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- The NVT ratio left bearish territory after a long time.
- The number of transactions paralleled the price increase.
The world’s largest digital asset Bitcoin [BTC] rose back above $37,000 in the past 24 hours, supporting interest from bullish market participants.
The rally has resulted in a 32% spike in Bitcoin’s market cap over the past month, AMBCrypto found after examining CoinMarketCap data.
Source: CoinMarketCap
As Bitcoin gained momentum, one of its crucial growth potential metrics revealed a healthy picture.
Network activity corresponds to market capitalization growth
The asset’s Network Value-to-Transaction (NVT) ratio has improved significantly over the past month, according to an X-post from an on-chain analytics firm Santiment. In fact, the ratio exited bearish territory after spending most of 2023 there.
The recovery was enabled by a sharp increase in network activity in October.
Source: Santiment
The NVT ratio determines whether the valuation of a crypto asset is higher than the value sent over the network. Think of it as an equivalent to the price-to-earnings ratio commonly used in the stock markets.
A higher value means that the asset is overvalued compared to the transactions in the chain, and vice versa.
The shift in Bitcoin’s NVT ratio reflected a continued increase in Bitcoin’s network activity, which corresponded with market capitalization growth. According to Santiment, the number of transactions on the proof-of-work (PoW) blockchain coincided with the price increase.
Source: Santiment
With an emphasis on network fundamentals being higher than ever in Web3, the scenario boded well for Bitcoin’s long-term prospects.
Rally stimulates speculative interest
BTC’s ongoing rally also continued to boost derivatives markets. Open Interest (OI) in futures contracts has surpassed $17 billion in the past 24 hours, the highest since April, according to Coinglass.
The month-long uptrend has resulted in a 54% jump in the dollar value committed to active contracts.
Source: Coinglass
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Moreover, Bitcoin market participants remained greedy, according to Hyblock Capital. This meant they were in the mood to buy more.
In the short term, such buying pressure could be a useful catalyst for Bitcoin’s market value growth.
Source: Hyblock Capital