Bitcoin ($BTC #Bitcoin) Yardstick
-The Bitcoin Yardstick is a metric that provides insights into Bitcoin's valuation relative to the energy used to secure and operate its network. Here’s a more detailed explanation of the Bitcoin Yardstick and its significance, based on the provided chart:
Bitcoin Yardstick Definition
Market Cap: The total market value of all Bitcoins in circulation.
Hashrate: The total computational power used to mine Bitcoin and secure the network.
Normalization: The yardstick is normalized using a 2-year rolling Z-score, which helps to smooth out short-term fluctuations and highlight long-term trends.
Similarity to Traditional Financial Metrics
PE Ratio Comparison: In traditional finance, the PE (Price to Earnings) ratio is a valuation measure comparing a company's current share price to its per-share earnings. Similarly, the Bitcoin Yardstick compares the market cap (analogous to price) to the hashrate (analogous to earnings). However, instead of earnings, it uses the energy consumption needed to secure the network.
Importance of the Metric
Energy as Lifeblood: Energy consumption is critical for the Bitcoin network's security and operation. The Bitcoin Yardstick captures the relationship between price and energy, providing insights into the network's health and valuation.
Trend Analysis: By plotting this data, we can observe trends over time, helping to identify potential bull and bear periods.
Interpretation of Signals
The chart uses color-coded lines to indicate different market conditions:
White Lines: Indicate bear periods, where the yardstick is 1 standard deviation (SD) below the mean.
Light Blue Lines: Indicate bull periods, where the yardstick is 2 SDs above the mean.
Dark Blue Lines: Appear when the yardstick is 3+ SDs above the mean, marking extreme bullish conditions.
Observations from the Chart
Historical Trends:
Light Blue Signals: Historically, Light Blue signals appear during the latter stages of bull markets, suggesting heightened investor confidence and strong price momentum.
Dark Blue Signals: Dark Blue signals are reserved for periods of drastic price increases, typically seen in the peak phases of bull runs.
Current Status:
Increasing Yardstick: The yardstick is currently increasing but has not yet signaled Light blue or Dark Blue. This suggests that while there is upward momentum, we may still be several months away from reaching new all-time highs (ATHs).
Historical Context and Effectiveness
2014 Analysis: The metric was less effective in 2014 due to the network's nascent stages and lower overall stability and adoption.
Cycle Variability: Each market cycle can differ, and the yardstick may not always provide clear signals. However, it still offers valuable probabilistic insights.
Probabilistic Insights
Continued Uptrend: Despite potential variability, the yardstick suggests that the overall probability favors a continued uptrend for Bitcoin, aligning with historical patterns where increased energy use and network security accompany rising prices.
Conclusion
The Bitcoin Yardstick is a valuable tool for understanding the relationship between Bitcoin's market value and its underlying energy consumption. By normalizing this relationship and analyzing long-term trends, investors can gain insights into potential market cycles and price movements. While each cycle may differ, the yardstick's probabilistic approach suggests a continued positive outlook for Bitcoin, aligned with its historical performance.
Bitcoin BTC:
- The price held during the 20-week moving average (WMA) test.
- There was a daily deviation below $61K, followed by a lower high that held after a return to $61K.
- Ideally, the $64K area holds, with $67.5K being a key level to watch.
- Support: $64K area
- Resistance: $67.5K
Ethereum ETH:
- The price held the 20 WMA.
- There has been no breakout against Bitcoin yet, with similar observations as above.
- Support: $2800 area
- Resistance: $3300 area
Support and Resistance Levels Based on Daily Chart for AltCoins key levels:
- Bitcoin Cash ($BCH): $350 support
- Injective Protocol ($INJ): $18 support
- Maker ($MKR): $2150 support
- TRON ($TRX): $12.40 support
- Render Token ($RNDR): $10.50 support
- Fetch.ai ($FET): $1.85 support
- Solana ($SOL): $125 support
- Binance Coin ($BNB): $510 support
- Chainlink ($LINK): $13 support
- Immutable X ($IMX): $1.80 support
- Avalanche ($AVAX): $29 support
- THORChain ($RUNE): $5.40 support
- Stacks ($STX): $2.00 support
- NEAR Protocol ($NEAR): $5.80 support
Disclaimer: The content provided in this article and website is for educational purposes only and is not intended as financial advice. Cryptocurrency investments are highly volatile and risky. There is a potential for significant loss, up to and including the total loss of your investment. Readers are advised to conduct their own research and consider consulting with an independent financial advisor before engaging in any financial transactions based on this information. Neither the author nor this platform assumes liability for financial losses that could occur as a result of using this information