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If history repeats itself, the Bitcoin period top will most likely occur at prices over $166,000 per coin.
Bitcoin (BTC) is comfortably holding over $60,000 after breaking out of a two-month climbing triangle. Present on-chain amount indicates that consumers are already purchasing Bitcoin at current prices.
Furthermore, as compared to historical network valuation multiples, the current price is not quite close to a short-term price peak.
BTC price bull run not overheated, investor activity shows
If bear market bottoms are often associated with seller exhaustion, bull cycle peaks are associated with buyer exhaustion. In the past, observing long-term investor behaviour at various points of a bull market proved to be a strong proxy for BTC stock support thresholds and overheated conditions. The current level of investor interest shows that the economy is far from overheated.
“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 on-chain amount of investor interaction is then compounded by the 2-year moving median of “Network Value” over “Transactions” (NVT) and separated by the circulating supply. The price calculated using this formula is known as the “NVT Price.”
Because of the long-term moving average of NVT, the price of NVT not only gives a clear idea of how much volume is able to pay current prices, but it can also be used as an indicator of the price floor in a bull market. As a result, NVT may also be referred to as the network’s valuation multiple based on transaction value, or as Bitcoin’s PE, or “price to earnings,” ratio.
NVT premium says short-term top possible at $95K
After a bull market, the market price seldom fell below the NVT price. If it did, it would have been a fantastic buying opportunity. NVT’s current price is $47,500. Based on the trading price of Bitcoin yesterday of $61,600, the market is ready to pay a premium of 1.3 times the current long-term investment value. The NVT premium is the name given to this multiple.
Through previous bull runs, NVT premiums above 2 were short-term price highs, and NVT premiums above 3.5 marked the end of a bull market. This measure currently indicates that the latest NVT premium of 1.3 is nowhere near previous bull market highs.
Based on the current NVT price of $47,500, the next big short-term high with an NVT premium of 2 could be at or above $95,000, while the next major period peak with an NVT premium of 3.5 could be at or above $166,300.
Current NVT premium suggests more upside potential
While an NVT premium of 1.3 which result in a short-term price decline of 30% or more, the multiple also indicates that it will take at least another 54% price rise from yesterday’s closing price to hit a possible short-term cycle peak.
This, however, means that history will repeat itself and that similar NVT prices as seen in previous bull markets will be hit again. Of necessity, neither is promised. Nonetheless, if this pattern occurs again, the risk-to-reward ratio clearly supports the upside.
Furthermore, according to Woo, a $166,000 price tag could be a reasonably optimistic estimate. According to the economist, the price of Bitcoin could hit $300,000 by December 2021, as previously noted by Cointelegraph.