What is NVT?
It stands for Network Value to Transactions ratio. It divides the outstanding market value of a cryptoasset by the value of daily transactions on that same network.
Your NVT numbers are different from everyone else’s, why?
Most other estimates of NVT are done only for Bitcoin, and use blockchain.info’s estimates of USD transaction value on-chain. We don’t use any heuristics to estimate volume, other than very straightforward exclusions. Thus Blockchain.info has an estimate of USD volume transmitted on chain that’s 5-6 times lower than ours, resulting in a higher NVT.
Don’t these estimation difficulties render your NVT numbers useless?
We don’t think so. We’ve run tests and the difference between our “naive” transaction volume figures and blockchain.info’s estimates, and they’re consistent across time. That means our NVT chart looks the same as others’, even though the numbers in the denominator are different. More on the caveats here.
What is NVT good for?
Even though the transaction figures aren’t perfect, you can use it to compare different cryptocurrencies (compare NEM and Litecoin, for instance), or use it to look at the valuation of a cryptocurrency like Bitcoin over time (look at Bitcoin’s NVT in the bubble of 2014 compared to its NVT now). Time-series and cross-sectional comparisons are meaningful. More on that here.
Why do you do your own estimates if everyone else uses blockchain.info?
Blockchain.info estimates Bitcoin transaction volume according to a set of unknown heuristics. This makes reproducing their approach for other cryptocurrencies impossible. Thus we can’t compare altcoins and Bitcoin transaction volumes using their methodology. We are aware that our on-chain volume estimates are far higher than “real” economic volume, although finding the truth of the matter is difficult. We have had success using heuristics to reconstruct the blockchain.info estimates, and we plan on making this available once we’ve tested and formalized the methodology.
Is on-chain volume really a good proxy for the utility of a cryptocurrency?
We’re actually not sure. It is most relevant for a cryptocurrency adopted as a Means of Exchange (MoE). If Bitcoin were to become a pure Store of Value (SoV) asset, with relatively little turnover and little economic activity, on-chain volume would become less relevant. In fact, if you believe that high velocity has a price-suppressing quality, you might imagine that lots of on-chain volume wouldn’t necessarily drag up price. Additionally, since Ethereum is an account-based cryptocurrency, it can’t be directly compared with Bitcoin or other UTXO-based cryptocurrencies.
Who came up with NVT?
The first person to publicly propose it, as far as we’re aware, was Willy Woo in 2016, although I’m sure it has been proposed elsewhere.
How do you find your data?
We rely on block explorers for some cryptoassets and we run full nodes for others. We aren’t able to get data on transaction volume for Zcash shielded transactions or any Monero transactions.
Are you open-source?
Yes, you can find our github here. We encourage anyone to play with our tools and innovate on them.
Do you make money from Coinmetrics?
You’ll notice that there are no ads, and nothing sneaky like a webminer on our website. Previously we accepted donations to cover our costs. We’re rolling out some formal sponsorships now to support our long-term vision. Get in touch if you are interested in becoming a sponsor.
Should I use Coinmetrics to make investment decisions?
We are not investment advisers – we are a data service. Nothing on here is intended as investment advice. Consult a registered investment professional and do your own research.
Who is behind Coinmetrics?
We’re a small team consisting of two programmers and an investment analyst.
Do you have a position on the scaling debate, Bitcoin forks, or whether any cryptocurrencies are worth investing in or not?
We have private positions, but we are interested in presenting the data as neutrally as possible without bias. We make careful attempts not to take a side on any sensitive issues, even though that might upset some of our readers.
Why are you only covering 14 assets right now? What about the rest of them?
Due to time constraints and the significant costs and logistical issues involved with running multiple full nodes, we decided to start with the most major cryptocurrencies. We are gradually adding support for more as time goes on. We are limited by our appetite to invest in a revenue-negative venture. Since tokens may have different valuation methodologies, and we’re mostly looking at comparables, we wanted to pick a sample of cryptocurrencies for now. It’s easiest for us to incorporate UTXO systems.
How do I get in touch with you?
The best way is by DM-ing our twitter account @coinmetrics.