KILLED · spurious
Hypothesis
The Network-Value-to-Transactions ratio (market cap / on-chain transaction volume) is crypto’s P/E; high NVT = overvalued = short.
Math — NVT
$$ \text{NVT} = \frac{\text{Network Value}}{\text{Daily On-chain Tx Volume}} $$
Method
NVT and NVT-signal (smoothed) vs forward returns; controlled for the structural decline in on-chain volume as activity moved to L2s/exchanges.
Results
| Raw NVT trend | structurally rising |
| Forward-return edge after detrending | none |
On-chain transaction volume structurally collapsed as activity moved off-chain (exchanges, L2s), so NVT rises mechanically regardless of valuation. The denominator no longer measures economic throughput. Dead metric for timing.
A valuation ratio is only meaningful if its denominator still measures what it used to. Definitions rot as market structure changes.