What is NVT Price Model ? The NVT (Network Value to Transacti | Trading Crypto Guide ™

What is NVT Price Model ?

The NVT (Network Value to Transactions) price model is a cryptocurrency valuation metric that was introduced by Willy Woo in 2017. It is used to assess the fundamental value of a cryptocurrency network based on its on-chain transaction volume relative to its market capitalization.

The NVT ratio is calculated by dividing the total market capitalization of a cryptocurrency by its daily on-chain transaction volume. The idea behind this model is that the transaction volume on the blockchain can be indicative of the network's adoption and utility.

When the NVT ratio is high, it suggests that the cryptocurrency's market capitalization is overvalued relative to the level of economic activity happening on the network. Conversely, a low NVT ratio may indicate that the cryptocurrency is undervalued compared to the level of transactional activity.

The NVT price model is one of several valuation metrics used by analysts and investors to gain insights into the market's sentiment and potential price movements. However, like any valuation model, it should be used in conjunction with other analysis tools and not relied upon as the sole determinant of an investment decision.