Ethereum Network-to-Value Ratio (NVT) has dipped to a 3-month low despite a notable 20% rally in the price of ETH. As the world’s second largest cryptocurrency gains momentum, the declining NVT ratio sparks a fascinating debate around its valuation.
According to blockchain analysis company Glassnode, the Ethereum NVT ratio has dropped to 59.3, hitting its lowest level since November 19. This revelation highlights fascinating market dynamics within the crypto industry.
This evaluation stems from the 7-day moving average of Ethereum’s Network-to-Value (NVT) ratio, a metric that gauges the digital assets market cap in correlation with the worth of on-chain transactions executed on the Ethereum network.
The NVT ratio is an on-chain indicator that provides insights into the valuation of the crypto-currency by comparing its market cap to the value of on-chain transactions processed on the underlying blockchain.
A rising NVT ratio, which indicates a slower growth rate of on-chain transactions relative to the cryptocurrency’s price, suggests that the network is over-valued. On the other hand, a declining ratio points towards a more favorable valuation.
We can compare the NVT ratio to the price over earning (P/E) ratio used in stock markets to determine whether a share price is low or expensive.
Ether’s Price Surges Over 20% in Recent Days
Data reveals that Ethereum gained a six-month high of $1,784 and surged over 20% recently. According to Coinbase, Ethereum rose 6.38% in the last 7 days and 7.53% in the last 24 hours. With this price surge and falling NVT ratio, Ethereum offers attractive value, offering investment options in the current market dynamics.
The NVT ratio is important as an on-chain sign because it shows the link between the total value of the crypto market and the value of transactions happening on the Ethereum network.
Crypto markets also surged on Monday morning, with Bitcoin (BTC) climbing nearly 20% to over $26,000, while Cardano (ADA) and Binance Coin (BNB) also rose, each posting gains of 10%.
Related Reading | Dogecoin Bug Persists in 280 Blockchains, Says Security Firm
This overall uptrend in the crypto market may encourage investors to consider Ethereum and other digital assets. As viable investment options, especially given Ethereum’s good value based on the NVT ratio.
However, potential investors must exercise caution and conduct thorough research before making any decisions, as the crypto market is notorious for its elusive and unpredictability.