Dynamic Range NVT SignalABOUT DYNAMIC RANGE NVT SIGNAL
NVT Signal (Credit: Willy Woo and Dmitry Kalichkin) is akin to a "PE" ratio for Bitcoin , and can be used to identify when Bitcoin is overbought or oversold based on the relative value of transactions sent across the network.
This indicator includes a 2 year moving average and standard deviation to identify outlier values, instead of declaring a static high-low range for relative valuation.
THEORY
A dynamic "high-low" range was chosen for the following reasons:
- Bitcoin is only 10 years old, it is likely that relatively "high" and relatively "low" NVT values will change with time, as have PE ratios over the last century.
- Some transactions are now made off-chain (eg. Liquid Network's private side-chain which is used by many major exchanges). If this trend continues, we can expect "normal" NVT ranges to increase with time (as the relative portion of public on-chain transaction values decreases).
CALCULATION
- NVT = Circulating Market Cap / 90 average On-chain Transaction Value*
- Overbought (default): NVT > 2-year mean + 2*standard deviations. I.e. NVT Signal is in the top 2.5% of values for the prior 2 years.
- Oversold (default) NVT < 2-year mean - 0.5 * standard deviations.**
*Data source: Blockchain.info, estimated transaction value does not include returned to sender as change.
**Oversold under 2-year mean was chosen due to the skewness of NVT Signal, it is not normally distributed. For example: NVT Signal has never been less than the 2-year mean - 2* standard deviations. This may change in the future.
NOTES ON USAGE
- Use with care. Bitcoin can remain "overbought" or "oversold" for extended periods (eg. 2015-2016).
- As Bitcoin ages, the validity of NVT Signal will need to be monitored. Particularly with respect to potentially increasing use of side-chains, private transactions and potentially the lightning network.
- It is likely that a 2-year “look back period” for calculating mean and standard deviation will not be sufficient in the decades to come. As Bitcoin matures and stabilizes (some time in the future), a longer "look back period" should probably be used. To allow for this, the defaults for this indicator can be easily adjusted.
Valuation
🔗Blockchain Fundamentals - Average Cap & Top Cap -Cryptorhythms🔗Blockchain Fundamentals - Average Cap & Top Cap (Marketcap Alternatives)
Intro
Last one for a couple days but then I will be back! Here are the marketcap alternatives Average Cap (created by Renato Shirakashi) and Top Cap (created by Willy Woo).
Descriptions
Average Cap
This is the "forever" moving average of Market Cap. The cumulative sum of daily Market Cap values divided by the age of the market in days.
Top Cap
Willy Woo: "I found historically 35x Average Cap picks the market top. This 'Top Cap' together with Delta Cap creates a 'Valuation Bollinger Band'. Top Cap helps us estimate the next top, I would guess at $90k as a minimum (on the early trajectory). Top Cap is very experimental."
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🔗Blockchain Fundamentals - Fee Ratio Multiple by Cryptorhythms🔗Blockchain Fundamentals - Fee Ratio Multiple by Cryptorhythms
Intro
Back with the next indicator in the Blockchain Fundamentals Series! Hope everyone is enjoying using these as much as I enjoyed porting them to tradingview. This one is not a buy / sell signal, but useful none the less. Created by Matteo Leibowitz.
Description
Fee Ratio Multiple (FRM), which seeks to measure the transaction fee revenue growth required for dis-inflationary Proof of Work chains to maintain existing security levels once block rewards are fully phased out. A high FRM suggests that a network will have to maintain inflationary block rewards in order to sustain security, whilst a low FRM suggests that a network can maintain existing security levels while simultaneously achieving low inflation. The latter outcome is arguably more desirable for a long term Store of Value and protection against inflationary government-controlled currencies.
FRM is explicitly about security, which should be considered the foundational layer of the chain stack. By looking at FRM we can deduce how secure chains will be once block rewards disappear. Further, FRM implicitly measures the strength of an assets properties as a Store of Value.
A low FRM suggests that an asset can maintain its current security budget (miner revenue) without having to rely on an inflationary subsidy.
Conversely, a high FRM suggests that an asset will require heavy inflation via block reward subsidies in order to maintain its existing security budget.
I suggest everyone read the article here for further clarification on what this indicator means and how to use it: medium.com
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💬 Questions? Comments? Want to get access to an entire suite of proven trading indicators? Come visit us on telegram and chat, or just soak up some knowledge. We make timely posts about the market, news, and strategy everyday. Our community isn't open only to subscribers - everyone is welcome to join.
For Trialers & Chat: t.me
🔗Blockchain Fundamentals - BTC Network Momentum - Cryptorhythms🔗Blockchain Fundamentals - Bitcoin Network Momentum by Cryptorhythms
Description
Network Momentum is a view created by PositiveCrypto which looks into the value transmitted through the Bitcoin blockchain denominated in BTC value plotted against Bitcoin`s price. It serves as a leading indicator of Bitcoin bull markets. Sufficiently high levels of value throughput is needed drive bull markets.
Network Momentum, if it was corrected for Bitcoin`s expanding token supply, would essentially be Bitcoin Velocity. In other words an inverse chart of NVT Ratio.
Bitcoin Network Momentum is another piece of the puzzle to help our understanding of Bitcoin fundamentals and their impact on price. Bitcoin Network Momentum looks at the relationship between Bitcoin’s price and the BTC value of daily transactions flowing through the blockchain.
It is important to note here that we are using the BTC daily value flowing through the blockchain, not the USD daily value which NVT Signal uses.
What we see when we look at this is that the BTC value of daily transactions acts as a leading indicator of Bitcoin’s major market phases.
Extras
We give you the option of changing the median price lookback length
👍 Enjoying this indicator or find it useful? Please give me a like and follow! I post crypto analysis, price action strategies and free indicators regularly.
💬 Questions? Comments? Want to get access to an entire suite of proven trading indicators? Come visit us on telegram and chat, or just soak up some knowledge. We make timely posts about the market, news, and strategy everyday. Our community isn't open only to subscribers - everyone is welcome to join.
For Trialers & Chat: t.me
🔗 Blockchain Fundamentals - Thermocap by Cryptorhythms🔗 Blockchain Fundamentals - Thermocap (Marketcap Alternative) by Cryptorhythms
Description
Market capitalization is an indicator for assessing the value of equity in companies. Crypto has inherited the metric from stocks and is having a hard time trying to get rid of it. Problems here are:
Market Cap takes into account all coins distributed so far, not distinguishing lost coins within the circulating supply (or coins intended to be hodled for long periods).
The point is: if a cryptocurrency has a market cap of $1 billion, it doesn’t mean that $1 billion has flown into that asset. One can create a billion coins; sell 2 of them for $2; and thus pump into CoinMarketCap an excess of $999.999.998 in relation to the actual amount that asset has been traded for.
A more appropriate measure of network value was recently put forth by Nic Carter. Remember capital flows in crypto generally do not come in via exchanges (miners notably like to sell OTC). Every buy in an exchange is matched by a sell. Money that comes in = money that goes out.
True inflows (in Bitcoin, at least) are the aggregate of resources spent by miners. And a good proxy for that is the amount these folks are earning back from networks they support in return for their investments. That’s aggregate security spend (or Thermocap): what was actually paid out to miners (coinbase transactions * their price in USD at the time they were mined).
What does it portray?
A more effective measure of wealth in illiquid markets. How much the network has been worth to its maintainers, in cash flows.
UCSgears_Transaction Valuation IndexHere is the Version 2 of the TVI indicator posted earlier.
This is inspired from the Value Charts Indicator.
Version 1
UCSgears_Transaction Valuation IndexThis is an indicator, That works great in a wip-saw market range. Would not use this to trade in a breakout.
I am calling it the "Transaction Value Index (UCS_TVI)", The reason is because, it measure where the price currently from the mean trade value.
The cross represents the highest trade value on that day, circle represents the lowest trade value.
In other words, Top and bottom of the candle wicks, in relation to the mean trade value (MTV).
Watchout for Further Updates on Optimizing this indicator.
DO NOT CONFUSE IT WITH FUNDAMENTAL VALUATION, THIS IS PURELY TECHNICAL VALUATION TECHNIQUE
As Usual, Good Luck
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