BTC’s NVM Ratio May Continue to Climb, According to Report

The blockchain intelligence firm, CryptoQuant (@cryptoquant_com), tweeted their analysis for Bitcoin (BTC) this morning. In the tweeted analysis, CryptoQuant analyzed BTC’s NVM Ratio, which is a metric used to assess the fair value of a blockchain network based on the number of active users.

According to the report, a high NVM Ratio suggests that the network is overvalued and indicates that the price is too high compared to the number of active users. The opposite is true for a low NVM Ratio.

The NVM Ratio for the crypto market leader fluctuated between 0.6 and 2 in 2021, stated the report. Values above 2 are indicative of an overvalued network, which coincided with BTC’s price reaching an all-time high at the time.

CryptoQuant’s report added that BTC’s NVM Ratio began forming a descending pattern in 2022 – causing the figure to fall below 0.6 and signaling the start of the crypto bear market. BTC’s NVM Ratio then continued within the descending pattern until it hit a two-year low of 0.26 as a result of the FTX collapse.

The report mentioned, however, that BTC’s NVM Ratio experienced an inflection point in January 2023 and surged from 0.26 to 0.6, breaking its 100 EMA in the process. This increase in BTC’s NVM Ratio was accompanied by a rise in the market leader’s price, with BTC’s price rising from $17K to $21K.

BTC’s NVM Ratio (Source: CryptoQuant)

Currently, the NVM Ratio for BTC is showing an upward trend and has hit a 7-month peak of 0.75, stated the report. According to CryptoQuant’s analysis, it is highly probable that the NVM Ratio will continue its rally to reach values above 1.

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