Bitcoin just had its largest 48-hour pullback since May 2020, back when the asset’s halving took place. The drop in price has the cryptocurrency now trading below a key fundamental level. A deeper dive into other Bitcoin fundamentals may be hinting that a more severe correction that may have only just started.
Here’s what the cryptocurrency’s underlying network metrics are saying about what’s about to come in terms of price action across the crypto market.
Bitcoin Energy Value, Production Costs, and Hash Ribbons Potentially Signal Deep Downside
Technical analysis across any and all assets is exactly the same: open up a chart, check out the candle structure, and look for any patterns or signals. But when it comes to cryptocurrencies, fundamental analysis is dramatically different.
Fundamental analysis is based on two main concepts: qualitative analysis and quantitative analysis. Qualitative analysis comes down more to if you like a coin’s ticker, or if you prefer a Justin Sun against a Vitalik Buterin, for example.
In terms of quantitative analysis, rather than reviewing company revenue reports for tips on stock valuation changes, crypto analysts look at on-chain data and other barometers that measure the health of the underlying blockchain network.
In Bitcoin, this includes how much BTC is held in wallets or on exchanges, metrics like energy value and production costs, hash rate, difficulty, and network-to-transaction ratios.
These fundamentals unique to Bitcoin and crypto make things a bit more tricky, but thanks to contributions from the likes of Willy Woo and Charles Edwards, these metrics have been turned into TA tools.
BTCUSD Daily Energy Value 2016 - 2020 Comparison | Source: TradingView
By adding these metrics to Bitcoin price charts, it can reveal some compelling signals. The chart above depicting Bitcoin’s energy value shows the first major weekly close below the indicator after quickly poking above it. The last time the cryptocurrency peeked its head above this level then abruptly fell below, was in June 2019, and it signaled a top.
Comparing the past bear market turned bull with whatever is currently going on in crypto, shows a similar initial pump from the bottom that got overheated too soon. The next time Bitcoin went slightly above this metric on weekly timeframes, the cryptocurrency had a 40% post-halving selloff.
This year’s halving came and went, but no death spiral ever arrived. However, energy value is just one signal that is suggesting it could still be coming.
Related Reading | Why Are Bitcoin Miners Moving An “Unusually” Large Amount of BTC?
The cost of producing each BTC is now above the market price the cryptocurrency is trading at. When this happens, miners are better off buying – so instead, they sell.
The post-halving death spiral last time around was due to capitulating miners. Rising fees may have staved this off for some time, but miners have begun moving an “usually” large sum of BTC to exchanges.
The Hash Ribbons have started turning down once again, and when they do, it signals that such a capitulation event is taking place. Past instances of this, line up with the recent Black Thursday bottom, and the 2018 bear market bottom. It also matches the last post-halving death spiral, and it looks a lot like what’s about to happen next.
BTCUSD Daily Production Cost & Hash Ribbons 2016 - 2020 Comparison | Source: TradingView
NVT Ratio Demonstrates How Far A Drop In The Cryptocurrency Could Go
Finally, the last fundamental signal in Bitcoin that things aren’t looking so hot in the short-term, is the NVT ratio. NVT stands for network-to-transactions. This ratio compares Bitcoin’s price in relation to the total value being transacted across its network.
NVT recently got hot, similarly to the February 2020 peak, the June 2019 top, right before the drop to Bitcoin’s bottom, and before that when the asset hit $20,000. Now, it is back, and it’s no longer red.
BTCUSD Daily NVT Ratio Past Top Comparisons | Source: TradingView
When prices drop and NVT ratio turns back to black, some type of drop has followed. The furthest back was a 70% collapse from $20,000 to $5800 in February 2018. Bitcoin is currently showing a correlation to that particular bottom when compared to the DXY Dollar Currency Index.
The next time this tool triggered, Bitcoin fell over 50% to $3,200 and met what is hopefully the bottom. Next, was in June 2019, and although it took until December to get there, Bitcoin once again bottomed after a 53% drop.
2020 kickstarted a fast recovery to $10,000, but even quicker the cryptocurrency plummeted 62% to $3,800 on Black Thursday. Now, Bitcoin went back above $12,400 where it may have topped again according to the NVT ratio. But the question is – how deep does this drop go?
Related Reading | This Monthly MACD Bearish Divergence Warns Of Imminent Bitcoin Crash
Taking the four catastrophic collapses, and averaging them out comes to a 58% fall. A dump of that magnitude would take the cryptocurrency back to roughly $5,200. However, given the pandemic, the risk of the coming election, and the aforementioned ominous comparison to the DXY index, there is one more important thing to pay attention to.
According to the NVT ratio, Bitcoin tops out when the indicator turns red. It bottoms when it turns green. The only time the cryptocurrency has turned green since the $20,000 peak was when the crypto asset plunged from $20,000 to $5,800.
Could the latest sighting of red, give us the first glimpse of green before things move up again? And it could it all be due to the comeback of the greenback?
Bitcoin Proponents Against Elon Musk Following Heated Dogecoin vs Bitcoin Tweets
Last week, Elon Musk and Tesla shocked the entire crypto industry following an announcement that the electric car company will no longer accept bitcoin payments for “environmental reasons.”
A Hard Pill For Bitcoin Maximalists
Giving its reasons, Tesla argued that Bitcoin mining operation requires massive energy consumption, which is generated from fossil fuel, especially coal, and as such, causes environmental pollution.
The announcement caused a market dip which saw over $4 billion of both short and long positions liquidated as the entire capitalization lost almost $400 billion in a day.
For Bitcoin maximalists and proponents, Tesla’s decision was a hard pill to swallow, and that was evident in their responses to the electric car company and its CEO.
While the likes of Max Keiser lambasted Musk for his company’s move, noting that it was due to political pressure, others like popular YouTuber Chris Dunn were seen canceling their Tesla Cybertruck orders.
Adding more fuel to the fire, Musk also responded to a long Twitter thread by Peter McCormack, implying that Bitcoin is not actually decentralized.
Bitcoin is actually highly centralized, with supermajority controlled by handful of big mining (aka hashing) companies.
A single coal mine in Xinjiang flooded, almost killing miners, and Bitcoin hash rate dropped 35%. Sound “decentralized” to you?https://t.co/Oom8yzGRNQ
— Elon Musk (@elonmusk) May 16, 2021
Musk Working With Dogecoin Devs
Elon Musk, who named himself the “Dogefather” on SNL, created a Twitter poll, asking his nearly 55 million followers if they want Tesla to integrate DOGE as a payment option.
The poll, which had almost 4 million votes, was favorable for Dogecoin, as more than 75% of the community voted “Yes.”
Following Tesla’s announcement, the billionaire tweeted that he is working closely with Dogecoin developers to improve transaction efficiency, saying that it is “potentially promising.”
Tesla dropping bitcoin as a payment instrument over energy concerns, with the possibility of integrating dogecoin payments, comes as a surprise to bitcoiners since the two cryptocurrencies use a Proof-of-Work (PoW) consensus algorithm and, as such, face the same underlying energy problem.
Elon Musk: Dogecoin Wins Bitcoin
Despite using a PoW algorithm, Elon Musk continues to favor Dogecoin over Bitcoin. Responding to a tweet that covered some of the reasons why Musk easily chose DOGE over BTC, the billionaire CEO agreed that Dogecoin wins Bitcoin in many ways.
Comparing DOGE to BTC, Musk noted that “DOGE speeds up block time 10X, increases block size 10X & drops fee 100X. Then it wins hands down.”
Ideally, Doge speeds up block time 10X, increases block size 10X & drops fee 100X. Then it wins hands down.
— Elon Musk (@elonmusk) May 16, 2021
Max Keiser: Who’s The Bigger Idiot?
As Elon Musk continues his lovey-dovey affair with Dogecoin, Bitcoin proponents continue to criticize the Dogefather.
Following Musk’s comments on Dogecoin today, popular Bitcoin advocate Max Keiser took to his Twitter page to ridicule the Tesla boss while recalling when gold bug Peter Schiff described Bitcoin as “intrinsically worthless” after he lost access to his BTC wallet.
“Who’s the bigger idiot?” Keiser asked.
Who’s the bigger idiot? pic.twitter.com/YopCoat33W
— 🍊💊 Max Keiser (@maxkeiser) May 16, 2021
Aside from Keiser, other Bitcoin proponents such as Michael Saylor replied to Tesla’s CEO:
The world needs a decentralized, secure, deflationary store of value like #Bitcoin much more than it needs the more centralized, less secure, inflationary medium of exchange that you describe above.
— Michael Saylor (@michael_saylor) May 16, 2021
Tesla CEO Elon Musk Explains Why ‘Bitcoin Is Actually Highly Centralized’
On Sunday (May 16), Tesla and Space X CEO Elon Musk attacked Bitcoin (BTC) for being highly centralized after podcaster Peter McCormack criticized Musk for supporting Dogecoin (DOGE) and for spreading misinformation about Bitcoin. As you probably already know, on May 12, Tesla and SpaceX CEO Elon Musk shocked the world by complaining about Bitcoin mining’s […]
On Sunday (May 16), Tesla and Space X CEO Elon Musk attacked Bitcoin (BTC) for being highly centralized after podcaster Peter McCormack criticized Musk for supporting Dogecoin (DOGE) and for spreading misinformation about Bitcoin.
As you probably already know, on May 12, Tesla and SpaceX CEO Elon Musk shocked the world by complaining about Bitcoin mining’s high usage of fossil fuels and saying that for this reason Tesla would not be accepting Bitcoin as a form of payment until “mining transitions to more sustainable energy.”
The next day, Musk revealed that has been working with Dogecoin developers to reduce the power consumption of mining of the meme-based cryptocurrency.
In fact, as Decrypt reported on May 14, according to Ross Nicoll, one of the part-time Dogecoin developers Decrypt talked to, Musk “started talking to the developers in 2019, he has ‘encouraged them to improve the higher transaction throughput,’ provided ‘lots of advice and input,’ and shared his vast Rolodex of contacts.”
Nicoll also said (1) that the dev team he is part of is hoping to reuce Dogecoin’s power consumption; (2) Musk has been with Dogecoin’s dev team since April 2019 (when he said that Dogecoinmight be his favortie cryptocurrency); and (3) that Musk had offered to fund the team, but his offer of financial support had been rejected (just as with offers they had received from other wealthy potential backers).
Yesterday, Dogecoin supporter “@itsALLrisky” said on Twitter explained why he thinks that Dogecoin, which Musk has referred to as “people’s crypto”, is better than Bitcoin. Musk said Dogecoin would beat Bitcoin “hands down” if its developers made three improvements: 10X faster block production time, 10X larger block size, and 100X lower transaction fees.
Well, today, McCormack criticized Musk for supporting meme-based Dogecoin, which he thinks could potentially result in ill-informed investors in $DOGE suffering big losses, as well as causing harm to Bitcoin’s reputation and its ecosystem.
McCormack’s accusations angered Musk, who seemingly warned that he might just “go all in on Doge.”
Musk then went on to explain why he believes that Bitcoin is highly centralized.
The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.
ETH Developers Calculated How To Defuse The Difficulty Bomb
ETH developers calculated how to defuse the difficulty bomb because if they leave it untreated, they will slow down the network as we can see more in our Ethereum news today.
Ethereum’s encoded difficulty bomb is set to explode this summer and James Hancock as well as Tim beiko said that the ETH developers calculated the time needed to delay the bomb and this could the last time the developers need to take that action. Ethereum developers agreed on Friday how to delay the difficulty bomb ad if that is left untreated, the entire network could be slowed down. The difficulty bomb is an old piece of code that makes mining on ETH slower and less profitable over time by increasing the lag between the production of blocks.
We just wrapped up #AllCoreDevs 113 😁
Recap below 👇🏻 https://t.co/wDU2vlNnBS
— Tim Beiko | timbeiko.eth 🦇🔊 (@TimBeiko) May 14, 2021
Ethereum 2.0 switches the network from proof of work as a way of validating transactions with powerful mining computers to Proo of Stake which rewards the ones that pledge the coins to the network. It takes an average of 13 seconds to mine a block on ETH right now and without delaying the bomb, it could take more than 20 seconds to validate the block by the end of the year. Ethereum developers agreed on how many blocks were quite necessary to delay the bomb until December. The calculation for the delay was proposed by the ETH core developers James Hancock as he said:
“The bomb’s always there, and we defuse it by turning the blocktime back just for the bomb.”
He later said that the proposal will delay the bomb by 9,700,000 blocks. Tim Beiko, the ETH core developer also said that the developers dismissed a proposal to delay the bomb next spring but that won’t be necessary. The developers expected that by December, the network will update to allow the ETH 1.0 the network that relies on PoW to communicate with ETH 2.0 as the new network relies on PoS and this is known as the Merge:
“If the Merge is ready by December, we won’t need to do anything about the bomb because we will move away from mining entirely.”
If the merge plans remain unimplemented, the Shanghai fork is expected to go live and will delay the bomb once again. The Bomb has been delayed three times so far.
DC Forecasts is a leader in many crypto news categories, striving for the highest journalistic standards and abiding by a strict set of editorial policies. If you are interested to offer your expertise or contribute to our news website, feel free to contact us at [email protected]
Billionaire Druckenmiller says ledger-based system could replace USD worldwide
First Spot: Coinbase’s App Surpassed TikTok, Instagram, and Facebook on iOS in the US
Raze Network Kicks Off Testnet Phase With UI Community Voting
dotmoovs Raises $840,000 From Strategic Investors and Partners
The challenges with designing a CBDC, explained
Casper Network’s CSPR Spot Trading Now Open on OKEx
How did Internet Computer (ICP) become a top-10 cryptocurrency overnight?
When dollars meet the hype: The biggest NFT hits from celebrities
PARSIQ Integrated Into Polkadot For Smart Triggers Across the Relay Chain
Uniswap flips Bitcoin on daily revenue… and it’s more impressive than you think
US Investment Bank Cowen to Offer Crypto Custody Services
Polkadot, Cosmos, Bitcoin Cash Price Analysis: 11 May
From cypherpunk to state contracts: the changing face of blockchain
DeFi lending platform Aave reveals “private pool” for institutions
TA: Ethereum Overcame Odds With New High, Here’s Why ETH Could Test $4.5K
MoneyGram to Enable Users to Buy Bitcoin and Withdraw it From Birck-and-Mortar Locations
Griff Green: Doge-loving hippy hacker steals crypto before bad guys can
Here are the Top DeFi Tokens With The Largest Price Jumps This Week
As Elon Musk’s SpaceX Literally Sends Dogecoin To The Moon, Justin Sun Craves For Tron to Tag Along
Gaming Giant Kinguin Taps Immutable X for NFT Offering
Blockchain1 week ago
Crypto Market Cap Added $300B in 7 Days as Altcoins Explode: The Weekly Recap
Blockchain5 days ago
Palantir Accepts Bitcoin for Payments and Considers Adding BTC to Balance Sheet
Blockchain1 week ago
Ray Dalio’s Bridgewater CFO leaves to work on Bitcoin full-time
Blockchain1 week ago
Ethereum price closes in on $4K as Shiba Inu (SHIB) steals Dogecoin’s thunder
Blockchain1 week ago
CFO of World’s Largest Hedge Fund Joins Institutional Bitcoin Firm NYDIG
Blockchain1 week ago
Banking Giants Goldman Sachs and Citi Warm Up to Offering Bitcoin (BTC) Services
Blockchain1 week ago
Ethereum (ETH) Hits $3800 ATH As Coinbase Premium Shoots With Institutional Interest
Blockchain1 week ago
Crypto Banter Will Give Away Over $500K To 10 Eligible Community Members