed that the price of Bitcoin may have reached a ‘local low’. This exciting forecast is based on the latest movement of the ‘NVT Golden Cross’ metric.
For context, the ‘Network Value to Transactions’ ratio is an on-chain indicator that estimates the difference between Bitcoin market capitalization and transaction volume. Typically, a high NVT value indicates that the price of an asset is high compared to the network’s transaction volume, indicating that the coin is overvalued.
Conversely, when the value of the NVT metric is low, it implies that the market value of the coin is small relative to the transaction volume. Typically, this indicates that the asset is undervalued and the price may still have room for upward movement.
Now, the Golden Cross indicator is a modified version of the NVT ratio, and it helps to highlight gradual buying and selling zones in short-term trends. According to Burakkesmeci, he explained that when the NVT GC exceeds 2.2 (the red zone), it means that the price is overheating in a short-term trend (and the formation of a potential local top).
On the other hand, the NVT Golden Cross falling below -1.6 indicates that the price decline is easing, signaling a potential bottom. Burakkesmeci noted that these local tops and bottoms are regions and not just precise levels.
As you can see in the chart above, the NVT Golden Cross has passed below -1.6 and is currently around -3.3, indicating that the Bitcoin price is at a local low. According to the CryptoQuant analyst, this could be a “gradual buying opportunity” for investors looking to enter the market.
Bitcoin market in extreme greed
Investors will need to proceed with caution, especially as the Bitcoin market appears to be overheating in the long term. According to another CryptoQuant analyst, the Fear & Greed Index has highlighted extreme greed for the top cryptocurrency.
When the Fear & Greed Index moves to one side, there is usually a potential for market reversal depending on sentiment. In this case, where the market is in extreme greed, Bitcoin price may be about to witness a correction.
At the time of writing, the price of BTC is just under $91,000, reflecting a 3% increase in the past day. According to CoinGecko data, the market leader is up as much as 19% over the past seven days.