This indicator, created by Willy Woo, was an attempt to create the equivalent to a price-earnings ratio (PE Ratio) for the Bitcoin market. It was first introduced via Twitter on February 23, 2017. Woo explained its essence in an article published by Forbes on September 29, 2017.
This was later changed in a revision of the NVT ratio, called the NVT Signal (Signal applies MA only to the volatile Transactions component, without smoothing the already stable NV; more about this in the following section). Woo himself agreed that Signal is a more responsive indicator than Ratio.
NVT Ratio can be used to:
- Detect past bubbles. In the graph below, the NVT (brown line) intersects the upper limit of the normal NVT range when the correction happens (close to the intersection with the yellow line, logarithm of NV);
- Detect a sharp increase in a new cryptocurrency’s NV: a sharp NVT rise towards the upper limit of the normal NVT range precedes a peak in NV (2011).
Submitted February 22, 2019 at 10:28PM by lama_in_the_house http://bit.ly/2Xj9SHW
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