On-chain analysis: NVT indicator suggests a short-term strong BTC explosion

In this article, Bitcoin Magazine looks at the Bitcoin (BTC) on-chain index, specifically the Network Value to Transaction (NVT) ratio, to determine the near-term outlook for BTC price.

What is NVT?

NVT (Network Value to Transaction) is an indicator that shows the relationship between on-chain transaction volume (transaction) and market capitalization. It’s simply the relationship between market value and daily transaction volume in the chain.

A very high value is considered bearish as it means that an increase in market value will not be supported by an increase in the volume of transactions in the chain.

Since July 2019, the NVT has fluctuated between 13 and 40, apart from a few deviations above and below these two values.

On July 25, NVT broke the range to hit an all-time high of 60.46. At that point, BTC was trading at $ 33,000.

Despite the fact that the price has rebounded, NVT has since declined and is currently at 32.3, right in the middle of its long-term range.

The source: Glass knot

This becomes clearer when you look at the number of daily on-chain transactions.

In July it was 195,248, currently it is 255,488.

This increase in the number of transactions is the cause of the decline in NVT.

The source: Glass knot

NVT signal

On-chain analyst @Woonomic tweeted an NVT signal chart showing that Bitcoin is oversold.

The source: Twitter

Since the 2018 low, NVT has only fallen below 20 four times (black circle). Each was followed by a clear upward movement.

Therefore, if history rhymes, a significant upward trend is likely in the near future.

The source: Glass knot

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