Bitcoins P/E Valuation - Network Value to Transaction Ratio (NVT)

The Network Value to Transaction Ratio (NVT) is one of the most fundamental valuation models to apply to crypto-assets. The NVT measures the value of the network relative to its utility as a payment network.


The ratio is derived through the following formula; Network Value to Transaction Ratio (𝑁𝑉𝑇) = Network Value / Transaction Volume


The NVT ratio is often called the P/E Ratio for crypto-assets and it is one of the most direct metrics to determine fundamental value. If a network carries a relatively high NVT ratio it is likely that the network is overvalued or in a state of high growth. A network with a low NVT ratio is considered to be undervalued since the transactional volume across the network is higher relative to the network’s value.


For our analysis we applied a 90-day moving average of adjusted Tx_volume to derive a network to utility ratio that is more in-line with the network’s fundamental value, and not reflective of short-term speculative price shocks.



Data: Coinmetrics; Analysis: Bitassist Research & Analytics

Observing the NVT ratio over bitcoin’s history, we can see that it has successfully identified each of the major periods of overvaluation, and with remarkable accuracy. Applying the NVT to the bull run in late 2017, there was a clear signal to exit $14,3k on 7th Dec’17.


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