Total BTC owned by users
In the cryptocurrency hemisphere, one looks at very different metrics than the traditional stock market. When we take a look at stocks, equities have various metrics such as revenue, earnings per share and other valuation figured. These metrics allow one to measure the productivity of the company and upper management. Bitcoin is a decentralized system that has no management. With its decentralized model, Bitcoin has no earnings or revenue metrics. This is why many skeptics have a difficult time assessing the emerging asset class. With Bitcoin operating off math and software, we can take a look at the “Bitcoin Network” to help us assess productivity and value prop. Below we have taken a look at a few Network facets to assess productivity up to this point.
Blockchain Wallet Growth
When an individual wants to purchase cryptocurrency, they need to setup a wallet to hold the assets. An example of this could be a Coinbase account where you have a personal wallet to hold your portfolio of digital assets. We can take a look at wallet growth to help us identify overall crypto sentiment. Even though the study below studies the whole Blockchain, it can still be relevant to Bitcoin sentiment since Bitcoin now controls around 70% of the market (current Bitcoin Market Dominance is 70%). As you can see, wallet growth has surged since 2012. In 2012 there were only around 11,000 wallet users. If we fast forward to 2019, we now witness 41,000,000 wallet users. This equates to 372,000% percent growth in users since 2012. The number of wallets has increased regardless of market activity. Whether the markets have been bullish or bearish, users are still setting up additional wallets. A pure example of this is after the massive sell-offs in 2018, you can still see wallet growth accelerating this year. Some will argue that a single user has multiple wallets if they hold assets on different exchanges, meaning this might not be the best representation of new investors entering the market. We understand this argument, but you still can’t discount the continuous “YOY” (year over year) growth in wallet growth.
Number of Unspent Bitcoin Transaction Outputs
Within the Bitcoin Network there is a metric called “UTXO” ( Unspent Transaction Outputs ). This metric can get quite technical and difficult to understand at times. Historically, UTXO has been linked to accumulation levels in Bitcoin. If we go back to 2017 during the massive bull run, we will see that UTXOs rallied to 67 million territories before falling substantially during the large 2018 sell off in Bitcoin. 2019 has been a bull market for Bitcoin and we can see that in UTXO activity as well. The data below will argue that more and more people are holding their Bitcoin this year and not spending it, hence an unspent transaction. This simply means more and more accumulation is occuring in the market in 2019. This study can be linked to positive sentiment in Bitcoin as of late.
Bitcoin Hash Rate Growth
Bitcoin Hash Rates simply relate to amounts of computing power allocated to securing the Bitcoin Blockchain. As Bitcoin blocks are formulated, they must be “hashed” before they can be recorded on the Blockchain. We can see from the figure below that Hash Rate growth continues to increase in 2019. There was a slight down trend February-March, but has since increased month over month. High hash relates to high amounts of computing power being utilized to secure the Bitcoin Network. As hash rates increase, this also increases the competition for miners to mine bitcoin and earn rewards. Miners are only going to participate if they can make a profit. There are a lot of operational costs that miners experience in order to mine Bitcoin. Increased hash rates have been linked to increased Bitcoin price historically. You can simply see the correlation the last few months, as hash rates have increased so has Bitcoin price. In order for miners to stay afloat and offset costs, Bitcoin price needs to advance to compensate for OPEX. Increasing hash rate is positive for Bitcoin network because it shows more and more miners participating despite increased competition. This could be linked to miners anticipating Bitcoin growth looking forward. The figure below displays Bitcoin “tera hashes per second (trillions of hashes per second).
- 24 Hours Change
- Bitcoin (BTC) $10124.78 1.66%
- Ethereum (ETH) $190.22 1.04%
- Ripple (XRP) $0.27 2.50%
- Bitcoin Cash (BCH) $309.43 2.23%
- Litecoin (LTC) $73.62 1.85%
- EOS $26.06 -0.52%
- Binance Coin (BNB) $3.65 1.48%
- Bitcoin SV (BSV) $1.00 0.26%
- Tether (USDT) $80.44 1.69%
- Stellar (XLM) $0.05 6.36%