Bitcoin is currently treading through a turbulent landscape, hovering around a pivotal support area as market participants grapple with the alignment of its price and network fundamentals. Despite short-term price fluctuations, a deeper examination of on-chain indicators reveals a more complex narrative unfolding beneath the surface.
A notable analysis highlights Bitcoin’s NVT Golden Cross, which is smoothed using a 100-day moving average. This indicator provides valuable insights into the interplay between the cryptocurrency’s market valuation and its on-chain activity.
The Network Value to Transactions (NVT) ratio, akin to a Price-to-Earnings (P/E) multiple in traditional finance, replaces corporate earnings with transaction volume as the economic output measure. Essentially, this metric attempts to address a primary question: Does Bitcoin’s market capitalization reflect the genuine economic activity occurring on the network?
When valuation surges ahead of transaction volume, it signals potential overheating in the market. Conversely, if the price lags behind network usage, it could indicate undervaluation or excessive risk aversion. The NVT Golden Cross enhances this analysis by juxtaposing short-term and long-term trends in the ratio, thereby revealing when substantial price deviations occur relative to fundamental values.
NVT Golden Cross Indicates a Structural Valuation Reset
According to an analyst, the most telling signals from the NVT Golden Cross typically occur during periods of stark negative divergence, where market sentiment and fundamentals are at odds. Presently, the indicator sits at a historically low level of approximately -0.58, signaling a condition that extends beyond mere bearish sentiment.
This peculiar position suggests that Bitcoin is structurally undervalued, with price compression overshadowing any significant drop in on-chain economic activity. Such market conditions are typically seen during instances of forced deleveraging and heightened risk aversion, wherein liquidity exits speculative positions displacing prices downward, despite stable transaction processing on the network. This dynamic often leads to valuation discrepancies that historically serve as critical inflection points rather than marking the end of bullish cycles.
Currently, a key metric to observe is the NVT Golden Cross recovering from -0.58 towards about -0.32. This movement suggests a gradual realignment of price with transaction-driven fundamentals, following a significant valuation reset. Nevertheless, as the indicator remains in the negative zone, it implies that Bitcoin’s pricing continues to reflect conservative estimates relative to its on-chain capabilities.
The transition implied by this setup aligns with market movements from deep undervaluation towards equilibrium. Historically, such phases have coincided with accumulation periods and more methodical capital allocation, setting the stage for constructive price discovery.
Bitcoin Consolidates Above Long-Term Support as Trend Weakens
On the weekly chart, Bitcoin is trading around the $88,000 mark after experiencing a sharp downturn from cycle highs exceeding $120,000. Currently, the cryptocurrency is consolidating just above the rising 200-day moving average, strategically positioned around the mid-$80,000s. This level has historically been a fulcrum between extended bull markets and significant corrections, underscoring the importance of the current market structure.
However, momentum indicators indicate a notable weakening. Bitcoin has lost ground below the 50-day moving average and has struggled to retake this level, suggesting that sellers maintain control in the short to medium term. With the slope of the 50-day moving average flattening, it reinforces the transition from expansion to consolidation. Concurrently, the 100-day moving average is trending downward, contributing additional resistance in the $95,000 to $100,000 region.
Selling pressure has intensified as the price broke down from the $100,000 threshold, while the recent bounce back to $88,000 has occurred on relatively lighter trading volume. This signals that while buyers are attempting to defend support, there is insufficient conviction for a definitive trend reversal.
As long as Bitcoin remains above the 200-day moving average, the broader uptrend is technically sustained. Yet, a breach below the $85,000 to $88,000 zone could precipitate a more profound retracement. In contrast, a bullish confirmation necessitates a decisive reclaim of the 50-day moving average alongside an increase in trading volume.
