Key Points
- Bitcoin’s price recently surged past $98K, but declining network activity is raising concerns about overvaluation.
- Bitcoin’s fair value as per Metcalfe’s law falls between $48K and $95K, suggesting that the current price might be unsustainable.
Bitcoin’s Bitcoin (BTC) price has seen a decline after a recent surge that took it over $100,000, with the price recently touching $98K.
This price range is exciting for investors, however, the underlying on-chain data tells a different story.
Disconnect between Bitcoin’s Valuation and Network Activity
Bitcoin’s price recently dropped to $98K, down from its six-figure high.
However, an examination of network activity suggests that 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 $48K and $95K.
With BTC trading above this range, there are concerns about sustainability.
Declining Network Activity: A Warning Sign?
A deeper look into Bitcoin’s network fundamentals reveals a decline in daily active addresses, a metric for user activity.
This decline aligns with the downward trend in Metcalfe valuation bands since March 2024, indicating 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 Market Value to Realized Value (MVRV) ratio further reinforces this concern.
Technical Indicators: Where is BTC Headed?
From a technical perspective, Bitcoin has maintained a bullish structure but shows 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 $95K region is possible, aligning with the upper Metcalfe valuation band.
However, Bitcoin could target psychological resistance at $100K if bullish momentum persists.
Correction or Consolidation?
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.
On the other hand, if BTC reclaims network activity growth, the rally could resume, defying fundamental concerns.
