On-chain data shows that the Bitcoin NVT Golden Cross has entered overbought territory, something that could prove bearish for the price.
Bitcoin NVT Golden Cross has been moving up lately
As noted by an analyst in a CryptoQuant after, 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 relationship between Bitcoin’s market capitalization and transaction volume (both in USD).
What this metric tells you is whether the asset is currently overpriced or underpriced, based on how the value of the network (the market cap) compares to the ability to trade coins (the transaction volume).
High readings of the indicator suggest that the cryptocurrency limit is too high compared to its volume, which is why the price of the coin may be currently overvalued. Similarly, low readings may imply that the asset may be undervalued at the moment.
Now, a metric derived from the NVT is the “NVT Gold Cross,” which compares the NVT’s 30-day moving average (MA) to its 10-day MA. By taking the ratio of the long-term and short-term trends in this way, the indicator can help pinpoint the tops and bottoms in the NVT.
Here is a chart showing 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 seen in the chart above, the quant has highlighted the historical regions where the Bitcoin NVT Golden Cross has signaled underbought and overbought conditions for the asset.
It seems that the metric readings above 2.2 have been a sign that the cryptocurrency is undersold, while those below the -1.6 level imply an oversold condition.
The chart shows that the indicator hit the undervalued region last month and the price reacted by observing rising momentum. Since then, the statistic has been on an overall upward trend.
About a week ago, when Bitcoin hovered around the $30,000 level, the NVT Gold Cross entered overpriced territory. After this formation, the price faced a serious drop as it plunged to the low $27,000 level.
The stat cooled for a while after this sell-off, but in the past few days it has risen again to hit the red zone. This would mean that the asset could become overbought again.
Over the past day, however, Bitcoin has only seen strong upside momentum as the coin’s value has now recovered to levels above $29,000.
In the past, peaks weren’t always formed immediately when the NVT Gold Cross came to this area, so this wouldn’t exactly be unprecedented. Given that the rise may have just made the coin too expensive, a local high could be reached for the asset soon, if the pattern of this metric is anything to go by.
BTC price
At the time of writing, Bitcoin is trading around $29,400, up 1% over the past week.
Looks like BTC has sharply surged over the last 24 hours | Source: BTCUSD on TradingView
Featured image of mana5280 on Unsplash.com, charts from TradingView.com, CryptoQuant.com
