Bitcoin NVT Remains Bullish, All-Clear Signal For Rally?

Keshav Verma

Last Updated: June 11, 2024 7:00 am

3 mins read

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On-chain data shows the Bitcoin Network Value to Transactions (NVT) ratio is above the bear zone, implying the recent price growth might have been healthy.

Bitcoin NVT Ratio Has Remained Outside Red Since October

According to data from the on-chain analytics firm Santiment, the NVT ratio has seen a significant improvement recently. The relevant indicator here is the “NVT ratio,” which keeps track of the ratio between the Bitcoin market cap and daily circulation.

The market cap here is naturally the total value of the asset, while circulation refers to the number of unique tokens observing some movement on the network inside a 24-hour rolling period.

Some other analytics websites use transaction volume in place of circulation, but Santiment’s version uses the latter because the volume often contains noise that’s not relevant to the market (like relay transactions of the same coins, which are counted multiple times in the volume, but only once in circulation).

When the value of the NVT ratio is high, it means that the price of the asset is high compared to the blockchain’s ability to transact coins right now. Such a trend can suggest the coin may be overvalued at the moment.

On the other hand, the metric being low implies the cryptocurrency might be underpriced currently as its transaction volume is at healthy levels compared to the market cap.

Now, here is a chart that shows the trend in the Bitcoin NVT ratio over the last few years:

Looks like the value of the metric has been green in recent days | Source: Santiment on X

As displayed in the above graph, the Bitcoin NVT ratio exited the historical bearish territory back in October and has continued to be outside it in the weeks since then.

The metric hasn’t exactly returned to the bullish zone proper yet; it has been more leaning towards neutral. However, the fact that the indicator has improved inside this period despite the cryptocurrency’s market cap also seeing a significant boost at the same time is certainly a positive development, as it suggests that the network activity growth has been outweighing the rise in the price.

At the current values of the ratio, the transaction activity of Bitcoin is justifying its market cap, so at the very least the asset may not be in immediate danger of a correction.

This naturally means that the rally should be able to continue for a while until the ratio returns back into the bearish territory (which may not even happen if the circulation continues to improve, as it has been during the price surge so far).

BTC Price

After seeing a pullback to as low as $35,000 earlier, Bitcoin has successfully recovered back above $37,000 during the past day.

The value of the asset has registered a strong rise during the past day | Source: BTCUSD on TradingView

Featured image from Jievani Weerasinghe on Unsplash.com, charts from TradingView.com, Santiment.net

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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