# NVT Advanced Signal
π **NVT 90DMA & Advanced NVT Signal Guide**
#### π§ What Is It?
**NVT (Network Value to Transactions) Ratio** is a metric that measures the relationship between Bitcoinβs 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.
***
#### π 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
***
#### πΆ 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.
***
### βοΈ How to Use It
#### 1. **Interpreting Values:**
* **NVT value too high:** May indicate price inflation β potential for selling pressure.
* **NVT falling:** Could indicate rising transfer activity or falling market cap β recovery potential.
#### 2. **Cross Analysis:**
* If **Advanced NVT Signal rises above NVT 90DMA** β market may be overvalued relative to chain activity.
* If **Advanced NVT Signal drops below** β 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.
***
#### π‘ 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.).
***
### π Conclusion
**NVT 90DMA** and **Advanced NVT Signal** compare Bitcoinβs 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.
***
### π 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 β possible overvaluation.
* **Low NVT:**\
Indicates increased activity or reduced market cap β 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 β 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 β possible overvaluation.
* If BTC falls but NVT remains flat β falling chain activity β possible risk.
***
#### β οΈ 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.
***
#### π― Use Case Example
If the **blue NVT 90DMA** is above 3M, the **orange Advanced NVT Signal** is also rising, and price is parabolic:\
β **Overvaluation risk is high.**
If instead, **Advanced NVT Signal is dropping** while price is flat or rising:\
β **On-chain support may be forming, potential buy opportunity.**
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