BTC: When and How Will Bitcoin Dump? NVT Suggests Warning Signal

Hello Traders. After yesterday's mildly successful pump, we were again met with a strong rejection off of the prior double top - now creating a triple top. What does this mean? Well, it can mean a lot of things, but let's leave all of the technical analysis behind and find one other way to find the tops in terms of price action. I would like to introduce to you the 'NVT' Indicator (Network Value Transaction Value). This indicator is particularly interesting to me due to the fact that it has either called for consolidation, or, retracement within the timeline. One thing for sure is, if it does consolidate, we can see that it eventually leads to a retracement.

What is the NVT Signal?
Predicting bubbles in any sort of market is not easy whatsoever, but, with more data indicators rising on the horizon, we can start pulling data in all sorts of ways to find the 'relative tops'. Now, I chose this NVT indicator due it's relative simplicity in visualization, but complex calculations of the market. But for the sake of the post, I will only show it from a visual perspective to show how it works instead of going into all of the calculations.

The NVT indicator (also known as the NVT ratio) became popular after Bitcoin printed the All-Time High last December 2017. There was no prior data nor any way to predict the bottom of the Bitcoin market due to it's price discovery to the general public; however, one indicator that was able to predict the 'relative top' was the NVT - which existed back then.

Standard NVT Ratio is simply the Network Valuation divided by the Transaction Value flowing through the blockchain and then smoothed using a moving average (MA). As we can see, the past few years has also shown that the NVT indicator was proven extremely useful.

What we can pull from this data is that although this indicator proves usefulness in calling tops, we can also now use this as some form warning signal when the NVT goes into the yellow territory on the oscillator.

To break it down, we are seeing two types of indications:

1. We can be in some form of 'consolidation' phase,
2. We can be in some form of 'retracement' (dump) phase.

This alone, proves that this indicator is more than enough to use as a trading indicator, considering all factors of the market.

These are not the only ways to trade the NVT indicator. I’m sure a seasoned trader could come up with some additional ways to trade it and decipher the indicator in a better way.

Trade Safe.
X Force

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