On-Chain Analysis: NVT Model, Record Fees and Miners Accumulation

In today’s on-chain analysis, we take a look at several indicators that give a comprehensive view of the ongoing Bitcoin bull market.

On the one hand, we see confirmation of the dynamic development of the long-term bull market (transaction fees and on-chain trading volume), on the other hand, we have signals of short-term consolidation and preparation for the next dynamic phase of growth (the NVT model and the miners accumulation).

BTC price action

Last week, there was a continuation of the drop in the price of Bitcoin (BTC) and a clear bounce. From an all-time high of $64,895 on April 14 to a low of $47,000 on April 25, BTC lost 27.5% of its value.

The following bounce pushed the price to $56,500 area, near the 0.5 Fib retracement level of the entire downtrend. Currently, daily candle bodies are in the range of $49,000-56,500.

The market expects a consolidation within this range before the next big move and the increase of Bitcoin volatility.

First bounce off the NVT model

The NVT (Network Value to Transaction) indicator created by Willy Woo describes the relationship between market capitalization and the transfer volumes. It is similar to the price to earnings (PE) ratio used in traditional markets, but instead of talking about the company’s profits, it refers to the investor’s volume.

To relate NVT to Bitcoin price, we use the long-term 2-year median and multiply it by the transaction volume shown on-chain. In doing so, we obtain a responsive, long-term market health indicator that is used to identify an ongoing bull or bear market.

Last week, we recorded the first intersection of Bitcoin’s price with the NVT Price indicator since the beginning of the bull market in September last year (orange circle).

Looking at the previous cycles, we can see that such an intersection (red circles) appeared regularly and signaled large increases in the following weeks. In the 2013 bull market, such a cross occurred only once, almost immediately resulting in an exponential increase in the BTC price.

In the run of 2017, we observe as many as 4 intersections. Each time it was a signal of a continuation of gains – until the price dropped deep below the NVT line, made a bearish retest of the indicator and continued to collapse.

So, from the moment of Bitcoin price braking through (green arrows) and trading above the NVT lince, we were dealing with a cryptocurrency bull run. Usually this intersection was near the halving (red dashed line).

In the short term chart, we can see that the first intersection within this bull market was on April 24 in the $50,000 area. The bounce pushed the price above the NVR lince again. If the BTC price continues to consolidate, it cannot be ruled out that the curves will cross several times before their next divergence.

Record high fees and volume of on-chain transactions

Last week’s on-chain data shows new all-time highs in both transaction fees and volume of on-chain transactions. Both values have already exceeded the historic ATHs from the peak of the previous cycle at the end of 2017.

The gigantic spike in Bitcoin network activity led to an increase in the average transaction fee to $58.71 on April 22, which is the new ATH. It is worth adding that the highest average fees in the previous cycle were $54.70.

This corresponds to the indicator of total transfer volume, which hit the new ATH at the level of $67.18 billion of daily volume. The previous all-time high from 2017 was $46.68 billion at the height of the bull run. As of today, it is an increase of over 40%.

Miners accumulate BTC

An interesting perspective is provided by the activity data of miners who returned to the Bitcoin accumulation phase. The number of coins they collect reaches areas that have not been seen since mid-2018, when Bitcoin was traded around $10,000.

This is an unprecedented situation and very different from the previous run where miners regularly sold their resources. Despite increased sales in the first quarter of 2021, we see a clear accumulation in April. On-chain analyst @WClementeIII illustrated this trend by sharing the Miner Net Position Change indicator chart, comparing two cycles against each other:

This is confirmed in the Glassode chart, which shows a drastic decline in the Balance of Miners Wallets in early 2021 and a re-accumulation since the end of March. This is an additional confirmation of the ongoing, many weeks of Bitcoin price accumulation, at which miners do not experience sales pressure. Today the total value of miners’ balance is 1.8 million BTC.

Conclusion

On-chain analysis suggests Bitcoin is in a period of consolidation that is preparing the alpha cryptocurrency for further gains. The systematic development of the bull market is confirmed by the new ATH of transaction fees, the on-chain trading volume or the recently discussed increase in BTC new addresses.

At the same time, the first intersection of the NVT curve in this cycle and the re-accumulation of Bitcoin miners are signals for the upcoming continuation of the long-term bull market. The previously mentioned @WClementeIII summarized on Twitter the reset of the main indicators of the Bitcoin network: