It is the PE (Price Earning Ratio) ratio of Bitcoin, which arises from dividing the dollar value of on-chain transactions by the market capitalization.
The number of unique Bitcoin addresses that sent or received transactions.
Only how you activate addresses that made successful transactions are taken into account.

Dynamic range bands identify regions of undervaluation and overvaluation (green/red).

The number of unique Bitcoin addresses that sent or received transactions. Only how you activate addresses that made successful transactions are taken into account.

The formula is:
The number of unique Bitcoin addresses that sent or received transactions. Only how you activate addresses that made successful transactions are taken into account.

NVT Signal = Circulating Market Cap / On-Chain Transaction Value 90 DMA

The number of unique Bitcoin addresses that sent or received transactions. Only how you activate addresses that made successful transactions are taken into account.

NVT (by Willy Woo and Dmitry Kalichkin) can be used to identify when Bitcoin is overbought or oversold based on the relative value of the value of transactions sent over the network.

Currently there are daily movements that occur in exchanges and in layers 2 such as the Lightning Network that are not reflected in this graph.