Disclosures: I own test ethereum coin and you should expect on these speculative investments to loose money part of the time. You hav3e been warned.

Some of you will not like this, well tough damn shit.

NVT, Willy Woo what the mess did you create?

Okay NVT is suppose to provide a certain picture of Price behavior in order to be able to characterize which is a speculative bubble and which is not. not a bad concept.

It’s usually stated as

transacted volume in USD / marketcap

as being the derived V in the monetary equation of

MV = PQ

with M being marketcap.

Problem 1: Chris Burniske in his article Cryptoassest Valuations implies that PQ is not transacted vol USD as Woo claims but in fact marketcap. That means we need to reverse it as we are going from non-fiat to fiat to

M is transacted Vol USD*(marketcap/transacted Vol USD)

Oh but there is more in that mess Will Woo made.

Problem 2 and 3:

Problem 2 is that even if we take the reworked formula, ie 1/v we only get a partial picture of P not the full one as obviously V does not equal P in Monetary Theory.

Problem 3 is th3e death tone for NVT. There is a full circular reference to P in the derivation of NVT which makes it certainly useless as an analytical tool.

So if we cannot use NVT, ie V or the right way 1/V what can we use for the full behavior picture of P?

Metcalfe-Lee Formula

There are several reasons why Mr Lee, cofounder of Fundstrat, choose to derive the right side of the Monetary Theory. The reason forgotten was that it eliminates the full circular reference problem with P.

P = ((nodes²)*(transacted vol USD/active accounts)/coins mined total

Because P’s impact in the average USD transacted per account is small taking into it the full numerator and denominator means that we have a considerable less than full circular reference to P in this equation.

So How DO We detect Speculative Bubbles?

You chart nodes squared and the average transacted USd per account the combination of rises and falls fo each together will predict whether the bubble has a speculative character.

HOW Do We Detect BUy Half from the Sell Half of the Bubble?

Take the first derivative, its differences of slope over time of points, than use calculus to compute a series sum of 15, 30, 60, or 90 days. When you plot that set of values over the plot of P it will cross the climb of fall of P and thus that is your dividing tool to get the buy half and the sell half.

LOOK FOLKS

There is a ton of people out there in roles as Fund managers, Brokers, etc relying upon economics they do not remember and math they forgot to value this stuff. Always use more than one source of information where one of those sources is trying to poke holes in the points of the other article. You will catch the errors I found this way. AND remember the financial press is an echo chamber and will not take the time to debunk something that is obviously somewhat a useless tool.