[ad_1]
introduction
If this is the first time you read a report on the value of Bitcoins, you may want to read the first article in the series, published in July, to be captured. There have been some changes since the report was created, such as the transition from the use of Bitcoin (BTC-USD) (OTCQX: GBTC) (COIN) market capitalization to price. If you want to deepen the statistical relationships between network data and the price of Bitcoin, see this article, where my unconventional approach is validated using Spearman & # 39; s Rho.
Signal distribution
This time I want to start with the result and then work backwards. Look down.
| Name of the indicator | Unique addresses | Hash Power | Total transactions |
| Expected price | $ 1,543 | $ 5.153 | $ 4.076 |
| Effective / expected | 2.41x | 0.72x | 0.91x |
| Metric signal | Overbought | Oversold | Oversold |
Source: tables showing the value of Bitcoin and blockchain.com
Source: blockchain.com and new author graphics
January 2019 Signal
If the price of Bitcoin is lower than all three forecast metrics, then we have a situation that historically translates into strong price performance over the next few months or even years. When the price is above all three forecast metrics, this has historically been a sign that the price may be close to a correction phase. The rest of the time, the price is less than at least one forecast metric and above at least one other. In that state, short-term movements are less clear. This is the position in which we find ourselves now, which I call "it is complicated".
Let's talk about unique addresses
The number of unique addresses in use has been greatly reduced after the last bubble due to a couple of factors. (1) There were a large number of speculators who simply stopped using or exchanging Bitcoins after the last explosive bubble. They had many bitcoin addresses, but then they sold or consolidated all their funds into one long-term archiving address. (2) At the peak of the last bubble, the Bitcoin network has become almost unusable due to high fees. However, with the increase in the use of SegWit, average commissions decreased and people took advantage of this opportunity to consolidate the "dust" in their portfolios, which is essentially the equivalent of the one hundred percent trade. penny for a single $ 1 of law (or four quarters, get the idea).
However, performance is a moving target and Bitcoin will require many more updates before it is ready to compete with global financial institutions. Let's take a look at some of this technology now.
Scalability technology
Bitcoin juggernaut Blockstream has launched its own solution to move transactions from the baseline level to a federated sidechain. This approach has been criticized by some because of the open nature of Bitcoin. But I have a different point of view when it comes to this approach, which they call Liquid Sidechain.
My reasoning is this. You can build permission-based systems on an open system with no permissions, but the opposite is not true. If I want to open a "Bitcoin Bank" where we deal in fiat and Bitcoin, I can take possession of your paid Bitcoin, offer you an insurance and you can have a system very similar to what we have now. You might think, "what's the point?" The point is that the market will give people everything they are willing to pay. If you want Bitcoin insurance, someone will offer it. If you want to save your Bitcoin to Wells Fargo, I bet you'll be able to do it at some point. In this scenario, the bank's behavior is similar to what happens in exchanges at the moment. I can move credits from one account to another without ever hitting the blockchain. This reduces the burden on the blockchain, at the price of trusting the institution. Where this could make sense is for the large institutions that trust each other. If I do not trust you, or do not know you, I would default to a higher level of security and request a transaction on the base level.
I do not want to go on a bribe here, but I think we should open our minds to a world where mixed security is the norm. In fact, some aspects of this system already exist. For example, if I have a Visa card, most vendors will trust an authorization when I scroll through my card. But if I'm buying a house, you'd probably want me to write you a check. And if you are the bank of international settlements, you could also move large amounts of gold between countries at a high price every few years. Different security for various levels of trust.
Source: liquid.horse
These humble statistics show that while liquid sidechain is tiny at this time, there is significant growth. Remember that this sidechain has only been around for three months.
Bakkt
Bakkt, from the Intercontinental Exchange, announced that he had raised $ 182 million in the first round of financing. The reason this is important for the downsizing technology is that Bakkt is launching a future Bitcoin contract with physical delivery, complete with a two-level Lightning Network style solution. This means that the growth of Bakkt will be more sustainable as only settlement transactions will have to be transmitted on a chain.
"Our system would work on a layer above the blockchain, and we should keep our mobile book omnibus in addition to the blockchain," explains Loeffler. The Bakkt design is not revolutionary. It closely resembles a technology called the "lightning network" that is already in use. In the lightning network, the same two participants, such as an appliance manufacturer and a component supplier, make multiple Bitcoin transactions. As long as the parties use a fixed number of Bitcoins to buy, sell from each other and store for that purpose, the transactions are not reported to the blockchain and are moved back and forth within the same ecosystem. – Luck
The reason this is a big problem for downsizing is that, since their launch, Bitcoin futures have grown by almost 25% month by month, according to LedgerX. These futures are settled in cash, but give us an idea of what could happen with Bakkt's Bitcoin contracts. If Bitcoin established that futures should see the same growth, then it could cause network congestion problems if a scaling platform were not present.
In other words, when Bakkt becomes active, we could see a lower impact than expected on the number of unique addresses in use due to transactions occurring on the omnibus level.
The network of lightning
The Lightning Network has had an incredible year. Although the network itself is still small compared to the basic Bitcoin level, there are now more than 20,000 peer channels and over 520 Bitcoins on all channels.
Source: p2sh.info
Transactions on any of these second-tier solutions will have a minimal impact on the number of unique addresses in use (a one-to-many relationship).
Starting with a single Bitcoin on the Lightning network in January 2018, channel capacity has doubled nine times by the end of December. If this pace continues, we will see 1% of the bitcoin circulating on the Lightning network by the end of 2019.
Therefore, while the sum of all the activities of these systems is still minimal, it is clear that at the current rate of expansion it will not take long before a point of no return is reached. The point of no return will indicate a point in time when the network transaction throughput is no longer a constraint. This will unlock a huge upside potential in the price.
Basic level improvements
While level two solutions and sidechains are taking off, the base layer is not overlooked. Solutions like Segwit are now more common, and its signatures are Schnorr Firme and Bulletproofs. The combination of these technologies will increase Bitcoin base layer throughput by orders of magnitude over the next few years. I believe that by 2020 the implications of these changes will be difficult to underestimate. When the next halving block occurs, the Bitcoin network will be able to process more transactions more securely than ever before. With the addition of additional levels of security and privacy, Bitcoin will be ready to upset the global economy like never before.
Let's talk about hash rate
The hash rate of the Bitcoin network has gone through periods of decline in the past. Looking at this data on a monthly scale, I can only see one other time where there has been a three month decline.
Source: blockchain.com and new author graphics
Zoom out puts the power of the hash into perspective. Even with the recent decline in hash power, it doubled again in 2018 (up 19x compared to two years ago) while the price rose from almost $ 20,000 to $ 3k. Mining profits have been squeezed, but miners with the lowest cost structure will persist unless the system itself collapses, due to downward adjustment of the difficulty.
Source: blockchain.com
Conclusion
The number of unique addresses provides the most prudent price forecast for Bitcoin as of January 1, 2019. However, as more businesses move from the chain, it is predictable.
The price of Bitcoin is now lower than forecasts of the hash rate and the total number of transactions.
The January signal is "complicated", but I have the feeling that we are very close to a change in the season.
Greetings,
Hans
This article was first published in Crypto Blue Chips.
Revelation: I am / we are long BTC-USD. I wrote this article alone, and expresses my opinions. I'm not getting any compensation for this (other than Seeking Alpha). I have no business relationship with any company whose actions are mentioned in this article.
[ad_2]Source link
