The main idea and principle of NVT Ratio

Home » FINTECH » The main idea and principle of NVT Ratio
2018-03-30
The main idea and principle of NVT Ratio

Every market has periods of a very severe overbought situation. At this time, many users are experiencing euphoria. However, all possible price movements are cyclical, and the stronger the growth is, the deeper the subsequent decline in the end will be. If the period of exponential growth lasts suspiciously long, the probability of a market”bubble” formation , which will burst sooner or later, increases.

The most striking example of the financial bubble is “tulipomania” in the Netherlands (1636-1637). The Japanese financial bubble in the real estate and securities markets (1986-1991) is also very famous. You may also hear abut the “dot-com bubble” that happened in 1995-2001. The latter is often used by “old school” financiers trying to analyze the situation on the cryptocurrency market.

However, in the end of 2018 and the cryptocurrency market showed some signs of the financial bubble. For example, Bitcoin charts often show rapid 20-30% growth, which attracts many new users, who are looking a fast and easy income.


In order to understand the essence of the NVT Ratio, you should draw an analogy with the world of mainstream finance.

Ratios are often used to evaluate the assets of a traditional financial market. They allow users to compare different assets among each other, and also provide an opportunity to determine whether a particular financial instrument is overvalued or undervalued.

One of the most popular tools is the price/earnings ratio (P/E, PE ratio). It is the ratio of the market price of a share to the profit earned on it (EPS). It can also be calculated by dividing the company’s market capitalization by its annual profit.

Small values ​​of the coefficient signal about the undervaluation of shares, large values ​​of the coefficient  signify about their overestimation. Thus, this indicator not only allows you to compare the shares of different companies with each other, but also gives an idea of ​​their true value.

The current market price of the shares  (or its value at a certain date) can be taken in the archives of stock exchanges. The earnings per share (Basic earnings per common share, Basic and diluted earnings per share) can be found in the company’s income statement.

CRYPTOCURRENCIES
  • bitcoinBitcoin$3,677.68
  • rippleXRP$0.325917
  • ethereumEthereum$122.36
  • tetherTether$1.00
  • eosEOS$2.44
  • stellarStellar$0.106713
  • litecoinLitecoin$32.77
  • cardanoCardano$0.044915
  • tronTRON$0.024122
  • moneroMonero$45.02
  • iotaIOTA$0.311866
  • nemNEM$0.057095
  • dashDash$71.95
  • neoNEO$7.83
The complexity Bitcoin mining is growing
As a result of the next recalculation of the complexity of mining Bitcoin on the night of January 14, this figure increased by almost 5%. The complexity of mining is a parameter of the blockchain network, which shows how difficult it is to perform a mathematical calculation to find a new unit and, accordingly, to […]
2019-01-18 0 5
Bitcoin volatility fell by 98% over the year.
Since January last year, the first cryptocurrency volatility has decreased by 98%. So, if on January 16, 2018, this figure was $ 3,468, then a year later – only $ 61, notes CoinDesk Markets analyst Omkar Godboul. The daily volatility over the past year decreased from 9.1% to 3.6%, although on December 16, 2018 was […]
2019-01-17 0 8
Will Ethereum hard fork Constantinople be launched this week?
Ethereum, one of the largest and most influential blockchains in the world, is planning to improve its code in the near future. A massive system upgrade, or hardfork, called “Constantinople” will include a number of technological improvements called to enhance practicality and the architecture of smart contracts. The Ethereum community will make a final decision […]
2019-01-15 0 31
The Brit​ish citizen was trying to buy a gun with cryptocurrency
David Mitchell, a 48-year old British citizen, was arrested by the US police after an attempt to purchase a gun with cryptocurrency via the dark web. Mr. Mitchell was planning to buy a Glock 9mm pistol which costs around £2,000. The man explained to the court that he was curious whether it is possible to […]
2019-01-14 0 18
© 2017–2018