Tracking Bitcoin’s (BTC) Market Cycles Through Miner Metrics: Key Insights

Key Takeaways

• Bitcoin (BTC) miner behavior can determine market cycle bottoms and tops
• The Bitcoin market cap has outpaced Thermocap but has not reached overbought levels.
• The Hash Ribbon indicator began its recovery after a three-month miner capitulation.

Bitcoin miners are some of the main drivers in a Bitcoin market cycle. Whether the BTC price is enough to offset mining costs and what miners do if it is not can determine the stage of Bitcoin’s market cycle.

Previously, miner capitulation has coincided with market cycle bottoms.

Let’s examine several on-chain indicators relating to miners. We will compare them to the previous market cycles and see what they mean for this one.

Market Cap to Thermocap Ratio

The market cap to Thermocap Ratio is a miner indicator that compares the value of all BTC in circulation to that of all BTC paid to miners.

To create the indicator , miner fees, and rewards are taken from each transaction and multiplied by the BTC price. Then, the thermocap is compared to the market cap to determine if Bitcoin is over or undervalued.

A high ratio is a sign of overvaluation since it means that Bitcoin’s actual value is outpacing its fair value, derived from the cost of production.

Historically, overbought values have been considered those above 0.0000040, while underbought ones are those ten times lower, specifically below 0.0000004.

The indicator reached this overbought territory in both the 2014 and 2018 market cycle tops. However, it did not do so in 2021. In this case, a bearish divergence marked the bitcoin cycle top. The 2013 and 2018 Bitcoin market cycle tops both reached this level.

As of October 2024, the Market Cap to Thermocap ratio is 0.000010, while the cycle high is 0.000013. Both are way below previous readings, even those in 2021 when BTC topped at 0.000025. Additionally, the indicator has not reached a descending resistance trend line that connects all the previous highs.

Currently, the trendline is at 0.000020. So, the indicator suggests that BTC can continue increasing for a while until it reaches an overbought level.

Unique Hash Ribbons Signal

The second indicator analyzed is the Hash Ribbon, which directly compares mining costs and rewards instead of comparing them with Bitcoin’s value.

According to the indicator, Bitcoin miners capitulate when the mining costs exceed the rewards, which aligns with Bitcoin’s bottoms.

30- and 60-day moving averages (MA) of the hash rate create the indicator. When the 30-day MA crosses below the 60-day one, the indicator turns red, marking a period of capitulation.

This means that the short-term computational power used to mine is declining relative to the long-term one, indicating that miners are exiting.

Then, the indicator turns to white once miners begin to recover.

The indicator showed capitulation for roughly three months between May and July 2024, the second-longest period after April-August 2021. After that, the BTC price began a notable upward movement.

However, the current cycle differs because the indicator capitulated again in August. As in previous instances, the BTC price did not increase between these two capitulations.

Nevertheless, a closer look reveals that the short-term MA (green) has already crossed back above the long-term one (black icon).

So, the capitulation is already over after less than a week, meaning it is possible that this was just a short-term occurrence instead of a true capitulation.

These readings align with the Bitcoin pi cycle top indicator , which predicted the two previous cycle tops and suggests more room to grow.

Miner Behavior Predicts Bottom

Both miner indicators analyzed suggest that the Bitcoin price has not reached its cycle top yet. Furthermore, the Hash Ribbon indicator suggests that a violent move to the upside could occur soon since miner capitulation is already over.