James Bennett, CEO of ByteTree, returned for this week’s Onchain Reaction. He explained how after an exciting week in the cryptocurrency markets, bitcoin remains in a lower volatility regime despite the price surge toward USD 19,000 and pushing USD 20,000. In previous bull markets, such as in 2017, bitcoin’s price volatility surged up to approximately 150% on an annual basis. Currently, that metric hovers at around the 50% mark, which is lower than the likes of Amazon, Apple and Tesla stocks over the past few months.
(0:56) “It’s very exciting to see the bitcoin price surging to new all-time high levels with volatility still remaining low,” said Bennett.
Diving into the metrics on-chain, he said that Bitcoin’s transaction value has held well above the USD 5 billion per day threshold, which means there are over USD 5 billion worth of transactions being settled on the Bitcoin network each day.
In the below chart, the gold circles illustrate periods where this has happened in the past, prior to a subsequent drop in price, indicating we are in the late stage of a bull market. Bennett described it as a “bit of a frenzy,” saying that there was perhaps “whale money” moving around the ecosystem.
(1:44) “We’re starting to see a more sustainable picture building up. And I’m very much looking forward to seeing this progress over the coming weeks and months,” he said.
ByteTree looks at onchain transaction value across the whole spectrum, including the small transactions, or micro transactions, up to the whales. And one of the things they like to do to understand the type of users on the network is to break it into quintiles, or five different bands, going from the smallest to the top band, each with the same number of transactions in it.
The lowest value of traffic, or the bottom quintile, is actually growing in terms of its value, which means that there is a slightly more sophisticated user on the network transferring a higher value as a standard payment.
The last time we were up at these levels was in the bull market of late 2017, as represented in the dark blue lines along the bottom of the chart. July 2019 was a similar story. Bennett points to the right side of the below chart, where there is an “organic build” toward the traffic, which isn’t reflecting the previous spikey movements. This gives him confidence that this is a well-sustained or underpinned bull market.
Miners are an integral part of the Bitcoin ecosystem and are needed to keep the network running.
(3:51) “Miners are doing very well. I’m pleased to report, their revenues are the highest they’ve been so far in 2020 despite the halving event that we saw in May,” said Bennett.
There is USD 20 million-plus of total revenues, which is fees plus coinbase, or newly minted coins being generated, which he says is positive to see. After previously spiking, fees have returned to more normal levels of 10%, which is still reflective of a bull market.
Lastly, he took a look at miners rolling inventory (MRI), which is the difference between what has been mined and what has been sent out or spent for the first time. Miners sold very strongly into the current price surge, peaking at 123%, which means they took the opportunity to “bag profits” when they could. MRI has since dropped down to 106%. Anything above 100% means miners are sending out more than they’ve generated, which is only possible if they’ve been sitting on inventory from before.
(5:39) “So, overall, all lights are green for the Bitcoin network at the moment,” concluded Bennett.