Quick takeaways:

• Bitcoin fundamentals point to growing holder inertia over the last 7 days, painting a picture of market indecision and a wholesale ‘wait and see’ approach to the US election.
• Assets covered: Bitcoin
• Metrics used: Daily active addresses, Token circulation, Age consumed, Mean Coin Age, Network Profit/Loss, Social sentiment, Social volume, Funding Rate, MVRV

Tomorrow will mark the third US presidential election since Bitcoin’s inception in 2008, and likely the most consequential for the world’s largest cryptocurrency.

While neither candidate has much of a platform when it comes to blockchain, most pundits agree that Tuesday’s vote is bound to have an impact on BTC’s future price action - in one form or another:

Who gets the BTC bull vote?

The best case scenario for Bitcoin has been a topic of some debate, of course. Some, like Alex Kruger, propose a Biden win as the most bullish option, and it’s pretty easy to see why. A victory for the Democrats has been equated (unfairly or not) with tax increases and a new wave of regulation, both of which could tank the stock market and force money into safe-haven assets.

In Kruger’s view, the second most bullish option would be a contested election, which - judging by some of Trump’s recent comments - isn’t entirely out of the question either. As Nigel Green, CEO of deVere Group recently told Forbes:

“Markets loathe uncertainty, so in the event of a contested result, safe-haven assets will get a boost–especially non-sovereign classes such as gold and bitcoin”.

It is, however, at least worth mentioning that both these arguments assume Bitcoin will not be affected by the traditional market post-election, a notion that has proved flimsy throughout the last 10 months.

Regardless of the outcome, both Kruger and Green think it’s going to prove profitable for the benchmark coin in the long run.

What is certain, however, is that not all crypto traders are as high on hopium, with many choosing to sit out on the market action until the dust settles:

But what do Bitcoin’s fundamentals say? With early voting well underway, let’s have a look at the behavior of major Bitcoin stakeholders ahead of the election night, and their potential reaction in days to come:

Holders on the sidelines

Despite just recording one of its highest monthly closes ever, Bitcoin’s on-chain data has been sending some serious “wait and see” vibes as of late.

Let’s start with Bitcoin’s daily active addresses (DAA for short), which have slumped to a 5-month low during last week and seem to signal a growing aversion to trade ahead of the US election:

The gradual decline in the amount of unique addresses sending or receiving BTC is that much more curious given the coin’s +19.5% price growth within the last two weeks, or its first $13k close since July.

Even Bitcoin’s short-lived stint above $14k - recorded last Friday - failed to fully resuscitate its on-chain activity, suggesting an ongoing reluctance to interact with the top coin for the time being.

How much of this is directly tied to the US election is impossible to measure, although the recent market chatter does make it a likely culprit in my eyes. Based on text data from 1000+ crypto-related social channels, there’s been a strong uptick in mentions of ‘biden’, ‘trump’ and especially ‘election’ over the past 7 days, coinciding with Bitcoin’s thawing DAA and shaky price action:

Another sign of short-term network atrophy can be found in Bitcoin’s 7-day circulation, or the amount of unique BTC moving between addresses within the last week.

On October 24th, Bitcoin’s 7-day circulation surged to its highest level since Black Thursday, indicating a strong uptick in previously idle Bitcoin amid its $13k push. Since then, however, Bitcoin’s 7-day circulation has almost entirely retraced back to pre-rally levels, suggesting that the rise in unique BTC transfers was exclusively tied to the initial pump:

And it’s not just Bitcoin’s day-to-day network participants that have taken a hiatus. According to several metrics that track the activity of previously dormant Bitcoin, most long-term investors and proverbial ‘HODLers’ have also been sitting on their bags ahead of the election.

Similar to its 7-day circulation, Bitcoin’s Age Consumed had its highest spike in 8 months recorded on October 23rd, indicating that a significant amount of previously idle BTC were moving on chain:

Since then, long-term investors have largely remained on the sidelines, with most dormant BTC metrics fully normalizing to end the month. This is perhaps most evident on Bitcoin’s Mean Coin Age chart (MCA for short), which calculates the average amount of days that each BTC has stayed in their current address.

As a rule of thumb, a rising MCA slope signals a network-wide HODLing trend (most coins staying in their current addresses, therefore their ‘age’ is rising), while drop-offs indicate increased movement of BTC tokens between addresses and potential redistribution events.

While a sizable dip in Bitcoin’s Mean Coin Age has been recorded on October 23rd (consistent with other metrics that track dormant BTC), the slope has been on an uninterrupted incline since, pointing to a shift to holding after a short profit-taking stint:

And speaking of investor sell-offs, we’ve just recently added a metric to Sanabse that tries to capture these periods of profit-taking and holder capitulation on-chain.

Network Profit/Loss (NPL for short) computes the average profit or loss of all coins that change addresses daily. For each coin that moves on-chain, NPL takes the price at which it was last moved and assumes this to be its acquisition price. Once it changes addresses again, NPL assumes the coin was sold.

In line with the spike in Bitcoin’s 7-day circulation and dormant coins, Bitcoin’s NPL has recorded a string of pronounced spikes immediately after the rally to $13k, suggesting that Bitcoin’s investors have - on average - been selling their BTC at significant profit:

While you may expect to see signs of ‘weak hand’ capitulation ahead of tomorrow’s vote, Bitcoin’s NPL has in fact retreated close to breakeven since October 23rd, suggesting relative (and perhaps surprising) calm among BTC investors heading into D-day.

Overall, a number of metrics have pointed to ongoing inertia on the BTC network over the last 7 days, painting a picture of market indecision and a wholesale ‘wait and see’ approach to the US election.

As yet undecided

Growing signs of market uncertainty are not limited to Bitcoin’s on-chain data either. According to our social sentiment algorithm, Bitcoin-related mood on crypto social media has shifted from overwhelmingly bullish to ambivalent in the last week alone, suggesting a swift end to the ‘omg $13k’ hype:

The amount of BTC-related mentions on 1000+ channels has also seen a steady decline since the October 23rd spike, as the moonboys logged off and the community chatter eased back to normal:

Investor ambivalence is also evident in Bitmex's funding rate for perpetual contracts, which has continued to hover between slightly negative and neutral over the past 7 days. When the funding rate is positive, longs pay shorts. When the funding rate is negative, it’s shorts that are paying longs:

With that, I think it’s fair to conclude a sizable amount of investor ambiguity has materialized on Bitcoin’s charts ahead of the elections. This does leave a lingering question, however - what could happen if Bitcoin holders aren’t happy with the election results?

'Cashing out' potential

Depending who you ask, any result tomorrow could be bullish for Bitcoin’s short-term price action, or a dump catalyst. Instead of debating individual scenarios, let’s assume the worst-case scenario - whatever that may be for most Bitcoin holders - happens tomorrow. How are they likely to react to bearish election results?

One way to find out is by checking Bitcoin’s MVRV ratio - which calculates the average profit (or loss) of a certain group of BTC holders - so we can evaluate how likely they are to sell based on their current ROI.

On Sanbase, you can track the MVRV ratio of different Bitcoin investors based on the time that they acquired their coins. For example, Bitcoin’s 30-day MVRV calculates the average profit/loss of all addresses that acquired BTC in the past 30 days. It currently hovers at +6.98%, which means that Bitcoin’s short-term holders are (on average) up +6.98% on their initial investment.

As a rule of thumb, the higher the MVRV ratio, the more likely it is that BTC holders will begin to exit their positions and take profit. At the moment, all of Bitcoin’s MVRV bands are well into positive, meaning that most BTC holder groups are (on average) currently in profit.

At the time of writing, Bitcoin’s MVRV ratios range from +6% for those that acquired BTC in the past 30 days to +32% for those that acquired BTC in the past 365 days:

What does this mean in case of a bad election result? Let’s say Biden wins tomorrow, the stock market panic dumps and Bitcoin ends up not being the safe-haven asset it is touted to be, and nosedives in unison.

Should Bitcoin investors feel uneasy about the coin’s mid-term PA in light of the election results and the third wave of Covid-19, the current profit margins would allow for short-term profit taking and a potential exodus into stablecoins - similar to what we’ve seen happen on Black Thursday.

Far from saying that is what will happen, of course, but it’s safe to say that Bitcoin’s fundamentals have not convinced me of unshaken investor confidence ahead of Tuesday’s vote. Stay safe out there!