Bitcoin Hash Rate Reaches Record High As On-Chain Indicator Flashes Macro Buy Signal

4 min readJan 19, 2022

Bitcoin’s hash rate has reached new all time highs months after the Chinese regime banned crypto mining in the country.

As network activity trends up and to the right, the technical picture is as dull as ever. However, one on-chain data point suggests that the bottom could already be in.

Let’s dig in.

Bitcoin Hash Rate Reaches Record High of 196 Exahashes

The Bitcoin hash rate, which is one of the most consequential indicators of network activity trends, has witnessed a significant jump of over 100% in six months.

Data analytics firm Glassnode shows that Bitcoin’s 7-day mean hash rate has reached a new all time high of 196 Exahashes.

Check out the full article here!

Dear readers,

The purpose of this newsletter is to provide context to cryptocurrency markets. This analysis takes time to write-up and it’s released every Monday and Wednesday. I am not perfect and this is not a science — nor is this newsletter a signals service. While I cannot promise perfection I do my best to be honest and transparent. I am also working on keeping my wording simple and to the point. Please bear with me.

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Technically speaking

Bitcoin Breaks the Weekly Trend

Bitcoin witnessed a relief rally to $44,600 last week, yet has remained in no-man’s land for the most part. Price-action was neither here nor there , as velocity slows down and bitcoin trades at the lows.

Bitcoin lost 2.3% on the day and exchanges hands at $42,100 at the time of writing.

The relative strength index trend remained in tact as prices rejected from resistance; though this trend will likely be broken by the end of January.

In short, bitcoin is either forming a bottom at around $40,000-$42,000 in preparation to test higher liquidity, or the bottom isn’t in yet — in which case last week’s $35,600 level could be hit.

Open Interest / Market Cap Ratio remains high

Meanwhile, the OI/Mkap ratio has remained at elevated levels, which have historically preceded major pumps or dumps. Given that Bitcoin has traded on a downward trajectory for over two months amid neutral or negative funding rates, the odds of topside liquidity getting taken out are higher, in my estimation.

Bear in mind, shorts have had a free ride so far and markets tend to punish shorts harder than longs overall (because all markets tend to trend up and to the right over a long-enough period of time).

That said, an empty book shelf is more interesting than bitcoin price-action currently.

Dormancy flow flashes Buy Signal

When price-action turns dull for a prolonged period of time, it often pays to look more closely at what’s going on under the hood (this is not to say that one shouldn’t neglect on-chain data if volatility is up).

Specifically, Bitcoin’s entity-adjusted dormancy flow has reached a buy zone. This rare signal flashed for the 6th time and is historically 100% accurate, as analyst Zhu Su pointed out recently.

Briefly, dormancy describes the average number of days each coin transacted remained unmoved. The higher the dormancy, the older the coins transacted that day are on average, and the more old hands are releasing their bitcoins into circulation. This is said to be ‘annualised destruction’ relative to transactions.

While dormancy flow doesn’t mean Bitcoin will hit all time highs tomorrow, it does indicate that older coins aren’t moving and that macro consolidation is in its final chapter. Volatility is coming, and this on-chain indicator places the odds firmly in the hands of team ‘up only’.

Catch you later.

p.s. This is my opinion. It is not financial advice.

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