Thermocap

Thermocap Indicator

The Thermocap indicator measures the cumulative earnings of miners from block rewards since the inception of a cryptocurrency. This metric provides insights into the cost of securing the network, miner profitability, and the relationship between market capitalization and miner incentives.

Steps to Use the Thermocap Indicator

1. Understand the Concept:

• Thermocap: The total sum of block rewards earned by miners over time, expressed in the cryptocurrency’s native units.

• Relevance: Reflects the total historical cost of securing the network and the cumulative rewards distributed to miners.

2. Interpret the Thermocap Indicator:

• High Thermocap: Indicates a significant amount of miner rewards have been distributed, reflecting network growth and longevity.

• Low Thermocap: Suggests a relatively new or low-reward network, with lower historical mining costs.

• Trends Over Time: Analyze thermocap growth to assess the relationship between network security costs and market value.

3. Analyze Historical Patterns:

• Network Maturity: Older networks with longer mining histories typically have higher thermocap values.

• Bull Markets: The growth of thermocap may accelerate as more rewards are distributed during high activity periods.

• Halving Events: The rate of thermocap growth may slow after halvings due to reduced block rewards.

4. Make Decisions:

• During High Thermocap Periods: Evaluate the sustainability of miner incentives and the relationship between thermocap and market capitalization.

• During Low Thermocap Periods: Consider the implications for network security in newer or lower-reward networks.

• Validate Network Health: Use this metric alongside other indicators to confirm trends in network security and miner profitability.

Tips:

• Combine with Market Cap: Analyze the ratio of market cap to thermocap to evaluate market valuation relative to network security costs.

• Monitor Historical Trends: Compare thermocap growth over time with network milestones and market cycles.

• Account for External Factors: Consider regulatory changes, energy prices, and technological advancements influencing mining costs.

• Use with Miner Revenue: Pair thermocap data with miner revenue metrics to assess long-term miner profitability.

How to Use the Indicator Effectively

• Assess Network Security Costs: Use thermocap trends to evaluate the cumulative cost of maintaining network security.

• Identify Market Cycles: Monitor changes in thermocap growth relative to market capitalization to detect valuation trends.

• Support Strategic Decisions: Incorporate insights from this indicator into network evaluations, investment strategies, and miner behavior models.

Created By Rafael Schultze-Kraft