cryptocurrency

Economics of Unwinding Bitcoin Bubbles – NVT Ratio

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A look at the Bitcoin NVT Ratio, November 2018. Understanding the underlying on-chain economics of unwinding Bitcoin bubbles.


The Bitcoin NVT has been indicating 2014-like bubble territory (see here and here) since Q1, 2018. Around this time, money sent through the blockchain plummeted and the price didn’t initially react proportionally. The more responsive NVT Signal gave signs overvaluation around 2017’s Q4 price bubble peak 2018.

Unwinding Bitcoin bubbles (over level 95), has to show through either increasing transaction volume or lower prices.
Where’s the NVT today?
Bitcoin’s NVT ratio is still indicating bubble territory.

Historical Bitcoin Bubble Unwinds – Bitcoin Network Momentum

This Bitcoin Network Momentum chart above, shows how the 2013 Bitcoin bubble ended in a combination of increasing Bitcoin transactions and market sell-offs.

On the right side of the chart, you can see a spike in transaction volume. A possible indicator of incoming momentum/ rising BTC transaction volume and falling prices (Late Bear Phase) bringing the NVT sub 95 to “normal” levels.

The dynamics and relationship between network value and on-chain volume, is described perfectly in this article.

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