NVT

Definition

The typical formula for NVT is the following:

NVT = Daily Market Cap / Daily Transaction Volume

Santiment provides an alternative formula for NVT:

NVT = Daily Market Cap / Daily Circulation

Since daily circulation is zero at the beginning of each day, NVT based on it would have a spike at the day beginning, we solve it with rolling NVT metric which uses rolling circulation for last 24 hours and is computed using following formula:

NVT = Intraday Market Cap / Rolling Circulation

For some assets there is a more prceise metric called Circulation NVT, which takes 24 hour rolling daily circulation instead of daily. The Network Value-to-Transaction (NVT) ratio is an asset valuation metric similar to the P/E ratio traditionally used in equity markets to gauge a stock's growth potential.

The P/E or Price-to-Earnings ratio is calculated by dividing the company's current price per share with its earnings per share. A high P/E could mean a stock's price is high relative to its earnings and therefore possibly overvalued. Conversely, a low P/E might indicate that the current stock price is low relative to earnings and possibly undervalued.

As crypto assets are not companies, their earnings are not known , so Transaction Volume is often used as a proxy for the blockchain's underlying value.

Since Transaction Volume gets rather noisy and often includes duplicate transactions (sending 10 ETH to a deposit address which then sends them to the exchange hot wallet counts as 20 ETH Transaction Volume even though it's the same 10 ETH being transacted), it's not an ideal measure of a network's economic activity. That's why at Santiment we calculate NVT using Daily Trx Volume, but also by using Circulation instead, which filters out excess transactions and provides a cleaner overview of a blockchain's daily transaction throughput. You'll find both approaches plotted on the graph and can choose which one you prefer.

As with P/E, a high NVT indicates that an asset's network valuation is higher than the value being transmitted on the network. In other words, the network is expensive relative to how much value it moves, signaling a potentially overvalued asset.

Conversely, a low NVT denotes an asset that is cheaper per unit of on-chain transaction volume, signaling a potentially undervalued asset.

NVT is often used as a long-term indicator of an asset's price trends, rather than a day-to-day valuation metric.

Ratio

Data Type

Timeseries Data

Latency

On-Chain Latency

SanAPI

• nvt - NVT using 1 day Circulation. Computed with daily frequency.
• nvt_5min - Same as nvt, but computed with 5-minute frequency.
• nvt_transaction_volume - NVT using Transaction Volume. Computed with daily frequency.
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{
getMetric(metric: "nvt") {
timeseriesData(
slug: "santiment"
from: "2019-01-01T00:00:00Z"
to: "2019-09-01T00:00:00Z"
interval: "7d"
) {
datetime
value
}
}
}

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{
getMetric(metric: "nvt_transaction_volume") {
timeseriesData(
slug: "santiment"
from: "2019-01-01T00:00:00Z"
to: "2019-09-01T00:00:00Z"
interval: "7d"
) {
datetime
value
}
}
}

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