Learn The Top 5 On Chain Bitcoin Metrics For Making Your Bitcoin Mining More EffectiveShreya
The growth of the cryptocurrency ecosystem is massive, and there have been several instances where Bitcoin miners and traders had made an enormous profit by understanding the market trends and making intelligent choices. In the cryptocurrency space, staying updated with the latest market trends and on-chain metrics can decide the difference between success and failure.
Moreover, it is challenging to value the Bitcoin network and other digital currencies as they do not resemble the traditional financial currencies. Frequently used metrics to value traditional assets such as Benjamin Graham’s earning and growth formula cannot be used in the digital space. So to understand the value of the market and make educated choices, it is vital to comprehend on-chain Bitcoin metrics and make Bitcoin mining more effective.
There are several metrics that decide the profitability of a Bitcoin mining operation apart from making smart choices in choosing mining pools and mining rigs. Here are the top 5 on-chain Bitcoin metrics that a miner should study to make Bitcoin mining more profitable.
- Price Correlation and Active & Unique Addresses
- Total Transaction Value and Confirmed Payments
- Estimated Total Transaction Value per Day
- Hash Rate
- Restrictions and Profitability
Price Correlation and Active & Unique Addresses
The total number of unique addresses have increased for popular blockchain networks such as Bitcoin and Ethereum, whose data is available on Blockchain.com. These metrics are primarily affected by the changes in the market trends. For instance, post-China crackdown on Bitcoin mining, the number of miners decreased significantly, causing a drop in hash rate as well.
However, as the Bitcoin miners relocated themselves to new preferable locations, the number of unique addresses making crypto transactions also increased, suggesting an impending bull run for the crypto industry. This metric can help a Bitcoin miner understand the perfect time to jump in the mining and make smart moves to ensure a good long run.
Total Transaction Value and Confirmed Payments
Post-China’s crackdown, the total number of transactions on the Bitcoin Network has risen significantly. The market trend also has seen a favourable growth in the payments, which indicates more utility of the Bitcoin network. Moreover, considering the stand of different countries of accepting Bitcoin legally has also contributed to the growth of confirmed payments.
Presently, the Market Cap of Bitcoin is over $742 Billion, according to CoinMarketCap, which is expected to increase in the following months.
Estimated Total Transaction Value Per Day
The total Transaction Value per Day (one month average) has seen quite a rollercoaster ride in the last year. Starting with $1.6 Billion in October 2020, the value grew to $6.7 Billion in April 2021. However, after China’s crackdown, the value decreased to $3.9 Billion in September 2021 and started rising again in October 2021 to $5.2 Billion.
This metric helps understand the market position of Bitcoin and can help a miner utilize the bear market to start their mining operations and immediately start making profits as the bull market approaches. Currently, the 24h volume of Bitcoin is steady at $26 Million.
Hash Rate is an important metric in the Bitcoin mining industry as it determines the profitability and complexity of Bitcoin mining. The hash rate generally increases when there are more miners and per day transactions and decreases during the bear market. Currently, the mining industry is observing the highest hash rate in the history of Bitcoin mining, suggesting a good sustainable future for Bitcoin mining.
Restrictions and Profitability
The profitability of Bitcoin mining depends upon several factors, as discussed above. However, it is also important to check the restrictions of the location a Bitcoin miner aims to use and the electricity and other costs to ensure hefty profits with low overheads.
Being a new Bitcoin miner, the mining industry can seem to be a complicated space. However, with the right approach, proper research and smart decisions, a Bitcoin miner can quickly establish their foothold in the industry.