NVT Signal, or NVTS, is an indicator that compares the market cap of Bitcoin to the aggregate USD value of daily transactions on the Bitcoin blockchain. It is a value indicator that shows a multiple of Bitcoin price against the actual usage of its blockchain. When the NVTS is low, it suggests Bitcoin price is low relative to the amount of utility the network provides, and vice versa.
This indicator aims to provide the following: 1. An open-source implementation of NVTS on Tradingview, as the most popular one currently is closed-source. 2. To provide two simple ways to define and visualize "overbought" or "oversold" conditions using the NVTS. Here, we have absolute value of NVTS & deviation from a long-term moving average. 3. Crude integration into Tradingview's alert system.
What this indicator CANNOT do: 1. Timeframes below 1d. 2. Signals based on statistical analyses, such as seen in Bollinger Bands et al. (However, with the appropriate type of account, you can add BBands on top of this indicator.)
I would like to express my gratitude to Willy Woo, Chris Burniske and Dimitry Kalichkin for their work on NVT Ratio and NVT Signal, without which my indicator would not have been created.
Feel free to fork & improve, or experiment with settings. I hope this indicator will be useful to someone.
There's a big difference between the NVT Signal posted on Woo's website and your indicator. Do you see any reason why that might be?
kishin
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@d14b0ll0s,
Thanks for pointing that out. It seems that Woo has changed something about how the NVT Signal indicator is calculated since I published this script.
Back then, his interpretation was a somewhat naive "Over 150 = overbought, under 45 = oversold," of which overbought conditions are highlighted with a red background in my script.
My script further attempted to implement a "deviation from mean" component, by highlighting values with a deviation above the user-set threshold MA in white.
Maybe Woo simply changed his data supplier for onchain activity, but unfortunately I hadn't noticed.
Interpreting blockchain activity is not simple, since you want to exclude "change" outputs - but there is no surefire way of telling which outputs are spends, which are change outputs, and which are between wallets controlled by the same entity.
This hypothesis is supported by the rough shape of the signals matching, although there are some noticeable deviations.
I'm not a fan of cherry picking data sources to curve-fit an indicator, but either way I'm afraid QUANDL:BCHAIN/ETRVU is the only way I know of to use daily blockchain activity in TV scripts.
Thanks again for bringing this to my attention.
Tl;dr - you can keep using this indicator, which is essentially the OG NVT Signal, though you will have slight divergences from Woo's current implementation, due to different data sources being used.
d14b0ll0s
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@kishin, Many thanks for the detailed explanation. It's a bit strange if Woo decided to change the calculation just now, when the original calculation is screaming ATH on NVT-S (unless it's a problem with data supplier, as you said). Other than that, I like how RMA on NVTS can be used to track change reversal thanks to your implementation (I've played around with the visual side in Pine at my end without changing anything in your calculations and variables, but trying out different MAs or stdev might give interesting results too, so let's keep in touch about this). Meanwhile, keep up the good work.