Bitcoin’s Lightning Network designed to free up Bitcoin’s on-chain congestion and improve its scalability seems to have lost its mojo as the network capacity, among others, have started declining for over a month.
The network capacity for Lightning Network, at press time, was 1020 BTC, which is worth $8.1 million. Over the course of a month, this has decreased by approximately 4%.
A similar trend of decline can be observed in the number of active channels on the network. It decreased by 5.4% over the month and was at approximately 36,592 channels, at press time. The number of new nodes in the last 24 hours has also declined by 15% and the current number of new nodes were at 17.
However, the number of active channels at press time increased by 1.35% in the last month and was currently at 4294 active channels. The fall in the activity of Lightning Network is noteworthy because the last few weeks have been rough as the on-chain fees for Bitcoin has reached somewhere between $3 and $4. Moreover, the number of unconfirmed transaction has been increasing simultaneously, increasing the mempool size of Bitcoin.
One can only imagine what would happen if the bull run actually begins and the price of Bitcoin skyrockets leading to similar, if not worse, situations as it did during December 2017.
A Reddit user Henry Cashlitt, commented:
“People don’t want to use LN when tx fees are high because it costs too much to open a channel. People don’t want to use LN when tx fees are low because then they can just send transactions cheaply directly on-chain.”
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Bitcoin’s on-chain/off-chain valuation indicators the key point of focus as coin heads to $13,000
With the rise in Bitcoin’s price, the rest of the cryptocurrency market has followed suit by displaying a green trend across the board. In a recent series of tweets by popular cryptocurrency analyst Adam Tache, users were informed about the top Bitcoin on-chain and off-chain valuation indicators, derived from on-chain valuation models.
The analysis touched on the Mayer Multiple created by dividing the price by the all-important – 200 day moving average. The current average Mayer Multiple stands at a figure of 1.39, which may climb higher. Looking at previous figures, the normal Mayer Multiple figures stated that if the value shoots up to 2.4, then Bitcoin eventually retraces back to a comfortable 1.5. The Mayer Multiple is usually considered as the original indicator used to clock the valuation of Bitcoin.
Another major indicator discussed in the thread was the NVT Ratio invented by Willy Woo, Partner at Adaptive Fund. The indicator is used to calculate Bitcoin’s prominence or value in the cryptocurrency space by evaluating the amount transacted on the blockchain as a “proxy for investment flow and bear and bull market cycles.”
At the moment, the NVT ratio for Bitcoin is in an abnormal region compared to the start of previous bullish patterns. The NVT ratio was above the “bear market” separator, which meant that the cryptocurrency was overbought. When Bitcoin is overbought, it usually means that the buying pressure is much higher than the selling pressure. Adam Tache opined,
“NVT signaling overbought is likely due to a number of factors — namely the proliferation of exchange-based, purely off-chain txs driving short-term price action.”
The analysis also pointed out the liveliness of the Bitcoin indicator created by Tamas Blummer. The indicator showed the inverse count of lost or ‘HODLed’ Bitcoin, while stating that when the ratio increases, long-terms holders of the cryptocurrency decrease their positions. The indicator conveyed accumulation of Bitcoin when the ratio decreased.
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