[Overview] Bitcoin Values: Hash Rate, Dominance, Energy, NVTS & Volume

[dragonvslinux]

Source: TradingView, July 21st 2020.

• Hash rate: Bitcoin Hash Rate Indicator.
  
• Dominance: Bitcoin Dominance Oscillator (BTC.D RSI)
• CME Volume: CME Bitcoin Futures Volume
• NVT Signal: Network Value to Transactions ( NVT ) Signal with RMA
• Energy: Bitcoin Energy Value Oscillator

Recent topics:

[Charts] Hash Ribbons Buy Signals 2016-2020 Extrapolation [Signal Confirmed!]
[Charts] Just another analyst - my ongoing TA

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[jackg]

Have you built up any patterns from this? I'd say it looks like hash rate increases as the price remains high and stable or as a delayed reaction to a price rise?

[dragonvslinux]

Have you built up any patterns from this? I'd say it looks like hash rate increases as the price remains high and stable or as a delayed reaction to a price rise?

Not specifically, this was intended as an educational overview, rather than any speculation. However, it is true that based on the previous 2 halvings, hash rate has always increased and price has followed suit. There are probably correlations from 2016 with the market dominance too, that of when it is high it's likely to fall, but to the overview benefit of Bitcoin's price, as opposed to it's downfall. This graph was mainly to represent the different Bitcoin values on the "same page", highlighting it's transparency as a currency.

As for the other values; CME volume (representing institutional volume) is in a healthy uptrend, compared to retail that is. Energy remains low, meaning price has the ability to rise, rather than be capped by high energy outputs as in 2017. NVT Signal is boring and relatively redundant as a metric these days, but isn't too high which is a good thing. The most interesting metric to take away is that in the past 3 years price remains "below" (in comparison) to hash rate, dominance, cme volume & nvt signal.

[fillippone]

Source: TradingView, July 21st 2020.

• Hash rate: Bitcoin Hash Rate Indicator.
  
• Dominance: Bitcoin Dominance Oscillator (BTC.D RSI)
• CME Volume: CME Bitcoin Futures Volume
• NVT Signal: Network Value to Transactions ( NVT ) Signal with RMA
• Energy: Bitcoin Energy Value Oscillator

Recent topics:

[Charts] Hash Ribbons Buy Signals 2016-2020 Extrapolation [Signal Confirmed!]
[Charts] Just another analyst - my ongoing TA

I think the quality of the indicators varies greatly.
For sure Dominance is a shitty indicator, and we know why. I struggle finding a good rationale for investing according to a shitty indicator. In case you think differently, please change my mind.
I am not familiar with the "Energy Value Oscillator": can you point me in the right direction?

As a suggestion, it is very difficult, or not obvious, how to read the vertical axis on the right: which axis refers to which indicator? Would it be possibile to colour code the right axes to match with the relevant indicator?

[mariah.sadio]

Looks like its correlating in some way but so hard to create trading pattern based on it

[dragonvslinux]

Source: TradingView, July 21st 2020.

• Hash rate: Bitcoin Hash Rate Indicator.
  
• Dominance: Bitcoin Dominance Oscillator (BTC.D RSI)
• CME Volume: CME Bitcoin Futures Volume
• NVT Signal: Network Value to Transactions ( NVT ) Signal with RMA
• Energy: Bitcoin Energy Value Oscillator

Recent topics:

[Charts] Hash Ribbons Buy Signals 2016-2020 Extrapolation [Signal Confirmed!]
[Charts] Just another analyst - my ongoing TA

I think the quality of the indicators varies greatly.
For sure Dominance is a shitty indicator, and we know why. I struggle finding a good rationale for investing according to a shitty indicator. In case you think differently, please change my mind.

No offence but couldn't get past the first line of that post, as there is a glaring error. Market dominance isn't based on market prices, but market capitalizations.

In the last cycle we saw Bitcoin lose a considerable amount of it's dominance during the bull market, while regaining it's dominance in a bear market / consolidating below ATH. While this may not be true for the next cycle, it would suggest that Bitcoin losing it's market dominance is overall healthy; as it implies an increase in speculation in the crypto market. This is why we saw Bitcoin's dominance increase in the past two years, because there was a reduction in speculation within the cryptocurrency markets (which after a blow off top, is also healthy). Therefore, the fact dominance remains relatively high at the moment should be considered a positive sign - as it has a long way to go down. I don't understand how anyone can think the next cycle won't be another bubble with an obscene amount of speculation into shitcoins. A bubble without ridiculous speculation? Yeh right.

Overall the dominance metric is more useful for alts/btc trading (speculating), and currently it's been at very strong long-term resistance for close to a year. Seeing how aggressively the 200 Week MA is sloping downwards with it's long-term bearish posture, as well as how dominance is following it downwards, does indicate strong rejection - this translates to an increase in speculation to come. Some people would say it's stupid to do TA or put MAs on BTC dominance chart, but I'd argue it'd be naive not to recognize the obvious trend that has occured - failure of Bitcoin's dominance to move back above and stay above it's key long-term resistance. Which is exactly what you'd expect from such bearish resistance. Even though I'm inclined to believe Bitcoin's dominance will rise in the short-term, I recognize this completely contradicts it's long-term moving average.

PS - Bitcoin's dominance has nothing to do with the "value" or alts or anything like that, to me it's merely the value of speculation (or over-speculating). As referenced in a previous linked post, we are likely to again see Top 10 altcoins wiped off the map in the next bubble, as part of the "healthy turnover" of shitcoin speculation, that's indicative of a Bitcoin/crypto bubble. If you don't think there will be another bubble and wave of speculation, then sure BTC dominance probably won't crash again. I think this is naive though.

I am not familiar with the "Energy Value Oscillator": can you point me in the right direction?

More info, https://bfy.tw/OaX4 

As a suggestion, it is very difficult, or not obvious, how to read the vertical axis on the right: which axis refers to which indicator? Would it be possibile to colour code the right axes to match with the relevant indicator?

Good point, well made. While the intent wasn't so much reading the different values of these indicators, rather to compare them over the past few years (using the ratio from their ATHs), I probably should of labeled the A-F axis along with the indicators. Without re-doing the chart, I'm not able to clarify this to you I'm afraid.

[fillippone]

No offence but couldn't get past the first line of that post, as there is a glaring error. Market dominance isn't based on market prices, but market capitalizations.

Well, of course I do agree, but market capitalisation=circulating supply*mkt price.
What I meant in that sentence "dominance is based on prices, as circulating supply is supposed to be "sticky" and only slowly moving so only little affecting capitalisation and then dominance.
So a fabricated, fake or erratic market price can alter capitalisation and then dominance.

PS - Bitcoin's dominance has nothing to do with the "value" or alts or anything like that, to me it's merely the value of speculation (or over-speculating).
<...>

Good point, but I think many tend to use it as a metric of the "value" of the shitcoin.
My extreme position is that price isn't relevant neither for the bitcoin, as the importance of BTC price is way beyond his market price.

[dragonvslinux]

No offence but couldn't get past the first line of that post, as there is a glaring error. Market dominance isn't based on market prices, but market capitalizations.

Well, of course I do agree, but market capitalisation=circulating supply*mkt price.
What I meant in that sentence "dominance is based on prices, as circulating supply is supposed to be "sticky" and only slowly moving so only little affecting capitalisation and then dominance.
So a fabricated, fake or erratic market price can alter capitalisation and then dominance.

I do hear what you're saying, this is notable with some of the CMC re-calculations on BTC.D, where certain altcoins have inaccurate or completely wrong circulating supply listed, and therefore the market capitalization (and therefore Bitcoin dominance) get's re-calculated. This is why you see some of the long wicks on certain time-frames, but not on others, for reference sake. But I've never seen this because the listed price was wrong, personally speaking.

PS - Bitcoin's dominance has nothing to do with the "value" or alts or anything like that, to me it's merely the value of speculation (or over-speculating).
<...>

Good point, but I think many tend to use it as a metric of the "value" of the shitcoin.
My extreme position is that price isn't relevant neither for the bitcoin, as the importance of BTC price is way beyond his market price.

Thanks for understanding my viewpoint   Indeed many tend to use altcoin dominance as a metric of the vaue of shitcoins, just like they did in 2014 and 2018. No doubt, within another bear market, these individuals (probably newer investors) will probably re-consider the value of these shitcoins   Even ETH, the leading altcoin, isn't worth holding in a bear market in comparison to Bitcoin - this should be enough conclusive evidence to anyone paying attention that altcoins don't hold their values long-term in comparison to BTC, and nobody can rationally argue otherwise imo. But also worth acknowledging that just like Silver (no.1 "altmetal" let's call it) isn't worth holding in a bear market of precious metals, in a bull market, it has always outpaced gold (in the short-term), as have other alternative metals to the Daddy of all metals. This is nature of speculative markets.

I guess you mean dominance isn't relevant in your second sentence, which I agree is true. Bitcoin doesn't need dominance to fall in order to rise in price (we saw this in Q3 of 2017), nor does it need dominance to rise in order for the price to fall. At some point the close correlation between the fall of BTC dominance and a bull market will likely de-correlate, but only after sufficient speculation imo, for example another few bubbles sometime in 2035 I'd imagine - once fiat becomes more or less redundant. Not before.

Until then, Bitcoin bubbles will generate shitcoin speculation from new investors flooding into the market, making the same mistakes again and again, which isn't a bad thing for Bitcoin at all. If anything, it's likely to continue to reduce the corrections Bitcoin faces in bear markets, as the lower the market dominance, the more shitcoin profits can return to Bitcoin, while the shitcoins of the latest cycle will continue to lose 95-99% of their value. In contrast, Bitcoin is likely to correct less deep each time.

PS - While it's completely true that a portfolio only holding Bitcoin will out-perform a diversified portfolio with altcoins/shitcoins (even a market-weighted one) in the long-term, it's also true that a diversified portfolio of Bitcoin and altcoins will almost certainly out-perform a purely Bitcoin portfolio in the short-term (during bull markets), and consequently under-perform during bear markets. Therefore as long as the profits are appropriately sold back into BTC, these diversified portfolios can out-perform Bitcoin. This is why older investors continue to speculate on altcoins imo, not because they believe that they have value, but solely to increase their Bitcoin holdings. Many OG Bitcoiners have preached this for many years, and it's how they stack their sats. I guess it'd be easy to argue that this makes all altcoins scams, but on the same basis, it would be like calling Silver a scam, or Microsoft, simply because they aren't the best performing asset within their respective markets.

[fillippone]

PS[/i] - While it's completely true that a portfolio only holding Bitcoin will out-perform a diversified portfolio with altcoins/shitcoins (even a market-weighted one) in the long-term, it's also true that a diversified portfolio of Bitcoin and altcoins will almost certainly out-perform a purely Bitcoin portfolio in the short-term (during bull markets), and consequently under-perform during bear markets. Therefore as long as the profits are appropriately sold back into BTC, these diversified portfolios can out-perform Bitcoin. This is why older investors continue to speculate on altcoins imo, not because they believe that they have value, but solely to increase their Bitcoin holdings. Many OG Bitcoiners have preached this for many years, and it's how they stack their sats. I guess it'd be easy to argue that this makes all altcoins scams, but on the same basis, it would be like calling Silver a scam, or Microsoft, simply because they aren't the best performing asset within their respective markets.

I do agree here.
But pinch of salt: you have to be a good trader.
I am not a good trader, and hence i prefer to concentrate on the long run target only, as trying to select the right shitcoin to ride in the next bull market has aldready proven an epic struggle for me.

The best trades I did with alts (namely: BTC fork from the fork season back in 2017) are the one where I sold them as soon as I had the full control of such coins. Even in my best intention, I couldn't help having a few shitcoin in my portfolio where I am in deep red (thanks to some "frinds" who lured me in the "next Bitcoin" or the "next Blockchain"). I am only waitng the next FOMO to dump those.

[dragonvslinux]

PS[/i] - While it's completely true that a portfolio only holding Bitcoin will out-perform a diversified portfolio with altcoins/shitcoins (even a market-weighted one) in the long-term, it's also true that a diversified portfolio of Bitcoin and altcoins will almost certainly out-perform a purely Bitcoin portfolio in the short-term (during bull markets), and consequently under-perform during bear markets. Therefore as long as the profits are appropriately sold back into BTC, these diversified portfolios can out-perform Bitcoin. This is why older investors continue to speculate on altcoins imo, not because they believe that they have value, but solely to increase their Bitcoin holdings. Many OG Bitcoiners have preached this for many years, and it's how they stack their sats. I guess it'd be easy to argue that this makes all altcoins scams, but on the same basis, it would be like calling Silver a scam, or Microsoft, simply because they aren't the best performing asset within their respective markets.

I do agree here.
But pinch of salt: you have to be a good trader.
I am not a good trader, and hence i prefer to concentrate on the long run target only, as trying to select the right shitcoin to ride in the next bull market has aldready proven an epic struggle for me.

This is very true, and highlights the point that "investing" in altcoins (ie hodling) isn't that smart, however trading the 4-year cycles of them is; if you know what you're doing. Not convinced you'd call that investing if you're ony holding them for a year or two, I guess it's subjective. Personally I haven't recently divested my BTC into altcoins based on solid fundamentals alone, but on the technical price action against Bitcoin looking like a good risk/reward ratio, as well as when altcoin dominance has been due a bounce upwards . This is how I manage to stack sats in the short-term at least, using the confluence of three metrics at minimum.

The best trades I did with alts (namely: BTC fork from the fork season back in 2017) are the one where I sold them as soon as I had the full control of such coins. Even in my best intention, I couldn't help having a few shitcoin in my portfolio where I am in deep red (thanks to some "frinds" who lured me in the "next Bitcoin" or the "next Blockchain"). I am only waitng the next FOMO to dump those.

"Fork season" haha, I remember this  

I also still have some altcoins in the deep red from 2018. At a time when I was re-investing profits from 2017 back into the market around a $6.5K Bitcoin, but given Bitcoin's dominance was less than 50%, I unfortunately diversified half into altcoins Of course if the market had swiftly recovered from these levels instead of dropping further (ie, the bear market being over), then this would of worked out great no doubt, however clearly this wasn't the case! Obviously if I had put 100% into Bitcoin I would have been a better off. Classic case of new altcoin investor vs seasoned crypto investor.

I used to worry about these 2018 shitcoins never being able to re-gain their $ value, but I think in reality they will eventually at the peak of the next bubble, and go higher even during a blow-off top. We've already seen altcoins 10-100x after losing 90-99% of their value, so it's not possible to right a coin off until it's not trading anymore imo. It's worth remembering the first years of Bitcoin's price action, $33 down to $1 (-97%), and it turned out BTC wasn't a complete right off after all, just more volitile to begin with. With that said, I'd feel worse selling a shitcoin that I'm 99% down on, only to see it 100x back to fiat value, compared to dumping it next to nothing.

It's clear that these 2018 coins I have will never re-gain their BTC value ever again, hence finding Bitcoin dominance chart very important to me. If I had paid more attention to this before, I would of made very different decisions in 2018 I think. That said, it's 2020 now and dominance is now very high and at long-term resistance imo (altcoin dominance is at long-term support more relevantly), so not scared in diversifying after sensibly staying away from altcoins in 2019. So far, so good  

PS - Cheers for turning me into a Hero Member!

[el kaka22]

This is just basically a way to show that there is connection to any of that to bitcoin price, see anyone of those lines being identical to bitcoin price itself? None of them are like that which as you can assume means that bitcoin doesn't have anything that changes its price.

Of course there are some that you could argue that resembles it, but at the same time it is not effecting it all that much, just resembles a tiny bit. The only thing we could say that resembles it is the NVT signal and even that is not enough, it is close and at least closer than the other stuff but it is still wildly different as you can see from the chart. Bitcoin price depends on one thing and one thing only, which is people buying and selling, if people buy it goes up and if people sell it goes down, simple as that.

[hugeblack]

I apologize because I have not read your last reply accurately. You may need to split it into several parts.

Dominance

Bitcoin Dominance is misleading, so even using it to speculate on altcoin is wrong for two reasons:

• It measures all altcoin as if it were one currency and therefore there is no point in measuring it in speculation.
• Altcoin follows Bitcoin as if it were similar to BTC leverage and thus rise with it and vice versa.
• Depending on the market capacity, which varies greatly, you can find a big difference between how it is calculated in CMC and CoinGecko.

Hash Rate, Energy, & Volume are all measures that track the price. Whenever the price increases, more people who want to mine/buy will increase, and Hash Rate/Volume will rise.

[fillippone]

<...>
I used to worry about these 2018 shitcoins never being able to re-gain their $ value, but I think in reality they will eventually at the peak of the next bubble, and go higher even during a blow-off top. We've already seen altcoins 10-100x after losing 90-99% of their value, so it's not possible to right a coin off until it's not trading anymore imo.
<...>

I am not sure how convenient is looking at shitcoin price in USD rather than sats.
You say that in the next bubble many shitcoin will eventually top their ATH, sure, I do agree? But how much bitcoin has to go so that my BitcoinPizza, or Bitcoin Private top their ATH?
As the main purpose of dealing with shitcoin is staking more sats, I usually look those against BTC. Is in this numerarie I state the profitability  of a trade.

[exstasie]

My view on the dominance metric: it's all about money flow.

Falling dominance means money is increasingly flowing into the altcoin markets. That means two things. First, increasing demand for BTC to send to altcoin exchanges or to arbitrage ALT/USD markets. Second, decreased BTC supply on fiat markets, since BTC are being pulled into the altcoin markets for speculation. That's why dominance plummeted during the 2017 bubble.

A multi-month bearish pattern on BTC.D like March-May 2017 would be a beautiful sight.