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WU BTC Miners revenue to Hashrate normalized ratio (Top indicator)

Authors: Vincent Duchaine and Jennifer Kwiatkowski

Refresh rate: daily

Proprietary Wealth Umbrella Trading View Indicator name:

- ☂️ WU BTC MRHR Top Indicator

The Bitcoin ecosystem is built such that network participants exchange their computing power for a reward. This reward comes from two different sources. The first is the transaction fee miners get from processing a transaction on the network and the second is the Bitcoin mining reward.

A healthy network should have a well balanced ratio of the total mining revenue (transaction fees + reward) versus the available computing power in the network (something we call hashrate). This means that both should usually grow at the same pace. This even has some relation with the blockchain security as discussed in this article. However, Bitcoin being Bitcoin, it sometimes gets ahead of itself, and in the past this has always coincided with a “greed stage” of a cycle where we are usually going to see the top.

This indicator is a normalized version of this ratio that is designed to rise sharply around the top.

BTC Miners revenue to Hasrate normalized ratio (Bitcoin/US dollar)
Miners revenue to Hashrate normalized ratio 2013-2022

Interestingly, although many metrics didn’t see (or didn’t peak the overheating around the November 9th 2021 top of that last bull run, this indicator peaked at a value not seen in 8 years.

BTC Miners revenue to Hashrate normalized ratio (Top indicator) and  Metcalfe
Comparaison of Nov 2021 reading of Miners revenue to Hashrate normalized ratio with an other on-chain metric

You may recall that China banned Bitcoin mining in May 2021, news that triggered a severe correction along with a massive drop of the hashrate. This blow in the network health due to the lack of computing and mining power caused a scarcity in Bitcoin, triggering the run at the end of July 2021. However, this uptrend occurred before the hashrate had recovered to its previous levels, resulting in the peak seen in the miner revenue to hashrate ratio.

This again shows the importance of assessing the health of Bitcoin using various indicators that monitor different aspects of the ecosystem.

(P2 2022)


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