Bitcoin [BTC] has had a remarkable October, defying earlier lows and surpassing previous losses with significant gains.
After touching a low of $58867, BTC surged to July levels of $69k.
Presently, at the time of writing, Bitcoin is being traded at $69028, reflecting a 7.96% increase over the past week and a 9.52% rise on a monthly scale.
The recent spike has evoked mixed feelings among analysts, sparking both optimism and pessimism. For instance, analyst Burak Kesmeci from CryptoQuant has hinted at a potential market correction, highlighting the NVT golden cross.
Assessment of Market Sentiment
Kesmeci’s analysis points to Bitcoin’s NVT Golden Cross entering a critical zone in the short run.
According to him, a correction in the market is inevitable before any potential upturn can take place.
For those unfamiliar, the NVT Golden Cross entering the critical zone suggests that BTC’s current valuation is surpassing its network activity’s intrinsic worth.
Thus, an overvaluation relative to the value being transacted on the blockchain has occurred.
This situation indicates a probable overbought scenario where price escalation lacks support from the network’s fundamental functionalities.
Such circumstances often foreshadow a price correction to realign market prices with network fundamentals.
Following this analysis, it is anticipated that Bitcoin will undergo a downward correction in the near future.
Interpretation of BTC’s Charts
As stated by Kesmeci, the existing fundamentals do not uphold a lasting rally and may decline to match the prevailing demand.
Therefore, the pertinent question arises concerning the sustainability of the ongoing rally and the insight provided by market indicators.
The first crucial indicator to examine is Bitcoin’s NVT Ratio, which gauges the network value concerning transactions.
According to CryptoQuant, the NVT ratio has been ascending in the past week, indicating that BTC is overpriced relative to its actual utility and network operations, resulting in artificially high prices.
Further, Bitcoin’s Stock-to-Flow Ratio has dwindled over the previous week, signaling an increase in the coin’s availability. Elevated BTC supply often steers the market towards a bearish trend, particularly if the demand remains stagnant.
Lastly, Bitcoin’s Price DAA divergence has stayed negative over the recent week, indicating an unsustainable price surge.
A negative Price DAA signifies that the existing rally is fueled by speculation or short-term market fervor.
In essence, although Bitcoin has surged to recent heights, the underpinning market fundamentals suggest an incoming correction. Therefore, the current upsurge is predominantly steered by speculation rather than genuine demand.
An anticipated correction could see Bitcoin retracting to the $65872 support level.