#062 - NVT Golden Cross: The Tool That Predicted Bitcoin’s 85% Surge in January 2024

TLDR: The NVT Golden Cross is an on-chain indicator that measures Bitcoin's activity to predict market moves. Yesterday's alert at -2.77 suggests Bitcoin is undervalued, similar to a January 2024 signal that led to an 85% price increase. This tool indicates buy signals below -2 and sell signals above 2.2. Despite market drops, the current value points to a potential rally. Use it with other indicators for better trading decisions.

Yesterday morning, a telegram alert was triggered.

It triggered today as well with an even lower value

The last time this alert was triggered was on January 19th.

Bitcoin then went up 85% to reach $70k.

Impressive.

This alert comes at great timing since the market sentiment is pretty bad, with Germany and Mt Gox users dumping Bitcoin. (to be fair, I would also dump my BTC if it were locked for 10 years)

This tool is the NVT (Network Value Transfer) Golden Cross—an incredibly accurate on-chain indicator that helps you spot when the market is about to peak or find a local bottom.

In this guide, I’ll explain how you can use the NVT Golden Cross to help predict Bitcoin Market Moves

Enjoy!

My name is Kierin (Onchain Edge), and I write weekly data-driven insights for crypto investors. I will try my best to make sure you don’t f*ck this rally up. Join 800+ savvy investors.

BTC Onchain Edge Index (current value: 20.9 Good time to buy DCA 0.5)

The underrated NVT Golden Cross

Traditional Bitcoin indicators like Moving Averages or the Relative Strength Index (RSI) mainly rely on price and volume data.

Even though they are good indicators they miss key onchain insights and they are also lagging indicators.

Relying only on the price and volume can lead to less informed decisions, especially if you aren’t the best at technical analysis.

I particularly like one-glance indicators.

That’s why I love this one.

The Solution: NVT Golden Cross

The NVT Golden Cross uses on-chain transaction data to provide a more fundamental view of Bitcoin’s valuation.

This is what my NVT Golden Cross chart looks like on Cryptoquant. (This is part of the pro charts so you an only access with a pro subscription)

You don’t need to understand how the NVT golden cross works to understand the chart. When the value is above 2.2, the market is overvalued, and when it’s below -2, then it’s undervalued.

Here’s an ELI5 explanation of the NVT Golden Cross:

“Think of the NVT Golden Cross like a heartbeat monitor for Bitcoin. It measures how active Bitcoin is, just like checking a pulse.

When the "heartbeat" is faster than usual, Bitcoin might be too expensive, signaling that you might want to sell (above 2.25).

When the "heartbeat" is slower, Bitcoin might be cheap, so it signals you might want to buy (below -2). This helps you decide when to buy or sell Bitcoin based on its activity level.”

How it works

• Overvaluation Signal (Above 2.2): Indicates Bitcoin might be overpriced. Consider selling.

• Undervaluation Signal (Below -2): Suggests Bitcoin could be underpriced. This might be a buying opportunity.

So, in other words, it’s a valuation metric.

I have found that it’s easier to use the NVT Golden Cross for buying than selling. The issue when selling is that it often reaches extremely high values before the market has topped.

Pro tip: You can also use divergences on the NVT Golden Cross to find even more accurate entries and exits.

6 reasons why the NVT Golden Cross is so powerful

1. On-Chain Data: Bitcoin transaction data can provide much deeper insights into Bitcoin’s real usage. There will be extremely high usage in the euphoria stage.

2. Valuation Metric: Similar to a P/E ratio, it helps identify overvaluation or undervaluation based on network activity.

3. Leading Indicator: High probability prediction of price movements before they happen.

4. Medium-Term Forecasting: Useful for predicting larger market cycles.

5. Network Health Insight: This shows the relationship between Bitcoin's market cap and transaction volume.

6. Specific Thresholds: Clear buy and sell signals make it easier to interpret.

How It Works (You can skip this if you

The NVT Golden Cross compares the NVT ratio's short-term (10-day) and long-term (30-day) moving averages.

Practical Application

The easiest way to use it is in combination with the Onchain Edge Index and tradingview indicators, such as the VMC and the LDC Machine Learning indicator.

Past Examples

January 2024: The indicator reached -2.37, showing a lot of potential. A bearish divergence made me hesitant, but it shows that sometimes you need to trust the indicator.

• May 2024: Recently, the NVT Golden Cross detected a peak in May 2024. The indicator rose above 2.2, suggesting that Bitcoin was overvalued. This signal helped traders prepare for a potential market correction, and soon after, Bitcoin prices adjusted downward, proving the indicator's effectiveness.

NVT Golden Cross Current Value & Analysis

What does the current NVT Golden Cross value tell us about $BTC today?

Below is the quick take I shared a few days ago on cryptoquant before the crash.

In a nutshell: The current value of -2.7 is at a similar level as on the 19th of January 2024 before the rally to $70k

Even though Bitcoin dropped a bit, the current price of $55k is not guaranteed to be the bottom.

The $51k support needs to hold. If not, then the next support is at $45k.

That would definitely be a good place to buy, but I don’t expect it to go that low currently.

If we reach any of these low levels, then it will be a fantastic buying opportunity, as the NVT Golden Cross does take a while to play out and the market tends to still drop a bit after it triggers.

Takeaways

If you find this information helpful and want to support me, please consider using my referral links if you trade on Binance, Kraken, or Bybit. Happy trading! This Ai tool is also excellent: Perplexity is a great tool for quick market insights and data.