A recent Coinmetrics report says on-chain fundamentals are hinting at bitcoin experiencing its biggest breakout yet. The report notes that bitcoin is already showing signs of this following its rise by about $1,000 in one day on October 21. The digital asset has subsequently set a new all-time high for the year.
A New Precedent
While acknowledging the difficulty in predicting bitcoin’s future value due to its notorious volatility, authors of the report insist there is a difference between previous bull runs with the current one. According to their report, “BTC has been growing in ways that we have not seen in previous bull runs.”
Explaining their stance, the authors point to bitcoin’s growing correlation with gold as one of the reasons for their bullishness. In the report, the authors say bitcoin, which has had a low correlation with both gold and the U.S. dollar throughout most of its history, changed after March 12. The authors say:
As panic over Covid-19 rapidly set in, equities around the world crashed. Crypto went down with the rest of the markets, with BTC and ETH price both dropping about 50%. Since then, BTC’s correlation with gold has been near all-time highs while it’s correlation with the dollar has been at all-time lows.
According to the data, the bitcoin and gold correlation has been positive (above 0) for much of 2020 while the digital asset’s correlation with the US dollar has stayed negative during the same period. It is this growing relationship with gold that has some touting bitcoin as a form of digital gold.
Companies like Microstrategy and Square Inc recently announced their acquisition and subsequent holding of bitcoin as a treasury reserve asset.
More Hodler Addresses
Meanwhile, the report also points to another important signal, “the percent of supply held for at least one year (or in other words, the percent of supply that has not been moved on-chain as part of a transaction).” According to Coinmetrics, “as of October 25th, about 62.5% of the total BTC supply had been held for at least 1 year, which is close to all-time highs.”
As precedent shows, “the percent of supply unmoved for at least 1 year has peaked during periods where price has been at local lows.”
The report adds:
BTC’s velocity is also at its lowest levels since 2011. Velocity measures the number of times an average unit of supply has been transferred in the last year. High velocity means a relatively high turnover. A decreasing velocity suggests BTC is trending towards being used as a store of value as opposed to a medium of exchange.
Another metric suggesting which suggests a pending bitcoin breakout is the “number of addresses holding at least $100 worth of BTC (which) hit a new all-time high of 9.74M on October 22nd.”
In conclusion, the report states that historically, “bitcoin price has hit a local peak within 1.5 years of each previous halving.” As holding activity increasing and the “halving less than six months in the rearview, all signs are signaling that BTC is poised for takeoff.”
Do you agree with Coinmetrics’ assessment that bitcoin is about to breakout? Tell us what you think in the comments section below.
The post Report: Bitcoin Set for its Biggest Breakout Yet appeared first on Bitcoin News.
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