Are bearish corrections finally behind for Bitcoin

After dropping below $34,000 on 7th July, Bitcoin was positioning itself near the aforementioned price range yet again. Although stronger bullish sentiments would possibly be confirmed after it closes a price position above $36,000, Bitcoin’s on-chain fundamentals have looked extremely positive over the past week. Network value has definitely increased BTC’s intrinsic interest in 2021 and at press time, a sharp signal has been observed from one of its significant indicators. 

Bitcoin NVT Ratio and Signal: Market cycle trigger?

Speaking about Bitcoin’s Network Value to Transactions or NVT Ratio, it is computed by diving the market cap of Bitcoin by on-chain volume measured in USD. It describes BTC’s network utilization, and over time, it has been extremely reactive whenever Bitcoin has been under immense buying/selling pressure. 

Source: Glassnode

At press time, the above chart represented an uptick for the NVT ratio since the beginning of June 2021. After reaching a yearly low of 24, it is currently recording a high of 41.01 suggesting that the network value is outpacing the value being transferred on the network. 

Keeping it in mind, the NVT signal presents a strong reversal indicator. 

The NVT signal is an aggregated representation of the NVT Ratio, which uses a 90-moving average of the daily transaction volume. The present NVT signal displays an interesting position. 

Source: Glassnode

According to the chart above, the NVT signal has reached a low range last witnessed during January 2019, and it is currently facilitating a rising curve. Based on the historical charts, lower NVT signals have helped Bitcoin exhibit strong recoveries in the market, and a similar situation may unfold again for the largest digital asset. 

Lets’ not put all the chips in yet

While on-chain metrics may turn relatively bullish, the presence of retail is still essential for Bitcoin to retain bullish momentum in the charts. According to CryptoCompare’s

“Top spot exchanges witnessed a strong drop in spot volumes over the past month, as Binance faced a 56% drop, Huobi Global reflected a 40.2% decline and OKEx spot trading dropped by 41.6%.”

Such a significant drop in spot trading suggested that retail traders have remained extremely cautious since the drop in May, and they haven’t turned a bullish page with the digital asset yet.

Therefore, keeping an eye on retail activity remains vital in order to catch the bullish wave when it predominantly unfolds in the market.