The Bitcoin block reward halving is nearly here.
The event is happening in around 4 hours from now, meaning that BTC’s inflation rate will be cut in half from ~3.6% to ~1.8% — inflation lower than that of most fiat currencies and purportedly lower than that of gold.
Data shows that as the halving has been activated, Bitcoin is fundamentally healthier than ever, which is “long-term bullish for BTC” according to one analyst.
Bitcoin’s Booming On-Chain Metrics
According to analysis by Rafael Schultze-Kraft — co-founder of crypto analytics and data company Glassnode — “Bitcoin’s fundamentals are stronger than ever.”
By comparing key on-chain metrics from the time of the last block reward halving on July 9th, 2016 to that of today, he found a number of trends that suggest market growth. Some of these are as follows:
- The aggregate count of BTC addresses has increased by 234%.
- Bitcoin’s daily active address count, which many say is one of the best metrics to determine the usage of blockchain, is up by 59%.
- In a similar vein, the daily transaction count has risen 44%, reflective of the growth in active addresses.
- The hash rate of the Bitcoin network — the amount of computational power being used to process blocks — is up 6,837%. This signals strong support from cryptocurrency miners about the long-term future of the network.
- The amount of value being sent on Bitcoin each day has risen from $270 million to $2.1 billion.
- The number of addresses holding more than one Bitcoin has increased by 64%.
1/ #Bitcoin fundamentals are stronger than ever.
As the halving approaches, let's zoom out and look at how on-chain fundamentals have developed historically, and how they compare to the last halving.
TL;DR – Network fundamentals are compelling; long-term bullish $BTC
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— Rafael Schultze-Kraft (@n3ocortex) May 10, 2020
This data led Rafael Schultze-Kraft to the following conclusion:
Yes, Bitcoin remains a volatile asset and short-term price action is still subject to large drops. But zooming out, Bitcoin’s fundamentals keep on painting a strong and unambiguously bullish picture. Investors with a long-term horizon and low time preference know this.
This assertion comes shortly after Glassnode released an extensive research report revealing that per their analysis, Bitcoin performs better when the blockchain is growing:
“Historically strong on-chain fundamentals coincide with good Bitcoin performance and vice-versa,” the firm wrote in the report, referencing their backtest of the accuracy of a new aggregate metric called the Glassnode On-Chain BTC Index.
A Strong Macro Backdrop
Adding to this, Bitcoin arguably has a strong macroeconomic backdrop that didn’t exist during previous halvings or previous years in the cryptocurrency’s history, analysts have argued.
As reported by Blockonomi previously, Galaxy Digital CEO and former partner at Goldman Sachs Mike Novogratz explained that with “central banks and fiscal agents” pushing their balance sheets to unprecedented levels to respond to the COVID-19 lockdowns, assets with safe-haven properties should start to divert from stocks.
Novogratz posited that Bitcoin and gold have a “very decent chance” of rallying “much higher than we have had before” — this means prices of over $20,000 for BTC and over $1,900 for an ounce of the precious metal.
The macro backdrop is so convincing for Bitcoin that last week, we saw Paul Tudor Jones — the world’s seventh highest-paid hedge fund manager of all time worth over $5 billion — show his support for the cryptocurrency.
In a note titled “The Great Monetary Inflation,” Jones explained that he thinks Bitcoin is looking like a lot like gold did in the 1970s.
What happened with gold then, for those unaware, is the precious metal rallied hundreds of percent within years due to an influx of inflation (15% per annum at one point) and an abolishment of the gold standard.
Jones added while he subjectively sees Bitcoin as the worst store of value amongst fiat, gold, and financial assets, he sees the cryptocurrency as the “fastest horse in the race.”
He doubled down on this sentiment in a Monday morning interview with CNBC, saying that he has 1-2% of his personal assets, meaning his $5 billion, invested in Bitcoin, along with the few percent of BTC allocation in his fund.