On-chain data shows that the Bitcoin Network Value to Transactions (NVT) Golden Cross is currently at a level that may indicate that BTC is undervalued.
Bitcoin NVT Golden Cross has been in the oversold zone recently.
As one analyst at CryptoQuant Quicktake explained, mailAccording to the NVT Golden Cross reading, the cryptocurrency may be entering a recovery phase. The “NVT ratio” is an indicator that tracks the ratio between Bitcoin’s market cap and the network’s transaction volume (both in USD).
When this metric is high, it means that the cryptocurrency’s value (i.e. its market cap) is high compared to its trading volume (transaction volume). This trend may indicate that the asset is currently overpriced.
On the other hand, an indicator that assumes a low value indicates that the market cap is not overvalued compared to the transaction volume, and therefore the coin may have room to see an increase.
In the context of the present topic, it is not the NVT ratio itself that is of interest, but rather a modified version called the NVT Golden Cross. This measure compares the short-term trend of the NVT ratio to the long-term trend to identify the tops and bottoms of the indicator.
The 10-day moving average (MA) represents the short-term trend, while the 30-day MA corresponds to the long-term trend. Now, here is a chart showing the trend in Bitcoin’s NVT Golden Cross over the past few years:
On the chart, the quantitative analyst highlighted two historically important areas for Bitcoin NVT Golden Cross. In the area above 2.2, the asset may be considered overvalued and due for a correction.
Similarly, the area below the -1.6 line is the area where the lowest levels occurred, where the coin became undervalued. The chart shows that the indicator value has recently declined in this last area.
The last time NVT Golden Cross dropped into the low-value zone was during the market crash that followed the approval of an exchange-traded fund (ETF) at the beginning of the year. That drop was followed by the cryptocurrency surging toward its all-time high (ATH).
Therefore, it is possible that Bitcoin will also see a rise this time. The rally may have already started, as the coin has recovered above the $64,000 level since falling below $54,000.
Despite this rise, the NVT Golden Cross is still at -1.8, which is within the low value zone. If this indicator is the benchmark, there may be room to continue rising.
Bitcoin price
At the time of writing, Bitcoin is trading at around $64,900, up 13% from last week.