Bitcoin just had its largest 48-hour pullback since May 2020, back when the asset’s halving/" target="_blank">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.
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.
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.
