Bitcoin Fundamentals Continue to Strengthen Despite Volatility: A Data Perspective by IntoTheBlock

Bitcoin Fundamentals Continue to Strengthen Despite Volatility: A Data Perspective by IntoTheBlock

Created 2yr ago, last updated 2yr ago

This week, IntoTheBlock looks at how Bitcoin hodlers have been faring. The answer? Actually, pretty well.

Bitcoin Fundamentals Continue to Strengthen Despite Volatility: A Data Perspective by IntoTheBlock

Table of Contents

Every week, IntoTheBlock brings you on-chain analysis of top news stories in the crypto space. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the major developments in the industry. 

Bitcoin Fundamentals Continue to Strengthen Despite Volatility

Crypto markets have experienced continued fear, uncertainty and doubt (FUD) throughout the past weeks surrounding several current and upcoming events as Bitcoin and Ether dropped below $30,000 and $2,000 respectively. The GBTC Trust shares unlock brought volatile conditions into the market; more information about this topic is available on this article. The coronavirus delta variant concerns keep increasing, people fear whether this could have a significant impact in traditional and crypto markets. Lastly, alarms about new regulations toward crypto companies across the United States and Europe rise. This article offers a data perspective analysis from the current market conditions shaped by these events.
Bitcoin's price has ranged in the 30K region for a bit over two months now. This brings into question the significance of the 30K mark. Many consider Tesla’s entry into the market a defining step for Bitcoin’s validation in the traditional finance ecosystem. Tesla’s entry price was about $34,700. This past step in relation with price consolidation around this range could signal future resistance and support building around this price in the market.

While looking at the historical for the price performance capital markets indicator, it shows BTC's price is outperforming traditional finance indices in spite of recent volatility.

As of July 20, 2021 using IntoTheBlock’s capital markets insights

It can be seen that even after a 50% drop in price followed by a back and forth in the 30K range, BTC's price is still 236.79% up in a one-year time-frame, growing quicker than traditional finance indices in the West.

Addresses that hold cryptos for over one year are classified by IntoTheBlock as hodlers. This category is currently on accumulation phase, where they have continued to increment their number of BTC holdings. For the past month, they have managed to increase around 240,000 BTC.

As of July 20, 2021 using IntoTheBlock’s Bitcoin ownership metrics

As shown by the chart a 2.48% increase in volume (number of Bitcoin) and a 0.84% in number of addresses increase can be seen. While this category keeps growing the number of liquid coins turning illiquid keeps increasing, making the available amount more scarce.

Moreover, the long-term conviction from these holders acts as a self-fulfilling prophecy for Bitcoin’s store of value thesis. This is the case as if enough people believe Bitcoin will sustain its value over time — like it has proven in the past — it should indeed appreciate or hold its value given that the market’s consensus is built into an asset's price. Therefore, the increasing number of hodlers further propels Bitcoin’s status as digital gold. 

A clear relation can be seen when analyzing the price performance indicator with the hodlers one. This connection being that all hodlers who at least entered the market one year ago (if not more), after a 50% drop in price, they are still  236.79% up in a one-year time frame. This brings clear evidence of the importance of long-term investment.

Another indicator that we have kept an eye on is the Global In and Out of the Money indicator. It classifies addresses based on if they are profiting (in the money), breaking even (at the money) or losing money (out of the money) on their positions at current price. IntoTheBlock calculates an address’s average cost based on the weighted average price at which it bought or received the tokens currently held by the address.

As of July 20, 2021 using IntoTheBlock’s Bitcoin Financial metrics

This indicator shows that 68.27% of the addresses are currently “In the Money.” Since they are at profit, this majority have not yet been seen in pressure to sell their holdings. It also comes in to show how the long-term holders are the one’s beneficiating while the traders who entered the market at a later point, trying to make a profit, are the ones at loss.

While everything is subject to change, there is a relation between the illiquid tokens and price worth clarifying. Once demand for the limited tokens sets in and has a direct effect on price, making price go up. Those long-term holders will start to be tempted to start taking profits again as they did in this past cycle.

The crypto market is still considered by many to be in an early stage consolidation phase following its 50% drop. Numerous innovations and improvements to this new technology are underway. Countless projects currently working are determined in bringing the best of the best into this new field. While markets remain volatile, conviction and underlying progress continues. 

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