Bitcoin (BTC), which just entered a key price area, has signaled that the bear phase is over, data confirms.
Charles Edwards, the founder of Crypto Investment firm Capriole, tweeted on January 24 that Bitcoin’s network value-to-transaction (NVT) ratio was being highlighted as it gave a rare “oversold” signal.
NVT claims it’s reversal-time
The market was not far from a retest at the seminal $30,000 mark before Monday’s Wall Street Open. Bitcoin price losses increased over the weekend.
On-chain analysts believe that recent losses are more a sign of market reaction than a hint of things to come.
NVT supports this thesis, which calculates the overbought and oversold Bitcoins.
NVT was first created by Willy Woo, a statistician, and Dmitry Kalichkin (entrepreneur), to determine whether price behavior corresponds with on-chain activity.
Edwards modified the metric further by adding standard deviation bands in order to account for natural changes as Bitcoin matures. This resulted in the “dynamic range NVT,” which is what was returned to its green zone last week.
These NVT behaviors have been observed in two years: only summer 2021, the post-China mining ban period, and the coronavirus crisis of March 2020.
Edwards tweeted, “Valuing Bitcoin network based upon transaction value throughput suggests that we have entered the Value Zone,” alongside a print from NVT’s most recent movements.
Bitcoin dynamic range NVT vs. BTC/USD chart. Source: Charles Edwards/Twitter
“People have very short memories.”
Others questioned the legitimacy of recent losses on the spot market. Even though BTC/USD briefly exceeded -50% against November’s all time highs,
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Scott Melker, a trader, analyst, and podcast host, reminded his followers that two months was all it took to make some balances halve.
“People have very short memories. Bitcoin soared from 60K to $30K in just 10 days! He tweeted, “10 DAYS!”
“That was much more aggressive and on much higher volumes than it was 8 months ago. “We’ve been there before.”
BTC/USD 1-day candle charts (Bitstamp), showing May 2021 decline. Source: TradingView
According to Melker, the current drawdown in crypto markets’ kneejerk reactions is not surprising. For several weeks, sentiment has been hovering at the bottom of its historical range.