Thriller Insights - S3EP20: Bitcoin Mining Analysis

This week, we have seen an unprecedented amount of liquidity of economic stimulus stabilize the economy, putting an end to weeks of free fall caused by the corona pandemic.

All the major US equities were up by around 9% to 12% this week—on Tuesday, the Dow Jones had its best day since 1938. Bitcoin had its least volatile week since its price cut in half on March 13. Bitcoin’s market value rose from $3,867 to $7,000 in the 13 days to March 25, this week Bitcoin has consistently hovered around the $6,500 mark. But the major question is What are miners doing?

Throughout the 81 percent recovery, miners have sold more coins than what they generated, according to (MRI) figure, a measure created by ByteTree to track the changes in inventory levels held by miners. 

The 21-day rolling MRI stayed above 100 during the entire duration of the recent recovery from lows below $4,000. An MRI above 100 means miners are selling more than they mine and running down inventory, while a below-100 MRI reading indicates miners are amassing inventory by selling less than they mine.

But this was expected because prices have continued to go up.

Mining pools so far are the highest percentage of bitcoin flowing into exchanges and will continue to have significant influence on prices into the halvening.

Miners sold 2,788 BTC against 1,588 BTC mined, slamming the market. We need to watch Miners and what they do. Can they remain profitable will be crucial.

Buyers are now absorbing the extra Bitcoin flooding the market and is having very little impact. This is good. Sign of strength in the overall Bitcoin & Crypto market.

Miners behaving this way was expected, when we discussed during Thriller Insights - S3EP19: The Bitcoin Crash Explained and Whats Ahead go back and listen.

Can’t stress this enough the overall health of the mining network is intrinsically linked to Bitcoin’s value. We absolutely must hold $4800.

Bitcoin

TradingShot Chart

We are currently more than 450 days since the bottom of the previous bear cycle in December 2018. Despite the $14K peak last June 2019, Bitcoin's continuous and most recently more aggressive correction has most people worried that we are moving away from the long term bullish trend upwards

Comparison with the 2016 Cycle

At the moment the price is on the 0.382 fibonacci re-tracement level from the previous cycle's top (December 2017) and 0.236 from its bottom (January 2015). If we go back to the same day during the previous cycle (i.e. +450 days from the January 2015 bottom), we will see that the price was on the 0.5 fib from the previous cycle's top (December 2013) and above the 0.236 from its bottom (October 2011). This means that at the moment BTC is more or less at the same spot where the price was during the 2016 cycle. Which means that the general bullish trend hasn't changed from the last cycle.

The Growth Channel

During 2015/2016, the price was having a smoother, gradual rise from its cycle bottom until roughly after the halving when it really goes parabolic. It was based on a channel up log scale with clear higher lows and higher highs. The parallel lines of this growth channel have a starting base on the last volatility zone before the cycle's top. In the current cycle, BTC is trading in the middle of its 2019/2020 growth channel.

TradingShot is showing that all his markers have not diverged from the bigger, historic bullish trend. The only thing that does not ring true is the $13.8K June peak, remember this was during all the speculation over wider acceptance of digital currencies and Facebook’s Libra project etc…

All is fair in charts because the recent "March 13th crash" was as well an anomaly, with very few of us expecting corona to have an impact much less a recession so soon from the yield curve inverting. If we never had those events, Bitcoin would have had a smooth rise within its growth channel just as it did in 2015/2016.

Boom or Bust with DeFi? That is the question.

Enterprise blockchain funding has lagged. Efforts to reduce back-office costs and improve business processes are still ongoing. However, funding to other applications has been nearly 7x higher than to enterprise blockchain over the past 5 years.

Central banks are serious about fiat digital currencies. The future of programmable money could come out of a central bank, not a startup. Central banks across the globe, such as in China and England, are exploring central bank digital currencies.

Dual Token Sales. Simple Agreement for Future Tokens (SAFTs), Security Token Offerings (STOs), and Consumer Token Offerings (CTOs). A dual token sale will have one token specifically designated as a security or investment with access available only to accredited investors. This security token can then be used to raise money for a blockchain project while still following regulations for traditional securities like stocks or bonds.

The other token in a dual token sale is normally a utility token–a token used in the network or platform. This second token isn’t used for raising money, but instead fulfills another role depending on how the platform is designed. With dual token sales, companies could satisfy the SEC’s requirements by raising money with a security token, offering a utility token that could be used right away, and becoming decentralized later. In theory, a dual token model allows projects to stay out of trouble. Besides regulation, dual tokens allow projects more customization in their token economies. Two tokens allow for different properties, multiple incentive structures, and more options for users. By adding smart contracts and dApps to the equation, the tokenomics of a dual token system could become even more complex. In some instances, the reason for having two tokens has nothing to do with regulators or token sales, but is essential to how the system functions.

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