Kategorie: Bitcoin News

Key  Takeaways

• Bitcoin is up nearly 50% thus far this year, but there have been no positive catalysts from within the industry
• Rally is nothing but macro-driven, writes our Analyst, with Nasdaq up 16% and Bitcoin continuing to trade like a levered bet on the index 
• There are many headwinds still present, the latest being the potential regulatory clampdown, such as the BUSD shutdown this week
• Bitcoin – and crypto – remain vulnerable to these factors, and despite the recent rally is still 65% off highs with many questions still unanswered

 

What do the below things have in common?

• Crypto lender Genesis files for bankruptcy
• Parent company DCG announces it is to sell off crypto assets at a discount
• Layoffs surge, including Coinbase, crypto.com, blockchain.com
• SEC sues the issuer of Binance’s stablecoin, BUSD, with the coin to gradually wind down
• Regulatory clampdown fears rise off back of BUSD case, most predominantly for world’s second largest stablecoin, USDC

 

They are all negative news events, that’s what. And yet, despite these headwinds, the crypto market is on an absolute tear thus far this year. Bitcoin is now staring down the barrel at $25,000 for the first time since August 2022.

Were all the bearish catalysts priced in? Maybe. One could certainly argue that prices incorporated the DCG and Genesis issues in the immediate aftermath of the FTX collapse in November. The BUSD story was certainly a surprise, however. Then again, should that really impact markets? Maybe not. 

The big crypto-specific story is the looming threat of regulation and the fears surrounding projects like USDC, the stablecoin that carries a $41 billion market cap. The concern around securities laws was first triggered last week when crypto exchange Kraken was issued with a $30 million fine in relation to staking products it offered.  

To frame it a different way, has cryptoland seen viable reasons to jump up to this extent? Bitcoin is now up 48% on the year. Where has the good news been?

Crypto is rising for one reason only 

The answer may not be the romantic one, but it’s macro. Inflation readings have softened, with the market moving towards an expectation of a Fed pivot off tight monetary policy sooner than was previously anticipated. 

The market, whether you agree or not, is now positioning itself as if inflation has been slayed – or, at least it is in the process of being slayed, with the peak in the past and numbers falling. In terms of prices, this means that optimism creeps in because the market expects a pivot off tight monetary policy sooner than was previously anticipated. 

For crypto, that is the most important thing bar none. The asset class is positioned as far out on the risk spectrum as can be, and despite claims from advocates to the contrary, it very much trades like an extreme-risk asset.

It is no coincidence that Bitcoin plummeted precisely when the Federal Reserve transitioned to a hawkish interest rate policy back in April of last year. And with inflation then softening towards the end of the last year, it has bounced back up. 

There are not many charts more indicative than the below one, a simple comparison of rates and the Bitcoin price. Again, not an overly romantic view, but it paints a pretty clear picture.   

Another way to chart this, albeit not an overly fashionable graph again, is by plotting Bitcoin against the tech-heavy Nasdaq index. It’s the modern-day Ross and Rachel from Friends story – the duo just can’t seem to separate for longer than a few days. 

I was tempted to decry what I think is an overreaction in the crypto market. But in truth, this is simply a continuation of what we have been seeing over the last few years. In good times, Bitcoin rises a magnitude higher than the Nasdaq, and in bad times, it does the same in the opposite direction.

Bitcoin is simply trading like a levered bet on the Nasdaq, which itself has been glued to inflation numbers and Federal Reserve minutes. 

I think what we have seen thus far this year is the strongest argument yet that Bitcoin is simply trading like a levered bet on the long end of the risk spectrum. There has been nothing but bearish catalysts from within sector, and yet it’s rocketing upward. 

The Nasdaq, on the other hand, is also printing boisterous gains – up a cool 16% at time of writing, meaning Bitcoin has pretty much tripled its gains. From the BTC all-time high in November 2021, the Nasdaq shed about 37% to its low. Bitcoin lost 77%. 

And so, while the Bitcoin price rise may seem jarring in nominal terms – it’s up nearly 50% this year! – it’s not that much over what we would have expected, had you known the Nasdaq would jump 16%. 

Not to mention, Bitcoin is still down 64% from its all-time high, and the space remains barren compared to the fruitful abundance of the bull market. 

None of this analysis is particularly revolutionary. We know for a long time now that Bitcoin is an extreme risk-on asset and its price movements are leveraged bets on the macro situation – with some crypto-specific scandals (looking at you, Do Kwon and Sam Bankman-Fried) thrown in. Do Kwon and Sam Bankman-Fried) thrown in. 

But when staring at the jaw-dropping percentage gains for Bitcoin, it’s important to keep this perspective. The space remains very vulnerable to some seriously bearish The space remains very vulnerable to some serious issues surrounding bankruptcies (and ongoing contagion out of FTX) and a potential hit to its reputation on the mainstream stage, not to mention the collapsed volumes and interest – which have not shown much bounceback even amid the recent rally. 

Bitcoin is 65% off its high, even after this run. It’s great that the economy appears a little more optimistic than a few months back, and that is obviously a good thing for Bitcoin. But be careful here people, there remain a lot of predators lurking in the long grass. 

The post Bitcoin rally could be a mirage, writes our Analyst – a Deep Dive appeared first on CoinJournal.

Bitcoin was 26X more volatile on a weekly basis than the euro in 2022, up from 19X in 2021 and 16X in 2020

Key Takeaways    

• There is a perception that Bitcoin’s volatility is coming down, however the data fails to back this up
• Bitcoin’s volatility fell until 2015, but it has not improved since then
• In comparing the asset’s returns to the Nasdaq and individual stocks, it blows them out of the water
• Bitcoin’s average volatility vs USD on a weekly basis was 26X greater than the euro last year, up from 19X in 2021 and 16X in 2020

Bitcoin and volatility are like the two leads in a rom-com. They may have some time apart intermittently, but you know that they will get back together before long. 

But are things improving? I have written plenty about what I believe is the single biggest challenge to Bitcoin ever “achieving” anything of note – volatility. We at CoinJournal.net dove in to assess whether the situation is getting better. 

Realised volatility

The first step is charting the realised volatility. We annualised the annualised mark over a rolling 30-Day window, which in layperson’s terms means we assessed the magnitude of the movement by looking at a rolling 30-Day window. 

The chart shows two things right off the bat. The first is that Bitcoin was all over the place until 2015, which is not surprising. At that point, it was still a niche Internet currency few had heard of, and its liquidity was minimal. While this article is striving to assess whether Bitcoin’s volatility is coming down, it is hard to put any weight into pre-2015. 

The short answer is that it certainly has come down since before this time, but you don’t need much analysis to deduce that. The interesting part is whether it has continued to come down. Let’s zoom in on the time period since 2015. 

Certainly a less perceptible trend, but it does look like the tail end – that being the latter half of 2021, 2022 and the start of 2023 – may suggest Bitcoin is calming down a little. 

Upon further inspection, it doesn’t really hold, however. The period is devoid of any big isolated spikes which we have seen in the past – see March 2020 above, for example – which makes it seem like it has been serene. But aside from not offering an explosion of brief movement, the last couple of years have still offered near-constant volatility, and not dissimilar to what we have seen for much of the previous years. 

“I was expecting a little more improvement with regard to Bitcoin’s volatility,” said Max Coupland, Director of CoinJournal. “There is a common perception in the space that Bitcoin’s volatility is coming down. But the CoinJournal research team had a hard time backing this up with numbers.

In truth, while the period since 2015 has undoubtedly seen Bitcoin become mainstream and its price move sharply upwards as a result, its trademark volatility remains as fierce as ever. Bitcoin, in the short-term at least, remains more of a gamble”. 

Bitcoin is still too volatile to be a store of value

Bitcoin is still yo-yoyoing like there is no tomorrow. 

Perhaps the below chart is a more intuitive display of this. The simple reality is that, if the asset is ever to act as a store of value, it is vital that these days where it moves 5%, 6%, 7% (or more) become a thing of the past. 

It hasn’t happened to date. 

The point is a simple one, but it bears repeating. An asset can’t lay claim to being a store-of-value (and certainly not a currency) while it is oscillating so wildly. People point towards developing world currencies as unsafe to store one’s wealth (and they are correct – looking at you Lebanon, Argentina and Venezuela), but Bitcoin is still a currency that can crater 20% overnight. Is that much better?

Volatility less severe over long time periods

Like anything, the volatility of Bitcoin does settle down a little when assessing it on a larger time frame. 

The next chart plots the average daily returns over the prior 30 days. Again there is a noticeable downtrend to 2015, but not much improvement afterwards. 

Zooming in on the prior graph, looking at the period since January 2020 (i.e. the pandemic bull market and the post-pandemic collapse) shows that while these moves are not overly large – they don’t spike over 3% – these are still daily averages, meaning the gain and loss is averaged out. And even then, 3% on a daily basis is far beyond what it needs to be. 

Bitcoin’s volatility can’t compare to mainstream assets

When comparing Bitcoin to anything but other cryptocurrencies, the contrast is stark. If Bitcoin is a mainstream asset, it carries volatility unlike anything else. That, above all, is the killer point. 

An apt comparison is the Nasdaq, which is the more tech-heavy index and hence prone to more volatility. Over the last couple of years, this has rung especially true, as the world has transitioned to rising interest rates and the stock market plays a game of cat-and-mouse with the Federal Reserve. 

Tech is particularly sensitive to interest rates because profit is not a favoured word in Silicon Valley. Instead of profits, companies are commonly valued off the promise of future cash flows, with unicorns seeing fat valuations off the back of these future cashflows being discounted at 0% rates. That is no longer the case, and hence we have seen share prices collapse and layoffs flood across the sector. 

Nonetheless, comparing the Nasdaq’s volatility to Bitcoin is like comparing a great white shark to a goldfish. It’s just not a fair fight. 

Of course, the Nasdaq is an index comprised of 100 stocks, and so when I say it’s not a fair fight to compare its volatility to Bitcoin’s, that is literally the case. 

But even if we plot the volatility of some individual stocks of the Nasdaq against Bitcoin, the divergence is clear. 

In summary, Bitcoin has a hell of a long way to go. In my eyes, this has always been its biggest challenge: to overcome this volatility. If it doesn’t, then what is really the point of this asset? You can’t have a store-of-value if it is prone to massive plunges in price. 

I will finish with one more comparison – of where Bitcoin needs to get to, to illustrate how far it still has to go. To be a store of value, Bitcoin’s volatility needs to be (at least) on par with major currencies. 

The below chart compares its volatility since 2015 to the euro, the newest of the “premier” currencies, launched around two decades ago.

The final chart below shows this another way, in weekly terms. In fact, on a weekly basis, Bitcoin was 26 times more volatile than euro in 2022. It was 19X greater in 2021 and 16X greater in 2020 – yet further evidence that the volatility is not dissipating.

It’s clear Bitcoin has a long way to go. That is accepted by most. But the thought that the volatility is coming down is a misconception, at least to date. 

As for the future, well who knows?

Research Methodology

We drew price volatility measures from Glassnode, with our Analyst, Dan Ashmore, building the charts and comparing to other assets. Price data for stocks was scraped from Yahoo Finance. 

If you use our data, then we would appreciate a link back to https://coinjournal.net. Crediting our work with a link helps us to keep providing you with data analysis research.

The post Bitcoin isn’t getting less volatile, and that’s a massive problem – a Report appeared first on CoinJournal.

Key Takeaways

• The net unrealised profit/loss of all Bitcoins is currently 0.11 BTC, or $2,500
• The profit has been positive since January 13th, having been negative for most of the prior 6 months
• Two-thirds of the Bitcoin supply is in profit, despite prices remaining nearly 70% off all-time highs

Whatever you think of Bitcoin as an asset, the public ledger that is the blockchain makes it a lot of fun to get a bit nerdy and look into the analytics behind the asset. Love it or hate it, we have a wealth of information via on-chain analytics that we simply don’t have for most other assets. 

Today, let’s do a quick little piece assessing Bitcoin’s unrealised profit. In simple terms, what would the profit or loss be if all Bitcoins were sold right now? Obviously, this would tank the market, and everybody’s net worth would go poof. But hey, don’t ruin the party. It’s still a reasonably indicative metric. 

After all, if Bitcoin is ever to perform as a store-of-value, it has to satisfy the definition of that term – that is, protect one’s wealth.

Majority of Bitcoin is still profit-making

First step is simple. Let’s look at how much of the Bitcoin supply is profit and supply. The below chart plots this, as the total supply of Bitcoin climbs mechanically via its pre-determined schedule towards its final supply cap of 21 million coins. 

The merciless effects of the bear market are clear to see. That’s a whole lot of red appearing on the right side of the chart, with over 10 million bitcoins in loss in November 2022. Thanks, Sam. 

The little renaissance that 2023 is has kicked that number back down, with 6.6 million bitcoins currently at a loss. 

The next chart shows this in a different way – tracking the percentage of the total supply in profit. 

We can see that with two-thirds of the total supply in profit, it is likely that Bitcoin’s total unrealised profit is a positive number, i..e if everybody sold at the current price, the difference between that current price and the price at which the bitcoins were purchased would be positive. 

And it is. A profit of 0.114 BTC, or about $2,500 at current prices. 

The profit number flipped positive on January 13th of this year, having been negative for most of the second half of 2022, as Bitcoin found out the hard way how much tougher things are when the money printer is turned down and interest rates are no longer zero.

What does this all mean?

So, what does this all mean? Well, nothing. Sort of. 

On-chain metrics are fun to play around with, and certainly some can be nice indicators. But the above charts are just a fancy way of looking at price, really. Price go up, profit go up. Price go down, profit go down. 

Not to mention, the market right now is clearly following macro news, essentially a leveraged bet that the words of Fed chairman Jerome Powell will be kind. 

I did have a play around with layering the price over various charts, trying to ascertain whether there was an impact. But, nah.

Nevertheless, despite the lack of predictive power here, it is an interesting way to view the dynamics of Bitcoin and gauge the overall sentiment of the market. 

The uptick in profit metrics is clear since the start of the year, even if prices are still a magnitude below bull market levels. Whether the market continues to bet on the Federal Reserve loosening rates, or if inflation and employment numbers give it a reason to hesitate and pull back, remains to be seen. 

It’s a macro world, and Bitcoin is just living in it. Stay tuned for more on-chain pieces, and we will try nail down into this relationship a bit more. 

The post If all Bitcoin was sold today, the profit would be $2,500: An on-chain analysis appeared first on CoinJournal.

Key Takeaways

• Two-thirds of the Bitcoin supply has not moved in over a year
• Metrics for percent of supply unmoved in 2+, 3+ and 5+ years also at all-time highs
• The average hold period for Bitcoin on-chain is 3.8 years
• Despite thesis that dwindling supply will boost price, this has not proved the case thus far

The capped supply of Bitcoin has always offered an intriguing layer to analysis of the enigmatic asset. 

Simply put, there are not many assets worldwide that offer an inelastic supply. Truthers argue that this cap will inevitably squeeze the price upwards through the simple economic theory of supply and demand. That is, assuming the demand continues to grow, of course. 

Here, we look at this supply, and how many of the total supply of 21 million bitcoins (of which 19.3 million are currently in circulation) have not moved in quite some time.

Percentage of Bitcoin supply unmoved in over a year at all-time high

If one takes the 1+ year mark as a benchmark for long-term holders, that means a growing amount of Bitcoin supply is held by what constitutes long-term investors. 

Two-thirds of the Bitcoin supply has not moved in over a year, an all-time high. That means no purchases or sales. 

In expanding the timeframe out, we can look at what portion of this 67% has been held for even greater amounts of time. On the below chart, I have plotted the portion of supply that has been stagnant for 1+ years, 2+ years, 3+ years and 5+ years. 

The results are interesting. Nearly half the supply – 49.3% – has not moved in over 2 years. Pushing out to 3+ years, the number is 39%. And 28.1% of the supply has not moved in 5+ years. The marks are all all-time highs.

So, diamond hands? Well, sort of. The numbers are certainly large, but there are other variables at play. Most notably lost coins, for which it is impossible to know how many there are. Satoshi Nakamoto is estimated to own over one million coins, which is circa. 5% of the supply alone. 

Long-term holders growing despite market carnage

Nonetheless, to see such stout numbers following the year that crypto has had is notable. The average hold time of Bitcoin on-chain right now is 3.8 years.

This comes less than a year after the collapse of LUNA (May-22) which sparked a meltdown crisis that ultimately bankrupted hedge fund Three Arrows Capital and sent a wave of contagion across the industry. 

Things shook further when this contagion claimed crypto lender Celsius in June. The fallen crypto lender disclosed two months before, at the Bitcoin 2022 conference, that it held 150,000 Bitcoin, which would constitute 0.8% of the supply. 

Unfortunately for investors, court filings by Kirkland & Ellis indicate that the firm has lost roughly 62,000 Bitcoin, and right now it is unclear how many they really held, nor how many the bankrupt firm now holds. 

Then there was the staggering collapse of FTX in November.

But despite this,  long-term holders do continue to grow, at least if on-chain metrics are to be trusted. 

Dwindling supply not supporting price

But as for the thesis that a dwindling supply will push price up, it has not worked to date. Bitcoin has collapsed while these metrics have all jumped to all-time highs. 

What happens in the long-term remains to be seen. The advocates aren’t wrong when they reference simple supply and demand. This will undoubtedly help the price, and if long-term holders continue to hold, the liquidity drying up further can only squeeze the price upward. 

On the other hand, every sale needs a bid order, and these have not been coming in quickly enough over the last two years. As I have written about repeatedly, Bitcoin continues to follow the macro cycle, trading like an extreme-risk asset making a mockery of those who claim it is any sort of inflation hedge. Look no further than its reaction to recent inflation readings and Federal Reserve meetings on interest rate policy for evidence of this. 

Undoubtedly the most important week for BTC this year. Not only are investors Fed-watching but they’re praying for expansionary policy & inflationary pressure⬆️

BTC & S&P500 correlation at all-time highs. Fed indirectly controlling BTC price

There’s an irony in there somewhere

— Dan Ashmore (@DanniiAshmore) February 1, 2023

Supply drying up is a good thing. But until Bitcoin sheds its high-risk image, it will continue to trade like a levered bet on the Nasdaq. Every asset needs a bid, people, and in times of uncertainty, the market has shown that Bitcoin is the last thing that investors want to hold. 

Time will tell if this all changes. 

The post Long-term Bitcoin holders at all-time high, but price not cooperating appeared first on CoinJournal.