NVT Ratio

Definition

Network Value to Transactions Ratio (NVT Ratio) is defined as the ratio of market capitalization divided by transacted volume in the specified window.

NVT Ratio=Market CapTransaction Volume in USD\text{NVT Ratio} = \frac{\text{Market Cap}}{\text{Transaction Volume in USD}}

Interpretation

NVT Ratio can be thought of as an indicator that measures whether the blockchain network is overvalued or not. 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 possible removal of the price bubble soon. This interpretation is based on the effect of mean reversion.

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