> For the complete documentation index, see [llms.txt](https://cddstamp.gitbook.io/cddstamp/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://cddstamp.gitbook.io/cddstamp/nvt-advanced-signal.md).

# NVT Advanced Signal

📊 **NVT 90DMA & Advanced NVT Signal Guide**

#### 🧠 What Is It?

**NVT (Network Value to Transactions) Ratio** is a metric that measures the relationship between Bitcoin’s market capitalization and its on-chain transaction volume. It is often referred to as the crypto market's equivalent of the price-to-earnings (P/E) ratio.

**Formula:**\
`NVT = Market Cap / On-Chain Transaction Volume`

This indicator helps assess whether Bitcoin is overvalued or undervalued based on the level of economic activity occurring on-chain.

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#### 📈 NVT 90DMA (90-Day Moving Average)

In this version, the NVT value is smoothed using a 90-day moving average, resulting in a more stable curve.

**Purpose:**

* Filter out daily volatility
* Better observe trend structure
* Simplify signal generation

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#### 🔶 Advanced NVT Signal (90DMA)

This enhanced indicator was proposed by **Willy Woo**.

**Formula:**\
`Advanced NVT Signal = Market Cap / 90DMA(On-Chain USD Transaction Volume)`

In this implementation, USD volume is estimated by multiplying BTC transaction volume (`b_val`) with daily BTC price (`price`). This produces a price-sensitive, normalized signal that reflects economic value.

<figure><img src="/files/I1M2O7Hq6atB86xoZmho" alt=""><figcaption></figcaption></figure>

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### ⚙️ How to Use It

#### 1. **Interpreting Values:**

* **NVT value too high:** May indicate price inflation → potential for selling pressure.
* **NVT falling:** Could indicate rising transfer activity or falling market cap → recovery potential.

#### 2. **Cross Analysis:**

* If **Advanced NVT Signal rises above NVT 90DMA** → market may be overvalued relative to chain activity.
* If **Advanced NVT Signal drops below** → increasing on-chain activity may be supporting the price.

#### 3. **Historical Context:**

* During the 2017 and 2021 bull markets, NVT spiked sharply and dropped steeply as markets corrected.
* High NVT readings often signal macro tops.

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#### 💡 Notes & Suggestions

* This indicator is **not suitable for short-term trading**, but ideal for understanding **mid-to-long-term trend structures**.
* Should be interpreted **alongside other on-chain indicators** (SOPR, Dormancy, Realized Cap, etc.).

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### 📌 Conclusion

**NVT 90DMA** and **Advanced NVT Signal** compare Bitcoin’s market value with its on-chain economic activity, helping detect artificial inflations or undervaluations early. It is a powerful signal source for long-term investors and macro trend analysts.

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### 🔍 What to Watch For on the Chart

#### 1. **Level of NVT 90DMA (Blue Line)**

* **High NVT (e.g., > 3M):**\
  Market cap is high relative to on-chain activity → possible overvaluation.
* **Low NVT:**\
  Indicates increased activity or reduced market cap → potential recovery.

#### 2. **Advanced NVT Signal (Orange Dotted Line)**

This signal represents price valuation normalized by on-chain transaction volume.\
If it **diverges from NVT 90DMA**, structural change may be occurring:

* **Breaks upward:** Market may be overheated relative to activity.
* **Drops down:** On-chain activity increasing → price may be supported.

#### 3. **Crossovers Between Blue and Orange Lines**

* **Orange crossing below blue:** Price correction may follow.
* **Orange crossing above blue:** Value recovery may be underway.

#### 4. **Alignment with BTC Price (Green Line)**

* If BTC price and NVT both rise → possible overvaluation.
* If BTC falls but NVT remains flat → falling chain activity → possible risk.

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#### ⚠️ Warnings

* These are **not real-time trading signals**, but indicators of structural turning points.
* Extremely high or low readings are **not absolute buy/sell signals**. Combine with other on-chain metrics (SOPR, Puell Multiple, etc.).
* **Do not compare only with price.** Chain data may lead or lag market price.

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#### 🎯 Use Case Example

If the **blue NVT 90DMA** is above 3M, the **orange Advanced NVT Signal** is also rising, and price is parabolic:\
→ **Overvaluation risk is high.**

If instead, **Advanced NVT Signal is dropping** while price is flat or rising:\
→ **On-chain support may be forming, potential buy opportunity.**