Messari: Bitcoin Q3 Data Interpretation

Except for the activity of ecological development, almost all other data of Bitcoin have experienced a sharp decline.

Written by Sami Kassab, Kunal Goel, Messari Fellows

Compilation: Babywhale, Foresight News

Important points:

  • Bitcoin largely lost its inflation-hedging versus store-of-value narrative in the third quarter after falling 72% from its all-time high;
  • As the demand for block space fell, Bitcoin transaction volume and transaction fees fell by 3% and 23%, respectively, and the average daily settlement value fell by 44% month-on-month;
  • Miners are in a dire situation due to sharp rises in energy prices, all-time highs in hashrate, falling bitcoin prices, and lower transaction fees;
  • The White House Office of Science and Technology Policy (OSTP) expressed concern that PoW hinders U.S. efforts to combat climate change and that energy-intensive mining could negatively impact grid stability and prices;
  • In addition to PoW concerns, the OSTP report also highlights how bitcoin mining can help reduce greenhouse gas emissions and help accelerate the transition to renewable energy grids.

key indicator

Messari: Bitcoin Q3 Data Interpretation

Bitcoin market performance

Q3 Highlights

Messari: Bitcoin Q3 Data Interpretation

The recent market crash was both a narrative breakdown and a test of real properties for Bitcoin.

Hedge against inflation : Due to its fixed supply and “monetary policy”, Bitcoin should be used as a hedge against inflation. The reality, however, is that even as the U.S. CPI hit a multi-decade high, Bitcoin hit a low for the cycle.

Store of value : Bitcoin has fallen 72% in a safe-haven macro environment since hitting an all-time high of $69,000 in November 2021. Bitcoin’s price movement is not a store of value, but rather similar to the movement of U.S. tech stocks. Bitcoin prices have also been hit hard as the Federal Reserve shifts to a more conservative, less liquid and higher interest rate policy.

Standout in a Bear Market: Bitcoin lost its dominance in the throes of this bear market, due to Ethereum’s more prominent price performance as it moved towards PoS.

Institutional investment assets with lower volatility : Many institutions “surrendered” in this bull market, with Tesla selling most of its Bitcoin holdings in the second quarter, and the storm of large lending platforms and funds further intensified volatility. So while Bitcoin does attract some institutions, the stakes are still higher.

Messari: Bitcoin Q3 Data Interpretation

Retracements of over 70% are nothing new for Bitcoin and its holders, and many still believe that Bitcoin will emerge from the ashes. While the growth in users and transactions may not continue, network activity hasn’t dropped as much as price. With prices at multi-year lows, passers-by have left, but the network has moved on. A bear market is a time when buidlers strive to create, and build believers.

market indicator

Messari: Bitcoin Q3 Data Interpretation

Bitcoin returns have become increasingly correlated with U.S. tech stocks since the liquidity-fueled bull market ended in late 2021. During the quarter, the average correlation between Bitcoin and the Nasdaq 100 was 0.6. Surprisingly, Bitcoin, once dubbed “digital gold,” has a much lower correlation with physical gold. The average correlation between the two assets for the quarter was 0.2.

Messari: Bitcoin Q3 Data Interpretation

Bitcoin prices recovered gradually in the third quarter, with volatility trending lower. The 30-day average volatility in August was 60%, compared to over 80% in June. Lower bitcoin volatility has led to less liquidation in the broader crypto market. Long liquidations totaled $5 billion in August, less than half of June ($10.8 billion). Total short liquidations were also significantly lower, at $3.5 billion in August compared to $6.6 billion in June.

Messari: Bitcoin Q3 Data Interpretation

Overview of network conditions

Messari: Bitcoin Q3 Data Interpretation

The daily transaction volume of the Bitcoin network has remained largely unchanged throughout the year, averaging around 250,000 transactions per day. Average transaction fees have been very low since the 2021 bull run. The average fee per transaction so far is just $1.4, down 21% for the quarter and 55% for the year.

The last spike in fees occurred in early 2021, when Bitcoin’s price hit a new high. Usually during bull markets, users are willing to pay higher fees to ensure that their transactions are packaged early.

Messari: Bitcoin Q3 Data Interpretation

Growth in the number of Bitcoin addresses is slowing. In the third quarter, the number of holding addresses increased by only 1.1%, compared to 2.5% in the second quarter of 2022. On a monthly time frame, the number of holding addresses declined for the first time in August 2022 after 10 months of consistent growth.

Compared to the second quarter of 2022, the average daily active addresses were 890,000, a decrease of 4%. After peaking along with prices in Q4 2021, active addresses appear to have returned to normal levels. Also, some network activity has moved to layer 2 solutions like Lightning, which explains the drop in fees.

Lightning Network

Lightning Network is a two-layer payment channel network based on Bitcoin. It is designed to increase the throughput of the network while reducing transaction settlement time. The Lightning Network scaling method, first introduced in 2015, has grown in popularity over time and is now considered a commonly used scaling solution for Bitcoin.

The Lightning Network has been in a “stand-alone bull market” for the past year, unaffected by the overall market downturn. As token prices fall, network usage and activity tend to follow. However, while Bitcoin’s price has fallen by 57% over the past year, the key metric of the Lightning Network has been steadily increasing.

Furthermore, as the technical foundation of the network matures, the adoption rate of the Lightning Network increases. Additionally, many companies have built the Bitcoin and Lightning Network tools and services needed to reach mainstream adoption. For example, Voltage provides hosting services for Bitcoin and Lightning nodes built on the cloud.

Messari: Bitcoin Q3 Data Interpretation

Bitcoin capacity held in public channels on the Lightning Network reached a new high of around 4,828 BTC at the time of writing, valued at around $92.3 million. Increased adoption and increased integration have resulted in a dramatic 96% increase in capacity over the past year. Some of the companies adopting the Lightning Network in 2022 are Cash App, Kraken, BitPay, and Robinhood.

Messari: Bitcoin Q3 Data Interpretation

The number of Lightning channels and nodes has also grown steadily, with year-over-year increases of 24% and 14%, respectively. This growth shows that the Lightning Network is moving from a network of tech enthusiasts to a full-fledged financial payments network.


2021 will be an extraordinary year for Bitcoin miners. Since the price of Bitcoin is rising faster than the hash rate, almost all mining operations are profitable. During the 2021 bull market, many mining companies have taken advantage of the rising Bitcoin price to raise capital by issuing equity and debt to expand their operations. Mining stocks rose along with Bitcoin. However, the broader macro environment caused that excitement to come to an abrupt end in 2022.

The biggest expense for Bitcoin miners is energy costs. Just this year, energy prices across the U.S. rose 15% year over year. With global energy prices rising, many miners find themselves under pressure, especially those without power purchase agreements (PPAs).

About $5 billion in outstanding ASIC purchase orders will be delivered to miners by 2022. As the price of Bitcoin is on a downward trend, miners choose to list the miners as soon as they arrive to gain profits. This drives up the hashrate and difficulty of the network. Miners find themselves in increasingly difficult situations as computing power and energy prices rise and bitcoin prices fall. Many miners continue to finance their operations and pay down debt by selling bitcoin. Miners selling bitcoin instead of HODL added downward pressure on prices.

Miner income

Messari: Bitcoin Q3 Data Interpretation

Miners have two sources of income: block rewards and transaction fees. Their income depends on the price of bitcoin and the demand for bitcoin block space. Miner revenue peaked at $4.8 billion in the fourth quarter of 2021, but has since declined along with Bitcoin’s price. Quarterly revenue for miners fell by 28% and 22% in Q1 2022 and Q2 2022, respectively. If Bitcoin’s price remains range-bound at the end of the third quarter, quarterly miner revenue is likely to continue its downward trend given high energy prices.

Messari: Bitcoin Q3 Data Interpretation

Bitcoin’s block rewards make up the majority of miners’ revenue. During the quarter, miners received 1.7% of total revenue from fees. Although fee levels are up 0.1% from the previous quarter, they are well below what miners are earning during the 2021 bull run. Currently, low fees are not a huge issue as miners rely more on block rewards. However, if these low fees persist as the block subsidy approaches zero, Bitcoin’s long-term security could be at risk.

computing power

Messari: Bitcoin Q3 Data Interpretation

In May 2021, China’s ban on Bitcoin mining led to a rapid 50% drop in the computing power of the entire network. Two months later, after mining machines exported from China were turned back on, the hashrate started to increase. By December, the total hashrate had fully recovered to pre-May levels.

In June 2022, as energy prices continue to rise, computing power begins to decline. Hashrate is now near an all-time high as ASICs continue to be delivered to miners who order them in 2021. As hash power increases during Bitcoin price declines, miners may be forced to abandon their HODL strategies and sell their Bitcoin holdings.

Messari: Bitcoin Q3 Data Interpretation

While China’s mining ban initially negatively impacted Bitcoin’s hashrate and price, it ultimately benefited the network. Before the ban, Chinese miners had the dominant portion of computing power in various countries. Following the ban, Chinese mining operations moved to countries with less regulatory uncertainty, such as the United States, Kazakhstan and Canada. As a result, the Bitcoin network has become more decentralized and resilient, avoiding the geopolitical risk of one country owning the vast majority of computing power.

The total hashrate in the US will increase from 16% in May 2021 to 38% in January 2022. U.S. mining pools have also benefited from China’s mining ban, with Foundry USA becoming the largest mining pool. As of August 31, 2022, the Foundry USA mining pool had 24% of the network’s computing power, a year-on-year increase of 180%.

Energy consumption

Messari: Bitcoin Q3 Data Interpretation

Due to the decentralized nature, it is nearly impossible to determine the exact electricity usage of the Bitcoin network. The Cambridge Centre for Alternative Finance (CCAF) uses a real-time model to estimate the daily electricity load of the Bitcoin network within hypothetical ranges.

Compared to the second quarter of 2022, energy consumption is estimated to have increased by only 2%, while computing power increased by 6% and reached an all-time high. The reason may be due to the newer ASIC miners being more energy efficient and having higher computing power.

sentiment analysis

Messari: Bitcoin Q3 Data Interpretation

The HODL Wave categorizes Bitcoin’s unspent transaction outputs (UTXOs) by when they were last on the chain. Short-term holders (under 6 months) are at multi-year lows, holding just 23% of bitcoin’s supply as of Aug. 31. Short-term holders of Bitcoin have bottomed six times in the past seven years, always generating positive returns the following year.

Historically, the number of short-term holders has been the indicator of choice for Bitcoin price peaks. As Bitcoin started to make new highs, it started to appear frequently in the news and attracted more buyers. However, the last peak in November 2021 did not attract new investors in the same way, possibly due to macro-environmental factors.

Messari: Bitcoin Q3 Data Interpretation

The market capitalization to realized value ratio (MVRV) compares the current market capitalization to the sum of the prices of all bitcoins at the time of the last transfer, showing how profitable holders are cumulatively.

At the end of August, MVRV fell below the key level of 1, which means that holders are generally in the red. The disposition effect in behavioral finance shows that when investors hold a losing investment, they choose to hold it until it becomes profitable. Therefore, an MVRV below 1 is an accumulation area for long-term investors.

Messari: Bitcoin Q3 Data Interpretation

Google search trends help reflect the idea that not many new entrants came in from the last cycle. Usually, the number of Google searches goes down with the price of BTC. However, searches for Bitcoin have been low since 2017. On top of that, the second bull run in 2021 has half as much search interest as the first. The decoupling between Google search trends and BTC prices may indicate that fewer newcomers are entering the space.


In Q3 2022, some Bitcoin narratives failed to continue. Bitcoin has been neither a hedge against inflation nor a store of value over the past year. Additionally, on-chain metrics show a slowdown in transactions, new users, and active users. However, there has been a significant increase in development activity and usage in Bitcoin ecosystems such as Lightning Network and Stacks.

On the mining side, the industry is under a dark cloud as energy prices and inflation continue to rise in a illiquid macro environment. Also, with the hashrate hitting an all-time high and the Bitcoin price struggling to stay above $20,000, miner revenue is approaching unprofitable levels. If the price of bitcoin remains range-bound or falls further, some miners and companies will be forced to sell extra bitcoin to pay down debt and operating expenses.

Having said that, Bitcoin has survived much worse in its history. Eventually, new narratives may emerge to replace the old ones. Developers are building Bitcoin that brings new features to the protocol and smart contracts. Bitcoin mining can also be a way to fight climate change by reducing emissions and enhancing grid stability. Given Bitcoin’s unpredictability, the next cycle may be driven by the narrative of Bitcoin as an ESG asset.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-09-22 11:59
Next 2022-09-22 12:01

Related articles