Welcome to the seventh issue of the Broker’s Beat. We’re having a lot of fun creating this newsletter, because every week is different and the bulls are making big moves right now!
We still remain bullish on Bitcoin, but see a ton of different developments happening every week that change our near-term outlook.
Read on for more price analysis, mining insight, and news about liquidity in the markets.
“Although it has witnessed some short-term weakness throughout the past several weeks as it struggles to break above $12,000, it is important to note that its fundamental strength has been growing by leaps and bounds.
One sign of fundamental strength can be seen while looking towards the number of long-term Bitcoin investors.”
“Another reason behind the surge in hash rate could be the profitability of miners in China. Sichuan province is currently going through its rainy season, and the abundance of hydroelectric power plants in the region allows miners to obtain cheaper electricity, which in turn reduces their overall costs.”
“Although specifics are unknown, the new policies are likely to be detrimental to the long-term strength of the US dollar. For example, in 2020 alone, the Monetary Base and Fed Balance Sheet have exploded in hopes of sparking inflation against the Covid-19 led deflationary pressures.”
“Ethereum Classic’s current hashrate of roughly 3.2 terahash per second is down 74% from Jan. 1 and down 84% from its all-time high of 20.4 terahash per second set in late January, according to Coin Metrics. The downward trend continued after back-to-back 51% attacks during the first week in August.”
It seems like nearly every week is accompanied by a new swing in price. This week started with Bitcoin forming an ascending channel, but the trend has already reversed back down to a more moderate level in the $11,100’s.
The real hope in the 1-month chart below is that Bitcoin was oversold earlier this week. The RSI shows that the RSI nearly dropped to 20 before rebounding into the normal limits. We interpret this as a positive signal and expect Bitcoin to follow a bull trend in the coming weeks.
We’re still looking for a sustained push through the $12k level, but every week that it stays in the mid- to high-$11k’s is a confidence boost for BTC’s price level in the coming weeks. It may not go “to the moon” soon, but it will at least maintain these healthy gains.
Mining dominance is a less-exciting metric, but it is likely to get very interesting in the coming weeks.
Why? The Three Gorges Dam within China has been facing unprecedented flooding, and we have no idea how this is going to affect miners in China. It’s estimated that Chinese miners control approximately 2/3rds of Bitcoin’s mining power. Although it’s obvious that not all of this mining power will be affected by the dam, it is unlikely that miners will remain unscatched. We’ll discuss this more next week.
Below are the stats on the distribution of miners over the last 2 weeks.
Mining Distribution on August 27th
Mining Distribution on August 19th
You can see that F2Pool, BTC.com, and AntPool have all picked up several percentage points of total blocks mined, all at the cost of smaller miners.
As we commented on last week, Bitcoin’s hash rate high a new high of 129.075 TH/s, which coincided with the bull trend that briefly pushed BTC above $12k.
Since then, Bitcoin’s price has dropped back below $12k. As a result, you can see the hash rate dropping back to more moderate levels in the 30-day chart below.
It’s clear that this is going to be a volatile time for hash rate, especially with the news above about the Three Gorges Dam. Hash rate is proving to be very volatile, but that hasn’t affected the network difficulty, shown below.
Many were worried that the most recent halvening would result in a degradation of network strength, but the new highs that network difficulty is hitting say differently. With more miners active than there were before the halving, the strength of the network is not being called into question. Most everyone would agree a rising hash rate is a positive for Bitcoin and indicates many more good things to come.
Price and hash rate are both important, but hash rate may actually be the stronger indicator for long-term bulls. If the network is getting stronger, then good things will eventually come to Bitcoin. Of course, another benefit is that there is reduced selling pressure on Bitcoin.
On the liquidity front, recent analysis is showing there to be more “whales” in existence than ever before. Whales, or BTC addresses holding more than 1,000 BTC, are now rumoured to number 2,088.
We’ve heard of many big names getting into the Bitcoin space, but this is a good example of the shift from anecdotal evidence to more statistically backed information. Aggressive accumulation of BTC by large investors has generally had a very positive correlation with bull markets for Bitcoin.
This trend was reflected at the end of the 2018 bull market, when the number of whales rapidly dropped to 2014 levels. Liquidity matters in this regard, because bulls have an outsized effect on prices in such a small market.
Another thing to note before we close off is that some companies are starting to announce their use of Bitcoin as a reserve asset. Snappa, a Canadian graphics company is now doing this, and Microstrategy and Tahini’s (Canadian restaurant firm) have already implemented this practice. For the long-term prospects of Bitcoin this is great, and it gets even better when you think about how many companies are doing this that haven’t yet shared it with the world.
That concludes the seventh issue of the Broker’s Beat. This should help you keep in the know on what’s going on in the markets, as well as assisting in your trading activities.
Tomorrow we’re publishing our energy market and crypto research report. Watch out for this high-value report in your inbox, since it covers much more than the simple “proof-of-work” use cases you’ve already heard. You won’t want to miss it!