NVT Price values the Bitcoin network using the transaction volume settled by the blockchain. NVT Ratio is the ratio of on-chain volume to its market cap, which can be considered as analogous to the PE Ratio for the network. NVT Cap is then calculated by multiplying on-chain volume, by the 2 year median value of NVT Ratio, and then adjusted to NVT Price by dividing by the coin supply.
NVT Price is calculated considering a 28-day and a 90-day median of NVT Ratio to provide a fast and slow signal, respectively. NVT Price can generally be considered a 'fair value model', seeking to reflect the fundamental valuation of the network based on its utility as a settlement layer.
NVT Premium is the ratio of the market price above of below the fundamental valuation estimated by the 90-day NVT Price.
Coined By
Willy Woo, 2021