"Indicate the current value of the Puell Multiple Indicator of Bitcoin. Perform a technical analysis of the LTC using the Puell Multiple, show screenshots and indicate possible market entries and exits."
PEULL MULTIPLE INDICATOR.
Peull multiple indicator is a metrics indicator that is used to determine the market circle of Bitcoin or by extension other Blockchain running on proof of work consensus algorithm from the block miners perspective. The indicator focuses on the daily supply of BTC as against the moving average of the expected returns of the miners within 365 days.
BTC blocks are mined every 10 minutes. There are times when the blocks are mined lesser than 10 minutes or higher than 10 minutes due to hash rate. The indicator is calculated by the division of the daily issuance of BTC in usd with the moving average of 365 days of the daily BTC issuance in USD. With such miners revenue can be determined as either high or low at a particular period.
Because miners are always in need to sell off their proceeds in other to pay for cost of running their mining equipments, they are considered compulsory sellers. Therefore, when their revenue is low, it means an accumulation period and when it is high, it is time to sell.
Peull multiple = DA (daily issuance)/365 day MA of DA
Where the DA is daily issuance in USD.
How It Works.
As seen in the above image, we can notice two bands, the upper red band and the lower green band. These bands indicate periods when miner's reward which represents supply of BTC to the ecosystem is either too great or too low as against the expected average.
When the chart touches the green area as seen in the part marked
1 it means that the value of BTC is low (undervalued). This will mean a buy signal for aspiring investors.
On the other hand when the chart touches the red area as seen in the part marked
2 it means that the revenue of the miners are high ( overvalued). Thus, this may be a signal for investors to take profit.
Using Peull multiple to examine current state of Bitcoin.
Having understood how the indicator works let's check it's signal on the chart of BTC.
As noticed in the above image, BTC had several periods it touched both the green and the red areas giving buy and sell signals. Within 2020 - 2021 BTC has given 5 buy signals.
Currently, BTC is in between the two bands, showing indecision.
LTC Analysis Using Peull Multiple Indicator.
In the LTC chart above, we can notice that just like the chart of BTC there has been period when sell and buy signals play a part. An easier understanding is to take the green band side as an oversold position and the red band as an overbought position. At each time the chart touch the green bar, the chart goes up, at the time the chart touches the red area the chart goes down
Beginning from 2015 we saw our first oversold position when the LTC touch the green bar [area marked 1], 2019 and 2020 was another buy opportunity [ area marked 2 and 3]. 2017 and 2018 our indicator did hit the red bar.
March 21, 2020, the indicator touched the green bar, it lingered within the this area till March 29 2020. Ever since we have seen a strong upward push.
1-4are good entry points.
Areas marked 5 and 6 are good exit lines.
However, I saw another possible exit areas. Market has formed a resistance in the areas labelled
a -d. I have drawn a red line and label it
A to indicate that the chart has reached its first resistance lines. We shall wait and see. If the indicator hit the red area, investors will then be hopeful to take profit.
"Explain in your own words what Halving is, how important Halving is and what are the next reward values that miners will have. When would the last Halving be."
Block reward halving is a way of reducing the production of a crypto coin by splitting the production into two.
We can equally explain block reward halving as the reduction of block miners reward by splitting their reward into two. It means that rewards awarded to block miners will be half of their previous earnings after the halving.
As we already know, miners are are nodes that compete to add new blocks to the Blockchain. In proof of work consensus algorithm like the one used by Bitcoin, to find new blocks involve solving complex mathematical problems which at present is only achievable using high sophisticated computers. For the work of miners, they are reward with newly minted tokens and that is how new coins are created.
IMPORTANCE OF BLOCK REWARD HALVING
Block reward halving serves to checkmate the quantity of coin supply and ensure that it does not have exponential increase. At the same time it aids the rise of the coin price due to the scarcity that results.
1• The effects of supply and demand affects a crypto coin price. When there are more coin in circulation the value of a coin will drop if there are no corresponding demand to consume the supply. With block reward halving, the minting of new coins are cut in halve and therefore the overall supply inflation rate is reduced. This will create scarcity. With lesser supply the market will be competing for less available coin.
Consider in the case of Bitcoin, upon the first halving Bitcoin price was around $11 and after the halving, the price went up to $12. Within 1 year, Bitcoin price rose to $1,100. In 2016 after the second halving, price of Bitcoin was met with fluctuations between $500 - $1000 and just within a year, in 2017 the BTC price shoot up to $20,000. We saw another relationship between halving and Bitcoin price during 2020 halving, then BTC traded around $9,000 in may 2020, by December BTC traded at $20,000 and today November 2021 Bitcoin is s trading at $57,400.
2• Just as I mentioned above, the halving reduces production of new coins. This is important in sustaining the value of existing coin.
Bitcoin the first cryptocurrency block halving is designed to occur at every 210,000 blocks and that should happen in approximately every 4 years.
The first block halving occured in 2012, the halving split the block reward earning of Bitcoin from it's initial 50 BTC reward to 25 BTC. Miners then earned 25 BTC from every block produced. Since Bitcoin blocks are mined every 10 minutes, it means that 25 new BTC are minted every 10 minutes instead of the initial 50 BTC.
The second block halving occured in 2016 which further reduced block mining rewards by half. BTC block miners earn 12.5 BTC henceforth. Yet another halving and the lastest happened last year 2020, BTC block reward is now 6.25 BTC. The next expected halving is scheduled in four years and that should be the year 2024.
NEXT BLOCK REWARDS AND LAST BLOCK MINING DATE.
Currently, 6.25 Bitcoin is produced every 10 minutes. Miners earn 6.25 BTC for every new block produced.
In the next halving which is expected in 2024 BTC block reward will be 3.125. BTC. The next halving after 2024 wil be by 2028 in which BTC block reward will further be reduced to 1.5625 BTC. By 2032 we will expect another halving reducing BTC block reward to 0.78125 BTC.
In all, according to BTC model, there will only be 21 million bitcoins in circulation. Currently, there are up to 900 new BTC issuance daily. Over 89% of the total 21 million has been mined leaving 11 % left to be mined.
"3.- Analyze the Hash Rate indicator, using Ethereum. Indicate the current value of the Hash Rate. Show screenshots."
Going by the above understanding, hash rate has a relationship with the price of the coin. For example, if mining a coin becomes more profitable, many miners would want to mine. On the other hand, if mining a coin becomes less profitable many will turn to another project to mine. This is especially true in proof of work consensus algorithm where miners need to pay for their expensive equipments and electricity bill.
HASH RATE INDICATOR.
Hash rate indicator looks at the overall computational power of all the miners in the ecosystem. It tries to dictate when the hash rate was low and when the hash rate is high.
High hash rate shows that mining that crypto coin is profitable, low mining rate shows that mining the crypto project is less profitable at that time. Hash rate indicator tends to determine Bitcoin bottoms ( when the hash rate is low) therefore sending a buy signal.
A notable hash rate indicator "hash ribbon"uses multiple different day moving averages to determine micro bottoms of BTC. Just like the usual death and golden crosses of SMA, hash ribbons uses a 30 day (faster) MA and a 60 day (slower) MA. Aside from that, it equally uses a 10 day and 20 day period MA. Crosses of this indicators signal buy and exit positions. When the fast MA moves from above to below, it signals a buy. Another cross will mean an exit signal. Same also happens with the 10 and 20 day period MA. Using multiple MA indicators results to faster signal that can be used on day to day trading. However the indicator do not work on Etheruem.
The hash rate indicator we are going to use from glassnode.com for this analysis makes use of 2 MA. It may take time to dictate signal using this indicator but when the signal comes, it is profitable.
From my interaction with this indicator, I noticed that significant profit can be made using this indicator . Simply stating, When ever the faster MA move from above the slower MA to below or when the slower blue line MA rises above the faster gray MA it indicates that the hash rate has dropped as against the nom. At this point the hash difficulty will be adjusted and this signals a buy opportunity. A trader will therefore watch the market for better entry position. On the other hand when the faster MA is above the the slower MA the hash rate is high. A trader will then watch the market for possible take profit.
As I mentioned above hash rate follows price. I made the following observations using Ethereum chart.
June 03 2021
Hash rate 579,082,292,344.5/s
June 21 2021
Hash rate 482,012,101,507,446.2/s
As shown in this record above, price rose when the hash rate went high. Significantly, the mining difficulty increased. Price dropped when the hash rate went low.
In the above image, using a 30 days timeframe, we noticed that the faster MA has been above the slower MA since January 2021. This November, we are likely going to experience a cross as the two MA are coming closer. If the cross happens, investors should be willing to buy as Ethereum may likely experience another all time peak.
Using a shorter timeframe, we may notice a slight variance. Yet the two MA are closer and we are hopeful.
Nov 24 2021
Current hash rate 786,479,412,941,040.2/s
Calculate the current Stock to flow model. Explain what should happen in the next Halving with the Stock to Flow. Calculate the Stock to flow model for that date, taking into account that the miners' reward is reduced by half. Show screenshots. Regarding Bitcoin.
The stock to flow model is an indicator that measures the flow of Bitcoin relative to the current stock. The flow of Bitcoin can easily be measured overtime. This is because Bitcoin is produced at a fixed rate ( 10 minutes). The flow can be estimated based on the current block reward. After the halving in 2020, block reward is currently 6.25 BTC per block. Yearly, there could be approximately 52,560 blocks.
Stock flow model = stock divided by the flow. (Stock/flow)
Calculating the Current Stock Flow.
To calculate the stock flow, we need to first get the flow for the current year.
BTC flow = current block reward multiplied by the number of achievable blocks in a year.
Therefore, Flow = 6.25 × 52,560 = 328,500
Stock Flow = Stock divided by flow. (S/F)
We will get the available stock of BTC as at today and then divide it with the Flow.
BTC available as at today is 18,882,000
SF = 18,882,000 ÷ 328,500 = 57.47945205479452
In approximation = 57.5
SF = 57.5
Calculating stock to flow model indicator line, the indicator line.
Formula = 0.4 × sf ÷ 3
Which is 0.4 × 57.5 ÷ 3 = 7.6 BTC.
What will happen at next halving date with stock to flow.
The stock to flow will be calculated using the new block reward which is 3.125 instead of the current 6.25 BTC for the next annual reward. (52,560) ( note: BTC annual begins at the halving date)
Calculating The Stock Flow model At next Halving.
The next block halving of BTC is expected to occur in 2024 at block 840,000. The BTC reward will remain 6.25 till then when it will be split into half. Supply of BTC that day will remain constant at 6.25 BTC, therefore the halving will not have major changes untill after the date. To calculate the SF, we will obtain the total BTC that will be in circulation untill then.
Total BTC then will be
|Blocks||block reward||No. BTC|
Summing the total BTC together, at block 840,000 which is the next BTC halving we will have 19,687,500 BTC
Calculating Flow for the period.
3.125 × 52,560 =164,250
SF = 19,687,500 ÷ 164,250 = 119.8630136986301
In approximation = 120
SF = 120
Metrics indicators looks into the internal operations of the crypto project. Just like the the usual technical analysis indicators, it can still give buy and sell signals. Since the indication of the indicator seldom comes, it is recommended for long time investors.
Peull multiple indicator looks at the revenue side of the miners. When the revenue is low, investors may choose to acquire the asset. when the revenue is high, investors can take profit. The blue green band of the indicator shows low revenue when the chart touches that area. The red band is the take profit side signifying that the revenue is high.
Hash rate indicator is similar to the previous but gives signal based on the hash rate of the crypto project. Hash rate can be low when mining is not that profitable. Automatically there occurs an adjustment in the mining difficulty. When many persons finds mining profitable will increase the hash rate. Investors buy when hash rate is low, since low hash rate results in price fall, on the other hand investors take profit when the hash rate is high since the high. This process will repeat because hash rate increase the mining difficulty and makes it difficult for some miners to cope, low hash rate adjust the difficulty resulting in interested miners seeking to do business; in that case, there will be opportunity to buy and sell. Using the hash rate indicator, we can apply the knowledge of golden cross and death cross of moving averages. When the faster line stays above, it means that mining difficulty is high, however, traders can watch for possible exit places. Signal comes when the fast line moves below the slow line, although this signal seldom comes but when it does, it give a great opportunity to invest.
Stock to flow is another metrics indicator that looks at the flow total BTC in circulation as related to its annual nom. At every halving the flow of BTC reduces in half creating scarcity. The indicator is used to determine buy opportunities taking into consideration the flow of BTC as against it's stock.