- Bitcoin’s apparent demand drops signal overvaluation risks for the cryptocurrency.
- Rising social volume and dominance contrast with extreme fear, suggesting mixed market sentiment.
Bitcoin’s [BTC] apparent demand has recently plunged into negative territory for the first time since September 2024.
This change indicates a significant reduction in market activity, potentially forecasting a bearish turn in Bitcoin’s price.
At press time, Bitcoin was trading at $89,483.20, marking a 6.60% decrease over the past 24 hours. Could this sudden decline lead to further bearish action, or will Bitcoin weather the storm?
Is Bitcoin overvalued? The NVT ratio signals trouble
The Network Value to Transaction (NVT) ratio of BTC has experienced a sharp decline, dropping by 37.59% over the past 24 hours.
The NVT ratio, which compares Bitcoin’s market capitalization to the volume of transactions being conducted, has traditionally been a tool for determining whether Bitcoin is overvalued.
A sharp decline in this ratio suggests that Bitcoin may be overvalued based on current transaction activity.
This sudden drop in the NVT ratio adds weight to concerns about Bitcoin’s inflated market value, potentially foreshadowing a price correction.
Source: CryptoQuant
Rising interest or short-lived hype?
On a more positive note, Bitcoin’s Social Volume and dominance have been rising steadily in recent weeks. At press time, Bitcoin’s Social Volume was 1546, signaling an uptick in discussions surrounding the king coin.
Additionally, BTC’s Social Dominance stood at 27.23%, showing that the cryptocurrency remained the central focus in the market.
This increase in social activity could point to growing interest in BTC, suggesting that more people were actively engaging with the asset.
However, despite this rising attention, it remains uncertain whether these figures will directly translate into higher demand or price recovery.
Source: Santiment
Extreme fear grips the market: Is BTC in danger?
Bitcoin’s Fear & Greed Index has recently dipped into the “extreme fear” zone, registering a value of 25 on the 25th of February.
This suggested that investor sentiment was heavily negative, with many fearing further losses in the short term.
Extreme fear often coincided with oversold conditions, potentially signaling an upcoming price reversal. However, it can also imply that BTC may continue facing downward pressure until market sentiment improves.
Source: Bitbo Charts
Is Bitcoin’s support zone breaking down?
Looking at BTC’s technical chart, the price has broken below its key support zone, suggesting a weakening trend.
The support level that had been holding Bitcoin steady was breached, with the cryptocurrency struggling to remain above the $90,000 mark.
This breakdown aligned with negative sentiment observed in both fundamental and technical indicators.
Moreover, the RSI at 30.92 showed that BTC was oversold, suggesting that the price may experience further declines before stabilizing.
Source: TradingView
What’s next for Bitcoin?
In light of the declining apparent demand, NVT ratio concerns, and extreme fear in the market, Bitcoin faces potential further downside.
While rising Social Volume and dominance offer some hope, the overall bearish signals suggest that Bitcoin could experience continued pressure in the near term.
Therefore, it seems likely that BTC will face more downward movement before any potential recovery.
