Five reasons why this crypto bull market still has a long way to go

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When it rains, it pours! Much like last month in the cryptocurrency arena, negative news and FUD (Fear, Uncertainty and Doubt) swept in to dampen the cryptocurrency market. Black Friday has arrived early for the crypto world, and most coins are on sale at half price, but is this the start of the bear market, or are we ready for another head start?

When considering assets to invest in, do your homework and analyze the hard facts. Facts have an innate power; they cut through any clickable bait you see and show you an unbiased view of what’s really going on.

As a general rule, always look at what is going on under the hood, you will never know if a car is broken by looking at its paint job.

In the traditional world of finance, the role of an analyst is to assess the value of a company based on specific market parameters and accounting cash flows. These valuation methods can be very complex and require a lot of information that is not easily accessible; for cryptocurrencies it is slightly different.

This is called chain analysis, which is a live stream of cryptocurrency data ranging from the number of new users (showing the adoption and growth of coins) to wallet profiles, for example. , how many unique Bitcoin addresses have not moved their coins for more than five years (long term holders).

With this data, we can paint a pretty good picture of what the future of cryptocurrencies might look like.

Here are the five data-driven reasons why this bull run still has a way to go:

Stock-to-Dough

The Stock-to-flow (S2F) model was developed as a simple model for valuing rare commodities like gold. The S2F ratio shows the current stock of a product (current total supply) versus the new production flow (quantity mined that year).

For store-of-value (SoV) commodities such as gold, platinum, and now Bitcoin, a high ratio indicates that they are generally not consumed. Instead, the majority is stored as currency hedge, thus increasing the S2F ratio.

A higher ratio indicates that the commodity is increasingly scarce, and therefore more valuable as a store of value.

In the cryptocurrency world, PlanB has created a live S2F model for Bitcoin.

In the chart below, the price of Bitcoin is superimposed on the S2F ratio line. We can see that the price of Bitcoin has continued to follow Bitcoin’s S2F over time. The theory therefore suggests that we can project where the price may go by looking at the projected S2F line, which can be calculated because we know the approximate mining schedule of future Bitcoin mining.

The predictive price of the S2F model is currently at its largest ever deviation from the actual price. This model shows that Bitcoin is at $ 86,000, while its price is trading at around $ 34,000 (a 60% discount from the S2F price). This divergence has been an excellent predictor of low prices. The model also predicts that Bitcoin will be at $ 1,000,000 a coin by 2025.

The long game

It’s always a good idea to look at long-term price data using a good old log chart, for the simple reason that price changes are difficult to display on a linear scale and can be deceptive over an extended period.

For example, there is a fundamental difference if a security with a value of R100 goes to R110 (an increase of R10) or if that same security were to go from R20 to R30 10 years ago. A line chart would display the two increases in R10 as the same proportional movement on the chart, although they are very different when it comes to price appreciation!

A newspaper chart would indicate that the R20 to R30 move is 50% price appreciation while the R100 to R110 is only 10% price appreciation and would adjust them accordingly.

So, when evaluating long term trends, always remember to look at price charts in logarithmic terms for clarity.

Above we can see the log price chart for Bitcoin and how it is following a clear uptrend. Based on this assessment, we can see that this bull run still has some way to go before Bitcoin hits the upper band at $ 132,000.

Don’t watch what they say; watch what they do

Most of the news these days is just there to distract you from what’s really going on. That is why you should try to cut through the noise. One of my mentors once gave me advice that seems to ring true in this situation. He said never to believe people what they say, but rather what they do, said Brett Hope Robertson, investment analyst at Revix investment platform.

Below is a chart that shows the famous whales (people who hold over 1,000 Bitcoins) are starting to buy Bitcoin at these levels, with July showing the largest one-day peak seen in the past year. . Is all this happening despite all the negative press? Yeah! There is never a dull moment in the crypto world.

We also saw $ 1.3 billion worth of Ethereum or 0.5% of the total Ethereum supply exit trading in a single day! This was one of the largest single moves seen this year.

When the coins leave the trade, it means that the buyers have decided to move their coins to a cold room or a personal wallet. This shows the market that buyers have no plans to sell their coins anytime soon and that long-term demand is increasing, Robertson continues.

Positive supply shocks cause price increases

The Bitcoin liquidity supply ratio (blue line) shows the number of coins held by participants with little sales history (strong hands) divided by the number of coins held by speculative participants (weak hands).

We can see that long term holders are starting to rack up coins from retail traders who were rocked in the last Bitcoin price drop (orange line).

Another factor is the supply shock ratio (blue line); this is the total supply of coins divided by the coins available on exchanges. As the availability of coins on the exchanges decreases relative to the supply, this contributes to increasing supply shocks (increasing blue line).

We can see that this line is increasing as the price of Bitcoin (orange line) is decreasing. This leads to the fact that coins are withdrawn from the stock exchanges in anticipation of long term growth.

The unlikely hero

China’s recent crackdown on Bitcoin mining may have contributed to its low prices over the past month, but in the long run, China may have just become the unlikely hero of the affair. Bitcoin Bull.

It’s no secret that Bitcoin mining in China accounts for over two-thirds of global Bitcoin production (66%). This raised concerns that Bitcoin mining was too concentrated in one region of the world, putting the network at risk of blackouts and political interference.

This paints a pretty ugly picture for the risk of centralization of the crown cryptocurrency, but what if we look at it from a different perspective?

Since China announced its ban on Bitcoin mining operations, the ecosystem has started to migrate to North America and Kazakhstan, where energy is cheap, and hosts are more open to Bitcoin Mining.

It’s a huge deal, says Robertson, this migration will begin to decentralize the previously centralized Bitcoin hashrate. This is probably one of the most important steps Bitcoin has taken towards true decentralization, and it will finally put an end to the fear of hashrate concentration.

China has been at the forefront of banning several technological innovations, but that hasn’t stopped these tech companies from taking over the world as we know it. Twitter, Facebook and Google all have something in common: They have all been banned by China on several occasions. In fact, China’s tech bans have proven to be a very good buy signal over the years, Robertson points out.

The table below shows the returns of technological innovations banned by China.

The above five points based on the data show that there is still a lot of life left for this bull. In the long run, Bitcoin, and in turn, cryptocurrencies are just getting started.

Buying Bitcoin is a great way to market yourself. But you know what better? Buy Bitcoin and own the next Bitcoin. The best money managers in the world know that to be successful you have to be one of two things: be smarter or be first. Unfortunately, no one is smart enough to know which cryptocurrency project will win this race 10 years from now, and anyone who claims to do so is lying.

Therefore, the easiest way to be the first is to invest in a set of the best cryptocurrency projects and sit down while they fight for dominance, says Robertson.

On the Revix investment platform, you can access their out-of-the-box crypto packages. These bundles allow you to own an equally weighted basket of the largest and, by default, the best performing cryptocurrencies in the world.

You don’t have to try to guess which emerging cryptocurrencies will become the next Bitcoin since you will own a diverse basket of cryptos that will automatically update each month based on the performance of the crypto market.

Diversification works in all asset classes around the world. It’s no surprise that this also works in crypto.

For more information on crypto bundles, or a direct way to invest in Bitcoin or Ethereum cryptocurrency ether, visit Revix.

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