Issue 116: Revisiting Key Bitcoin Metrics
October 1st, 2020
Weekly Market Movement in Bitcoin
Analysis: Bitcoin and the cryptocurrency market in general has dropped sharply today, due to the news that the U.S. Department of Justice and the Commodity Futures Trading Commission (CFTC) have filed charges against crypto derivatives exchange BitMEX. This sudden drop in the market wiped out a week of modest gains for most major coins.
Big Story Of The Week for Bitcoin
With Bitcoin Settling Into A Range Between USD 10k And 11k, We Wanted To Revisit Key Metrics From The Network For Further ContextBTC’s hash rate – a reflection of the total computing power used to mine the network – achieved a new record high on September 24 according to Blockchain.com. Similarly, network difficulty, described as a ‘measure of how difficult it is to mine a new block for the blockchain…’ which rises as more actors attempt to mine BTC in order to manage stock-to-flow, achieved a record high last week. Stepping away from on-chain metrics, BTC HODL waves – a reflection of a coin’s age, i.e. ‘when it was last used in a transaction’ – remain relatively unchanged despite the asset’s drop after challenging USD 12k at the beginning of September. September’s market action did see a slight uptick of BTC deposited on Bitfinex (see chart), however, not breaking the metric’s mostly sideways movement since May. September also saw a slight jump in the number of addresses with a balance greater than 100 BTC. However, despite that jump that metric remains relatively in line with trends established in September 2018 where large holders seemed to have sold off ahead of the bear market of winter 2018/2019.
Takeaway: Those supporting a bullish BTC thesis would probably point to the flat metrics as evidence of an unchanged outlook for the asset despite a failure to break above USD 12k. A sustainably increasing hash rate and difficulty setting new highs shows growth and optimism in what is BTC’s most capital intensive sub-sector, mining. Ultimately, these metrics demonstrate that in spite of interest and price gains shifting towards DeFi and elsewhere (BTC Dominance declining), metrics that would be considered BTC ‘fundamentals’ continue to show incremental growth.
Other Weekly Headlines
- Ethereum 2.0 testnet Spadina has launched The testnet, which will allow prospective stakers to simulate joining the network and is considered a key step towards a full launch of Eth 2.0, will be up for 3 days. – link – @CoinDesk
- Filecoin, a decentralized data storage network built on a blockchain, announced it will launch its mainnet in October. Filecoin raised USD 250M via an ICO held in 2017. The announcement was made on Sunday. – link – @TheBlock
- Eminence.Finance, an unfinished decentralized finance platform, suffered a compromise resulting in a loss of USD 7M. The exploiter initially took USD 15M from the platform, but later returned USD 8M to Yearn.Finance, another DeFi platform built by Andre Cronje, who also built Eminence.Finance. – link – @TheBlock
- EY has launched a procurement management solution, called EY OpsChain Network Procurement, built on Ethereum. The platform, available in beta version, allows users ‘to run private, secure, end-to-end procurement activities on the public Ethereum blockchain.’ – link – @EY
- FinCEN director Kenneth Blanco touched on crypto at a virtual conference on Tuesday. Blanco described the ‘virtual currency space’ as a priority area. Blanco said cryptocurrencies continue to ‘come up’ during AML-related discussions with banks adding that exchanges are not the only clients that can come with ‘crypto risk exposure.’ – link – @FinCEN
Disclaimer: The opinions and analysis expressed in this newsletter are those of the writer, and not of Bitbuy. Nothing in this note should be considered investment advice.