Glassnode’s NVT Indicator Shows Bitcoin is Undervalued

Bitcoin is the flagship cryptocurrency, and in circulation for far too long, it is the most valuable digital asset out there. It is not only the most sought-after cryptocurrency but also the priciest one. Not everyone can start Bitcoin trading just out of nowhere because it requires tons of money and some skill as a trader to begin on this venture. But according to this new indicator made available by Glassnode, Bitcoin is considerably undervalued. This is known as the network value to transactions signal indicator, and it has been extremely lower than it was at the beginning of the year. 

This indicator works by calculating the popular NVT metric, which can be calculated by dividing the market capitalization of a dedicated cryptocurrency by its transactional volume in USD. This means that the total number of transactions that took place both in terms of buying and selling the cryptocurrency is denoted in the American dollar. For the indicator to calculate organic results, it needs 90 days of transactional volume data of a dedicated cryptocurrency presented in USD. 

When moving average is implemented or thrown into the mix, this indicator works more as a directional tool and removes the unnecessary clutter and noise created by random volume spikes. These spikes appear because of technical mistakes or some other problems on either the exchange end or the customer’s end. 

According to the indicator, the current value settlement is below 25, and reading the display chart of the metric; this number suggests that Bitcoin is undervalued. This low ratio also means that the market cap of Bitcoin is significantly immersive than the overall transactional volume recorded for the flagship cryptocurrency in U.S. dollars. This sudden drop within the network activity is because of a massive decrease in exchange inflows and the overall shift within the market exposure. 

Introduction of Crypto ETFs

More and more investments are entering the crypto market through the exchange-traded funds launched and approved recently by the Securities and Exchange Commission. This has massively cut down the direct exposure of investors to Bitcoin, and taking a highway in the form of a Bitcoin futures ETF means that this massively undervalues Bitcoin in the long run.

Leave a Reply

Your email address will not be published. Required fields are marked *