Bitcoin On-chain Deep Dive

The era of deep value is over. Welcome to a new era of the Bitcoin cycle: The Momentum Era. The data shows the current cycle has a long way to go. We are only about 20% of the way down the runway.

A thread covering 10 on-chain metrics I created. Here's what they say about Bitcoin today (6 March 2024) and where we go from here...

(1) Bitcoin Energy Value. Bitcoin's intrinsic value priced from the pure Joules of energy into the network only. No wacky formulas, no power laws. Energy alone maps the fair value of Bitcoin from inception. Currently at $70K, making Bitcoin fairly valued for the first time in 2 yrs.

(2) SLRV Ribbons. This shows the trend in the ratio of short-term to long-term holders. SLRV Ribbon uptrends usually isolate the best returning Bitcoin risk-on periods (purple). The trend still looks very strong today.

(3) Dynamic Range NVT Signal. This adds value bands to Bitcoins "PE Ratio", NVT, the value of on-chain volume to market cap. When the ratio breaks the upper band risk is high, vice versa with the lower. Recently DRNVT was overvalued, but has now flushed into relative value.

(4) Bitcoin Production Cost. Bitcoin broke out of the cost of production in recent months, along with the Ordinals fee boost, Bitcoin Mining is once again highly profitable. As you can see, these breakouts often lead to repricing a lot higher. But the era of value Bitcoin is over.

(5) Hash Ribbons. Hash Ribbons, my first on-chain metric, shows widening growth in Hash Rate locally, suggestive that Miners are doubling down and expanding with their growing profit margins. This is very healthy for network growth and security.

(6) Bitcoin Miner Sell Pressure. This metric measures the relative outflows from Bitcoin miners versus their holdings. It's VERY high right now, comparable to 2017. This highlights a few things: miners are v. profitable and locking that in, and ETF demand is draining supply.

(7) The Bitcoin Yardstick. The Bitcoin market-cap / hash rate valuation tool. The down arrows mark similar Yardstick scores to today. Typically we would see significant price volatility in this zone, and the potential for a large positive trend to form out of it. No more deep value.

(8) Hodler Growth Rate. The annual growth rate in Bitcoin holders of 2+ years (the important cohort). It's started to trend down, typical of the early stages of a bullrun as Holders sell into profit. Based on prior durations to cycle peaks (purple), we should have some time to go.

(9) Supply Delta. A more responsive ratio of short-term holders to long-term holders which helps to identify cycle tops. Growing Supply Delta (green) is very good. Breakouts above the upper band (purple) are also very good. We have both today.

(10) Bitcoin Heater. The Bitcoin heater aggregates all market leverage into one metric by looking at Perps, Options and Futures. High readings suggest a lot of leverage and more risk of downside. At 70% today it's quite high, but the recent flushout may see this metric normalise soon.

The Full picture

Bitcoin Macro Index. My favourite metric to summarise the full picture is Macro Index, which collates over 60 on-chain / macro metrics into one ML model. We are in strong expansion, in the very early innings of a typical Bitcoin cycle. Here's what comparables looked like.

Summary

All metrics generally agree that a very large multi-month uptrend will likely emerge from here. But several metrics suggest we have progressed faster than normal in 2024 and pre-Halving. 4 metrics suggest we may be due for a pull back or some volatility here first.

Bitcoin deep value is gone. That ship has sailed. You had 2 years to pick up undervalued Bitcoin. Instead an exciting new chapter has begun... Welcome to the Bitcoin Momentum era.

You can read more about each of these metrics and their derivation at https://Capriole.com/Research. Many of these charts are also available live and updated daily for you to monitor at https://Capriole.com/Charts.

NOTE: This thread summarized some of my public, on-chain metrics. But Capriole and I use a lot more. Please do your own research, this is not investment advice. I personally primarily invest using autonomous trading algorithms that manage my risk with Capriole Investments .