Indicator Overview

The indicator is the Network Value to Transactions (NVT) Ratio. It is calculated as Bitcoin's Market Cap (Network Value) divided by the daily USD value of on-chain transaction volume. It is analogous to the P/E (Price-to-Earnings) ratio for stocks, where Network Value is the price and Transaction Volume represents the economic throughput or "earnings" of the network. The NVT Ratio measures the market's valuation of the network relative to the value it transmits.

How To Use

The NVT Ratio is a valuation tool that assesses whether the network value is justified by its utility (transactions).

High NVT Ratio readings indicate that the network value is low relative to the value being transacted. This suggests the asset may be undervalued, as its utility and usage are high compared to its price. Historically, extreme low NVT values frequently occur during market bottoms or early stages of bull runs, indicating a high-value accumulation opportunity.

Low NVT Ratio readings suggest that the market capitalization is high relative to the value being transacted on the chain. This signals that the asset may be overvalued or in a speculative bubble, as investors are pricing in high future growth that current transaction volume does not support. Historically, extreme high NVT values often precede market corrections or bear markets.