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Bitcoin’s recent surge past $98K raises critical questions about its sustainability, as plummeting network activity indicates potential overvaluation.
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Indicators such as Metcalfe’s law and the Market Value to Realized Value (MVRV) ratio suggest Bitcoin’s price may not align with its current fundamentals.
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According to sources from COINOTAG, “The market is at a tipping point, and the lack of active users could signal a trend reversal.”
Explore the latest analysis of Bitcoin’s recent price movements, network activity concerns, and potential market corrections in this comprehensive overview.
Bitcoin’s Valuation and Network Activity: A Growing Disconnect?
Bitcoin’s recent decline to $98K raises alarms about its perceived value against a backdrop of declining network activity. While the price may generate excitement among investors, essential economic metrics reveal a potential overvaluation scenario.
The application of Metcalfe’s law, which correlates the value of digital networks with their user bases, suggests that Bitcoin’s real value should reside between $48K and $95K. This disparity indicates that the current trading price exceeds sustainable levels, casting doubts on the basis for further growth.
Source: CryptoQuant
Further analysis of the Metcalfe Valuation Bands indicates a potential deviation from historical norms. For the past few months, Bitcoin’s value hovered between the marked red ($48K) and blue ($95K) valuation limits. The recent price rise above this threshold suggests speculative activity, possibly driven by external investment inflows.
Network Activity Declining – A Warning Sign?
A thorough examination of Bitcoin’s network fundamentals reveals a significant drop in daily active addresses—a critical measure of engagement. This decline mirrors the diminishing activity noted in the Metcalfe valuation bands since March 2024.
The stagnation in user engagement seems to distance itself from current price levels, indicating that Bitcoin’s optimistic price action may not be fully supported by sound on-chain data.
Source: Glassnode
The Market Value to Realized Value (MVRV) ratio further substantiates this caution. Historically, when MVRV exceeds 2.4, market corrections generally ensue. The recent downturn in this ratio suggests that Bitcoin’s price may be inflated, hinting at a more fragile market environment.
Technical Indicators – Where is BTC Headed?
Technically, Bitcoin shows signs of fatigue within a generally bullish framework. The price is currently floundering around the 50-day Moving Average (MA) at approximately $98,710, with momentum indicators revealing slowing action. Failure to maintain position above this crucial metric could signal a decline toward the $95K support zone.
Nevertheless, should bullish momentum regain traction, a target approach to the psychological barrier of $100K remains feasible.
The long-term outlook appears solid, with the 200-day MA providing substantial support. However, present overextension may necessitate caution from traders.
Correction or Consolidation?
With network activity dwindling and Bitcoin’s price surpassing intrinsic valuation estimates, there exists a strong sentiment that the market could face a correction. While external catalysts like growing institutional interest may reinforce its current rally, on-chain fundamentals warn of a bear possibility.
Investors are advised to monitor network activity closely and observe key support levels to ascertain Bitcoin’s forthcoming movements. If the price struggles to maintain momentum above $98K, a healthy correction towards $95K-$90K might yield a favorable re-entry opportunity. Conversely, should network activity recover, it could signal a renewed uptrend.
– Read Bitcoin (BTC) Price Prediction 2025-26
