Bitcoin 'Enters Value Zone' When BTC Floor Index Turns Green Again

Dynamic range NVT is back to levels seen only twice in two years: the coronavirus crash in March 2020 and last year’s reaction after Chinese miners shut down.

Bitcoin 'enters value zone' as BTC floor price index turns green again

Data confirms that Bitcoin (BTC) has just returned to a key price zone signaling the beginning of an end to the downtrends.

In one tweet 24, Charles Edwards, founder of crypto investment firm Capriole, flagged Bitcoin’s network value-to-transaction (NVT) index because it gave an “oversold” signal. new and rare.

NVT says it’s time to reverse

Bitcoin’s price loss accelerated over the weekend, with markets not far away from retesting the nominal $30,000 mark before Wall Street opens Monday.

However, for on-chain analysts, there is plenty of reason to believe that the extent of damage witnessed recently is more of a market overreaction than a taste of things to come.

Supporting that thesis is NVT, which calculates Bitcoin’s overbought or oversold levels.

NVT, first developed by statistician Willy Woo and entrepreneur Dmitry Kalichkin, uses the ratio of Bitcoin’s market capitalization to its daily on-chain transaction value to generate an idea of ​​whether behavior whether the price actually corresponds to the on-chain operation.

Edwards then adjusted the metric by adding standard deviation bands to account for natural changes in on-chain behavior as Bitcoin matures. The result is the so-called “dynamic range NVT” and this very embodiment has returned to its green zone this week.

Over the past two years, only the summer of 2021 – the post-ban period of mining in China – and the coronavirus crash in March 2020 have produced such NVT behavior.

“Bitcoin network valuation based on transaction value throughput shows we have entered a value zone,” commented Edwards on Twitter alongside a print of NVT’s latest movements.

Bitcoin 'enters value zone' as BTC floor price index turns green again 7
Bitcoin Dynamic Range NVT chart against BTC/USD chart. Source: Charles Edwards / Twitter

“Humans have short memories”

Back in the spot market, others have questioned the veracity of recent losses, even as BTC/USD briefly exceeded -50% from its all-time high. November.

Related: Liquidity Supply ‘Increases Constantly’ – 5 Things to Watch for Bitcoin This Week

With two months being all it takes for some balances to halve, trader, analyst and podcast host Scott Melker, better known as the “Wolf of All Streets,” has reminds followers that this is nothing new for Bitcoin.

“People have brief memories. In May, Bitcoin went from 60k to 30k in 10 DAYS! 10 DAYS”, he tweeted.

“That’s much stronger, with much higher volume, and it was only eight months ago. We have been here before.”

Bitcoin 'enters value zone' as BTC floor price index turns green again 9
BTC/USD (Bitstamp) 1-day candlestick chart shows a drop in May 2021. Source: TradingView

Therefore, when it comes to the knee-jerk reaction from the crypto markets, the current drop is, in Melker’s eyes, negligible. Meanwhile, sentiment has been at or near the bottom of the historical range for several weeks.

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