The current plateau in Hash Rate growth is most unusual for Bitcoin.
The Hash Ribbons 1 month and 2 month moving averages have never been this close - for so long - except during a capitulation event.
We can measure the relative "growth" of the current month Hash Rate (HR) to the prior 2 months as: Growth = (1m HR - 2m HR)/(1m HR) In November 2019, "Growth" has been below 0.5% for over 7 days now, without a cross-over (capitulation event) occurring.
However, it appears as though miners are moving cautiously, and may be struggling between two tough choices: 1) To commit more resources to Hashing (and trying to accumulate more Bitcoin) ... OR... 2) To cut back Hashing power and risk missing a major Bitcoin Bull Run.
In attempt to plot some "similar" historic scenarios, I have flagged in red where "growth" was historically less than 2% for at least 1 week:
OCCURRENCE: DAYS TO CAPITULATION
Apr 2012: 2
Dec 2012: 2
Dec 2014: 2
Apr 2015: 21
Nov 2016: No Capitulation*
Oct 2018: 5
Mar 2019: No Capitulation*
May 2019: No Capitulation*
Result: in 5/8 cases a capitulation occurred within 1 month.
This suggests there is roughly a 60% chance of a capitulation occurring in the next month.
However, this result should be taken as a GUIDE ONLY. 10 years of data, and 8 similar data points, is FAR from an exact science. We only have 10 years of Bitcoin history to work with, it is imprecise, but that doesn't mean it should be ignored.
Notes: * Capitulation occurred >> 2 months away ** I excluded any occurrences within 2 months after a capitulation
The miners aren't stupid. Sooner or later it will be clear to everyone that the average growth and return rates of +4.58% per day (as was the case at the last bull run in 2015-2018) will never come back again.
In the future they will be much lower, if any.
Just think about it: With the much higher crypto market capitalization now, where is the constantly fresh, new money supposed to constantly come from, to maintain the high growth rates as in the early days when market cap was low? Consequently, the market will probably not grow, but rather stagnate and there will be much speculation and sideways movement with the money still remaining in capitalization. Eventually this money will be withdrawn as well, because it does not yield any profit.
This does not cover the cost of electricity in the long run, even with Chinese electricity prices.
Just my opinion.
I don't agree re- growth though. Bitcoin is only held by ~ 1% of the world's population.
In other words, there are plenty of pockets with money to inject. If we see mass adoption, there will be a lot of price appreciation.
Bitcoin also has the highest Sharpe Ratio of any other asset and is uncorrelated with many traditional assets - making it attractive for funds and other institutions (non-retail investors).
Time will tell!
ReallyMe
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@capriole_charles, Yes, is true in principle but I think there has been so much hype and buzz about crypto and "digital gold" for several years now that virtually everyone has heard it by now. And yet Bitcoin did not manage to become the "digital gold" or widely accepted means of payment. Not all those years. Therefore I don't believe that things will improve much in the future. We'll see, time will tell. ;-)
ReallyMe
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@capriole_charles, In other words, if Bitcoin has been around for 10 years and 90% of the world's population have heard of Bitcoin in the past 10 years and yet only 1% use it, what does that tell us about the future prospects? You understand what I'm getting at?
amrishkelkar
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@ReallyMe, I think that as the hardest money ever produced, bitcoin is in its price discovery phase. So, all bets regarding price predictions are off. We are in uncharted territory, at all times. Theoretically, we won't stop till bitcoin the black hole sucks in a considerable portion of the worlds capital. The fresh inflow that you refer to will come first from other stores of value, such as Gold, art, land/property even. As more and more people discover that Bitcoin is sound money, they will spend other forms of money first (e.g. fiat currency) before spending their bitcoin; at times even to buy bitcoin (By Gresham's law).
ReallyMe
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@amrishkelkar, Yes, absolutely, I too think people will vote with their 'stores of value' and their money, how much confidence they have in the crypto currencies. I'm a little skeptical at the thought that someone who is very wealthy will ever exchange his Van Gogh and Piccassos paintings or his land holdings for digital zeros and ones in a USB crypto wallet, though.
UnknownUnicorn4862126
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@ReallyMe, Legacy financial systems will take a looong time to move away from. Most people don't care about anything besides whatever pointless dumb shit they spend too much time on. I see your logic but perhaps widespread adoption will take a crisis or financial reset after all.
amrishkelkar
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Great work! Would you consider adding the 10d/20d BTC Price SMA like you mention in one of your articles? That would make this an awesome indicator.
Few other observations : In each of the halvening events, 1-1.5 years prior to the halvening, there seem to be 2 or 3 instances where the indicator turns negative (miner capitulation). For the upcoming halvening event, one instance already occurred at the end of last year. The second seems to be occurring right now; hopefully it is the last one before we blast off.
In the future they will be much lower, if any.
Just think about it: With the much higher crypto market capitalization now, where is the constantly fresh, new money supposed to constantly come from, to maintain the high growth rates as in the early days when market cap was low? Consequently, the market will probably not grow, but rather stagnate and there will be much speculation and sideways movement with the money still remaining in capitalization. Eventually this money will be withdrawn as well, because it does not yield any profit.
This does not cover the cost of electricity in the long run, even with Chinese electricity prices.
Just my opinion.
See this idea for more details