DataLight Longreads

Real Usage Index by DataLight. The metric you should always keep in mind when predicting Bitcoin price.

May 26, 2019

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Real Usage Index by DataLight. The metric you should always keep in mind when predicting Bitcoin price.

Now that we seem to be in the early stages of the next crypto bull run, or at least out of the depths of the crypto winter that began in 2018, many are fixated on what the next big price movement for Bitcoin will be. The parallels between 2019 and 2017 are drawing a lot of attention.

Many focus on fundamentals — institutional involvement, big companies adopting bitcoin, or mainstream penetration. Others look at technical analysis and charting, while some pay attention to the technical aspects of the blockchain itself, such as Bitcoin mining difficulty.

One underappreciated metric which is available on our DataLight Laboratory is Real Usage Index by DataLight.

What is “Real Usage Index by DataLight” and how might it relate to price?

Real Usage Index is a measure of how blockchains are really used. It is calculated as the number of active addresses multiplied by the number of transactions. This metric is particularly interesting if we compare the way it has been changing in 2019 to the last bull run in 2017.

While it is a very risky game to draw concrete predictions for the price of bitcoin or any cryptoasset, it’s still illuminating to see how the current market compares to that of 2017. The chart below compares the real usage against spectacular rise in the Bitcoin price in 2017 and 2018, and the same two metrics in 2018 and 2019.

What’s immediately noticeable is that the Real Usage Index is approaching the numbers of November 2017, when bitcoin saw an astonishing price surge which resulted in bitcoin hitting its all-time-high at nearly $20,000 in mid-December.

Moreover, the Real Usage has been growing steadily in 2019, building the momentum as it did in 2017 on the run up to the price surge, where the price remained below the Real Usage before rapidly shooting up to exceed it. If the pattern follows that of 2017, we may soon see a similar effect where the price soars to match Real Usage.

Why this Matters for Traders?

It’s a dangerous game making direct inferences from past charts or from single metrics. The Real Usage Index however is one important tool that traders and investors can make use of in our DataLight Lab. Here, users can build their own custom dashboards, incorporating the metrics and visualizations that best match their trading strategy.

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