{"id":391841,"date":"2019-07-31T20:00:05","date_gmt":"2019-07-31T20:00:05","guid":{"rendered":"https:\/\/uniquehot.com\/?p=391841"},"modified":"2024-06-11T08:51:44","modified_gmt":"2024-06-11T08:51:44","slug":"bitcoin-nvt-ratio-top","status":"publish","type":"post","link":"https:\/\/uniquehot.com\/news\/bitcoin-nvt-ratio-top\/","title":{"rendered":"Bitcoin NVT Ratio: Top Predicting Signal Hits Highest Peak, Is a 50% Drop Ahead?"},"content":{"rendered":"

Bitcoin price<\/a> is at a critical junction, with either a major bull run ahead or a deeper correction that could mean the bear market hasn\u2019t yet ended. <\/span>A powerful indicator called the NVT ratio \u2013 designed by one of the crypto community\u2019s best and brightest \u2013 has been used to time the tops and bottoms of Bitcoin<\/a> bubbles, and is currently showing that Bitcoin has fallen from the highest levels it’s ever reached.<\/span><\/p>\n

The last three times Bitcoin reached such high NVT levels, it fell on average 50%. Could a similar drop be ahead? The signal also never signaled a bottom was in back in December, which could suggest that if Bitcoin does drop it could fall further than many are expecting.<\/span><\/p>\n

Bull Market? Using NVT Ratio and Signal to Determine if Bitcoin Has Topped<\/h2>\n

Bitcoin is a powerful financial technology. So powerful, it often borders on religion, and many evangelists work tirelessly to spread the word about the first-ever crypto asset to the masses. Others contribute in other ways, dedicating research, analysis or some other kind of educational contribution, but still work toward the same goal of Bitcoin understanding and awareness.<\/span><\/p>\n

Few have contributed as much to the crypto community as analyst Willy Woo, who created the Bitcoin NVT Ratio<\/a>, or the ratio of the value of Bitcoin\u2019s network compared to the value of the transactions being broadcasted across the network. Woo\u2019s description of the NVT ratio calls it the \u201cBitcoin-land\u201d equivalent to the \u201cprice-earnings ratio\u201d in stock markets. But since Bitcoin is not a company, and doesn\u2019t have earnings, NVT ratio can be used as a \u201cproxy\u201d to company earnings.<\/span><\/p>\n

Related Reading | Why The Next Bitcoin Bull Run Could Eclipse The Last Crypto Bubble<\/a><\/strong><\/em><\/p>\n

The indicator successfully signaled the top of the 2017 rally, then almost immediately after signaled the sharp V-bottom structure in February 2018. The drop from peak to bottom was a nearly 70% drop, and ultimately, was not Bitcoin\u2019s final bottom.<\/span><\/p>\n

Later in 2018, NVT peaked again in July, resulting in a quick 27% fall that was quickly bought back up during the height of the ETF-approval speculation. Shortly after, NVT peaked again in August and stayed elevated until mid-November when Bitcoin plummeted to its eventual bear market \u201cbottom.\u201d<\/span><\/p>\n

The drop in November to the December \u201cbottom,\u201d was a 58% fall. Averaging out the three major NVT ratio peaks to their eventual \u201cbottoms\u201d suggests that a nearly 52% drop could be in the cards for Bitcoin.<\/span><\/p>\n

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Chart created with TradingView<\/a><\/em><\/h6>\n

Bear Market? Indicator Never Signalled a Bottom Was In<\/h2>\n

It\u2019s worth noting a few other factors that make the theory supporting NVT ratio as the best spot of tops and bottoms inconclusive.<\/span><\/p>\n

For now, the indicator never signaled a bottom was in back in December 2018 the same way it did in February 2018. Either this means the indicator simply missed didn\u2019t pick it up, or could mean that a bottom hasn\u2019t actually been set.<\/span><\/p>\n

Related Reading | Bubble Hasn\u2019t Begun: Google Trends Shows Little Interest in $10,000 Bitcoin<\/a><\/strong><\/em><\/p>\n

Many analysts have used the NVT ratio in their trading strategies with great success. The eccentric and outspoken top TradingView author MagicPoopCannon has repeatedly cited NVT as an important indicator he uses for Bitcoin price action and setting targets.<\/span><\/p>\n

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Bitcoin's 50 day EMA is right at 10k. If we break below that, we could see a major fall. Also, the NVT is finally flashing a sell signal again. The 50 EMA is very important right now. I'm expecting it to act as tremendous initial support, but soemtimes BTC DGAF.<\/p>\n

— MAGIC (@MagicPoopCannon) July 14, 2019<\/a><\/p><\/blockquote>\n