Hi Root. Thank you for another valuable chart and newsletter. I think it is very interesting and I am happy receiving and learning about the on chain analysis. I am trying to understand the charts better.
Based on last cycles (2019) we are like going down in the coming 4-6 months. The 2015 cycle shows a different view (ie back then the bottom was already in and we were slowly going up for the next 20 months).
Is there any way to compare the current behaviour on chain to favor one scenario over the other? I looked at the STH Supply chart and I see that the STH supply is going down. This also happened (more or less) in 2019 (and not in 2015) so to me this would indicate that we are likely going down for some months. Is this a correct on chain analysis or am I seeing things that are not there?
Good Question, Nneorej! We’re in between previous cycles. This is best visible in the following chart on the platform: “Cycle analysis” -> “Halving cycle” -> Days until Halving, scaled by Realized Price. The chart shows we’re not as over-extended as we were in 2019 but recovered more than in 2015. This means that downward price movements will likely be less intense than in 2019 but also less upward price movements as in 2015, favoring sideways behavior. Good catch from STH supply; we’re indeed at very low levels, indicating no new demand is coming in. This isn’t strange at this phase of the cycle, but there is less potential for major surges in Bitcoins price. Hopefully, this answer is satisfying. ✌️
I just want to add that the following chart:: “Cycle analysis” -> “Halving Progress” is also very helpful. It shows exactly what happened the last cycles. Of Course no guarantees but very interesting to see the difference between cycle 1 (2015) and cycle 2 (2019).
Thank you for introducing me to a "new" chart. At first I didn't understand the charts. Prices where way off :-) With some time/effort I understand the way the charts work and (at least I think) I understand them. To me it shows that the bottoms are way closer to each other than the tops. Unfortunately...
This is the difference between block time and human time. They do not sync up exactly so over time, the halving event will continue to “fall earlier”, July, May, April...
Indeed, this is correct. Blocks are found more or less every 10 minutes, 210k block per halving, meaning slightly less than 4 years. This causes the halving (historical catalyst) to shift slightly, but nonetheless, the cycle peaks fell (historically) always around Christmas. So, the top is not necessarily sooner.
The difficulty adjustment causes blocks to be found always around 10 minutes. If more hash rate is competing, temporary blocks are found a little faster, but every two weeks, the difficulty adjustment, in case of increasing hashrate, will increase the difficulty to find news blocks, again setting the time to ~10 minutes based on the new hashrate competing for blocks. The real reason the halvings shift on a 4-year basis is because a halving consists out of 210k blocks times 10 minutes = slightly less than 4 years. The increase in hashrate can make the average block time go to 9.96 minutes instead of 10. But sometimes a difficulty increase causes blocks to be found slower than 10 minutes, as old miners might not be profitable with the new hashrate, and stop competing. The best reference time, therefore, remains 10 minutes.
Hi Root. Thank you for another valuable chart and newsletter. I think it is very interesting and I am happy receiving and learning about the on chain analysis. I am trying to understand the charts better.
Based on last cycles (2019) we are like going down in the coming 4-6 months. The 2015 cycle shows a different view (ie back then the bottom was already in and we were slowly going up for the next 20 months).
Is there any way to compare the current behaviour on chain to favor one scenario over the other? I looked at the STH Supply chart and I see that the STH supply is going down. This also happened (more or less) in 2019 (and not in 2015) so to me this would indicate that we are likely going down for some months. Is this a correct on chain analysis or am I seeing things that are not there?
Good Question, Nneorej! We’re in between previous cycles. This is best visible in the following chart on the platform: “Cycle analysis” -> “Halving cycle” -> Days until Halving, scaled by Realized Price. The chart shows we’re not as over-extended as we were in 2019 but recovered more than in 2015. This means that downward price movements will likely be less intense than in 2019 but also less upward price movements as in 2015, favoring sideways behavior. Good catch from STH supply; we’re indeed at very low levels, indicating no new demand is coming in. This isn’t strange at this phase of the cycle, but there is less potential for major surges in Bitcoins price. Hopefully, this answer is satisfying. ✌️
I just want to add that the following chart:: “Cycle analysis” -> “Halving Progress” is also very helpful. It shows exactly what happened the last cycles. Of Course no guarantees but very interesting to see the difference between cycle 1 (2015) and cycle 2 (2019).
Thank you for introducing me to a "new" chart. At first I didn't understand the charts. Prices where way off :-) With some time/effort I understand the way the charts work and (at least I think) I understand them. To me it shows that the bottoms are way closer to each other than the tops. Unfortunately...
What is the significance of the quicker halving cycles ? more money flowing in ? Will the top be sooner too.
This is the difference between block time and human time. They do not sync up exactly so over time, the halving event will continue to “fall earlier”, July, May, April...
Indeed, this is correct. Blocks are found more or less every 10 minutes, 210k block per halving, meaning slightly less than 4 years. This causes the halving (historical catalyst) to shift slightly, but nonetheless, the cycle peaks fell (historically) always around Christmas. So, the top is not necessarily sooner.
I thinks it’s a function of the hash rate. There are more miners competing so blocks are being solved faster... am I right about this??
The difficulty adjustment causes blocks to be found always around 10 minutes. If more hash rate is competing, temporary blocks are found a little faster, but every two weeks, the difficulty adjustment, in case of increasing hashrate, will increase the difficulty to find news blocks, again setting the time to ~10 minutes based on the new hashrate competing for blocks. The real reason the halvings shift on a 4-year basis is because a halving consists out of 210k blocks times 10 minutes = slightly less than 4 years. The increase in hashrate can make the average block time go to 9.96 minutes instead of 10. But sometimes a difficulty increase causes blocks to be found slower than 10 minutes, as old miners might not be profitable with the new hashrate, and stop competing. The best reference time, therefore, remains 10 minutes.