After it broke out of the two-months ascending triangle, the bitcoin price is firmly consolidating above $60,000. Notably, the current on-chain volume suggests that investors are still majorly acquiring Bitcoin at the current price levels.
Additionally, the current price is not even near the near-term price top when comparing to the historic network valuation multiples. The BTC cycle top might come in at price levels above $166,000 per coin if history repeats itself.
Bitcoin Price Bull Run Is Not Yet Overheated
While the bear market bottoms mostly coincide with seller exhaustion, bull cycle tops happen to arise with buyer exhaustion. Watching the long-term investor activity in the different stages in a bull market seemed to be a good indicator for the bitcoin price support levels and overheated conditions in the past. The current investor activity indicates that the market price is far from becoming overheated.
On-chain analyst Willy Woo, who has developed a methodology to measure the activity, describes it as follows:
“Investor activity” is predicated on on-chain volume. This is because when BTC moves between wallets between two different participants, we assume there was a payment for it off-chain (fiat or alt-coin). It’s an imperfect measure but approximates what’s going on.
The investor activity, expressed in on-chain volume is then multiplied by the 2-year moving median of the “Network Value” over “Transactions” (NVT) and is then divided by the circulating supply. The price that is derived through this methodology is called “NVT Price.”
Interestingly, NVT price does not only give a good indication of how much volume is willing to pay current prices but it may also be used as an estimate of the price floor in a bull market as a result of the long-term moving average of NVT.
Thus, NVT could also be known as the valuation multiple of the network derived from the transaction volume or may be thought of as the PE or the ‘price to earnings’ ratio of BTC.
NVT Premium Aims At A Short-Term Peak At $95K
The bitcoin market price rarely plunged below the NVT price during a bull market. In case it did, it proved to be a great buying opportunity. The current NVT Price is $47,500. Based on April 16’s closing price of $61,600 per coin, the market seems ready to pay a premium of 1.3 times the current long-term investor valuation. The multiple is known as the NVT premium.
In the previous bull markets, NVT premiums above 2 turned out to be short-term price tops, and above 3.5 marked the top of a bull market. Today, the metric suggests that the current NVT premium of 1.3 is nowhere near previous bull market tops.
According to the current NVT price of $47,500, the next major near-term top with an NVT premium of 2 might be at or above $95,000 while a possible cycle top, with an NVT premium of 3.5 being put at or above $166,300.
Current NVT Premium Points To More Upside Potential
While an NVT premium of 1.3 may result in a near-term price drop of up to 30% or more, the multiple also shows that it might be at least another 54% price increase from yesterday’s closing price to reach a possible short-term cycle top.
Nevertheless, this hypothesis assumes that history will repeat once more and that similar NVT premiums as in the past bull markets would be reached once more. Neither of that is guaranteed. But, if the phenomenon were to repeat, the risk-to-reward ratio mainly favors the upside.
Moreover, a $166,000 price tag may be a fairly conservative projection, according to Woo. Based on previous reports, the analyst said that the price of bitcoin may also reach as high as $300,000 by December this year based on other metrics.