The Bitcoin NVT signal data provides conflicting predictions for what will happen to the current BTC price range. The price of Bitcoin at $16,786 may be “unsustainable,” as one metric reaches its highest level in seven months.
The network value to transaction (NVT) signal for Bitcoin reached levels on December 21 that had not been seen since April, according to Glassnode data.
Willy Woo, a statistician, developed NVT, which essentially calculates the relationship between on-chain activity and Bitcoin price.
The daily transaction volume 90-day moving average, according to Glassnode, “improves” NVT and makes it “better function as a leading indicator.”
On December 21, the NVT signal reached 18.58, a level last seen as Bitcoin fell in the final days of April. BTC/USD was trading at just over $40,000 at the time.
There Is a Catch To NVT
As noted by analysts, including Woo, the changing nature of the Bitcoin network means that transactions are increasingly moving off-chain. This, along with other phenomena, impacts on-chain transaction data to the point where NVT may produce an overly pessimistic picture of value-to-transactions.
A new dynamic range NVT (DRNVT) indicator addresses it. DRNVT, developed by Charles Edwards, CEO of asset manager Capriole, measures NVT deviation from the mean using standard deviations. It also provides value zones to help determine entry points based on their readings.
Bitcoin experiences a halving every four years. The time between each halving is an epoch. When a halving occurs, it reduces the rate at which new bitcoins enter circulation by halving the reward that Bitcoin miners receive. There have been four epochs and three halvings so far (November 2012, July 2016, and May 2020). The miner reward was originally 50 bitcoins, but it has since dropped to 6.25 bitcoins and will fall to 3.125 bitcoins sometime in May 2024.