Checking In On The King

With all the coverage of Ordinals, Ethereum, Solana, NFTs, Gaming,, and every other narrative, it can be easy to overlook that Bitcoin is still the king of this market. Behavior in the big coin can signal broader behavior in the market – the market doesn’t do anything unless Bitcoin says it can. As such, I wanted to check some of my favorite charts on the Big Orange Coin to see what it has been up to while looking elsewhere. 

Astoundingly, given energy price volatility, Bitcoin prices, and general sentiment towards PoW, Bitcoin’s hash rate is at an all-time high. Despite every headwind imaginable, Bitcoin has never been more secure.

Looking at the hash rate brings me to miners. First, as I predicted when Ordinals first appeared, Bitcoins fees remain elevated. Elevated fees are a godsend to miners, who are the primary beneficiaries of increased fees. Ordinals, specifically BRC-20s, have almost been acting like a buyer of last resort for blockspace, pushing the floor on fees upwards. However, in the past few days, fees have fallen significantly, from 10-50 sats per vByte to around 1-2. That being said, my hunch is that fees will probably climb again as new standards emerge – like Rune tokens. 

However, as readers know, miners are not altruistic Bitcoiners. Miners are in the game for greenbacks and can often be a hellacious source of Bitcoin sell pressure as they sell for Opex. Unfortunately, net miner positions are a challenging read. They have been selling and holding BTC in almost equal measure in 2023. I guess they may be waiting for rate decisions and an improvement in price as best they can and only selling small amounts as needed. I worry that miners almost get into a standoff with one another over selling their Bitcoin. The longer they wait to sell it, the more likely their competition does, which pushes the price down and makes their stock worth less. As such, the net miner position could turn negative if one prominent player decides to sell and others rush to follow suit.

When we move to network participants, we see the continuation of some trends. Having learned hard lessons from FTX, Bitcoin buyers have continued taking Bitcoin off exchanges at blistering rates. Since January of 2022, Bitcoin on exchanges has fallen from $2.86M to $2.3M – a drop of 20%.  

Along the same vein, despite many unknowns in the market, long-term Bitcoin holders have been steadily accumulating Bitcoin (shift the above chart to show the last year to see this clearly). Long-term holders accumulating is usually a sign of a bottom forming as long-term holders step in to buy at depressed prices. It’s not a perfect signal – nothing is – but this is a tick in the positive column for Bitcoin.

Finally, the accumulators have done decently well, given the recent price action on the orange coin. Around 70% of current Bitcoin holders are in profit. I like to watch this stat as things generally get a bit dicey when Bitcoiners in profit get above 90% – but 70% feels like a safe portion for now, given the surrounding market. 

In all, it’s hard to get a read on where Bitcoin is at. Many charts and metrics are promising – the high hash rate, declining exchange BTC balance, and accumulating long-termers are promising. But other metrics are just meh – miner positioning tells me little and is a little concerning. And the broader market sentiment around rates, inflation, bond markets, and escalating global conflict all seem to point to volatility. Regardless, Bitcoin leads this market, so it’s essential to check where it is; I just wish the metrics were clearer. But I will continue watching the king. 

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