Thread by @eliasimos

That time of the term again; this is a tweetstorm on the current state of Bitcoin and outlook for Q4.

If it were to have a title, it would be sth along the lines of "and now we wait..."

Let's do this 👇

1/ Since the top in July 2019, active addresses have been in decline. While an equilibrium was found for most of Q3, it looks like we are making way for new lows.

Definitely more SoV than means of payment.

Also, a sign of fading vibrancy.

2/ The volume of transactions has also decreased, normalizing back to Feb-March 2019 levels.

With that, the fees generated have reverted back to late March 2019 levels.

3/ At the same time, the flow from miner wallets to exchanges increased significantly over Q3.

Perhaps lower fees and high prices were attractive conditions for miners to take risk off their balance sheet.

As of late, the flow seems to be relaxing somewhat.

4/ Concurrently, demand for network resources seems to have stalled a little.

On the volumes end, while market level volumes are higher than in Q1, chain level (real) volume has plunged to 2-year lows.

That tells me the pie of market participants is likely not increasing.

5/ The on-chain volume levels also reflect on the state of the Mempool. Smooth sailing for Bitcoin transfers across the board.

While we did get a bump in Segwit adoption (50%!), absent other fundamental improvements, this could also be a sign of weak (new) demand.

6/ A look at the state of LN, echoes the observations above.

The growth in the number of nodes has stalled, the number of channels has continued to decline, as has the $BTC capacity of the LN.

7/ Now looking at the median transaction value, things also seem to normalize along with price, back to the $60 per transaction from a high of ~$100 when price >$10k.

8/ Among other things, the median could be an indication of retail interest.

An increasing median, can reflect increasing belief in the fundamentals of the network and increasing confidence in the potential for higher price levels.

And vice versa.

10/ Looking at HODLer behaviour, the most recent band of tourists seems to be departing, with all the short-term bands of the HODL waves viz, conceding to long-term ones.

In a way, this also implies that all the potential HODLers, from the existing pie are already in place.

11/ For reference, off the existing HODLers, approx. 2/3 are currently in profit.

The biggest profitable band is multi-x in profit. The 3rd biggest though is on the verge of losses.

A move below $8k could force them to capitulate sending us to $7k with ease.

12/ A quick look at the MVRV ratio agrees that a lot of the speculators were flushed out over Q3.

We are now at a level revisited before the second chapter of the previous bull market began.

Visiting lower levels puts us in historic bear market levels.

13/ Here's another view on how profit taking has panned out over 2019, using coin age consumed as a proxy.

Until further notice, it looks like we are starting to run out of sellers.

14/ Thinking about new demand, the famous halving could be a trigger for the more adventurous from the potential new demand pool to trickle into Bitcoin.

The yellow band marks where we are currently are countdown-wise, in terms of the previous BTC cycle.

15/ Now, let's take a look at the expectations of different stakeholders in Bitcoinland, re: price.

Off the different parties, traders appear to be the less optimistic.

16/ The probability of a return to 10k by year-end is set at ~25% in the options market, while $7k is attributed over 70% probability by year-end.

At the same time, longs are paying shorts in the funding market, implying a higher perceived prob. of downside in the short term.

17/ Miners on the other hand seem to be more comfortable at current levels.

Hashrate keeps breaking ATH's, while BTC outflows from tagged miner wallets have relaxed since August 2019.

18/ The Twitterati seem to be the ones with the least conviction.

The @cryptomenics sentiment indicator is back into the indecision zone. Historically, better buying opportunities appeared when the sentiment was grim for longer.

The Fear & Greed index agrees.

19/ The indecision - incidentally - reflects on the volatility profile of $BTC as of late.

Not much going on, though we are getting closer to a point where things tend to return historically.

20/ So what can we learn from all this? A few things.

The high correl of the median tx USD value with BTC's USD price, is a pretty good indication this is still a speculative asset.

🕯️@sqcrypto's output can't come soon enough🕯️

(am I doing this right?)

21/ Given that, it seems that we have hit a ceiling as far as new converts are concerned, at current price levels.

For demand to be activated, we will likely have to visit lower price levels - even momentarily, or consolidate here for a while.

22/ All that notwithstanding an unexpected external demand shock - like HK capital controls for example, at which point things could reverse and we should be off to the races.

23/ With BTC's dominance receding from local highs and other cryptoassets becoming more lively in the development/utility side of things, I think there is a pretty good chance that we will see more re-allocation from BTC to other assets.

24/ As an endnote, it's so refreshing to see data product builders making huge progress in the last 6 mo's.

First time I did this was in March 2019, and since then there's easily 3 times as many data points avail, 3 times more accessible.

Kudos to all!

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