Bitcoin's price recently hit $98,000, but declining network activity raises questions about the sustainability of this rally. AMBCrypto examines key valuation metrics to determine if Bitcoin's price is justified by its fundamentals.
Bitcoin's price recently surged past $98,000, but declining network activity raises concerns about potential overvaluation. While this price range excites investors, on-chain data paints a different picture. Network activity has hit a one-year low, prompting questions about whether current price levels are justified.
AMBCrypto investigates whether Bitcoin's rally is supported by fundamental factors by examining key valuation metrics like Metcalfe's law and the Market Value to Realized Value (MVRV) ratio. This analysis will determine if a correction is on the horizon.Bitcoin's price recently declined to $98,000, down from the six-figure mark. However, a closer look at network activity suggests the cryptocurrency might be overvalued at current levels. According to Metcalfe's law, which values a network based on the number of active users, Bitcoin's fair value falls between $48,000 and $95,000. The Metcalfe Valuation Bands, which have historically guided Bitcoin's price, indicate a potential deviation. Since February 2024, Bitcoin has largely remained between the red ($48,000) and blue ($95,000) valuation bands. The current price exceeding this range suggests a speculative premium, possibly fueled by external factors like ETF inflows or macroeconomic optimism.Network fundamentals reveal a decline in daily active addresses, a metric for user activity. The drop in active addresses aligns with the downward trend in Metcalfe valuation bands since March 2024, reflecting reduced on-chain engagement. This trend suggests that the underlying network fundamentals do not fully support the current valuation despite Bitcoin's price rally. The MVRV ratio further reinforces this concern. Historically, an MVRV above 2.4 has preceded corrections, and the recent downtrend in this metric indicates potential overvaluation. The gap between market price and realized value suggests investors may be holding unrealized gains, increasing the likelihood of profit-taking.From a technical perspective, Bitcoin maintained a bullish structure but showed signs of exhaustion. The price is currently hovering near the 50-day Moving Average (MA) at $98,710, while momentum indicators suggest a slowdown. If Bitcoin fails to hold above this level, a pullback toward the $95,000 region is possible, aligning with the upper Metcalfe valuation band. The 200-day MA remains far below current levels, indicating strong long-term support, but short-term overbought conditions cannot be ignored.With network activity at a one-year low and price exceeding fair value estimates, Bitcoin appears overextended. While external factors like institutional demand and macro trends could sustain its rally, on-chain fundamentals paint a more cautious picture. Investors should closely monitor network growth and key support levels to gauge Bitcoin's next move. If Bitcoin cannot sustain momentum above $98,000, a healthy correction toward the $95,000-$90,000 range could provide a better re-entry point. On the other hand, if BTC reclaims network activity growth, the rally could resume, defying fundamental concerns
BITCOIN PRICE OVERVALUATION NETWORK ACTIVITY METCALFE's LAW MVRV RATIO
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