Reasons Behind Bitcoin’s Price Drop to $66,000

Bitcoin has experienced a notable correction, dropping from a high of $69,500 to a low of $66,800 within 24 hours. This downturn was anticipated, as on-chain indicators suggested that the recent rally was not sustainable.

Key Factors Contributing to the Drop

1. NVT Golden Cross Signal: Analyst Burak Kesmeci from CryptoQuant highlighted the NVT (Network Value to Transactions) Golden Cross as a key indicator. This signal suggests that Bitcoin has entered an overheated zone, indicating the price is currently above what network activity can support.

2. Overbought Conditions: The NVT ratio's rise indicates Bitcoin's price has outpaced the real value being transferred on the blockchain, creating overbought conditions. Such situations typically lead to corrections as the market recalibrates to align price with fundamental demand.

3. Unsustainable Fundamentals: Current fundamentals do not support a continued upward trend. The increase in the NVT ratio signals that Bitcoin is overvalued relative to its utility, necessitating a correction to meet actual market demand.

4. Stock-to-Flow Ratio Decline: A decrease in Bitcoin’s Stock-to-Flow ratio points to an increased supply of BTC. When supply rises without a corresponding increase in demand, bearish market conditions can emerge.

5. Negative Divergence with Daily Active Addresses (DAA): The negative divergence between Bitcoin's price and DAA over the past week indicates that the rally has been largely speculative. This lack of genuine demand suggests that a correction is needed for Bitcoin to regain momentum for future gains.

In conclusion, while Bitcoin briefly peaked at $69,500, the underlying data indicates that a correction was necessary to align price with real market fundamentals.

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