If you’ve heard of the price-to-earnings ratio used to analyze stocks, then the network transaction value indicator (daily) provides a similar analysis. It’s calculated simply by dividing a coin’s market capitalization by the daily transaction volume. 

We use the daily transaction volume as a stand-in for the underlying, inherent value of a coin. This concept works on the assumption that the more volume moving around the system, the more value the project has. If a coin’s market cap increases while daily transaction volume lags, the market could enter bubble territory. Prices are rising without there being a matched increase in the underlying value. In the opposite case, a coin or token’s price may stay stable while daily transaction volume increases. This scenario could suggest a possible buying opportunity.

The higher the value of the ratio, the more likely a bubble will occur. This point is usually seen when the NVT ratio is above 90-95. A decreasing ratio indicates that the crypto is becoming less overvalued.