🟧 A Primer on Bitcoin Technical and On-Chain Analysis
Reading the Signals Beyond Price
Bitcoin’s price is what most people focus on. But beneath that flashing number lies a transparent and permanent record of every transaction ever made — a goldmine of data that no other asset can match.
For the thoughtful Bitcoin analyst, price is just the tip of the iceberg.
Below it lies the blockchain — an open ledger that reveals investor behavior, miner confidence, and long-term sentiment in ways traditional markets can’t.
Let’s take a calm dive into the key on-chain metrics worth watching.
🟠 1️⃣ Hash Rate and Mining Difficulty
The hash rate measures total computational power securing the network. A rising hash rate signals miner confidence — they’re investing in machines and electricity because they believe in Bitcoin’s future.
Mining difficulty automatically adjusts every two weeks to keep block times near ten minutes.
📉 A sharp drop in hash rate or difficulty can signal miner stress or capitulation.
📈 Steady increases often precede bull markets.
🟡 2️⃣ Active Addresses and Transaction Count
These metrics reveal network activity — how many wallets are transacting and how often.
Active Addresses: show how many participants are moving coins daily.
Transaction Count: shows how much real economic activity is happening.
When both rise together, Bitcoin’s user base and utility are expanding — always a good sign.
🟢 3️⃣ HODL Waves and Coin Dormancy
Every Bitcoin has an age since it last moved. Visualizing this creates HODL Waves, showing how long coins have been held.
When long-term holders refuse to sell — even during price rallies — it signals conviction and reduces liquid supply.
Coin Dormancy complements this by measuring how long coins have sat idle before being spent. Low dormancy = active market. High dormancy = strong hands holding tight.
🔵 4️⃣ Exchange Balances and Flow
Tracking exchange reserves helps you see how much Bitcoin is available for immediate sale.
📉 Falling exchange balances mean coins are moving to self-custody (bullish).
📈 Rising exchange inflows often precede volatility or corrections.
It’s the best supply pressure gauge we have.
🟣 5️⃣ Realized Price and MVRV Ratio
The Realized Price represents the average cost basis of all circulating Bitcoin — the “real” value at which holders acquired them.
When market price dips below realized price, history shows we’re near capitulation or bottoming zones.
The MVRV Ratio (Market Value to Realized Value) compares price to fundamentals:
MVRV < 1: Undervalued (good accumulation zones).
MVRV > 3: Overheated (caution).
🔴 6️⃣ NUPL — Net Unrealized Profit/Loss
NUPL tracks how much profit or loss the network is sitting on.
It moves through clear emotional phases:
🟥 < 0 — Capitulation
🟨 0–0.25 — Hope / Recovery
🟩 0.25–0.75 — Optimism / Belief
🟦 > 0.75 — Euphoria / Potential Top
Overlaying NUPL on the price chart helps visualize fear and greed in real time.
⚫ 7️⃣ SOPR — Spent Output Profit Ratio
SOPR answers one question:
“Are coins being sold at a profit or a loss?”
SOPR > 1 → Sellers are taking profit (bullish in uptrends).
SOPR < 1 → Holders are cutting losses (bearish).
Tracking SOPR helps identify capitulation points and profit-taking peaks.
⚪ 8️⃣ Long-Term vs Short-Term Holder Supply
On-chain data separates holders into:
Long-Term Holders (LTH) — coins held >155 days
Short-Term Holders (STH) — newer, more reactive participants
When LTH supply reaches record highs, weak-hand supply runs low — setting the stage for a supply squeeze and bull cycle.
🟩 9️⃣ Funding Rates and Open Interest
Though technically from derivatives, these metrics reveal trader sentiment.
Positive funding: longs pay shorts → excessive optimism → possible correction.
Negative funding: shorts pay longs → fear and exhaustion → potential rebound.
Pair funding with open interest (total leverage in the system) to spot when markets are overstretched.
🧭 🔟 The Macro Lens: Halvings and Supply Issuance
Every four years, Bitcoin’s block subsidy halves.
Each halving cuts new supply in half and triggers massive shifts in supply-demand balance.
Combine halving data with miner revenue and issuance rates to understand long-term cycles.
Each halving historically precedes a new multi-year price discovery phase.
🧩 Putting It All Together
No single metric tells the full story. The art of on-chain analysis is correlation — finding where multiple signals converge:
Rising hash rate + falling exchange balances = accumulation
Low NUPL + SOPR below 1 = capitulation and potential bottom
LTH supply at highs + MVRV rising = early bull market phase
The blockchain gives you the data. Your job is to interpret the human behavior behind it.
🧠 Final Thoughts
Bitcoin’s transparency is revolutionary. Every coin, every address, every movement — recorded forever and visible to all.
Unlike Wall Street, there are no secrets here.
For the disciplined analyst, this is pure signal: a way to understand market cycles, sentiment, and conviction — straight from the chain itself.
So next time someone asks where the price is going, you’ll have more than a guess.
You’ll have data, context, and conviction.
Not financial or legal advice, for entertainment only, do your own homework. I hope you find this post useful as you chart your personal financial course and Build a Bitcoin Fortress in 2025.
Thanks for following my work. Always remember: freedom, health and positivity!
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