MVRV and NVT as Key Bitcoin Indicators

Understanding bitcoin’s market behaviour requires deep assimilation into key fundamental indicators. In traditional stock market, P/E ratio (price to earnings ratio) has been the de facto instrument for security valuation. P/E ratio simply mirrors share price to its equivalent earnings per share. Rising P/E indicates either high growth potential or overvaluation.

In digital asset industry, the closest indicator to P/E is NVT, or network value to transaction value. NVT is calculated by dividing the Network Value (market cap) by daily USD volume transmitted through the blockchain. Furthermore to NVT, MVRV and its derivative MVRV-Z are indicators of choice for the smart money. In this article we’ll take a closer look into how to capitalize these indicators for understanding bitcoin.

MVRV, or Market Value to Realized Value, was firstly developed by David Puell and Murad Mahmudov in early October 2018.

MVRV is calculated by dividing the market cap by realized cap. MVRV is a good instrument for estimating if market participants are in profit or not. Negative MVRV ratio…