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The BeInCrypto editors analyzed two unrelated Bitcoin on-chain indicators that unanimously promise a bullish reversal for the BTC rate.
This coincidence of bullish signals from two different on-chain indicators may suggest that the market will form a macro bottom and BTC will reverse in a bullish direction soon.
First, we will look at the “good old” indicator of the network value of transactions (N/A), assessing how much the current dynamics of bitcoin is supported by the volume of transactions. This on-chain metric has proven its reliability more than once – especially at the moments of reaching oversold levels, which are traditionally associated with reaching the macro bottom for BTC.
As the second indicator, we chose the stablecoin supply ratio (SSR), which measures their purchasing power versus Bitcoin. During this correction, it has already reached a historic low, and now the purchasing power of stablecoins is approaching record highs.
On-chain indicator NVTS reached oversold level
NVT signal (NVTS) Is a slightly modified version of the NVT (Network Value to Transaction) ratio. The NVT on-chain metric reflects the ratio of network value to transaction volumes and is comparable to the traditional market price-earnings ratio. It indicates the under- / overvaluation of an asset at current price levels.
NVT is calculated by dividing the market capitalization of an asset by the volume of daily transactions made with it on the network, expressed in dollar value. This is in contrast to NVTS, which is calculated using a 90-day average daily transaction volume.
The long-term NVTS chart shows the significance of the 17.5 area (red line), from which the on-chain indicator has just rebounded. This area has already provided support to the market during the correction in the summer of 2021. Earlier, the indicator reached this level in March 2020, during the collapse triggered by the COVID-19 pandemic, as well as in December 2018, when the bear market reached the day.
NVTS chart. Source: Glassnode
Interestingly, in 2015, this same area has repeatedly acted as a resistance. You can also see that NVTS was groping for support here even before the second phase of the aggressive bull market in 2013.
The popular cryptanalyst @woonomic calls NVTS the “grandfather” of on-chain indicators, but at the same time he is sure that this metric “still works”.
In a recent tweet, he noted that all the times when the NVTS value sagged towards support (light pink) coincided with price lows for BTC (green).
A source: Twitter
The purchasing power of stablecoins is growing
If the bullish NVTS signal is confirmed, BTC will indeed complete the correction and begin to rally. However, this requires an influx of money into the market, with which these potential Bitcoin purchases will be made.
A week ago, the editorial staff of BeInCrypto already wrote that the on-chain indicator SSR is approaching an all-time low and may soon signal a bottom formation. At the time of writing, this stablecoin to bitcoin supply ratio is indeed at an all-time low (green area). This means that the purchasing power of stablecoins (USDT, TUSD, USDC, USDP, GUSD, DAI, SAI, and BUSD) is increasing against BTC.
Schedule SSR. Source: Glassnode
Also, two (not quite ideal) trend lines can be distinguished on the chart. BTC’s green uptrend line has been growing since it bottomed out in March 2020. The red line of the SSR downtrend has been declining since July 2019.
Recall that its decline signals an increase in the purchasing power of stablecoins. If its direct correlation with the bitcoin price persists, this gives us reason to expect the continuation of both of the above trends.
The importance of the area highlighted in green on the chart is also indicated by on-chain analysts @_checkmatey and @permabullnino. They also trace the relationship between the purchasing power of stablecoins and the price of BTC.
On the long-term chart, green bars can be seen indicating periods of growth in the purchasing power of stablecoins. Historically, they coincided with a correction in the price of bitcoin.
A source: CheckOnChain
At the moment, the strength of the current trend is second only to the correction period in May-July of this year.
This unanimity of two completely different on-chain metrics gives us reason to hope that the market is indeed shaping a macro bottom right now. As history shows, both indicators, being at current levels, turned out to be harbingers of a bullish reversal and an energetic rise in the BTC rate.
Read freshtechnical analysisonbitcoincanhere.
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