After breaking through a two-month uptrend triangle, the price of bitcoin (BTC) is firmly above $60,000. The current volume on the blockchain suggests that investors are still buying bitcoin en masse at the current price level.

Moreover, the current price is not even close to the top of the short-term price when compared to the historical valuation multiples of the network.

BTC price bull market not overheated, shows investor activity

While the lows of bear markets often coincide with seller exhaustion, the highs of bull cycles occur with buyer exhaustion. Tracking long-term investor activity at various stages of the bull market has historically proven to be a good indicator of BTC price support levels and overheating conditions. Current investor activity suggests that the market price is far from overheated.

Online analyst Willie Wu, who developed the method to measure this activity, describes it as follows:

The investment activity is based on the volume of the chain. Indeed, we assume that an off-chain payment has occurred (fiat or altcoin) when a BTC moves between the portfolios of two different participants. It’s an imperfect measure, but an approximation of what’s going on.

Investor activity, expressed in channel volumes, is then multiplied by the 2-year moving median of the network per transaction (NVT) and divided by the outstanding supply. The price determined by this method is called the NVT price.

Bitcoin NVT Price. Source: Woobull.com.

Not only does the NVT price give a good indication of how much volume is willing to pay at current prices, but it can also be used as an estimate of a floor price in a bull market based on the long-term moving average of the NVT. Thus, NVT can also be seen as an estimated network multiplier based on transaction volume, or one can think of the PE, the price-to-earnings ratio, of bitcoin.

NVT premium indicates that a short-term top at $95K is possible

The market price has rarely fallen below the NVT price during a bull market. If so, this is an excellent buying opportunity. The current price of the NVT is $47,500. Based on yesterday’s closing price at $61,600 per bitcoin, the market is willing to pay a premium of 1.3 times the investor’s current long-term valuation. This multiple is called the NVT premium.

In previous bull markets, NVT premiums of more than 2 proved to be short-term peaks and those of more than 3.5 a bull market peak. This figure currently suggests that the current NVT premium of 1.3 is far from the highest levels in previous bull markets.

Based on the current NVT price of $47,500, the next major short-term top with an NVT premium of 2 could be at $95,000 or higher, while a potential cyclical top with an NVT premium of 3.5 could be at $166,300 or higher.

Current NVT premium suggests greater upside potential

While an NVT premium of 1.3 could lead to a short-term price decline of 30% or more, the multiple also shows that a new price increase of at least 54% from yesterday’s closing price would be needed to achieve a potential short-term cycle stop.

However, this suggests that history will repeat itself and that NVT premiums similar to those of previous bull markets will be reached again. Nothing is guaranteed, of course. However, if this phenomenon were to be repeated, the risk-benefit ratio would certainly increase.

And, according to Wu, the $166,000 price tag is actually a pretty conservative estimate. As Cointelegraph previously reported, the analyst said the price of BTC could also reach $300,000 by December 2021, based on other indicators.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Nothing here should be construed as investment or business advice. Past performance is no guarantee of future results. Every investment and every stage of trading involves risk. The author has bitcoins. You should do your own research and/or consult a financial advisor to make your decision.

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