In the recent month, the cryptocurrency market has struggled with negative news and FUD (fear, uncertainty, and doubt). Is this the start of a bear market? Maybe, but this is not the way many crypto experts look at it. From their perspective, the coins are on sale at half price.
As a general principle, always look under the hood, you’ll never know if a car is broken by looking at it’s paint job.
In the traditional world of the stock market, an analyst's role is to use accounting data and market indicators to evaluate the value of a company. These methods can be very complicated and require a large amount of information that can’t be accessed easily. However, for cryptocurrencies, that is not exactly the case.
For cryptos, analysts use something called on-chain analytics, a real-time stream of cryptocurrency data. This includes data ranging from number of users to wallet profiles. For instance, on chain analytics shows how many unique Bitcoin addresses haven’t moved their coins in over five years.
With data like this, analysts can paint a pretty good picture of what the future of cryptocurrencies could look like.
“Most news nowadays is just there to distract you from what’s really going on. This is why you should try to cut through the noise. A mentor of mine once gave me a piece of advice that seems to ring true in this situation. He said, never believe people on what they say, but rather on what they do,”
- Brett Hope Robertson, Investment Analyst at investment platform Revix.
Data-driven reasons that this bull run still has some way to go:
- Don’t look at what they say; look at what they do
The data shows that miners and long-term holders have started to increase their positions and buy the dip again. More specifically, "whales", a person with more than 1,000 bitcoins, started buying bitcoins at high levels. July showed the most significant one-day peak last year. Despite the "negative news", all of this happened? Yes! Additionally, analysts have seen $1.3-billion worth of Ethereum move off exchanges in a single day! This was one of the largest single moves seen this year.
“When coins move off exchanges, it means that buyers have decided to move their coins to cold storage or personal wallet. This shows the market that buyers don’t intend to sell their coins anytime soon and that long term demand is increasing,”
- Brett Hope Robertson
- Positive supply spikes cause price increases
Long term holders are starting to accumulate coins from retail traders who have sold out in the most recent bitcoin drop. The Bitcoin liquidity supply ratio shows the number of coins held by participants with little history selling (strong hands) divided by the number of coins held by speculative participants (weak hands).
Another factor that suggests future price increases is the supply shock ratio, the total coin supply divided by the coins available on exchanges. As coin availability on exchanges reduces in relation to the supply, this contributes to increasing supply shocks. An increase in supply shocks leads to the fact that coins are being moved off exchanges in anticipation of long-term growth.
- China, the unlikely hero
It’s no secret that Bitcoin mining in China accounts for over two-thirds of global Bitcoin production. This raised concerns that Bitcoin mining was overly concentrated in one region of the world. China announced its ban on Bitcoin mining operations, and the ecosystem has started to migrate to North America and Kazakhstan. There is cheap energy there, and the hosts are more open to Bitcoin Mining.
China has been at the forefront of banning multiple tech innovations, but that hasn’t stopped these tech companies from taking over the world as we know it. Twitter, Facebook and Google all have something in common: they have all been banned by China at various times.
“Chinese technology bans have proven to be quite a good buy signal over the years,”
- Brett Hope Robertson