Hidden Capitulation?
![Hidden Capitulation?](/content/images/size/w1200/2023/05/2021-07-12-bitcoin-network-demand-model-banner-34.jpg)
Disclaimer: Your capital is at risk. This is not investment advice.
Bitcoin Network Demand Model
No good news from the Network Demand Model this week, but we’re at a point where “no news is good news”. The short-term transaction signal has switched off again, but it’s very noisy at this stage. It does look like fees have found a bottom of sorts, however. If there was going to be a repeat of the 2018 November collapse, then based on fees it should have happened by now. Or has capitulation already happened; we just didn’t notice because the set-up was different?
![](https://www.bytetree.com/content/images/2023/05/2022-03-21-ndm-118-jukebox.png)
Short-term transactions turn off but are tracing in a low range. Until we see a meaningful break one way or the other, the signal will flicker on and off.
![](https://www.bytetree.com/content/images/2023/05/2022-03-21-ndm-118-1.png)
Fees have also started to bottom out, a sign that things are unlikely to deteriorate further. This has been a powerful indicator in the past, with previous crossovers signalling a bull market resumption. As with transactions, we’re not there yet, but investors should keep a careful eye on this metric and prepare for an upturn.
![](https://www.bytetree.com/content/images/2023/05/2022-03-21-ndm-118-2.png)
Readers will know that I’ve been nervous about late capitulation in this cycle, much as we saw in November 2018, when after a period of low-level consolidation, the price suddenly fell a further 40% (see below). (Note: although this was painful, the price recovered within 6 months or so, showing the value of hodling).
However, as the long-term fee structure rebases this worries me less. As seen on the chart below, we have also seen a major price correction, the difference this time being that it has corrected from a secondary peak, which didn’t happen in 2018. In other words, it could be that the capitulation I’ve been worried about has already happened, just this time from a much higher base.
![](https://www.bytetree.com/content/images/2023/05/2022-03-21-ndm-118-3.png)
A price holding in this range is also consistent with our valuation work and lends support to the idea that market depth and greater institutional participation is dampening volatility.