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# NVT Ratio

Defined as the ratio of market capitalization divided by transacted volume in the specified window

## Definition

Network Value to Transactions Ratio (NVT Ratio) is defined as the ratio of market capitalization divided by transacted volume in the specified window.
$\text{NVT Ratio} = \frac{\text{Market Cap}}{\text{Transaction Volume in USD}}$

## Interpretation

NVT ratio is PE(Price Earning) ratio in cryptocurrency evaluating its value by transaction volume
If the value is too high, it means the network is overvalued compared to the low ability to transact coins in terms of volume, implying the possible removal of the price bubble coming. This interpretation is based on the effect of mean reversion.

### By value itself

An indicator that measures whether the blockchain network is overvalued or not.
• High: Overvalued Network worth - Bearish
Marketcap is too much valued compared to the low ability to transact coins in terms of volume
• Low : Undervalued Network worth - Bullish
Marketcap is undervalued compared to the high ability to transact coins in terms of volume
Last modified 1yr ago