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Bitcoin NVT Golden Cross Data Signals Potential Correction

Bitcoin, the world’s largest cryptocurrency by market capitalization, has been experiencing a strong rally since the beginning of 2024, reaching new all-time highs above $100,000. However, a technical indicator called the NVT Golden Cross suggests that Bitcoin may be due for a correction soon.

The NVT Golden Cross is a metric that measures the ratio of Bitcoin’s network value (the market capitalization) to the amount of transactions on the network. It is calculated by dividing the 90-day moving average of the network value by the 90-day moving average of the daily transaction value. The NVT Golden Cross occurs when this ratio crosses above the 360-day moving average of the same ratio.

The NVT Golden Cross is often used as a gauge of Bitcoin’s valuation, as it indicates how much investors are willing to pay for each unit of transaction on the network. A high NVT ratio implies that investors are paying a premium for Bitcoin, which may signal overvaluation and a possible price correction. A low NVT ratio implies that investors are getting a bargain for Bitcoin, which may signal undervaluation and a possible price increase.

Source: CryptoQuant

According to data from CryptoQuant, a crypto analytics platform, the NVT Golden Cross has crossed above 2.2 four times in the past year, and each time it was followed by a significant drop in Bitcoin’s price. For instance, in April 2023, the NVT Golden Cross reached 2.50, and Bitcoin price dropped by 20% in the following month. In July 2023, the NVT Golden Cross reached 1.95, and Bitcoin price dropped by 23% in the next two weeks. In December 2023, the NVT Golden Cross reached 3.82, and Bitcoin price dropped by 21% in the subsequent month.

As of today, the NVT Golden Cross value stands at 2.49, which is above the 2.2 threshold that has historically preceded a correction. This suggests that Bitcoin may be overvalued at the current levels, and investors should be cautious of a potential pullback.

However, the NVT Golden Cross is not a perfect indicator, and it may not account for other factors that affect Bitcoin’s price, such as supply and demand, institutional adoption, regulatory developments, and innovation. Therefore, investors should not rely solely on the NVT Golden Cross, but also consider other sources of information and analysis before making any trading decisions.

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