Bitcoin has shown an impressive upward movement recently, with the cryptocurrency surpassing the $120,000 threshold over the last day. This rise points to a continuing bullish trend after a notable dip earlier this week.
As Bitcoin approaches its historic peak, on-chain metrics are revealing robust transactional backing for the current price surge. Analysts are particularly noting a discrepancy between Bitcoin’s market valuation and its network activity.
CryptoQuant analyst Sunflowr Quant has pointed out this anomaly in a recent QuickTake post, focusing on the unusual pattern of the NVT Golden Cross indicator.
Typically, this indicator rises with price increases, as it measures the ratio of market cap to transaction volume. However, it is currently on a downward trend, which Sunflowr suggests is due to a surge in on-chain activity.
Bitcoin’s Network Expansion Signals Fundamental Strength
Sunflowr explains that the inverse relationship between Bitcoin’s climbing price and the declining NVT Golden Cross could signify that the surge is fueled more by genuine network usage rather than speculative trading.
“A dropping NVT ratio alongside a rising price indicates that transaction volumes are growing faster than the market cap,” he noted. “This suggests that the rally might be supported by substantial economic activity.”
This observation aligns with the broader belief that solid on-chain growth could underpin more sustainable price increases. If transaction volumes are increasing naturally, rather than being driven by speculative trades, it implies that user adoption and financial utility are bolstering the price.
Investors keeping an eye on these indicators may find the current climate promising, though caution is advised as other metrics suggest shifting market dynamics.
Shift in Holder Behavior Indicates Potential Market Changes
Another analysis from CryptoQuant analyst IT Tech highlights a different aspect of Bitcoin’s current market scenario: holder behavior.
In his “Holder Rotation” post, IT Tech observes that long-term holders, who have maintained BTC for over 155 days, are now net sellers, indicating they are offloading more than they are acquiring.
Conversely, short-term holders are again accumulating, a trend often noted in the latter stages of rallies. This shift between long-term and short-term holders has historically signaled caution.
Similar transitions were seen in April 2021 and November 2023, both preceding local peaks or cooling periods. While this may not confirm an imminent reversal, it underscores the importance of tracking related metrics like exchange inflows and funding rates.
“It’s a typical pattern of profit-taking by seasoned wallets, while newer investors may be entering due to rising prices,” IT Tech commented.
Featured image created with DALL-E, Chart from TradingView
