Many who aren’t crypto industry insiders may view “Bitcoin” and “crypto” as basically synonymous. While members of the traditional finance industry know that there’s much more to crypto than Bitcoin, they also know that Bitcoin’s performance and health serve as a bellwether for the acceptance and growth of the overall crypto industry.
Monitoring select blockchain metrics can help financial institutions and investors gauge market sentiment, predict changes in values and identify investment risks and opportunities not only in terms of Bitcoin, but also the larger crypto industry. Below, 11 members of Cryptox Innovation Circle detail Bitcoin blockchain metrics TradFi organizations would be wise to watch.
Realized cap
Realized cap is an on-chain metric that shows the total sum of profits and losses from all on-chain sales and purchases. An increasing realized cap would mean new investors are buying and selling Bitcoin (or any other cryptocurrency) for higher prices. This also means that the net sum of trades is in profits, and therefore, people are now bullish on Bitcoin. – Abhishek Singh, Acknoledger
Halving
Bitcoin halving should be considered by financial institutions because it can influence Bitcoin’s price through altered supply dynamics, potentially impacting miner profitability and network security. Halving can indicate broader mainstream adoption trends, present speculative opportunities and serve as a focal point for educational and marketing initiatives within the finance sector. – Irina Litchfield, Lumeria
Hash rate
As financial institutions explore cryptocurrencies, they should focus on a key Bitcoin blockchain measure: the hash rate. The hash rate measures the network’s strength and security by gauging its computational power. Keeping an eye on Bitcoin’s hash rate helps financial institutions assess the stability of the network and any investment risks linked to cryptocurrencies. – Vinita Rathi, Systango
Growth in the number of wallets with large holdings
In addition to the often-discussed “halving” of Bitcoin, financial institutions should also pay heed to the growth in the number of wallets holding large amounts of BTC. A wallet with a small amount of BTC could probably be assumed to be a retail investor, while wallets holding large amounts could potentially be “whales” or institutional holders. – Zain Jaffer, Zain Ventures
Number of solutions leveraging Bitcoin security
I think it’s useful to look at how many solutions are leveraging Bitcoin security through timestamping — or even better, merged mining — because all of that value will be leveraged and, thus, fed back into Bitcoin. For example Syscoin, Namecoin and Dogecoin merge mine and add value to ancillary chains. Many overlook the external value being built by leveraging Bitcoin security. – Jagdeep Sidhu, Syscoin Foundation
DeFi velocity
DeFi velocity (DFY) is a valuable metric for Web3 investors. In addition to total value locked, DFY also factors in volume to shed light on the user engagement and capital efficiency of a specific crypto market. Overall, this metric can help institutions differentiate between stagnant capital and healthy economic activity. – Wolfgang Rückerl, ENT Technologies AG
Transaction volume
Bitcoin transaction volume is a key blockchain metric for financial institutions monitoring crypto adoption and market activity. It refers to the specific number of transactions that occur on the Bitcoin blockchain within a specific timeframe. Financial institutions may find this metric essential as they explore crypto, as it shows trends, user engagement, risk and more. – Anthony Georgiades, Pastel Network
Bitcoin distribution
Monitoring the distribution of Bitcoin helps show macro trends in market sentiment. For example, analyzing the circulating supply of Bitcoin held by BTC “whales” (those who own more than 1,000 BTC) versus that held by BTC “shrimp” (those who own fewer than 1 BTC) helps financial institutions gauge risk exposure and the behavior of different investor groups to predict price stability and potential volatility. – Sheraz Ahmed, STORM Partners
Miner revenue from transaction fees
Ever-increasing energy costs and future halving events are presenting compounding challenges for Bitcoin miners. However, the rise of Bitcoin Ordinals and BRC-20 tokens is positioning miner revenue from transaction fees to become a new key vector to consider when calculating network health. As Bitcoin diversifies to accommodate a service economy, there’s no telling what novel applications could arise. – Oleksandr Lutskevych, CEX.IO
Number of unique wallet addresses
There is a direct correlation between market sentiment and the number of unique wallet addresses, and financial institutions can use this metric to infer Bitcoin’s strength. As Bitcoin becomes stronger as a store of value and the Lightning Network slowly and steadily begins handling micro payments, the growth of unique wallet addresses will become a strong predictor of market sentiment. – Tiago Serôdio, Partisia Blockchain
Bitcoin days destroyed
Financial institutions should measure Bitcoin days destroyed (BDD), which is the number of days since BTC was last moved multiplied by the amount exchanged. It reveals high-volume, low-value economic activities. BDD increases when long-term BTC holders sell — often before major market changes. – Arvin Khamseh, SOLDOUT NFTs
This article was published through Cryptox Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cryptox.
