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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.

📈 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

🔶 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.

⚙️ 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.

💡 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.).

📌 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.

🔍 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.

⚠️ 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.

🎯 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.

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