The Bitcoin NVT ratio is at an all-time high, suggesting that block chain network activity is increasing the price.
The ratio shows that BTC’s ongoing rally is organic – led by real demand from retail investors and institutions.
The Bitcoin NVT price is reaching a new all-time high and is entering the pricing process. Source: Willy Woo
Bitcoin’s NVT is calculated by dividing the market capitalization by the sum of the capital moved daily on the block chain.
In essence, Bitcoin consists of a block chain network and a settlement layer. Therefore, one of the most important basic factors would be the amount of capital moved on the block chain network.
The NVT ratio evaluates the current valuation of BTC by measuring the price and the sum of the capital transferred through the Bitcoin block chain. Analysts from Woobull.com explain:
„If Bitcoin’s NVT is high, this indicates that the network’s valuation exceeds the value transmitted through the payment network. This can happen when the network is growing rapidly and investors value it as a high-return investment, or alternatively when the price is in an unsustainable bubble“.
Real demand for Bitcoin, real rally, sustained upward trend
There are three components that typically make a Bitcoin rally a sustained and sustained upward trend:
First, the spot market must lead the futures market – not the other way around. This shows that there is a real demand from private and institutional buyers.
Second, the daily transaction volume on the Bitcoin Blockchain network must remain high – along with other fundamentals such as the hash rate.
Third, BTC should ideally create clear support and resistance levels over a long period of time rather than a massive run-up in a short period of time.
In recent months, the NVT ratio has risen steadily, indicating that Bitcoin user activity is increasing steadily with price.
As the fundamental factors are strengthening in step with the current rally, the likelihood of a broader uptrend is also increasing. Bitcoin bull Woo on this:
„While we are waiting for BTC to reach an all-time high on both the monthly chart at $14,000 and the $20,000 previous high. I would like to point out that the organic valuation of the NVT price by the underlying long-term investors is already at an all-time high. The price will follow.“
Where is the BTC cap?
In technical analysis, the term „pricing“ is used to describe a situation where the price of an asset reaches a new record high.
Since it is at a previously unseen high, it is not possible to predict where the next high will be.
The NVT ratio is in a similar situation where it has reached an all-time high and its next peak remains uncertain. Woo explains:
„In markets where all-time highs are reached, there is no history to fall back on, so pricing is wildly fluctuating upwards and exploring different levels, as there is no history to say ‚this is not valid'“.
For Bitcoin, which relies heavily on the fundamentals of block chain networks, the pricing of the NVT ratio is an extremely optimistic sign.