Bitcoin’s price has recently experienced a surge, peaking over $100,000 and then settling around $98K. This has sparked excitement among investors, however, the on-chain data tells a different story.
The network activity of Bitcoin has reached a one-year low. This is concerning as it raises questions about whether the current price levels are justified.
According to Metcalfe’s law, which values a network based on its active users, Bitcoin’s fair value should be between $48K and $95K. With Bitcoin trading above this range, it suggests that the cryptocurrency might be overvalued.
The Metcalfe Valuation Bands, historically a guide for Bitcoin’s price, indicate a potential deviation. Since February 2024, Bitcoin has remained between the red ($48K) and blue ($95K) valuation bands. The current price exceeding this range suggests a speculative premium.
On closer inspection, Bitcoin’s network fundamentals reveal a decline in daily active addresses. This aligns with the downward trend in Metcalfe valuation bands since March 2024, suggesting that the current valuation is not fully supported by the underlying network fundamentals.
The Market Value to Realized Value (MVRV) ratio reinforces this concern. Historically, an MVRV above 2.4 has preceded corrections, and the recent downtrend in this metric indicates potential overvaluation.
From a technical perspective, Bitcoin maintained a bullish structure but showed signs of exhaustion. If Bitcoin fails to hold above the 50-day Moving Average (MA) at $98,710, a pullback toward the $95K region is possible.
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.
If Bitcoin cannot sustain momentum above $98K, a healthy correction toward the $95K-$90K range could provide a better re-entry point. However, if BTC reclaims network activity growth, the rally could resume, defying fundamental concerns.
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