Ethereum’s network value (NVT) ratio has fallen to a three-month low despite a 20% price increase. This is notable because the NVT ratio basically divides the market value of Ethereum by the total value of transactions in the network. At the time of writing, Ethereum has an NVT ratio score of 59.3.
What does it mean?
This means that the market capitalization of Ethereum has decreased relative to the value of the network. Relatively speaking, more value is being sent across the network compared to market cap. In general, this bodes well for cryptocurrencies. The lower the NVT ratio, the “cheaper” Ethereum is according to this metric.
Regardless, a score of 59.3 means the lowest NVT ratio in three months. In that regard, it appears this mini bull market has more room to continue. Now it can be said that it is a small bull market, because it has risen by 20% in the past few days, which can be said to be quite impressive.
By the way, this does not mean that the uptrend will definitely continue. We’ll all have to see this eventually, but at least it’s a start. Ultimately, a lot will depend on the Fed, which is scheduled to hold another rate meeting on March 22.
P/E Ratio
The NVT ratio is based on the price-to-earnings ratio (P/E ratio) popular in the traditional financial world. This is one way to determine whether a company’s stock is overvalued or undervalued. In principle, the P/E ratio does not say much about a company. After all, you might be dealing with a tech company with huge potential but still thin revenue.
So you shouldn’t look at P/E ratios completely in isolation, and don’t do fundamental analysis. Like the NVT ratio, it is a tool rather than an indicator that can tell you all about future prices. If you believe in an asset, it can be an interesting tool that can help you make buying and selling decisions. Based on this metric, Ethereum appears to be relatively undervalued at the moment.
Information source: compiled from NEWSBIT by 0x information.Copyright belongs to the author Thom Derks, without permission, may not be reproduced