The below is from charts.woobull.com/bitcoin-nvt-ratio/
NVT Ratio (Network Value to Transactions Ratio) is the ratio of the Market Cap divided by the volume transmitted by the blockchain. Simplistically it could be seen as analogus to the PE Ratio used in equity markets. When Bitcoin`s NVT is high, it indicates that its network valuation is outstripping the value being transmitted through its blockchain.
We should take care not to think of volume through the blockchain as payments. Bitcoin is a store of value network, so volume passing through the blockchain reflects investor flows. More investment activity generates increased volume, when this volume dries up, NVT moves higher above its normal zone, this signals a bear market.
As investment flows move off the base chain onto higher layers like sidechains or an ETF, I expect NVT to skew or otherwise reduce in signal. Note that Liquid, Bitcoin`s first sidechain, went live 10 Oct 2018, this has taken volume off the main chain, but its effects so far have been minimal.
Calculation
Bitcoin`s NVT is calculated by dividing the Network Value (market cap) by the the daily USD volume transmitted through the blockchain. Alternatively we calculated as inverse monetary velocity, the coin supply of Bitcoin divided by the coins transmitted by the blockchain in a given day.
In the chart above, the NVT line has been filtered with a 14 day median.
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Note: "As investment flows move off the base chain onto higher layers like sidechains or an ETF, I expect NVT to skew or otherwise reduce in signal. Note that Liquid, Bitcoin`s first sidechain, went live 10 Oct 2018, this has taken volume off the main chain, but its effects so far have been minimal."
An enormous amount of BTC is being traded on exchanges. These trades are database entires. They are not reflected in the base chain. Look what a 5000 btc order did just recently. It is very possible that much of this almighty candle tail was not even reflected in the base chain.
NVT may, as an technical indicator, be leading us astray. I am not sure. I am suspicious. As an old white guy who has been in the trading industry since 1982, I no longer have a need for hair gel.
NVT Ratio (Network Value to Transactions Ratio) is the ratio of the Market Cap divided by the volume transmitted by the blockchain. Simplistically it could be seen as analogus to the PE Ratio used in equity markets. When Bitcoin`s NVT is high, it indicates that its network valuation is outstripping the value being transmitted through its blockchain.
We should take care not to think of volume through the blockchain as payments. Bitcoin is a store of value network, so volume passing through the blockchain reflects investor flows. More investment activity generates increased volume, when this volume dries up, NVT moves higher above its normal zone, this signals a bear market.
As investment flows move off the base chain onto higher layers like sidechains or an ETF, I expect NVT to skew or otherwise reduce in signal. Note that Liquid, Bitcoin`s first sidechain, went live 10 Oct 2018, this has taken volume off the main chain, but its effects so far have been minimal.
Calculation
Bitcoin`s NVT is calculated by dividing the Network Value (market cap) by the the daily USD volume transmitted through the blockchain. Alternatively we calculated as inverse monetary velocity, the coin supply of Bitcoin divided by the coins transmitted by the blockchain in a given day.
In the chart above, the NVT line has been filtered with a 14 day median.
__________________________________________________________________________
Note: "As investment flows move off the base chain onto higher layers like sidechains or an ETF, I expect NVT to skew or otherwise reduce in signal. Note that Liquid, Bitcoin`s first sidechain, went live 10 Oct 2018, this has taken volume off the main chain, but its effects so far have been minimal."
An enormous amount of BTC is being traded on exchanges. These trades are database entires. They are not reflected in the base chain. Look what a 5000 btc order did just recently. It is very possible that much of this almighty candle tail was not even reflected in the base chain.
NVT may, as an technical indicator, be leading us astray. I am not sure. I am suspicious. As an old white guy who has been in the trading industry since 1982, I no longer have a need for hair gel.