On-chain data shows that things are not looking good for Bitcoin, as the NVT ratio indicates that the crypto is currently still overvalued.
Bitcoin NVT Ratio Remains at High Values
As noted by an analyst in a CryptoQuant after, BTC is currently overvalued from an on-chain perspective. The “Ratio of Network Value to Transactions (N/A).” is an indicator that measures the relationship between Bitcoin’s market capitalization and transaction volume (both in USD).
This ratio assesses whether Bitcoin’s current value (i.e. market cap) is reasonable or not by comparing it to the network’s ability to trade coins at the moment (the transaction volume). When the metric has a high value, it means that the price of BTC is high compared to its volume, and thus the coin may be in a bubble right now. On the other hand, low values suggest that BTC may be undervalued as the chain currently has a large ability to trade coins (compared to its market cap).
Here is a chart showing the trend in the Bitcoin NVT ratio over the past year:
Looks like the metric's value has been pretty high during recent weeks | Source: CryptoQuant
As the chart above shows, the Bitcoin NVT ratio jumped up after the LUNA collapses back in May of this year and has largely remained at similar or higher levels ever since. This means that despite the price perception of multiple crashes over the period, the value of the coin continued to become more overvalued as volumes fell sharply in the market.
Also after the FTX crash, which has dealt another solid blow to the crypto’s market cap, the metric has only surged higher as it recently registered a new high for the year. BTC has only become more and more overpriced as the bear has deepened, indicating the dire state of the market in terms of trading volumes.
The quant also notes that the number of UTXOs at a loss (basically the number of portfolios/investors at a loss) has risen consistently throughout the bear.
The metric continues to ride on a constant uptrend | Source: CryptoQuant
Both signs are certainly not in favor of Bitcoin and could indicate further pain lies ahead for investors. “A longer bear market could be seen as a potential risk that could increase selling pressure,” the analyst explains.
BTC price
At the time of writing, Bitcoin is trading around $16,800, down 5% over the past week.
The price action in the asset seems to have been stale in the last few days | Source: BTCUSD on TradingView
Featured image by Maxim Hopman on Unsplash.com, charts from TradingView.com, CryptoQuant.com