On-chain data shows the Bitcoin NVT ratio is currently flashing a buy signal, a sign that the bottom for the asset’s price might now be in.

As pointed out by an analyst in a CryptoQuant post, the Network Value to Transactions (NVT) Golden Cross has now dipped below the -2 mark. The “Network Value to Transactions (NVT) ratio” is an indicator that measures the ratio between the Bitcoin market cap and transaction volume (both denominated in USD).

When the value of this metric is high, it means that the price of the asset (that is, its market cap) is high when compared to its ability to transact coins (the transaction volume). Such a trend may imply that BTC is overvalued right now.

On the other hand, low values can suggest that the market cap isn’t that much relative to the volume, so the cryptocurrency’s price may be undervalued at the moment.

In the context of the current discussion, the NVT ratio itself isn’t of interest, but rather a modified form of it called the “NVT Golden Cross” is. This new indicator aims to pinpoint tops and bottoms in the NVT ratio by comparing its 30-day moving average (MA) with the 10-day one.

Now, here is a chart that shows the trend in the Bitcoin NVT Golden Cross over the past year:

As displayed in the above graph, the Bitcoin NVT Golden Cross has plunged recently as the cryptocurrency’s price has gone through a crash. Following the latest drawdown, the indicator is now deep inside the negative territory, at a value below -2.

In the chart, the quant has marked two lines for the metric that have held some significance for the asset during the past. The first of these (marked in red) takes place at around 2.2, while the other one (green) is at -1.6.

Historically, whenever the NVT Golden Cross has crossed above the former line, the cryptocurrency has generally observed the formation of a local top. Similarly, a break below the latter level has resulted in bottoms for the coin.

From the chart, it’s clear that the indicator has now dipped firmly below the bottom line, implying that Bitcoin might be undervalued currently. In the past year, there have been three other instances of the indicator plunging below the line, each coinciding with some sort of low for the price.

The first two of these had reached bottom values similar to now, while the third occurrence (which is the latest one) saw the NVT Golden Cross dip much deeper towards the -3.1 mark before the bottom was hit.

It’s unclear which scenario might play out for Bitcoin this time, but one thing may be clear from this pattern: the bottom could be near for the cryptocurrency, or may even already be in.

At the time of writing, Bitcoin is trading at around $26,500, down 7% in the last week.

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