The relevant indicator here is the Ethereum NVT (Network Value to Transactions ratio) (30-day SMA), which measures the ratio of Ethereum’s market capitalization to its daily transaction volume over the span of 30 days.
CryptoOnchain revealed that the 30-day moving average NVT recently hit its lowest point ever recorded. As explained by the on-chain analyst, this could suggest two things: firstly, that the Ethereum token is undervalued.
For context, a low NVT reflects very high transaction volume compared to a relatively low market capitalization. What this means is that the Ethereum network is being heavily used, but the price isn’t showing its worth as much as its usage suggests. Following this logic, one could conclude the market is currently undervaluing Ethereum’s utility.
The second indication from the historically low NVT is that the increase in transaction volume could be due to “temporary factors such as DeFi, NFT events, or large capital movements.” According to the analyst, these temporary factors do not necessarily mean sustainable growth for the ETH price.
However, in what was a caveat, the online pundit mentioned that there have been cases where very low NVT levels were accompanied by further price declines.
Seeing that the Ethereum NVT is not just at a mere low level, but at its all-time low, it seems more likely that the market is undervaluing the token’s worth. It is therefore not out of the question to expect a more upward swing in the price of the cryptocurrency.
Nevertheless, with the possibility that a bullish phase might not necessarily follow in mind, investors might want to tread cautiously. As of this writing, the Ethereum token is valued at approximately $4,670, reflecting an over 4% price increase in the past 24 hours.
