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What are the metrics that matter when evaluating the overall "health" of Bitcoin?

What are the thresholds?

Specifically

  • Economic (e.g. velocity, days destroyed, market volume & beta)

  • Technical (e.g. rate of difficulty change, block size, tx fees, size of the chain)

  • Diversity of stakeholders (who are the market movers, large investors, what are their intents: profit vs stability)

  • etc.

Specifically, I'm trying to get an understanding of financial health of a system that proclaims to be superior to the one it's trying to replace (or compliment).

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This strongly depends on what you think makes a financial system healthy.

As long as there is no challenge to the core of Bitcoin, distributed no third party controlled transactions, there is no need to worry about any of the technical aspects. Stakeholders are the major problem here, the hashrate distribution being the clearest example. Stakeholder power must be distributed to preserve the nature of Bitcoin. Hashrate has a hard limit at 50%, but even close will cause less reliability. Other stakeholder measurements have no clear/hard limits.

The health measure then comes purely from the hashrate (indicating security and current interest in the minable Bitcoin) and the amount of users connected to the network. Sadly the users connected cannot be measured correctly due to Bitcoin wallet services.

Any other metrics can show you what happens to Bitcoins, but not everywhere else. Some indications can be given about how Bitcoin are used, but not about their actual "health". At least not in any measure of health I can currently see to be valuable. I'd consider transaction origin and destination diversity to give some indication of user diversity, which would indicate how much Bitcoin is used, which would indicate robustness through diversity.

FYI: Many interesting graphs are here. They say something, but do not clearly indicate health. I do think most of them have "better" or "worse" directions, but they are fairly easily manipulated, especially in unhealthy circumstances.

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As for now (years after this question was published), there are metrics discussed and published on several sites trying to achieve that. Basically you would be googling for "fundamental analysis" metrics. Because searching for the health of the underlying product to the traded asset is basically fundamental analysis common in other spheres of trading and it is also starting to develop with time in Bitcoin network. There are many different ways to look at it, woobull charts are categorizing the metrics into 4 basic categories (as of now): Signaling; Investment related; Monetary properties; Network properties. Bitcoin Hash Price is one of the earliest approaches to look on the FA through network properties ... new approaches were develop over time.

One of the most famous and basic metrics would be Bitcoin NVT (network value to transaction; https://charts.woobull.com/bitcoin-nvt-signal/ ) Ratio and all of its derivatives (often easier to use like NVTsignal), other metrics worth looking might be the Realised Cap (and especially MRVR which is derived from both NVT and Realised Cap), HODl waves and others.

In different times different sites might be dedicated to publishing fundamental metrics, as of now, I would recommend these three:

  • Coinmetrics.io
  • charts.woobull.com
  • lookintobitcoin.com

Their livability may change over time or they may be for subscription only, so searching for those metrics listed above should help to discover page dedicated to publishing fundamental metrics even in the future.

One of the latest metrics (derivative of MRVR) would be MRVR-Z score https://www.lookintobitcoin.com/charts/mvrv-zscore/

Another way to look into this problematic would be following the guys who specialize into researching such metrics and publish the metrics -

  • Murad Mahmudov 🚀 on Twitter : @MustStopMurad
  • Willy Woo @woonomic
  • David Puell @kenoshaking
  • nic carter @nic__carter
  • Antoine Le Calvez @khannib

and others

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