Bitcoin Chain Analysis (BTC): Bullish NVTS and SSR Signal Reversal

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Today’s chain analysis for Bitcoin examines two independent indicators that appear to be generating the same bullish reversal signal. Their confluence may soon lead to a macro bottom for the BTC price.

The first is the NVT signal, which is an equally old and effective chain indicator. It was found to be particularly effective when it hit the “oversold” territory which is historically correlated with the Bitcoin macro lows.

The second is the SSR, which measures the purchasing power of stablecoins compared to BTC. It hit an all-time low during this correction, and the purchasing power of stable coins is approaching record highs.

Bitcoin NVTS hits oversold level

NVT Signal (NVTS) is a modified version of the original NVT report indicator. The latter is calculated by dividing the market capitalization by the volume transferred to the chain measured in USD. In contrast, NVTS uses a 90-day moving average of daily trading volume in the denominator instead of the gross daily trading volume. This improves the reading to function better as a leading indicator.

The NVTS long-term chart shows the importance of the area near the 17.5 value (red line) from which the indicator has just rebounded. This area provided support during the 2021 summer correction. It had previously reached exactly the same level during the COVID-19 crash in March 2020 and at the bear market low in December 2018.

NVTS Graphics by Glassnode

Interestingly, the same area around 17.5 acted as resistance on several occasions in 2015. Even before that, just before the second phase of the violent 2013 bull market, NVTS also found support.

One of the more popular on-chain analysts, @woonomic, calls NVTS the “grandfather” of on-chain indicators, but insists it “still works”.

In a recent tweet, he pointed out that historically he hasn’t given a very frequent reading of being “oversold” on a chart he designed himself. All periods where NVTS fell to the support level (light pink) coincided with the BTC price lows (green zone).

Source: TwitterStablecoin purchasing power increases

If NVTS is indeed currently giving a bullish signal and the correction in the price of Bitcoin is expected to end soon, the price of BTC is expected to rise. For this to happen, funds must flow into the market with which potential purchases could be made.

Last week, BeInCrypto’s chain analysis highlighted a stable supply ratio (SSR) that was approaching the all-time low (ATL). Today, in fact, the SSR is at a record level (green zone). This means that the purchasing power of stablecoins (USDT, TUSD, USDC, USDP, GUSD, DAI, SAI and BUSD) is increasing against BTC.

SSR Graphics by Glassnode

Additionally, we notice two (non-ideal) trend lines on the chart. The green uptrend line is for the price of BTC, which is up from the low in March 2020. The red downtrend line is for SSR and has been in place since July 2019. Note that its decline indicates an increase in the power of purchase of stable coins. If the positive correlation between the increased purchasing power of stablecoin and the price of BTC holds, we can expect both trends to continue.

The importance of the green area in the graph above is also highlighted by the analogous stablecoin purchasing power graph prepared by two chain analysts @_checkmatey_ and @permabullnino. In the long term chart, we see green bars which indicate areas where the purchasing power of stable coins has increased.

We have highlighted the strong growth periods of this trend in purple to show the correlation with the price of BTC. This turns out to be negative. Periods of strong increases in the purchasing power of stablecoins have historically coincided with sharp corrections in the price of Bitcoin.

Source: CheckOnChain

It is no different in the current correction, which indicates the second increase in the purchasing power of stablecoins. The current trend is just behind the deeper correction in May-July this year.

The juxtaposition of the two indicators of the current chain analysis gives a strong indication in favor of the thesis that bitcoin is reaching a macro plan. Historically, both indicators at their current values ​​have been bullish signals, after which the price of Bitcoin has increased dynamically.

For the latest Bitcoin (BTC) analysis from BeInCrypto, click here.

Disclaimer All information on our website is posted in good faith and for general information purposes only. Any action that the reader takes with the information found on our website is strictly at his own risk.

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