XRP’s NVT Shows Bullish Divergence as Asset’s Market Cap Plunges Deeper
- What is NVT and why is it important?
- The case of XRP
According to a recent Santiment Prospects article, XRP is one of the best looking NVT charts in the entire crypto market, considering the increase in network traffic in May, with a further correction in June. More so, the NVT chart may form a divergence for XRP, which would be a bullish factor for XRP by the end of this summer.
What is NVT and why is it important?
The NVT is a digital asset industry alternative to the PE ratio, which assesses asset value by market capitalization divided by trading volume. If the value is too high, the network is considered overvalued relative to the low transaction volume.
To simplify: whenever NVT values are high, the asset is considered bearish because the value of the network is overvalued and a coin or token is considered bullish if the market capitalization is undervalued compared to the volume of high transactions.
The case of XRP
As NVT suggests, XRP is currently bullish as the price of the asset has taken a huge hit, falling to multi-week lows at $0.33, making the market cap of the asset considerably higher. low despite the remaining transactional activity.
With XRP’s high user activity and low market capitalization, a divergence is occurring that hints at a possible reversal that could occur once the correction in the market is over.
NVT is one of many indicators that hinted at the XRP retracement, as the relative strength index shows the asset being oversold over certain time frames. This suggests the imminent demise of the bearish rally.
At press time, XRP is changing hands at $0.33 and losing 1.4% of its value in the past 24 hours.