Bitcoin On-Chain Analysis - Part 1: Miners


Since Bitcoin still has the largest market cap at the moment, it sort of dictates the trend of the crypto market. While not all the cryptos have the same properties as bitcoin, some of the on-chain metrics can still be relevant or exist in other forms. For Bitcoin on-chain analysis, I use Glassnode’s T2 subscription. T1 is free to check out at Here are some of the charts I tend to use. I will be adding more charts over time as I continue to learn about on-chain analysis for Bitcoin.


A lot of my knowledge with on-chain analysis has come from others who’ve paved the way for this field, and here are their free newsletters and Twitter handles:


Will Clemente:


[T1] Mean Hash Rate (7d Moving Average)

Metric Description: the average estimated number of hashes per second produced by the miners in the network.

(Source: Glassnode)

What is Hash Rate?

Since Bitcoin runs on the Proof of Work (PoW) network, the miners are required to solve a math puzzle. Their goal is to develop a 64-digit hexadecimal number, called a hash, that is less than or equal to a target hash in SHA256, Bitcoin’s PoW algorithm. Miners have multiple processing units to spit out hashes at different rates.

Hash Rate can be viewed as the total combined computational power to mine. It can be a good indicator to observe the participation of the miners during bull and bear markets. It is also an important metric for assessing the strength and security of the Bitcoin network. A decline in hash rate means a reduction in the cost to perform a 51% attack, making the network more vulnerable.

(Source: Investopedia; Coindesk)

Mean Hash Rate Chart

Whenever we see a drop in hash rate, it could either mean some dramatic events have happened or a declining Bitcoin price accompanied by expensive running costs, so the miners decide to use the energy elsewhere.

During the China ban, we saw a cliff drop in the hash rate in the Bitcoin network. Since May, we have been witnessing a downtrend as weak miners, who have older generation mining rigs, are shutting down their machines due to a higher operating cost than the Bitcoin price.

[T2] Hash Ribbon

Metric Description: this is a market indicator that utilizes the 30-day and 60-day SMAs of the hash rate as described previously, to identify the bottoms of Bitcoin price. When the 30-day SMA line (green) crosses over the 60-day SMA line (blue) or when the ribbon switches from light red to dark red areas, the worst of the miner capitulation is over. Miners tend to capitulate and turn off their machines when Bitcoin becomes too expensive to mine relative to the cost of mining.

(Source: Glassnode)

Hash Ribbon Chart

While this indicator does not provide the best buy and sell signals, it does give a relative magnitude of the miner capitulation. When the green line crossed below the blue line, it implies that more and more miners are shutting down and lowering the hash rate of the network.

In July, the green line was attempting to cross over the blue line, hinting at the end of miner capitulation, but the hash rate diverged again and is not showing signs of reversal. Hence, more selling pressure can be expected from the miners.

[T2] Market Cap to Thermocap Ratio

Metric Description: the Market Cap to Thermocap Ratio is simply defined as Market cap / Thermocap, and can be used to assess if the asset’s price is currently trading at a premium with respect to total security spent by miners. The ratio is adjusted to account for the increasing circulating supply over time.

(Source: Glassnode)

What is Thermocap?

Aggregate security spend, or “Thermocap”, is the aggregated amount of coins paid to miners and serves as a proxy to mining resources spent. It serves as a measure of the true capital flow into the network and is computed as the aggregate coinbase transactions multiplied by the price in USD at the time they were mined.

(Source: Glassnode)

It’s essentially capturing how much miners have been paid in USD since the Genesis block (converting Bitcoin to USD at the time of block production) and it captures the aggregate ‘cost of production’ for all circulating Bitcoin.

At the time of writing, the Thermocap is around $42 billion.

Market Cap to Thermocap Ratio Chart

The chart presented here defines the market cap as the Bitcoin Price, which at the time of writing is around $21,000. Therefore, the market cap to Thermocap ratio is 21k / 42 b = 0.0000005. The green zone is below 0.0000004.

Market Cap (Supply x Price) to Thermocap Ratio Chart

We can also compare the Bitcoin Market Cap, when it’s defined as Price x Supply, to the thermocap. This would bring the magnitude down to 1-100 rather than 7 decimal places.

The teal line in the chart below is the Market Cap to Thermocap Ratio defined here. The bottoms of the ratio are increasing in a more so parabolic fashion since the plot is on a log scale. Each cycle adds to the minimum monetary premium at the end of bear markets.

Note that the peaks of this ratio spike above 40, which can be used as an indicator that the premium is overheated during the bull market.

To better visualize the different multiples of the thermocap and how they compare to the market cap, we can use Bitcoin’s block subsidy model developed by @Permabullnino by plotting 2x, 6x, 32x, and 64x thermocap with the market cap as shown below.

1x TC served as the bottom for the 2011 bear market, 2x TC served as the bottom for the 2015 bear market, and 6x TC served as the bottoms for the 2019 bear market and the 2020 COVID crash. Interesting to see whether the 2022-2023 bear market traces back to 6x TC again or creates new support.

32x TC and 64x TC have served as the range for where Bitcoin Market Cap peaks.

(Source: Glassnode)

[T2] Puell Multiple

Metric Description: the Puell Multiple is calculated by dividing the daily issuance value of bitcoins (in USD) by the 365-day moving average of daily issuance value.

(Source: Glassnode; Medium Article)

This is comparing the daily aggregate miner income with its yearly average. When the daily miner income is significantly higher than its annual average (high Puell Multiple), then we can expect miners to slowly take profits. When the Puell Multiple is low, then we can expect the miners are capitulating and shutting down their machines.

Puell Multiple Chart

Observing the past cycle bottoms, we can see the Puell Multiple reached 0.3 every time. At the moment, the Puell Multiple is at 0.34 and we are likely at or near the bottom. Also, the vertical dashed lines here are when the halving occurred. The miner revenue gets cut half, which is illustrated by the sudden drop in the Puell Multiple.

Closing Remarks

While there are more charts that can be used to analyze the miners’ on-chain activities for the T3 subscription, I’ve found the above charts sufficient to get an overall idea about the miners side of the story.

Here are some of the other charts that can be helpful with analyzing miners’ transactions:
Screen Shot 2022-07-18 at 5.49.07 PM

1 Like

Thank you very much honger love you love to read this thank you for your help!

1 Like