Advanced NVT Signal

Network Value to Transactions ratio with 90-day smoothing - identifies overvalued and undervalued zones based on network activity

Advanced NVT Signal

Network valuation metric - identifies overvalued and undervalued zones based on transaction activity

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Lower values: Undervalued | Higher values: Overvalued

Overvalued Zone

> 75

Take profits - sell signal

Fair Value Zone

45 - 75

Neutral - hold positions

Undervalued Zone

< 45

Accumulate - buy signal

Understanding NVT Signal: NVT Signal = Network Value / MA(Transaction Volume, 90 days). Similar to P/E ratio in stocks, it measures Bitcoin's valuation relative to network usage. High NVT means price is high relative to activity (overvalued), low NVT means strong activity at reasonable price (undervalued). The 90-day smoothing reduces noise for reliable signals.

NVT Valuation Zones

Extremely Undervalued(< 30)

Undervalued(30 - 45)

Attractive(45 - 55)

Fairly Valued(55 - 75)

Overvalued(75 - 95)

Extremely Overvalued(> 95)

Created by

Willy Woo

Refined by D. Kalichkin

Metric Type

On-Chain

Valuation

Best For

Value Assessment

Multi-Week

Smoothing

90-Day MA

Transaction Volume

Historical Accuracy: NVT Signal has successfully identified major Bitcoin tops when exceeding 95 (Dec 2017, multiple 2021 peaks) and major bottoms when dropping below 45 (Mar 2020, Dec 2018). Unlike sentiment indicators, NVT is based on actual network fundamentals - transaction activity - making it a valuation tool rather than just a momentum indicator.

On-Chain Valuation: Network valuation metric similar to P/E ratio

Understanding NVT Signal

The NVT (Network Value to Transactions) ratio is Bitcoin's equivalent to the P/E ratio in stock markets. It measures the relationship between Bitcoin's market capitalization (network value) and the volume of transactions on the network. A high NVT suggests the network is overvalued relative to its usage, while a low NVT indicates undervaluation.

The Advanced NVT Signal improves upon the basic NVT ratio by using a 90-day moving average of transaction volume, which smooths out daily fluctuations and provides more reliable signals. This makes it particularly effective at identifying major market tops and bottoms. When NVT Signal exceeds 95, Bitcoin has historically been severely overvalued, marking cycle tops. When it drops below 45, Bitcoin has been undervalued, marking accumulation zones.

Created by Willy Woo and refined by Dmitry Kalichkin, the NVT Signal has proven remarkably accurate since 2011. Unlike price-only indicators, NVT incorporates actual network usage, making it a fundamental valuation tool rather than just a sentiment measure. The indicator works because high prices with low network activity (high NVT) suggest speculation without utility, while low prices with high activity (low NVT) suggest strong fundamental demand.

Key Features:

• Valuation Assessment: Determines if Bitcoin is overvalued or undervalued relative to network activity.
• Top & Bottom Detection: NVT > 95 signals tops, NVT < 45 signals bottoms with high accuracy.
• Smoothed Signal: 90-day MA of transaction volume reduces noise for reliable signals.
• Fundamental Analysis: Based on actual network usage, not just price or sentiment.

How to Use NVT Signal

For Selling Strategy:

When NVT Signal exceeds 95 (Extremely Overvalued), the network is severely overvalued relative to usage. This has historically marked major cycle tops. NVT > 75 (Overvalued) also warrants caution. These zones indicate price has outpaced network fundamentals, suggesting distribution by smart money.

For Buying Strategy:

When NVT Signal drops below 45 (Attractive) or especially below 30 (Undervalued), the network is undervalued relative to activity. These are strong accumulation zones. Low NVT means high network usage at reasonable prices, indicating strong fundamental demand and potential for price appreciation.

For Valuation Context:

NVT 55-75 (Fairly Valued) represents neutral territory where neither buying nor selling is urgent. Use this range to assess whether current price reflects network fundamentals. Sustained time in fair value suggests healthy market equilibrium.

Combined with Other Metrics:

NVT is most powerful when combined with NUPL, Reserve Risk, and price action. When NVT shows overvaluation and other metrics confirm top conditions, conviction increases. Similarly, multiple indicators showing undervaluation provide strong buy signals.

Pro Tips:

• NVT > 95 = Extremely overvalued - strong sell signal
• NVT 75-95 = Overvalued - take profits
• NVT 55-75 = Fairly valued - neutral, hold
• NVT 45-55 = Attractive - good value, accumulate
• NVT 30-45 = Undervalued - strong buy signal
• NVT < 30 = Extremely undervalued - exceptional opportunity
• Rising NVT = bearish (price outpacing usage)
• Falling NVT = bullish (usage catching up to price)
• Best for multi-week to multi-month decisions
• Combine with NUPL and Reserve Risk for confirmation

Calculation Methodology

NVT Signal is calculated as Network Value (market cap) divided by the 90-day moving average of daily transaction volume. Network Value = Current Price × Circulating Supply. The 90-day MA smooths transaction volume to reduce daily noise. Higher values indicate price is high relative to network usage (overvaluation), while lower values indicate strong usage relative to price (undervaluation). This implementation uses estimated transaction volume based on price volatility patterns as a proxy for actual on-chain transaction data.

30-150

Typical Range

> 95

Sell Zone

< 45

Buy Zone

Advanced NVT Signal