Bitcoin (BTC) has hit new 2020 highs, nearing the price of USD 14,000, and it’s “poised for takeoff,” according to crypto analytics firm Coin Metrics that gave three reasons why that might be the case.
In the past 24 hours, BTC had surpassed USD 13,800, or the level last seen in January 2018, before falling below USD 13,000 again and later rebounding to USD 13,116 (15:59 UTC). Though bitcoin volatility is not the least bit surprising, “something is different this time around,” argued the Coin Metrics team in the recent report. It added that,
“Ever since the March crypto crash, BTC has been growing in ways that we have not seen in previous bull runs. On-chain fundamentals hint that it could be poised for its biggest breakout yet.”
The firm gave 3 arguments to support this claim.
1. Correlation with gold/dollar and increased hodling
Following the crash of March 12, now known as Black Thursday, BTC’s usually low correlation with both gold and the US dollar – shifted. Since then, BTC’s correlation with gold has been near all-time highs, and it’s correlation with the USD has been at all-time lows, said the report.
Per on-chain data, BTC holding since March 12 has increased while price has risen, “signalling that BTC is increasingly being used as a store of value, similar to gold.” As of October 25, some 62.5% of the total BTC supply was held for at least 1 year, close to all-time highs.
BTC’s velocity – which measures the amount of times an average unit of supply has been transferred in the last year – is at its lowest levels since 2011, which suggests “BTC is trending towards being used as a store of value as opposed to a medium of exchange.”
2. ‘More holders than ever’
Continuing the above-mentioned argument, the report said that there “appear to be more holders than ever,” with the number of addresses that hold at least USD 100 worth of BTC hitting a new all-time high of 9.74m on October 22. This is a positive signal for BTC’s long-term adoption, said Coin Metrics.
Following the good old ‘not your keys, not your money’ saying, it seems that more holders want to custody their own coins, given that BTC supply is increasingly being moved off of centralized exchanges.
3. Decreasing BTC’s supply inflation
Supply issuance has been shrinking, especially when taken into account bitcoin’s halvings, the third of which happened just this May.
“Historically, BTC price has hit a local peak within 1.5 years of each previous halving,” said Coin Metrics. “With holding activity increasing and the halving less than six months in the rearview, all signs are signaling that BTC is poised for takeoff.”
Large investors-driven rally
Nic Carter, Coin Metrics co-founder, is quoted by Bloomberg as saying that “this rally seems to be more driven by allocators with larger balances getting involved, rather than a flurry of retail investors.”
This comes after PayPal‘s decision to include crypto in its offering, as well as Square‘s and MicroStrategy‘s investments in BTC.
Coin Metric’s weekly State of the Network report further added that bitcoin transaction fees exploded, increasing by 82.5%. “On October 22nd BTC’s average transaction fee shot up to [USD] 6.35, eclipsing ETH’s average fee of [USD] 1.69.” And while ethereum (ETH) average transaction fee was higher than BTC’s for most of September due to the decentralized finance (DeFi) boom, “the momentum has shifted back towards BTC.”
Meanwhile, Bitcoin bulls used the recent rally to share their optimism over bitcoin’s present and near future. Raoul Pal, CEO of Real Vision Group, for example, described the coin as “a supermassive black hole that is sucking in everything around it and destroying it,” including silver, gold, banks, bond, commodities, etc. “This narrative is only going to grow over the next 18 months,” said Pal.
Bitcoin’s performance is SO dominant and SO all-encompassing that it is going to suck in every single asset narrative dry and spit it out.
Never before in my career have I see a trade so dominant that holding any other assets makes almost no sense.
— Raoul Pal (@RaoulGMI) October 27, 2020
Meanwhile, others were expecting a correction before the rally continues.
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