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February 22, 2021

OnChain Reaction

Bitcoin’s Store of Value Features in the Spotlight w/ByteTree


James Bennett, CEO of ByteTree, discussed onchain insights and observations about bitcoin. The bitcoin price went to USD 58K over the weekend before retracing back to USD 48K. This challenges the notion that bitcoin is a store-of-value asset at this time, not that it won’t be one in the future.

(0:44) “But with volatility at around 110% for the last week, it’s difficult to say that this is a safe place to put your wealth in the short term,” said James, adding that he is still bullish on the network for the long-term.

Daily Transaction Value

(1:04) The overall network has been growing strong, and there has been a huge increase in transaction value, up to above USD 10 billion per day. Around 12 months ago when the BTC price was hovering in the lower teens, we were seeing about USD 2 billion in transaction value per day. The dotted line in the below chart represents the seven-day moving average for transaction value. From last October we started to see that increase from USD 2 billion up to USD 11 billion after a short-term correction from mid-January to mid-February.

Miner Revenues

Miners have been making hay while the sun shines. They have been doing an average of USD 60 million of revenue per day with fees as a percentage of total income rising to about 15%. The gold line in the below chart shows you the fees as a percentage of total revenues.

(2:35) “Fees haven’t just spiked in the short term. They’ve actually also continued to be a sustainable increase in revenue for miners,” said James.

Median Transaction Value

The median transaction values in blue have been rising over the last couple of months. We went from USD 150 in early December to above USD 250 for the median transaction. There are about 3,000-4,000 transactions in each block.

(3:21) “What it says is that the overall value of activity being transferred over the network is increasing. And that’s really positive for the longevity of the network and the space,” said James.

High-Value Traffic

(3:36) For a bird’s eye view, the gold in the below chart is the total USD value of low-value traffic, or the bottom quintile of traffic, vs. the top quintile of traffic, which is in blue. The core activity is what started pulling the price up from January last year.

In late 2020, when the institutional push happened, with the likes of MicroStrategy’s Michael Saylor, Paul Tudor Jones, and Bill Miller, among others, allocating to bitcoin, the high-value traffic picked up, with the blue line chasing up to the low-value traffic. This pattern stalled after Jan. 9 and then picked up again as we drove up toward the USD 60K level. Core traffic has been steadily increasing.

(4:50) “The core traffic is what sustains the network, and it’s really the institutional or high-value traffic which triggers those big responses in price,” said James.

Miners’ Rolling Inventory (MRI)

(5:12) Miners are very key players in the Bitcoin network and they often indicate the relative strength we see in the market. They sell when there’s a strong price and hold back when there’s a weak price. Peaks indicate when miners have been moving a lot of inventory off the books.

(5:37) “We hit about 160-170% MRI. That’s now retraced, possibly because miners have depleted their inventory or possibly because now they’re seeing that price is pulling back in the short term and they’re just waiting to see what happens next,” said James.

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Gerelyn Terzo
Gerelyn caught wind of bitcoin in mid-2017 and after learning about the peer-to-peer nature of Satoshi's creation has never looked back. Previously she covered institutional investing and fintech for several major trade publications. Gerelyn resides in Verona, N.J.

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