Miner's Rolling Inventory (MRI) is an indicator created by ByteTree that measures the bitcoin inventory levels held by miners.
The MRI is calculated using the formula shown below, which is the change in bitcoin first spend over a number of weeks, divided by the change in bitcoin generated by miners, then multipled by 100:
ByteTree notes that n should be 3-6 weeks.
For instance, if over a six-week period where n = 6, miners generated 100,000 BTC while first spend saw 102,000 bitcoins join the network, then 2% more bitcoins have been spent as compared to those that have been mined.
The MRI for six weeks would then be equal to 102%. For MRI values above 100%, this indicates that miners are selling more BTC than they mine and depleting their inventory. If there were more bitcoin generated than coins first spent on the network, then the MRI would be less than 100% which would suggest that miners are hoarding BTC.
The ByteTree terminal shows bitcoin's MRI value over 1-day, 1 week, 5 weeks and 12 weeks:
Since miners receive block rewards in the form of subsidies and fees when they solve a block, they obtain newly minted bitcoins that represents fresh supply and which have never been spent. ByteTree collects the unspent inventory of miners and tracks any of these coins when they are first spent. Then by plugging these values into the formula above, we get the Miner's Rolling Inventory.
Over bitcoin's price history, a high MRI has usually indicates a strong market that miners are comfortable selling into.
When using the MRI for 3 weeks and longer timeframes to buy bitcoin whenever the value was above 100%, ByteTree found that this method showed improved returns and lower drawdowns as compared to just holding bitcoin.
Similarly, they also looked at the opposite case, where you would buy bitcoin whenver the MRI value was below 100% and the results show that price weakness is often associated with a low MRI. When the market is weaker and there is less buying interest, miners tend to sell less of their inventories and the MRI falls as inventories rise.
Therefore, the MRI can be a useful metric to gauage to assess the health of the bitcoin market. When the MRI is at a low value, then traders should be wary of their downside risk. On the other hand, a high MRI value may indicate that the market may be beginning to enter (or is already in) a bullish phase.
ByteTree's platform also allows you to view the same on-chain and network statistics for other chains such as Bitcoin SV, DASH and Litecoin.