This data could bode well for Bitcoin’s rebound

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Amid a dreadful year for bitcoin and the broader cryptocurrency complex, HODLrs are on the lookout for any positive news that could support a bitcoin rebound in 2023.

If the on-chain data proves accurate, help could be on the way for bitcoin and for crypto-correlated exchange-traded funds such as the Invesco Alerian Galaxy Crypto Economy (SATO) ETF.

For the uninitiated, on-chain data analysis is the use of blockchain data to determine the opinions of bitcoin users in the market. Think of it as a sentiment indicator. This methodology is effective because it assesses both transaction data and the amount of inflows and outflows from crypto wallets.

Interestingly, on-chain data brings security to bitcoin transactions. This is what makes these transactions traceable. In fact, it was the on-chain data that provided clues to FTX’s collapse.

Bitcoin is a terrible asset to crime. It’s 100% traceable. Most other cryptocurrencies can also be traced. Hours after the FTX hack in November, Kraken Exchange said it identified the hacker. On-chain analysis was also invaluable in November for monitoring currency risk and the Capriole Fund used it to monitor FTX currency reserves and protect investors’ assets, according to Capriole Investments.

As for potential bright spots for bitcoin prices and ETFs such as SATO, Capriole highlights the storyline that started the run on FTX, including a Tweet from Binance’s CEO. The research firm noted that the subsequent fallout resulted in a rare deepening in Bitcoin’s value against on-chain fundamentals.

Capriole also pointed out that following the FTX calamity, bitcoin miners, several of whom reside at SATO, are capitulating. These companies sold reserves of bitcoins to raise capital, in turn sending the price of the biggest digital currency below its electricity costs – a remarkable scenario.

Caprioles Bitcoin Electrical Cost represents the cost of mining one Bitcoin based on the global average miner electrical cost of $0.05/kWh and factoring in mining hardware, depreciation and more, Capriole noted. It is incredibly rare for Bitcoin to trade below its electrical cost, a price that has been an all-time low for Bitcoin.

Conclusion: Bitcoin and its crypto peers remain beleaguered assets, and the ongoing FTX situation is not helping matters. However, the on-chain data could be a sign that digital currencies and associated stocks may improve in 2023.

vettafi.com is owned by VettaFi, which also owns the index provider for SATO. VettaFi is not the sponsor of SATO, but the affiliate of VettaFis receives index license fees from the sponsor ETF.

For more news, insights and analysis, visit the Crypto Channel.

Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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