Is Bitcoin price fall over? Seeking for answer in cryptoasset ratio analysis

How NVT and NVM ratios predicted Bitcoin price correction in May, and what they say about the near future

Dmitry Kalichkin
Jun 17, 2018 · 4 min read

Summary

Both NVT and NVM ratios have been in the red zone prior to correction, indicating Bitcoin price not being fully supported by fundamentals and the market being overheated. Moreover, both ratios are still in the red zone as of mid-June, which leads us to a conclusion that further correction might happen in the near future.

NVT predicting correction

First of all, let us remind everyone how NVT is defined:

NVM predicting correction

Let’s start from a quick refresher on NVM. This multiple quantifies relationship between current market Network Value and Network Value as a function of Daily Active Addresses based on Metcalfe’s and Odlyzko laws:

Zooming out: when moon?

We think that NVM describes a longer term “macro-level” network valuation. 2017 bull run still has an impact on Network Value, as suggested by NVM staying in the red zone almost all the time since November, 17. It went out of the red for a couple of weeks in the early February, but returned back again shortly. Based on this, we are far from trend reversal for the Bitcoin. NVT tells similar story on a shorter time frame.

90 day cryptoasset correlation matrix. Coefficients over 0.5 suggest strong correlation.

Acknowledgements

Special thanks goes to Cryptolab Capital analyst Roman Skoromniy who did all the number crunching for this note.

Disclaimer

None of the statements in the article should be considered investment advice. Due to the various risks and uncertainties, actual performance of the assets may differ materially from that reflected or contemplated in forward-looking statements.

Cryptolab Capital

Long-short digital asset investment fund

Dmitry Kalichkin

Written by

Chief Research Officer @ Cryptolab Capital. Technology investor, cryptoasset believer, snowboarder, Stanford grad

Cryptolab Capital

Long-short digital asset investment fund