The post Bitcoin’s NVT Ratio Signals Overheated Sentiment! Here’s Why BTC Price Needs A Retest appeared first on Coinpedia Fintech News

Bitcoin price continues to maintain its bullish momentum, remaining above the $52K threshold as investor confidence is triggered by bullish on-chain ETF reports. Despite this, the surge in purchasing demand for BTC raises alarms about a potential decline ahead, influenced by an overheated market sentiment as highlighted by various on-chain metrics. Such a scenario could necessitate a retest of Bitcoin’s immediate support levels to stabilize the current momentum.

Bitcoin’s NVT Ratio Skyrockets

According to the latest report by CoinShares, crypto funds from asset managers like BlackRock, Bitwise, Fidelity, Grayscale, ProShares, and 21Shares saw inflows totaling $2.45 billion globally in the last week.

This surge was largely driven by the launch of new U.S. spot Bitcoin exchange-traded funds, bringing the total inflows into digital asset investment products for the year to $5.2 billion.

With the recent uptick in prices, the assets under management (AUM) at these crypto investment firms have reached $67 billion, marking the highest level since December 2021 during the climax of the previous bull market, as pointed out by James Butterfill, the Head of Research at CoinShares.

As a result, the BTC price is experiencing positive momentum, consistently staying above the $52K mark. Yet, multiple on-chain metrics are now signaling an overheated sentiment for the BTC price, suggesting a potential need for a price correction. Among these indicators, the NVT ratio (Network Value to Transactions) has notably increased, currently standing at 133.2. This indicates that while Bitcoin’s network value has surged with the price hike, the volume of transactions has not seen a comparable increase, pointing towards a possible overvaluation.

Furthermore, the Netflow metric has recently experienced a significant rise, moving into the positive territory. This indicates that inflows are exceeding outflows for Bitcoin, leading to an increase in exchange reserves. Such a trend could bring a price correction for BTC. However, such retests might strengthen the buying momentum.

What’s Next For BTC Price?

Bitcoin is facing resistance at the $52,000 mark, with attempts by sellers to push the price below $50,000. However, buyers continue to defend a decline strongly. As of writing, BTC price trades at $52,122, surging over 0.7% from yesterday’s rate.

A potential challenge to the rally’s sustainability is the Relative Strength Index (RSI) heading toward the midline, hinting at a correction in the short term.

For a bearish shift to be confirmed, sellers need to push the price below the 20-day exponential moving average ($51,880), potentially leading to a downturn towards the $50K level. To enhance the chances of climbing to $55,000, buyers must breach the $52,800 resistance.

On the other hand, to plunge the upward momentum, bears must pull the price below the moving averages, potentially triggering a fall to the breakout point of $48,300. While bulls are likely to defend this level aggressively, a breach could see the price dropping to $47,000 and possibly further to $44,800.