As part of our on-going Tweetstorm Series, we showcase excellent Twitter threads on the most interesting topics in the industry and publish them here on Decentralize.Today.
Today we feature Hans Hauge, Senior Quantitative Researcher at Ikigai Fund, software engineer, Bitcoin miner and prolific Bitcoin analyst and author, and his tweet thread about the many data points that show the undeniable upward trajectory of the Bitcoin network's tremendous growth over the last ten years.
Average Block Size
The amount of data being stored on the blockchain has been increasing constantly, regardless of the price. Why do people want to transmit data on the Bitcoin blockchain? It's all about trust and the ability to transfer value without asking permission!
Realized Value- How much is the value of the all the bitcoins when they were last moved?
Realized value is at an all-time high. This is the amount the coins are worth the last time they were moved. Look at that momentum...
Mining Difficulty - How much are miners investing and spending to keep mining?
Look at the current mining difficulty. This represents an immense investment in infrastructure for the future of Bitcoin. Do the miners look worried to you? I estimate this represents at least a $10B investment in CAPEX and look at the growth...
Median Transaction Fee Pullback - How much
Check out the median transaction fee pull-back. The same thing happened in the last bubble. The price at those arrows on the left was $1k and $2.6k, which seemed high at the time. In retrospect, de nada.
Daily Issuance - Number of bitcoins being introduced into the supply every day.
Daily issuance count, look at the decline. This reduction in new supply fuels one of the most basic laws of economics, which most commonly applies to commodities, Supply and Demand. If the supply gets squeezed and the demand keeps increasing, well...
Annual Inflation Rate - Bitcoin's inflation rate will be lower than 2% after the next halving
Here's another view that takes into account the circulating supply. This is the Annual Inflation Rate. Who's ready for the next halving?
All-time Miner Revenue - Miners have earned $14 Billion in revenue of the last decade.
We talked about the miners earlier. What's driving that increase in difficulty? If you answered "Revenue growth for the industry in Log(Log()) scale" you get a gold star!
7-Day Active Supply - How many bitcoins are not moving at all, indicating that people are not selling but holding?
Let's turn our attention to the active supply over the last seven days. This gives us unique insight into the behavior of Bitcoiners, specifically if they're holding or trading. When the blue line touches the red line, there's more HODLing going on, bullish in a bull market.
30-Day Active Supply
If we substitute the 30 day count for the 7 day, we get an even better picture. In the middle of a bull market, we see velocity drop. Why? This is the calm before the storm...
180-Day Active Supply
Now look at this, expanding to 180 days. One - Bottom of the cycle, Two - Second chance to buy in, Three - Moon. 2017 - the price in floor two fell from the $700 range to the $500 range; 2019 the price fell from about $14k to where we are now, near $10k. Same Bitcoin, 20x bigger.
Transition from medium of exchange to store of value
Waxing philosophical for a moment, I suggest Bitcoin is evolving from a Method of Exchange that can store value to a Store of Value that can be exchanged. As the market value increases, look at the change in the active supply percentage over the trailing 1-year.
Value per Byte Transferred - History repeating?
Coming back to the "two chances to enter" model for a moment, isn't it a bit spooky how history looks like it's repeating itself? Check out the value per byte transferred below. Got your ticket to the moon yet?
Bitcoin Days Destroyed - A metric that is calculated taking the number of Bitcoins in a transaction and multiplying it by the number of days it has been since those coins were last spent.
I normally talk about Bitcoin Days Destroyed in the sense of the TOTAL number or the adjusted figure (total / circulating supply). But, if we look at the average there is a constant decline. The longer you HOLD, the less you want to FODL paradoxically. Bitcoin Singularity?
UTXO Set Size - Unspent Transaction Outputs are reaching an all-time high.
We talked about supply, now let's look at demand using the UTXO set size as another way to conceptualize the participants in the Bitcoin network. Look at the growth here. This is getting very close to an all-time high as well.
1-year Active Supply Turnover - HODLing is increasing.
In inventory management, turnover is a good thing because it shows you're moving your product. But with Bitcoin, we have to consider that an increase in HODLing means Bitcoin is transitioning into a Store of Value as I mentioned before. Inventory turnover also supports this view.
Unique BTC Addresses (Any Balance) - Near all-time highs.
Back on the demand side again for you Econ nerds, we can also look at the number of unique addresses that hold ANY balance of Bitcoin. Also, this is near an ATH.
Addresses with at least 1 BTC - This is now at all-time highs too.
If we ask "How many addresses have at least 1 BTC" the answer would be in the blue line below. This figure IS at an all-time high (as of yesterday). The virus is spreading!
Spent Output Profit Ratio -SOPR represents the profit ratio of coins moved on-chain, measured through the variation between purchase price and sale price. It shows if the average holder is in profit or loss.
SOPR has reset to the "around 1" level. Last time we saw this the price was around $5k. Now we have SOPR around 1 at $10k. To me this speaks of the lower risk to entry.
Bitcoin Volatility over Time - This shows how volatility is decreasing in Bitcoin, contrary to popular belief.
And of course volatility is decreasing over time in log scale. NBD. Majority of the volatility to the upside but let's not mention that.
Adjusted Binary Bitcoin Days Destroyed - The white gaps in the data points highlight the parabolic run-ups of the last two price cycles. We are not there yet at this moment, meaning more time to accumulate.
Another view of Bitcoin Days Destroyed, Adjusted Binary BDD. Green bars are LESS than average on an adjusted basis. Unless you see a white gap, we're not at the top of a bubble. It's just data.
Reserve Risk - The red bar and black line below shows the risk of entering at a certain price. The lower the line is, the better. We are now at a low point according to the data.
And lastly, Reserve Risk which answers the question "how much risk to I take on by entering now?" I rest my case.
Thank you for reading!
Prior to joining Ikigai, Hans was a software engineer, Bitcoin miner and prolific Bitcoin analyst and author. Hans bought his first Bitcoin in 2015 at $250 and began publishing Bitcoin fundamental research on Seeking Alpha in May 2018. In July 2018, Hans became the Seeking Alpha Bitcoin "Opinion Leader" - a designation signifying the most popular author on a particular subject. Hans has written more than 80 Bitcoin articles on Seeking Alpha, including four site-wide "Editor's Picks". Alongside his Bitcoin research work, Hans has more than six years of software engineering experience, specializing in open-source, full stack development using Ruby and JavaScript. Prior to that, Hans spent several years as a factory manager.
Hans holds a B.S. in Information Technology and an MBA from Whitworth University.
Follow him on Twitter for more expert insights into Bitcoin metrics.
