Bitcoin is up 20% from its recent low, is $ 100,000 still at stake?

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Bitcoin has fallen by half from its all-time high. Many predicted that its deflationary nature caused by halving the reward would push its price up to $ 100,000 or more. But now the crypto has been trading sideways for over a month and people are starting to wonder if there is an impending bear trap or if the bull market will continue.

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There are various fundamental trends going on with Bitcoin trading and within its blockchain that may provide some insight into the direction crypto could take in the coming weeks or months.

Supply exchange

One piece of data that can provide insight into Bitcoin investor behavior is where cryptos move in and out of exchanges. Typically, if Bitcoin is sent to an exchange, it is for the purpose of selling. When Bitcoin is sent out of an exchange, it can usually represent the act of buying and withdrawing to a personal wallet.

Examining how cryptos enter and exit exchanges can reveal broader trends. A lower bid on an exchange can cause the liquidity to trade to drop, resulting in a scarcity effect that can drive the price up. According to Viewbase, a site that aggregates data from over 14 of the major exchanges, nearly 10,000 Bitcoins have been sent to the exchanges in the past 30 days. This influx to the exchanges, presumably for the purpose of selling, matches the recent downtrend that Bitcoin has experienced.

More recently, however, the supply on the exchanges has declined, resulting in stabilization and support above the $ 30,000 mark. In the past seven days, over 13,000 Bitcoins have been withdrawn from major exchanges and on the last day almost 6,000 Bitcoins have left exchanges.

The price of Bitcoin has mirrored Bitcoin’s movements in exchanges, as Bitcoin has held steady near $ 35,000 over the past two weeks.

HODLER Accumulation

Another metric to gain insight into the health of the Bitcoin market is the number of addresses that accumulate Bitcoin. These are simply addresses that don’t sell Bitcoin and are continually adding more to their wallet. When the price of Bitcoin dropped drastically in early May, addresses that were accumulating more Bitcoin skyrocketed.

Cumulative addresses: https://studio.glassnode.com/metrics?a=BTC&category=&m=addresses.AccumulationCount&s=1605415570&u=1625616000&zoom=

This signals a high degree of trust among Bitcoin holders and shows continued support for the asset regardless of the price.

Always in profit

At Bitcoin’s peak price of around $ 65,000, almost 100% of Bitcoin wallets were at a profit. This means that almost 100% of Bitcoin holders bought the asset for a lower price, which makes sense for a coin that had just hit an all-time high.

At the coin’s lowest price since its fall, 69.5% of wallets were profitable. Right now, just under 74% of wallets containing Bitcoin are profitable. This means that only around 25% of Bitcoin holders have bought at prices above the current price.

In profit addresses: https://studio.glassnode.com/metrics?a=BTC&category=Addresses&m=addresses.ProfitRelative&s=1604842056&u=1625616000&zoom=

When an increased number of investors experience losses, it can reduce the overall confidence of the market in general. Even though Bitcoin has fallen 50% from its all-time high, the vast majority of investors remain profitable, which is likely another contributing factor to price stabilization above $ 30,000.

Mining hashrate

The recent mining crackdown in China has certainly helped push Bitcoin down from its highs. Such action by the country has caused fear in the market, and we have seen new addresses come out.

But while fear of regulation can cause massive sales, this recent drop in Bitcoin’s mining hashrate, or the total computational power of Bitcoin used to mine, could have a positive outcome.

Bitcoin Hashrate: https://studio.glassnode.com/metrics?a=BTC&category=&m=mining.HashRateMean&s=1604842056&u=1625616000&zoom=

Bitcoin has accumulated levels of computing power so immense that it consumes more power than entire nations. The more energy that is added to this network, the more secure it becomes.

On the one hand, it is bad to have a lower hashrate because the network security is slightly down. But this decrease in hashrate also represents an opportunity for miners to earn more money. Much more money.

Within Bitcoin’s mining infrastructure is an incentive mechanism. As the hashrate increases, the difficulty of mining increases. Typically, an increase in the price is followed by a higher hash rate, as the increased difficulty has less of an effect when the price is so high. If the price drops or an event like the crackdown in China occurs, the hashrate could drop. Then, the protocol will automatically readjust the mining difficulty so that it is lower. This process ensures that minors are always encouraged to continue and helps ensure that the network is always secure.

Right now, Bitcoin’s hashrate has seen a sharp drop as many miners in China have been forced to shut down. But Bitcoin’s mining difficulty has now dropped, which means there is money to be made for miners.

Mining difficulty: https://studio.glassnode.com/metrics?a=BTC&category=&m=mining.DifficultyLatest&s=1604842056&u=1625616000&zoom=

On June 27, miners received just over 388 Bitcoins for their work. On July 6, after the difficulty dropped, miners earned over 934 Bitcoin for their work in securing the network.

Mining rewards: https://studio.glassnode.com/metrics?a=BTC&category=&m=mining.RevenueSum&s=1622601120&u=1625616000&zoom=

This period of low difficulty for miners will likely result in a very quick recovery of Bitcoin’s hashrate. Overall, the decrease in hashrate can be viewed as positive as fears that China controls Bitcoin’s hashrate have now evaporated. Now, much of the electricity from China will likely be disseminated to other regions, helping the grid to spread geographically.

So, is $ 100,000 still at stake?

Much of the $ 100,000 forecast comes from the limited supply of Bitcoin coupled with the asset’s still declining inflation rate. These two factors are still true and always will be. Without external variables, and assuming that Bitcoin continues to be used more and more, its price would likely continue to rise as its finite supply is put into circulation. This pattern of using Bitcoin’s stock-to-flow ratio has worked well in the past, but the past is not always indicative of future results.

What is not predictable are external factors like the crackdown in China or people like Elon Musk, who have incomprehensible levels of influence. While these variables do exist and have the power to push Bitcoin off certain trajectories, fundamentals such as flow of exchange, investor confidence that builds up, for-profit holders, and the incentive for miners to continue to secure. the network are all signs of a continued bull market.

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