Issue #25

Buying $1 for 50 cents

Welcome to issue 25 of the Capriole Newsletter. We crack open the rarest of Bitcoin value metric readings you can count on one hand every 5 years. We dive into the troubling trend of demand across manufacturing and finally take note of the incredible pace of institutional investment into digital assets that continues despite the combined crypto, equities and bonds bear markets.


  • The Bitcoin Yardstick (new metric) is showing value not seen since $4-6K.
  • Capitulation of Bitcoin’s long-term holders has occurred.
  • An ultra-rare Bitcoin Energy Value discount has just occurred for the first time since March 12, 2020 ($4K).
  • Bitcoin’s long-term holder base is at an all-time-high. Fewer and fewer investors are leaving Bitcoin as years pass by, showing its stickiness as a store of value.
  • Growth in economic demand (new orders and production) is in a major downtrend.
  • End user supply also shows a concerning downtrend (inventories are up).
  • Increased odds of an equities bottom based on 150-years of yield curve stats.
  • Strong institutional investments: October saw the best good-to-bad news headlines ratio of all of 2022; with major investments occurring across banking and big tech.

Let’s dive in.

Bitcoin Fundamentals

The Bitcoin Yardstick

Here’s a very simple, but useful valuation method for Bitcoin. We call it the Bitcoin Yardstick. It is simply the Bitcoin Market-Cap / Hash-Rate, and normalized (divided by) the 2 year average.

Similar in concept to a PE Ratio, except instead of stock earnings, the Bitcoin Yardstick is taking the ratio of energy work done to secure the Bitcoin network in relation to price.

Lower readings = cheaper Bitcoin = better value.

Today we are seeing valuations unheard of since Bitcoin was $4-6K

The Bitcoin Yardstick is recording deep value not seen since 2019. Source: Capriole Investments

Long-term Holders have Capitulated

Net unrealized profit and loss (NUPL) is showing a washout in long-term holders. We have entered the capitulation zone (red) seen only once every 4 years in the past.

Long-term Holders are in “Capitulation”, in other words, most coin held today is held at a loss. Source: Glassnode

A 50 cent dollar

Bitcoin’s Energy Value, the fair value of bitcoin calculated by only considering the number of Watts used by the network, is currency $43K. This implies the current price is trading at a -54% discount.

This has only happened on two other singular days in the last 7 years, the massive 12 March 2020 collapse (Bitcoin: $4,841) and on 7 February 2019 at the bottom of the last halving cycle bear market (Bitcoin: $3,360).

There have only been 3 days in the last 7 years where Bitcoin was this cheap against its Energy Value. Source: Capriole Investments

A Store of Value

Two-thirds of Bitcoin has not moved in more than a year. 

We see a growing relevance of scarce, hard, digital money in a world where fiat currencies globally inflate and central banks lie about “inflation coming about from nowhere” while at the same time manipulating the money supply. The growing correlation of Bitcoin-to-Gold shows this too, and historically occurs at the most opportunistic moments.

Today represents an all-time-high in long-term hodling of Bitcoin. Despite the worst year in stocks and bonds in centuries, Bitcoiners have never held on to more Bitcoin. 

The below hodl waves chart shows the percentage of Bitcoin’s total supply held by long-term holders (held in place at least one year). It shows that once people discover Bitcoin, less and less let go of it over time. Each cycle, the floor and ceiling in Bitcoin held for the long-term has only increased. 

Bitcoin is becoming a reserve asset. The floor and ceiling of the  percentage of the network held for 1+years has only increased every cycle. Source: Glassnode

The Full Picture

We believe the full picture of Bitcoin’s fundamentals is best consolidated and viewed through the Capriole Macro Index.

The Bitcoin Macro Index, Capriole’s autonomous fundamentals-only trading strategy which uses machine learning to assess and learn on over 35+ Bitcoin on-chain and equity market metrics, remains in a bullish value region today.

Bullish Bitcoin fundamentals are showing strength in a region of value. Source: Capriole Investments

The Macro Index Oscillator. Source: Capriole Investments

Macro Review

Equities remain in a major downtrend, having seen some relief in October. Nonetheless, 2022 is the worst year for stocks since… the American Civil War.

2022 has been the worst year for stocks since the Civil War. Source: BofA Global Research

Economic health metrics are showing increasing risk of recession (as also reviewed in last month’s issue) and housing continues to show signs of plummeting demand amidst increasing interest rates.

Let’s focus on the Institute for Supply Management (ISM) report for October. The ISM manufacturing index, also known as the purchasing managers’ index (PMI), is a monthly indicator of US economic activity based on a survey of purchasing managers at more than 300 manufacturing firms. It is considered to be a key indicator of the US economy.

In October, the Manufacturing PMI clocked in at 50.2 (out of 100). Values below 50 represent contraction and are a leading indicator of recession. While PMI missed contraction by a whisker in October, it has been in a multi-month growth downtrend highlighting the increasing vulnerability of the economy under the current Federal Reserve regime.

The following three key components of PMI highlight the crux of today’s issue.

Growth in “New Orders” and “Production” (effectively: demand) is in a downtrend since the beginning of 2021. Inventories (supply) is up. These three metrics tell us we have had a major issue in demand ever since quantitative easing appeared to slow in 2021 and quantitative tightening began this year.  

If this trend continues; the labor market will be hit, and a Fed Pivot will follow.

It’s just a matter of time.

ISM surveys show growth in demand is in a major downtrend. Fed tightening is shell-shocking the US economy. Source: ISM October Report

But remember. When extremes are this great, it’s often when great opportunities start to appear. There are some reasons to believe the bottom may be in for equities, one such metric is our 150-year yield curve analysis. Confirmation of a recession would increase these odds, as would a Fed pivot. Until then, beware of the major trend.

The Headlines

Here’s the most important news in Bitcoin and crypto this month.

Note the ratio of “Good” to “bad” is the best we have seen all year. 

The notable highlights in October are massive integration into traditional banks and the payment giants, Visa and Mastercard. In other words, institutions are continuing to invest in crypto at break-neck pace. This is also shown by multiple consecutive all-time-highs in Bitcoin mining hash rates.

The Good

  • Elon Musk acquires Twitter, with a $500M investment from Binance. More
  • Hong Kong plans to legalize retail crypto trading. More
  • Revolut Bank to allow customers to make purchases with crypto balances. More
  • German bank N26 to offer crypto services. More
  • French banking giant Société Générale approved to operate digital asset services. More
  • Mastercard will help banks offer cryptocurrency trading. More
  • Visa is teaming up with FTX to offer debit cards in 40 countries. More
  • Visa files trademark applications for crypto wallets, NFTs and the metaverse. More
  • Google partners with Coinbase to enable cloud payments with cryptocurrencies. More
  • Google Cloud announces blockchain node service starting with Ethereum. More
  • Binance launches a $500M fund to provide loans to Bitcoin miners. More
  • Twitter will allow users to buy and sell NFTs through tweets. More

The Bad and the Ugly

  • Since 2019, 68 cryptocurrency exchanges have been shut down globally. More
  • The largest public Bitcoin miner, Core Scientific, says it may seek bankruptcy. More
  • Binance confirms BNB cross-chain bridge hack. More

The Bottom-Line

We are in that long, dull part of a Bitcoin cycle where price does not do a lot.

It goes sideways for months, as the typical U-shaped bottom takes shape. 

Retail interest has evaporated. Crypto Twitter has put its head in the sand.

No one talks about crypto at the bar and not at the family gathering.

While it seems like not much is happening, it’s times like these that historically offer the highest opportunity. We don’t know how long the macroeconomic situation will continue to look concerning. But we do know that we are seeing rare, once per multi-century downdraws across equities and bonds. We know that Bitcoin, the asset historically considered “too volatile” (an argument increasingly less relevant in a world where stocks are more volatile than Bitcoin), has not put in a new low in the last months but every other asset class has. We know that Bitcoin and crypto are the best performing asset class of the last decade. We also know that the Bitcoin valuations we are seeing today have historically happened only once every few years. These opportunities tend to stick around until they disappear rapidly, as the right vertical of the U-shape completes formation.

Finally, Bitcoin’s value prop has never been more important than today. Increasingly, people see the obvious fallacies and failures of central banks in delivering rational and controlled monetary policy through time.

Psychology is fascinating. Every bear market you are given months to get Bitcoin at a fire sale, yet most rather wait for new all time highs.

Charles Edwards
Capriole Investments Limited

New Article

We published a new article: Everything you need to know about yield curves. An analysis on 150-years of yield curve inversions and what they mean for investors, including:

  • Why they predict recessions
  • Why they predict stock losses
  • Why we may have seen the bottom
  • Why the US yield curve won’t matter very soon.

Read it on Medium here.

In the Media this Month

Charles’ interview with Mark Moss on Market Disruptors in October. We cover the metrics and valuations that tell us whether Bitcoin is cheap or expensive, we explore whether Bitcoin will continue to trade as a risk asset and much more.

The Capriole Fund

The Capriole Fund has one goal: outperform Bitcoin.

We are open to professional investors, but the fund has limited spaces.

Share the Post:

4 Responses

Leave a Reply

Your email address will not be published. Required fields are marked *


The information contained here is provided to you solely for informational purposes only. Opinions and projections included are provided as of the date of publication, may prove to be inaccurate, and are subject to change without notice. This information does not constitute an offering. Prospective investors should not treat these materials as advice regarding legal, tax, or investment matters. No recommendations are made to invest in Capriole Investments Limited nor any other investment. An offering may be made only by delivery of a confidential offering memorandum to appropriate investors. Past performance is no guarantee of future results. Investing in digital assets in general involves risk. Digital asset risks include, but are not limited to, exchange risk, legal risk, hacking risk, market risk, liquidity risk, trading risk and default risk. As with any investment, investing in digital assets could result in loss of investment. Additional digital asset risks are outlined at Decisions or actions based on the information provided are at the reader’s own account and risk.

Related Posts

Update #48

Welcome to Bitcoin price discovery, it's been a long time coming. With...

Charles Edwards

Update #47

The era of deep value is over. Bitcoin is fairly valued for...

Charles Edwards

Update #46

With the big Fidelity news, Bitcoin is finally being acknowledged in traditional...

Charles Edwards

Update #45

The brand names of these two behemoths in the traditional asset space...

Charles Edwards

Update #44

Today's Bitcoin ETF launch was the most successful launch in history and...

Charles Edwards

Update #43

ETF fever is coming to a head with approvals expected within the...

Charles Edwards

Update #42

Two major and positive events just unfolded in the Bitcoin space. According...

Charles Edwards

Update #41

Bitcoin is heating up, in both opportunity and across derivatives markets. And...

Charles Edwards

Issue #40

A new major trend has formed. We now have the biggest asset...

Charles Edwards

Issue #39

We have historically rare risk-asset signals appearing, amidst a period of Bitcoin's...

Charles Edwards

Issue #38

The last week has seen the biggest improvements across Bitcoin technicals and...

Charles Edwards

Issue #37

Bitcoin is pricing as a better-and-better inflation hedge. It is rapidly skewing...

Charles Edwards

Issue #36

The Fed is Building a War Chest. A macroeconomic deep dive to...

Charles Edwards

Issue #35

We are seeing some promising and rare structures form on Bitcoin which...

Charles Edwards

Issue #34

All else equal, Bitcoin is like a beach ball submerged underwater. Nonetheless,...

Charles Edwards

Issue #33

Last update technicals and fundamentals told us to be cautious with Bitcoin....

Charles Edwards

The Three Factor Model

90% of the S&P500 returns over the last half century can be...

Charles Edwards

Issue #32

Welcome to Capriole’s micro update #1. Where we consolidate the most important...

Charles Edwards

Issue #31

At $29K, Bitcoin’s on-chain fundamentals are not too hot and not too...

Charles Edwards

Issue #30

The failures of the Federal Reserve in managing the value of money...

Charles Edwards

Issue #29

This newsletter explores a taboo topic. The idea of the impossible, a...

Charles Edwards

Issue #28

Bitcoin’s deep value is slipping away and in its place a new...

Charles Edwards

Issue #27

We believe the 2020s will be the decade of hard money, much...

Charles Edwards

Why markets are not as overvalued as you might think.

Charles Edwards

Issue #26

The crypto world was shaken to the core in November as top...

Charles Edwards

Bitcoin Miner Sell Pressure

Charles Edwards

The Bitcoin Yardstick

Charles Edwards

Issue #25

We crack open the rarest of Bitcoin value metric readings you can...

Charles Edwards

Everything you need to know about yield curves

Charles Edwards

Issue #24

This month we deep dive into the macro and make the case...

Charles Edwards

SLRV Ribbons

Charles Edwards

Issue #23

Fear struck the market again with a blunt Fed speech. The broader...

Charles Edwards

Issue #22

This issue we deep dive into the many Bitcoin and macro metrics...

Charles Edwards

Issue #21

Today, we now find ourselves in a special juncture in the crypto...

Charles Edwards

The Digital Asset Thesis

Charles Edwards

The Capriole Macro Index

Charles Edwards

Issue #20

The S&P500 and Bitcoin showcased a strong recovery recently and today both...

Charles Edwards

Issue #19

Traditional markets have been taking a beating. Our February Newsletter and analysis...

Charles Edwards

Issue #18

The first quarter of 2022 is coming to a close. War in...

Ryan McCoy

Issue #17

For the past few months, Bitcoin has been driven by macro events...

Yassine Zrigui

Issue #16

Last month was mostly dominated by macro news much like December, namely...

Mick Herfkens

Capriole’s 2022 Market Outlook

A year ago, we published our “Christmas Special” newsletter. We wrote the...

Charles Edwards

Issue #15

If you have been around the cryptospace long enough, you have probably...

Ryan McCoy

Issue #14

Bitcoin started the month of November strong with a new all time...

Mick Herfkens

Issue #13

Bitcoin is up over 30% to date in October, reaching as high...

Charles Edwards

A Simple Metric to Identify Bitcoin Tops

Charles Edwards

Issue #12

Last issue, at $47K we noted some concerning metrics, but noted the...

Charles Edwards

Issue #11

Last issue we noted the improving fundamentals for Bitcoin following...

Charles Edwards

Issue #10

Last issue we reviewed the China’s crypto exodus and argued why we...

Charles Edwards

Issue #9

These are unprecedented times. The Bitcoin network has just experienced the biggest...

Charles Edwards

Issue #8

Bitcoin is trading at more than 40% below the all-time high for...

Jan Uytenhout

Issue #7

Every month we write a short update on the market. We try...

Charles Edwards

Issue #6

Every month we write a short update on the market. Last issue,...

Jan Uytenhout

Issue #5

Every month we write a short update on the market. We try...

Charles Edwards

Issue #4

Every month we write a short update on the market. We try...

Jan Uytenhout

Issue #3

Every month we write a short update on the market. We try...

Charles Edwards

Issue #2

We try to release our newsletters when we see key opportunities. Today...

Jan Uytenhout

What is Money?

Charles Edwards

Issue #1

This newsletter provides our airplane view of the Bitcoin market. It summarises...

Charles Edwards

The Energy Standard

Charles Edwards

Bitcoin Energy-Value Equivalence

Charles Edwards

Bitcoin’s Production Cost

Charles Edwards

Hash Ribbons & Bitcoin Bottoms

Charles Edwards

Metcalfe’s Law Says Bitcoin is Overvalued

Charles Edwards

Bitcoin Valuation using Dynamic Range NVT Signal

Charles Edwards

The Next Resession

Charles Edwards

Bitcoin Bottom Fishing with Miner Capitulation

Charles Edwards