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Bitcoin market sentiment and fundamentals proceed to favor the BTC worth bulls

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Bitcoin price saw a sharp surge towards the $ 13,000 mark in the fourth quarter. At the beginning of the quarter, Bitcoin (BTC) was below $ 11,000 in the region, and from there, on October 21 of this year, its price rose to the $ 13,000 mark for the first time through steady spikes.

The price rose to $ 13,217, a record high for 2020, before falling to around $ 12,750. This upward move is certainly indicative of the optimistic sentiment among investors in the current market.

Rising hash rate a bullish sign?

The Bitcoin hash rate has also risen steadily since the end of the second quarter and, according to BitInfoCharts, reached its all-time high of 157 exahashes per second on October 17th. The metric estimates the number of hashes per second that the Bitcoin network has performed in the past 24 hours. This indicates the speed at which a miner can get to a particular hash. This is the number of times a hash function can be calculated per second.

The more BTC that is mined, the greater the hash rate increase. Jay Hao, CEO of OKEx – a Malta-based cryptocurrency exchange – told Cointelegraph that the increasing hash rate is good news for the network:

“It shows that miners are convinced of the future price direction of Bitcoin and are increasing resources. They are often good at predicting BTC price, although price increases don't always follow increases in hash rate. There is no connection between the two. It is possible for the price to go up, especially if more miners are holding their new coins than are selling, but it is not a certainty. "

However, the rising hash rate also means that due to the increasing competition in the network, miners also need computing power to be able to mine profitably. Hao went further on these nuances, explaining that in the long run there is likely to be more competition and those with many resources will be more successful: "If the price of Bitcoin goes up, it will generate more income for miners, but if the price does not go up As the hash rate increases, the miners have more costs. "

Tone Vays, the organizer of the finance summit, agreed with the idea that a rising hash rate indicates a bullish sentiment and explained what that could mean for bitcoin miners, including a comparison with the ethereum network miners:

“The increase in hashrate during consolidation or a slow upward trend in price is always positive for more price upward trend. If the price goes up, miners who have invested in well-managed farms will benefit well. Bitcoin mining will always be more profitable in the long run than mining Ethereum for the obvious reason that Ethereum's C-level management is tasked with eliminating mining in favor of evidence of stake. "

Bitcoin distribution analysis shows patterns

As Bitcoin is getting rarer by the day, with only a limited number of coins to be mined, it is important to also consider the role that distribution trends among BTC holders play in the market sentiment. According to the Blockchain Center, cryptocurrency exchanges currently account for 12.62% of the total distribution of BTC, and that number is decreasing.

The two main reasons for this could be because new owners are buying Bitcoin from the secondary market and storing it in cold wallets as a store of value, much like traditional investors would do with gold, and the DeFi boom that could lead some investors to use Bitcoin for quick profits on DeFi- Tokenize markets instead of holding them. As this trend increases Bitcoin's cost of circulation, the price of BTC will increase as the exchange size in the token pool increases.

The second important number is the percentage of Bitcoin held by institutional investors and whales, which is 3.74% and increasing gradually. These large institutional investors are increasing the proportion of Bitcoin in their portfolios as they see it as a store of value and a hedge against the uncertainty in the traditional market. Hao went on to explain, "With less bitcoin left and more usage, the bitcoin price trend certainly seems bullish."

According to market sentiment data captured by IntoTheBlock, which analyzes on-chain data, exchange signals and information on derivatives, the market is currently “mostly bearish” even when Bitcoin hit $ 12,900. The indicators of large deals and net network growth suggest that the market is slightly bearish as they are losing size for the reasons given above. As cryptanalyst firm Skew noted, Bitcoin options markets are also pointing to "up volatility" for their underlying asset.

Macroeconomic indicators that make the markets bullish

The current macroeconomic scenario is extremely positive as US presidential candidate Joe Biden leads the polls and talks about new stimulus checks resume. In fact, it was the fastest recovery for the US economy in history. US stocks have risen since pandemic fears led to market lows in March. The Dow Jones Industrial Average rose more than 59%, the S&P 500 rose 63%, the small-cap Russell 2000 index rose 70%, and the Nasdaq composite index rose 81%. The Nasdaq even passed pre-pandemic highs.

At the same time, this has made the correlation between the BTC price and the US stock markets higher, along with positive funding rates in the Bitcoin futures market. These are very encouraging signs for Bitcoin, and recent BTC purchases from large institutional investors like Square and MicroStrategy are depressing short-term upward sentiment in line with traditional markets through the end of the year.

Connected: The next big treasure: Companies are buying up Bitcoin as a treasure reserve

Excessive quantitative easing by governments around the world to temporarily solve their nations' economic problems will also have a positive impact on the price of Bitcoin, according to Vays:

"Inappropriate money pressures from any government in the world, companies investing in Bitcoin as a strategic reserve, and the US's ongoing war on non-KYC / AML companies are more than enough for a Bitcoin price breakout."

Even when the traditional market has been exposed to extreme volatility, Bitcoin has held its own and proven to be a reliable alternative asset and potential store of value. More uses are also found in the cryptocurrency space, e.g. B. the use of tokenized Bitcoin in the DeFi ecosystem. The news of PayPal's October 21 announcement that it would allow crypto payments from 2021 on has given the blockchain industry a boost in confidence as it adds more credibility by presenting Bitcoin as an asset that can be used for everyday transactions.

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Melinda Martin