The so-called indicators on-chain of Bitcoin, those that come from statistics and parameters that reflect its activity on the blockchain, at the present time provide signals that are favorable to an evolution of the price of BTC.
Bitcoin blockchain data analytics company CryptoQuant posted a list of 10 indicators on that cryptocurrency on Twitter, accompanied by a buy or sell recommendation.
Among the 10 indicators on the list, only one has a neutral rating. The other 9 indicators include the “Buy” or “Strong Buy” recommendations.
We present below the most prominent indicators, among those proposed by CryptoQuant.
— CryptoQuant (@cryptoquant_com) September 16, 2020
Miners Position Index (MPI): -0.86
To calculate this index, the value in USD of all the outgoing BTC flows of the pools mining and divided by the 365-day moving average of the outgoing BTC flows from those pools.
A value greater than 2 suggests that miners are selling the mined BTC, while a negative value shows that they are avoiding selling and favoring accumulation.
The resulting value for this indicator, -0.86, implies that there is a net inflow that favors accumulation, and therefore it is an indication of purchase.
The Puell Multiple: 0.84
The Puell Multiple is the value in USD of the BTC issued daily divided by the 365-day moving average of the value of the daily issue.
This indicator explores market cycles from the point of view of miners’ income. The graph shows periods in which the value of the bitcoins issued daily is very low, and the Puell Multiple, as in this case, which is less than one, 0.84. The curve goes into the green box. Here the investor who buys is favoredSince you will receive significant returns if you sell later.
The lows of the Puell Multiple usually coincide with a trough of the BTC price curve.
In the opposite scenario, from a tall Puell Multiple, whoever sells makes large profits.
Hash Tapes: 125M
The basic theory of the so-called Hash Ribbons or Hash Ribbons is based on the fact that the bitcoin market tends to reach a valley when miners are forced to sell BTC, to cover the costs of mining. Also when there are a significant number of small miners who quit mining, or capitulate. This happens when there is a strong price correction and the mining operation falls below the bottom point of profitability.
The so-called hash tapes in their simplest version are two curves of 30-day and 60-day moving averages of the Bitcoin hash rate. When the 30-day moving average curve crosses and moves above that of the 60-day moving average, the miners’ capitulation process is already ending. Buying BTC at such times can lead to great returns.
Compared to the difficulty close to 100T, an amplitude of 125M is quite a low value. That low relative value implies that the curves are close to the crossing, so it is conducive to buy.
The so-called Difficulty Tapes are also built with moving averages and can fulfill the same prediction function of the Hash Tapes, but they do so about two weeks after the Hash Tapes.
BTC reserve from exchanges: 2.38 million BTC
CryptoQuant records, during the last year, the exchanges’ daily BTC reserves. And this has varied, with a decreasing pattern, in a range of 2.82 million BTC to 2.38 million BTC.
At the current moment, CryptoQuant records 2.38 million BTC in the reserves of all exchanges, a low of the curve, which is coming down, which is a bullish sign. Those reserves peaked at 2.82 million BTC in mid-March, when the crash of Bitcoin and cryptocurrencies occurred, in conjunction with all markets and stock indices.
Upon reaching the BTC reserves of exchanges a minimum in the last year, this indicator also recommends the purchase.
Stablecoin supply rate (SSR): 13.96 (all-time low)
By dividing the market capitalization value of BTC by the market capitalization of all stablecoins in BTC, the Stablecoin Supply Rate (SSR) is obtained. The higher the supply in the stablecoin markets, the lower the SSR. More pressure to buy BTC and other major cryptocurrencies may then arise. This can form upward pressure on the BTC market.
CryptoQuant highlights that the SSR value of 13.96, at the time of posting tweet, on September 16, it was an all-time low. At the time of writing, the SSR had already dropped to 13.82. CryptoQuant places as a recommendation, regarding the value of this indicator, «Strong Buy».
The total of stablecoins on exchanges reaches 2.33 billion, and a growth of more than 50% is appreciated since September 14. The fact that they are regulated gives stablecoins an important role in the cryptocurrency market as a supplier of liquidity, says CryptoQuant. “Thus, a greater supply of stablecoins in the market may indicate greater buying pressure from cryptocurrencies such as BTC,” says the data analysis company.
MVRV ratio: 1.46
The MVRV ratio is obtained by dividing the value of the market capitalization of bitcoin, by effective capitalization. This is defined by assigning the BTC of a bitcoin address the price they had in their last movement. In this way, the weight is taken from those coins that have not moved in a long time.
If the MVRV index is greater than 2, bitcoin is considered to be overvalued. CryptoQuant, with the current index at 1.46, points out that bitcoin is undervalued and it is conducive to buy now.
Reserves vs. Flow: USD 18,964
The Reserves versus Flow model orStock-to-Flow, which is associated with a shortage of an asset,measures the relationship between the supply of an asset and the annual growth of the production of that asset. CriptoNoticias addressed this metric by exposing several indicators proposed by Grayscale to perform a Bitcoin valuation.
Bitcoin, with decreasing inflation over four-year periods, exhibits a rising reserve vs. flow curve. This confers on it attributes of store of value, like gold and silver, according to Grayscale.
The prediction for the current moment of the model reserves versus the flow, provided by CryptoQuant is above USD 18,000, then recommends the purchase.
While many of the indicators presented tend to be based on historical patterns, they do not guarantee absolute predictability. The coincidence that they favor an uptrend, however, offers different criteria that can be contrasted and compared in a later analysis.