Bitcoin (BTC) NVT Ratio Spikes Past 2xSD, Market Watchers Turn Their Eyes to On-chain Signals

A well-known crypto analyst, Burak Kesmeci, recently posted on X about a spike in the Bitcoin Advanced Network Value to Transaction (NVT) metric.

Bitcoin (BTC) is holding strong above the $100,000 mark after a robust weekly climb, with analysts now turning their attention to on-chain signals that could change the course of its price movement.

Bitcoin Advanced NVT Surges Past 2xSD

A well-known crypto analyst, Burak Kesmeci, recently posted on X about a spike in the Bitcoin Advanced Network Value to Transaction (NVT) metric. The Advanced NVT is now sitting above a key threshold that often signals major price moves. This could mean Bitcoin is either preparing for a large price rally or facing a major correction.

Bitcoin's Advanced NVT has again moved past the 2xSD level.

Usually, it doesn't stay at this level for long, and often appears right before a steep upward or downward movement.

During the ETF rally, NVT surged well beyond 4xSD levels. However, with a parabolic rally, it is… pic.buffer.cc/G7R3nB7DqI

— burak kesmeci (@burak_kesmeci) September 24, 2024

The Advanced NVT is an updated and more sophisticated iteration of the original NVT indicator, which measures the relationship between Bitcoin's market cap and its daily blockchain transaction volume in dollars. When the Advanced NVT rises above its long-term moving average by over two standard deviations (2xSD), it indicates that the cryptocurrency's value is growing faster than the activity on its blockchain. In the past, this mismatch has led to either sharp rallies or steep corrections in Bitcoin's price.

Kesmeci noted that Bitcoin's Advanced NVT has once again moved past the 2xSD level. While this level doesn't usually sustain for extended periods, it often appears shortly before a substantial upward or downward movement in price. During the ETF rally, NVT surged to levels well beyond 4xSD as Bitcoin experienced a rapid price increase.

However, with a parabolic rally, it could move much higher than 4xSD. This has happened before with the ETF rally after the approval of Spot ETFs.

But, staying above this level might be unusual, and it doesn't necessarily mean it must fall back. Bitcoin could remain at this level if the market continues its bullish momentum.

Stable Funding Rate Indicates Calm Climb AHead?

Another voice in the crypto space, CryptoQuant's analyst Crypto Dan, added to the discussion by examining another signal: the Bitcoin funding rate. This tool helps determine when traders are leaning too heavily in one direction, which can then factor into market shifts.

According to Dan, the funding rate is now stable and well below the danger zone.

The Market is No Longer Overheated.

✍️ In March and November 2024, when the Bitcoin funding rate remained above 0.1, the market quickly pulled back after those periods. This signaled that traders were too optimistic and leveraged.

Now, the funding rate has stayed below 0.01 for… pic.twitter.com/uR2zM81L7v

— CryptoQuant Analyst Dan (@quant_analyst) September 24, 2024

"The Market is No Longer Overheated," stated Dan. He referenced the funding rate's history, especially when it remained above 0.1 during March and November 2024. During those times, the market experienced a swift pullback after those periods, hinting at an excess of optimism and leveraged positions among traders.

However, the funding rate has stayed at a calm level, remaining below 0.01 for the past three months despite Bitcoin trading close to recent highs. This pattern suggests that traders are approaching the market with less extreme confidence and are not taking on overly risky positions.

As Bitcoin hovers at a key price point, the next move will decide whether it continues the long-term trend or sparks a new one.