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Misleading data - beware!

Somebody flashed a chart about how the percent of miner revenue sent to exchanges spiked 300% and “increasing sell pressure” is “starting to occur” with “ATH amounts of BTC being sent to exchanges from miners.” 

This is the chart:

I talked about this in my September 30, 2023 update. Reposting here for everybody.

You’ll find a lot of this type of misleading analysis floating around the internet, especially from free sources. Ignore it.

First, this chart cuts off in June. It’s three months out of date.

Second, this looks at percentages rather than raw amounts. As such, it doesn’t capture the actual real-life impact of this data on the market.

Third, while I love Glassnode, I find CryptoQuant does a better job with exchange data. Here’s the same chart from CQ:

Fourth, this data looks at only one segment of the miner activities. It’s like saying the oil producers are struggling because they’re sending a lot of gas/petrol to service stations.

(Service stations make up only a portion of the oil and gas market.)

Last, this neglects to account for how miners sell.

Often, miners sell to brokers or large entities. These deals sometimes involve exchanges, either for convenience or to obscure the origin or destination of the Bitcoins or their purchasers.

Sometimes, these deals will go through multiple exchanges. Many people who run the exchanges are friends or share the same social and professional circles, so they can coordinate in a way that won’t necessarily appear in the data even if you look at the activities of each exchange or aggregate exchanges.

We know from my updates this summer that miners were selling a lot more than normal. I’ve talked at length about how mining is very competitive now and there’s a lot of stress and pressure on miners.

When you look at what’s actually going on today, you see miners shipping off LESS Bitcoin now than they did over the summer. You don’t even need to dig into the exchange or transfer data. Miners Position Index (MPI) tells you all you need to know.

MPI is a crude tool but it does the job—a simplified overview of the pace of miners’ selling relative to their historical tendencies. This metric looks at all miner activities, not just the ones that involve exchanges.

Be careful with free analysis! Sometimes, it’s very good. Usually, it’s worth what you pay for it.

Eastern Asia: Do Recent Hong Kong Developments Signal More to Come for China and Region at Large?

Bottom line: Hong Kong’s embrace of crypto doesn’t necessarily mean the Chinese government approves. People want to speculate, invest, and develop the technology. Chinese entities want a part of that. Whether that’s an official or tacit Chinese government position remains unclear.

My take: Hong Kong has long hosted over-the-counter (OTC) desks, a type of private broker for large crypto deals. Local leaders have expanded Hong Kong’s legal framework to encourage retail usage and crypto development. We already know the US share of crypto investment is way down from 2020 and 2021. Perhaps the Chinese government sees an opportunity to leapfrog or undermine the US but wants to see the results of Hong Kong’s efforts before deciding what to do.

Why we care: China has a lot of people and money. Its position on crypto should matter at least as much as that of Western governments!

Bitcoin adoption skyrockets: Nearly a million addresses now hold 1+ BTC

Bottom line: the number of whole-coiners is at an all-time high (assuming the proportion of wallets to users remains constant across time).

My take: some call this “adoption” but I call it stacking and distributing. Bitcoins keep flowing from whales and miners to normal people like you and me instead of tourists and traders who only want to flip a quick buck. It’s a shame we don’t have new money coming into the market from new sources. As soon as I find evidence that’s happening, I’ll tell you.

Why we care: we’re not deceived by sideways price movements and bad sentiment.

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