This is a really important post because I know a lot of analysts in the community who would have just posted the first plot and claimed a relationship. Negative results get no traction in the world of social media, so instead we see so many people focusing on less useful relationships that look at first glance really promising (e.g, most metrics including STH Realized Price).
Totally agree with that. Negative results are important to understand what works and what doesn't which is why I try to post interesting negative stuff from time to time.
However, with rise of derivative trading (CME for past three +years and stable coins margined perpetual contracts) maybe on chain metrics are not that indicative. Also with GBTC having a large locked up supply should have been more of a supply squeeze, since these coins don’t move.
It’s odd that the on chain metrics for exchange supply and others are relatively bullish yet the price action is weak. IMHO, a lot of profit taking took place in December ‘21 and macro economic (rate hikes, inflation, oil prices)) and geo political (Russia/ukraine) caused a downturn. It’s hard being bullish given this scenario.
Yes I think on-chain metrics have limited applications when it comes to Bitcoin's price. As you mentioned BTCUSD at any given time is not determined by what's happening on-chain.
The exchanges and the derivatives markets are where the price is set on a daily basis.
Imho on-chain data is more on the level of macro economics data, good to look for long term trends, regime changes and the likes. But probably only a handful of those metrics have a pattern of strong correlation with short term price moves.
This active supply does not filter out miners. But it would be an interesting topic to study what miners alone are doing.
It could be that if we measure the active supply in US$ we'll see different patterns across the cycles.
But I'm not exactly sure how the active supply in US$ would be defined. The issue is if say a coin transacted twice during the 90 days period then it is counted as 1 BTC moved for the active supply. But if it transacted twice which US$ value do we attach to it? The sum at the time of the two transactions would be the same thing as calculating the volume. Maybe the average? 🤔
Need to think about it more.
With the Coinmetrics dataset I can't really filter the active supply itself based on which wallets it originates from. Best I can do is correlate the active supply with what the address groups are doing over the same period.
But maybe I can do something like that using the Glassnode data set, need to take a look.
This is a really important post because I know a lot of analysts in the community who would have just posted the first plot and claimed a relationship. Negative results get no traction in the world of social media, so instead we see so many people focusing on less useful relationships that look at first glance really promising (e.g, most metrics including STH Realized Price).
Good work.
Totally agree with that. Negative results are important to understand what works and what doesn't which is why I try to post interesting negative stuff from time to time.
Cheers,
Nick
Great analysis. 👍
However, with rise of derivative trading (CME for past three +years and stable coins margined perpetual contracts) maybe on chain metrics are not that indicative. Also with GBTC having a large locked up supply should have been more of a supply squeeze, since these coins don’t move.
It’s odd that the on chain metrics for exchange supply and others are relatively bullish yet the price action is weak. IMHO, a lot of profit taking took place in December ‘21 and macro economic (rate hikes, inflation, oil prices)) and geo political (Russia/ukraine) caused a downturn. It’s hard being bullish given this scenario.
By the way, any correlation between oil prices an Bitcoin?
Let me talk about that next week.
Cheers,
Nick
Yes I think on-chain metrics have limited applications when it comes to Bitcoin's price. As you mentioned BTCUSD at any given time is not determined by what's happening on-chain.
The exchanges and the derivatives markets are where the price is set on a daily basis.
Imho on-chain data is more on the level of macro economics data, good to look for long term trends, regime changes and the likes. But probably only a handful of those metrics have a pattern of strong correlation with short term price moves.
Good questions!
This active supply does not filter out miners. But it would be an interesting topic to study what miners alone are doing.
It could be that if we measure the active supply in US$ we'll see different patterns across the cycles.
But I'm not exactly sure how the active supply in US$ would be defined. The issue is if say a coin transacted twice during the 90 days period then it is counted as 1 BTC moved for the active supply. But if it transacted twice which US$ value do we attach to it? The sum at the time of the two transactions would be the same thing as calculating the volume. Maybe the average? 🤔
Need to think about it more.
With the Coinmetrics dataset I can't really filter the active supply itself based on which wallets it originates from. Best I can do is correlate the active supply with what the address groups are doing over the same period.
But maybe I can do something like that using the Glassnode data set, need to take a look.
Cheers,
Nick