The 4 most important bitcoin charts

Foto von energepic.com von Pexels

Raw data is boring and hard to conceptualize. If you’re not wired to bounce numbers around in your head, you probably struggle to recognize patterns in a spreadsheet. At least I am way more drawn to charts and pictures. They do the work for you and abstract raw data to create a visual representation. They are easier to memorize and a good foundation for finding patterns.

So I decided to compile a list of the bitcoin charts that seemed the most essential to me. This is for all the visual people out there that learn better with pictures than endless rows of numbers.

The Bitcoin logarithmic price chart

The first chart is probably the most popular one, and if you’ve read anything about Bitcoin, you’ve probably seen it before. The chart shows the price action of the digital currency over the last decade on a logarithmic scale.

You can see the chart in all its glory on TradingView.

Why is this one the first on the list? Because it shows bitcoin’s growth in price over the last decade. Every “bubble” that popped, every cycle that ended with a new all-time high. It’s basically the roadmap of Bitcoin’s adoption over the last 10 years, and you can use it to search for correlations with whatever data that’s out there.

Why do we use a logarithmic scale? Because the linear graph looks like this.

As you can see, there isn’t much to see. It looks ridiculous. Linear price charts aren’t suited for assets that grow exponentially. We need a logarithmic scale to see all the little details that are otherwise hidden.

The Stock-to-flow model

The next chart is the visual representation of the stock-to-flow model by PlanB. It’s the most popular bitcoin price model and attempts to predict the future price based on existing (stock) and incoming (flow) supply.

Every four years, the reward the miners get for solving a block gets cut in half. It started with 50 bitcoin in 2009. Eleven years and three halvings later, it’s now at 6,25. This event creates a supply shock and serves as a catalyst for a new cycle. The model uses this dynamic combined with other data to predict bitcoin’s price leading to the often-cited 100,000$ goal by the end of this year.

If you want to learn more about how it works, you can check out the original post from PlanB or read my analysis of it here.

As you can see, the price has been following the blue line closely over the last decade. There are several periods where it broke above or below, but it always returned to the model’s prediction. And so far, we’re still on track to reach the 100k by the end of this year.

Bitcoin’s volatility

The next chart is important for Bitcoin’s role as a medium of exchange. Depending on when and where you learned about the case for Bitcoin, you’ve heard one of two pitches. Bitcoin is a medium of exchange (MoE) or a store of value (SoV). I think both of these pitches are true at their core, but Bitcoin has to serve as a store of value first before taking on the role of a medium of exchange. Why is that? The answer lies in Bitcoin’s volatility chart.

A currency that can move by 30% in a single day isn’t suited to be an MoE. It’s simply too risky and impractical. The price of consumer goods needs to stay more or less stable over long time periods. We can’t have bread that changes its price every day.

For Bitcoin to reach MoE status, the volatility needs to go down by a lot. And if you look at the following chart, you’ll see a trend that shows exactly that.

The chart compares bitcoin’s 60-day volatility (red) to gold (orange) and USD/EUR (blue). Bitcoin is still far more volatile than both, but the chart prints higher lows and lower highs over time. You can see a clear trend to the downside.

That’s because as a fixed-supply asset like bitcoin grows in valuation, it becomes harder and harder to move the price. We’ve reached a market cap of one trillion USD in 2021, and the more it grows, the closer the volatility will be to gold which sits at a market cap of about 9 trillion USD.

Bitcoin needs to reach a certain valuation before it can take on the role of an MoE, and that’s indicated by the chart above.

The road to the Bitcoin Standard

The last chart is not based on precise calculations or a mathematical model. It’s the visualization of an idea. The roadmap to the Bitcoin Standard. I put it in here because the chart is really good at showing the full vision of Bitcoin’s future.

If and when all of this will happen is, of course, highly debatable. The events that have to unfold to arrive at the Bitcoin standard involve almost all aspects of society and mean a complete remodeling of our global economy and power structure. To say there’s uncertainty is an understatement.

Nevertheless, looking at this chart helps to understand the full scope of the Bitcoin argument. You don’t need to believe all of this will happen, but you have to see what others deem Bitcoin capable of to start the debate. So here you go.

Bitcoin’s entire adoption life cycle.

I hope these charts gave you some food for thought and perhaps a more well-rounded picture of Bitcoin’s journey over the last decade. Let me know in the comments if you would add anything!

See you on my next post, and remember, always HODL.