A recent report from Coinmetrics indicates that the fundamentals of the chain indicate that Bitcoin is enjoying its biggest breakout yet. The report notes that bitcoin is already showing signs of this following its surge of roughly $ 1,000 in one day on October 21. The digital asset then set a new record for the year.
A new precedent
While acknowledging the difficulty in predicting the future value of bitcoin due to its notorious volatility, the report’s authors insist that there is a difference between previous increases and the current one. According to his report, “BTC has grown in a way we haven’t seen in previous bullfights.”
In explaining their position, the authors highlight the increasing correlation of bitcoin with gold as one of the reasons for their optimism. In the report, the authors say that bitcoin, which had a low correlation with gold and the U.S. dollar for most of its history, changed after March 12. The authors say:
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As the Covid-19 panic sets in quickly, shares around the world have plummeted. The crypto fell along with the rest of the markets, with both BTC and ETH prices falling by around 50%. Since then, BTC’s correlation with gold has been near record highs, while its correlation with the dollar has been at record highs.
According to the data, the correlation between bitcoin and gold has been positive (above 0) for much of 2020, while the correlation of the digital asset with the US dollar has remained negative during the same period. . It is this growing relationship with gold that some have promoted bitcoin as a form of digital gold.
Companies like Microstrategy and Square Inc recently announced their acquisition and subsequent holding of bitcoin as a cash reserve asset.
More Hodler addresses
Meanwhile, the report also points to another important signal, “the percentage of supply retained for at least a year (or in other words, the percentage of supply that has not been moved up the chain as part of the process). of a transaction) “. According to Coinmetrics, “As of October 25, around 62.5% of the total BTC supply was held for at least 1 year, which is near all-time highs.”
As the previous one shows, “the percentage of fixed supply for at least 1 year has reached its maximum point during periods when the price has been at the local low”.
The report adds:
Speed is also at its lowest level since 2011. Speed measures the number of times an average unit of supply has been transferred in the past year. High speed means relatively high rotation. A decreasing speed suggests that BTC tends to be used as a store of value rather than a medium of exchange.
Another metric that suggests a pending Bitcoin breakout is the “ number of addresses that have at least $ 100 in BTC (which) hit a new high of 9.74 million on October 22 ”.
In conclusion, the report states that historically, “ the price of bitcoin peaked locally within 1.5 years of each halving. As hold activity increases and “halves in less than six months in the rearview mirror, all signs point to BTC ready to take off.”