The On-Chain BTC Forecast: Week #40-41

This week, week 40, was marked with some modest gains as the price began to rise with excitement throughout crypto markets as investors dive back in for what could be called the “fall surge.” Over the last weekend, prices were fairly stable hovering just below the 50k level, and then rose as the proverbial crypto tide rose to the mid and upper 50s. This is to be expected as HODLing behavior increases, miners accumulate BTC, and professional investors brace for yet another strong finish in Q4 of 2021.

Looking over the last three months of pricing data, an upward trend does appear to be forming as we move out of the summer. Last year at this time, the price of BTC began heating up and began to climb around this time. We’ll be looking for similar action this year as we go into the new year just around the corner.

Major Takeaways for Week 40

  • Will BTC continue to surge from recent highs? This week certainly marks an exciting week as the price grows into the mid-fifties. However, looking at the miners’ profitability in the short-term and where the HODLers are; a decrease in price is almost certain for week #41.
  • How can we use BTC Liveliness as a short-term pricing metric? Contradicting the above forecast for a drop in price, BTC Liveliness numbers are low, and trending lower. This could be a signal for strong accumulation behaviors as we move into the first phase of the “fall surge.”
  • As always, are the HODLers HODLing? The data is clear that there are plenty of BTC that was purchased during the slow periods in price over the last summer. These coins are ripe for picking as time will tell if HODLers will HODL. This forecast senses a small sell-off into the recent market strength. Most HODLers have short memory spans, however, the memory of last fall can’t be forgotten as we saw the start of a +50k growth in price. Will we do it again?

This chart shows us two years of BTC pricing data. We can see that the climb to above 60k started in early October 2020, and added over 50,000 USD to the price as it topped out in the spring of 2021. 

Though it will take time to develop, the slope of growth this year compared to the same time last year is much steeper. This could mean incredible growth potential or the signal that we are still in a local plateau working our way slowly up to the last ATH that we saw in March and April 2021. 

BTC Liveliness is telling us a different story

Either way, it seems that a strong accumulation behavior is emerging now, with BTC Liveliness on a relatively downward trend, the signal we can interpret is that there is more HODLing behavior rather than the circulation of coins in the exchanges. This should signal growth in price. Our sense is that this is just the beginning of a much longer climb that will start in early December.

The Puell Multiple: Catching the Lows

The Puell Multiple, a metric that tracks the mining profitability at any given time–has been a fantastic metric to help us look at the markets from a perspective other than from a buyer/investor. The Puell Multiple, which is an elegant way to look at the number of BTC mined in a day, compared to the preceding year. This essentially tells us how the miners are doing, and when comparing this multiple to price, we can see when it is the best time for miners to release coins into the marketplace; or when they are holding, signaling accumulation, and setting up for a large gain in price.

Looking over the last two years of (average) miner profitability data, we can see that the Puell Multiple is very good at spotting low points in price. Since the last BTC Halving event in May of 2020 (this is when the block reward given to miners was halved. In the first part of 2020, miners received 12.5 BTC for each block mined, since the halving event in May; miners now collect 6.25 BTC for each block mined. It’s notable that the price of BTC was only $8,800 USD giving miners around $110,000 USD per block. Miners today collect 3x the value, which is now more than $340,000 USD per block even though the reward has been halved.  The next mining event could happen as early as mid-2024.

What this tells us in the short term is more difficult to understand, but we can compare this to other times when this metric was in middling ranges above the green band. As it rises up, above 2.0 and higher–the chances that miners will begin to sell-off their mined coin into the rising price of BTC. This forecast expects that we will follow the behavior of last year, signaling a large move in price to the upside as we go into the late months of 2020.

HOLD the line! No… I mean… HODL the line! HODL!!!

Looking at the HODLers, we can find different cycles in behavior and a more short-term perspective on pricing. The Realized HODL Ratio, can tell us when the market is overheated and at the top of a cycle. The last six months are hard to decipher, but, zooming out to two years, we see that currently, we are nearing a high point with this metric.

If we were to forecast price, based only on the RHODL-R here, we should deduce that we are currently at a cycle top, and should expect a reduction in the price for the short term. Looking at the beginning of 2021, and early spring, we can mark cycle tops and immediate price drops following. What this means is that older coins that were accumulated 3-6 months ago are ripe to be sold on the market at a profit. We should expect this to happen again as it’s clear we are near the top of this cycle.

Next Week #41 (Oct 8 – Oct 16)

Over the weekend going into week #41, we should see prices move a bit down in response to the latest uptick in prices as week #40 should certainly be recorded as a bullish week for BTC. Glancing around at other Altcoin markets, the entire cryptocurrency landscape benefited from a surge in demand and an overall gain in value. As such, whenever an expansion in price is realized, we should expect a decrease in action as 3-6 month HODLers begin to take profits early in this “fall surge.”

Later this Year

The outlook for the next few months is extremely bullish. New investors should wait briefly when deciding to buy more Bitcoin as we top out in this latest cycle. However, if the next two quarters are anything like last year, we can only expect the price of BTC to grow over the next 3-6 months as more and more people purchase coins near price tops.

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