Four Factors for Bitcoin’s Resurgence
ByteTree founder Charlie Morris analyzed four factors that can help understand how Bitcoin and cryptocurrencies have reacted to recent declines, and what is still to come.
The factors are chain data, technical analysis, investment flows and macro trends.
Technical and fundamental analysis of Bitcoin’s price
This analysis shows that it is too late to be cautious, but it is better to be patient. In fact, the network certainly seems stable, institutional investors have not left the crypto markets, and macro conditions will improve at some point.
Prices have stabilized over the past week, with a a slight increase in confidence in the markets after the end of the hard selling period.
Analysis of chain data
In terms of chain data, the network has only seen a modest decline compared to previous cycles, despite the price drop, and this should be seen as a positive given that some of the value of BTC comes from network activity and effects. There is also no significant decline in high value transactions, which suggests that institutional activity has remained high.
Miners is presumably reducing its activity and transaction fees continue to rise, despite lower average individual transaction volumes.
Morris notes that during the current cycle the price of BTC has been correlated with mining stocks, just as it is in a normal commodity market. From this he concludes that stocks will struggle to fall much unless Satoshi’s BTC is released into the market (which is quite unlikely).
Technical price analysis
From a technical analysis perspective, weak trends will worsen, while stronger trends will begin to emerge and become a reality over time. Two of these positive trends are Ethereum’s strength and Bitcoin’s strength against the Nasdaq (BitDAQ: BTC vs. NASDAQ).
Presence of institutional investors and macroeconomic environment
In terms of investment flows, capital flows into and out of the market have stabilised. The discount on GBTC ie. Grayscaleits fund dedicated to Bitcoin, is extensive.
In contrast, macro conditions indicate positive development for alternative assets such as cryptocurrencies and goods, with the US dollar still strong. But if the high isn’t what it is now, it should be coming soon.
In addition to all this is the commentary on Bitfinex Market analysts on yesterday’s trading day:
“Bitcoin and traditional stocks were on the rise immediately after yesterday’s FOMC announcement of its decision not to raise interest rates by 100 basis points and only 75 basis points. This decision, and the way it was communicated, appeared to have dampened some bearish sentiments .
No matter how well the Fed manages expectations, jump-starting economic growth will require investing resources in high-growth sectors such as blockchain and decentralized technologies. Still untapped and under-commercialised, this emerging sector has the potential to transform all major industry verticals.
There is a strong chance that the next decades of economic growth will be driven by blockchain-based technology – some of which will be driven by a secondary economy underpinned by digital assets.”
