Bitcoin’s drop from approximately $100,000 to $90,000 did not catch many off guard, given that CryptoCrypto had previously highlighted significant signs of an overheated market right before the sudden crash.
The recent market shakeout was anticipated to bring about a normalization of conditions, paving the way for a robust recovery. However, a crucial indicator known as the Bitcoin NVT Golden Cross continued to indicate elevated levels.
Bitcoin’s NVT Golden Cross Signaling
For reference, this indicator is a revised form of the Network Value to Transaction (NVT) metric. It has a history of accurately identifying both local highs and lows in Bitcoin whenever it shifts to positive or negative territory. A value exceeding 2.2 (indicating overbuying) may hint at a potential peak, while a figure below -1.6 could point to a nearby bottom.
CryptoQuant’s analyst DarkFost recently raised concerns when the indicator turned positive, suggesting a probable peak if it sustained its elevated position. At present, although the metric remains high, it is below the risky 2.2 mark despite Bitcoin experiencing a 9% downturn.
If we analyze historical patterns, the current BTC NVT Golden Cross reading stands at 1.73 (depicted by green bars), hinting that Bitcoin might still be poised for a further adjustment.
Nevertheless, other signs of market overheating such as funding rates have normalized following the decline to $90,000.
As per IntoTheBlock’s analysis, the recent market shakeout represented a clearing of leveraged positions, potentially reaching its culmination after the adjustment of high leveraged positions and the stabilization of funding rates.
Despite this, the diminished demand for Bitcoin among U.S. investors—showing negative interest for the first time post-U.S. elections—added to the weakening sentiment in the Bitcoin market. This shift was evidenced by the Coinbase Premium Index, which monitors the enthusiasm of U.S. investors toward Bitcoin.
Is a reversal in the trend on the horizon? Many experts in the market are optimistic that the market has bottomed out, and a recovery effort post the U.S. Thanksgiving holiday is likely.