In this article, BeInCrypto takes a look at Bitcoin (BTC) on-chain indicators, focusing especially on the Network Value to Transaction (NVT) ratio.
The NVT (Network Value to Transaction) is an on-chain indicator which shows the relationship between transaction volume and market capitalization. It is simply the ratio between the market value and the daily transaction volume.
A very high value is considered bearish, since it means that the increase in market value is not supported by an increase in transaction volume.
For a more detailed explanation, click here.
Current reading
Since July 2019, NVT has been hovering between 13 and 40, with the exception of a few deviations above and below. Therefore, it is possible to say that the indicator has created a range between these two levels.
On July 25, NVT reached an all-time high of 60.46. At the time, the BTC price was trading at $33,000.
Despite the fact that the price has been increasing, NVT has been falling since and is currently at 32.3, right in the middle of its long-term range.
Therefore, while the increase in the price of BTC was not supported by an increase in transactions in July, it is supported now.
This is more clearly visible when looking at the number of daily transactions.
Transactions were at 195,248 in July, while they are currently at 255,488.
This increase in the number of transactions is behind the drop in NVT.
NVT signal
On-Chain analyst @Woonomic tweeted a NVT signal chart, which shows an oversold reading.
Since the 2018 bottom, NVT has fallen below 20 only four times (black circles). Each was followed by a significant upward movement.
Therefore, if previous history is any indication, a significant upward movement is likely to follow.
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