What is NVT Ratio

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NVT Ratio, Network Value to Transaction Ratio, is an indicator that measures the value of the Bitcoin network. It calculates the ratio of the market cap of Bitcoin to its transaction volume over a certain period of time.

Indicator Overview

NVT Ratio = Market Cap / Transaction Volume

Indicator Performance

The NVT Ratio is similar to the PE ratio used in traditional stock markets and can be used to evaluate the value of the Bitcoin network.

  • A high NVT ratio (or an increasing trend) indicates that the market value of Bitcoin is relatively high compared to its transaction volume. The price of Bitcoin may be overvalued. This situation often implies an overheated market or overly optimistic investor sentiment. Historically, the extremely high NVT ratio has indicated that the market is approaching the top and can be a signal of a bear market.
  • A low NVT ratio (or a decreasing trend) indicates that the market value of Bitcoin is relatively low compared to its transaction volume. The price of Bitcoin may be undervalued. This situation suggests a sluggish market or cautious investor sentiment. Historically, the extremely low NVT ratio has indicated that the market is approaching the bottom and can be a signal of a bull market.

Overall, the NVT Ratio can be used to evaluate whether a cryptocurrency's value is overvalued or undervalued. It reflects the health of the market and can be used to assess macro market cycles and provide buy/sell signals.

Historically, NVT Ratio values between 30 and 50 have represented the market top, while values below 15 have represented the market bottom.

Source: CryptoQuant Quicktake

Bitcoin

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