- I jumped on the chain and noticed a key metric – miner revenue – suggesting that Bitcoin may be preparing for an upward move
- but looking at it in isolation , which means nothing. Bitcoin’s sample size is too small, the current environment is the only macro bear market since its launch in 2009
- On-chain metrics should come to me until risk aversion in the broader market dissipates That said, one of the most fascinating things about Bitcoin is the ability to jump on-chain and track metrics across its entire spectrum. As the years passed and we built more samples of Bitcoin’s performance, these metrics became more powerful.
One of my favorite on-chain metrics is the Puell metric. This takes the miner’s total revenue and adjusts it based on its annual moving average. Therefore, the calculation of the indicator takes the mining revenue divided by the 365-day simple moving average of the mining revenue.
market. They are often seen as forced sellers because their income is in bitcoin and their fixed costs – mostly electricity – are in fiat. Obviously, they have to pay these fixed costs, so the bitcoins issued by miners are always tied to the price.
The Puell indicator pretty much tracks whether too much or too little Bitcoin has entered the market relative to the historical norm. Looking back at history, there is a fairly strong relationship between the two – when the Puell indicator falls into the green area of the chart below, the price tends to move up.
The Puell indicator last fell into the “buy” zone It’s mid-June. Again, we saw an uptrend very quickly as bitcoin went from around $20,000 to over $24,000. Of course, in the past week or so, we’ve fallen back below $20,000 as the Fed’s interest rate plans and Comments on inflation have sparked risk aversion across all asset classes.
Interestingly, I noticed yesterday that the Puell indicator has moved back into “buy” territory. Enlarge The time period since the beginning of 2020 makes this more clear on the graph.
Again, I’m always hesitant to use on-chain metrics alone. In the current climate, this Especially true in the current climate where we have an unprecedented mix of a hawkish Federal Reserve, rampant inflation, and an increasingly volatile geopolitical climate.
This is Bitcoin The only time in short history we have seen this kind of macro convergence. The fact that Bitcoin was only launched in early 2009 means it has been in a period of ongoing bull market dynamics. As a result, the historical sample size of its price action is simply insufficient in order to draw any firm conclusions.
The way I ended up looking at the Puell indicator is that Bitcoin seems ready to move up If the macro environment cooperates. But this is a very big if. This has been the case throughout the year – and will continue to be – the macro development is Pushing the market.
Bitcoin follows the stock market, this is news that focuses on inflation, interest rates and the geopolitical space. So while this is a bullish one for Bitcoin , but it is meaningless until we gain further cooperation in the wider world.