The ratio of network value to transaction volume (NVT ratio) describes the relationship between the market capitalization and volume of transfers. It is considered to be analogous to the P / E (price-to-earnings ratio) used in the stock markets. This is a metric created by Willie Wu.
“When bitcoin NVT is high, it indicates thatthat the value of the network exceeds the value transmitted over its payment network; this can happen when the network is in high growth and investors view it as a highly profitable investment, or when the price is in a volatile bubble. ”
Using a 30-day moving averageNVT coefficient, the network cost is 21.41, which is the lowest value since July 2019. This tells us that market capitalization has not been matched by recent increases in remittance volumes and is undervalued by investors compared to the previous three years.
Another way to look at this ratio isuse signal ratio NVT. Instead of using daily transfer volumes in the denominator of the NVT ratio, the NVT signal ratio uses a 90-day moving average of the daily transaction volume. Using 90-day averages instead of raw daily volume mutes the impact of days with higher or lower outliers in remittance volumes and better reflects emerging short-term trends.
This approach improves the ratio so that it canserve as a leading indicator. Since the end of September, the NVT signal ratio has been relatively low (compared to the last three years), but still growing. This is another indicator that market capitalization is currently undervalued and may increase compared to the volume of transactions in the past 90 days.
The current NVT ratio is another indicator and metric that confirms the bullish expectations for the undervalued Bitcoin price in Q4.
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