On-chain investor activity suggests Bitcoin price cycle exceeds $ 166,000


After breaking the two-month ascending triangle, the price of Bitcoin (BTC) remains firmly above $ 60,000. The current volume on the chain suggests that investors are still buying Bitcoin heavily at current price levels.

Moreover, the current price is not even close to a near-term price peak compared to the historical valuation multiples of the network.

BTC Price Rise Not Overheated, Investor Activity Shows

While bear market lows often coincide with seller exhaustion, bull cycle highs occur with buyer exhaustion. Observing long-term investor activity during the various stages of a bull market has proven to be a good indicator of BTC price support levels and overheating conditions in the past. Current investor activity suggests that the market price is far from overheated.

Chain analyst Willy Woo, who has developed a methodology to measure this activity, described it as follows:

“Investor activity” is based on on-chain volume. This is because when BTC moves between wallets between two different participants, we assume that there has been an off-chain payment (fiat or alt-coin). It is an imperfect but approximate measure of what is going on.

The investor’s activity, expressed in on-chain volume, is then multiplied by the 2-year moving median of the “Network Value” on “Transactions” (NVT) and is then divided by the supply in circulation. The price derived from this methodology is called the “NVT price”.

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Bitcoin NVT price. Source: Woobull.com

The NVT price not only gives a good indication of ready-to-pay volume at current prices, but it can also be used as an estimate of the floor price in a bull market due to NVT’s long-term moving average. Therefore, NVT could also be referred to as the network valuation multiple derived from trading volume or could be viewed as the PE, or “price to earnings” ratio of Bitcoin.

NVT Premium Says Short Term Top Is Possible At $ 95,000

The market price has rarely dropped below the NVT price during a bull market. If so, it turned out to be a great buying opportunity. NVT’s current price is $ 47,500. Based on yesterday’s closing price of $ 61,600 per Bitcoin, the market is willing to pay a premium of 1.3 times the current valuation of long-term investors. This multiple is called the NVT premium.

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In previous bull markets, NVT premiums above 2 turned out to be short term price highs, and above 3.5 marked the peak of a bull market. Currently, this metric suggests that the current NVT premium of 1.3 is nowhere near previous bull market highs.

Based on the current NVT price of $ 47,500, the next major near-term high with an NVT premium of 2 could likely be at or above $ 95,000, while a potential cycle high, with an NVT premium of 3, 5, could be equal to or greater than $ 166,300.

NVT’s current premium suggests higher upside potential

While an NVT premium of 1.3 may cause the price to drop in the short term by 30% or more, the multiple also shows that it would take at least another 54% price increase from the closing price of d. ‘yesterday to reach a potential short-term cycle high. .

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However, this assumes that history will repeat itself again and NVT premiums similar to previous bull markets would be achieved again. Neither is guaranteed, of course. However, if this phenomenon were to repeat itself, the risk / reward ratio would certainly favor the upside.

Plus, a price tag of $ 166,000 may actually be a pretty conservative prediction, according to Woo. As TBEN previously reported, the analyst explained that the price of BTC could also reach $ 300,000 by December 2021, based on other metrics.

The opinions and opinions expressed here are solely those of the author and do not necessarily reflect the views of TBEN. Nothing here should be taken as investment or business advice. Past performance is no guarantee of future results. Every investment and trading move involves risk. The author owns Bitcoin. You should do your own research when making a decision and / or consult a financial advisor.