Finance

To start analyzing Bitcoin’s finance, we should admit that there are a lot of fundamental metrics which can help us make a decision, but metrics are just metrics and there are risks associated with investing in crypto assets. All metrics can only show general market and user sentiment in past and present, not in the future.

We use fundamental analysis as one of several aspects in our approach to investing. For instance, we use the following indicators and ratios.

Active Addresses (Daily) — indicator

Source: bitinfocharts

The graph above shows the average number of active addresses used on the Bitcoin blockchain in the last 30 days. It is obvious that the increase in the number of active addresses reflects the growth of the activity of the entire Bitcoin network. Now we are seeing this growth which is accompanied by a trend change to bullish.

Average Transaction Value (Daily MA30) in USD

Source: bitinfocharts

This graph reflects the average transaction value in the previous 30 days, and, as a previous graph, shows the rise in network activity. There is no man who can deny the trend change, because even transaction value is rising — more rich people want to buy and hold it waiting for the new high price.

Mining profitability in USD

Source: bitinfocharts

No PoW blockchain can function without its main power — miners. And the mining profitability can indicate the interest of miners. There is a graph which indicates mining profitability per one day and it can tell us that it can be a nice idea to return to mining business — profitability has doubled in several months.

Network Value to Transaction Value

Source: TradingView

It is time when we can see the high of Net Value to Transaction and it can be interpreted as a signal to sell BTC. To be honest, it is not just technical indicator, it is the fundamental indicator which shows the overbought of Bitcoin on the market because NVT displays that the value exceeds usage.

NVT ( Network Value to Transaction Value) = Network Value (Market Cap.) / Daily Transaction Volume

Average fee in USD

Source: bitinfocharts

As we know, every transaction includes fee which is paid to the miners for write this to the ledger, but because of low Bitcoin TPS (Transactions per second), there is a lot of unconfirmed transaction and if any user wants to make his/her transactions confirmed faster he/she is able to pay higher transaction fees. It is obvious that the growth of commission is due to increased activity. And today this fact can be seen on the chart above.

Monetary properties:

30-day Volatility — 29%

Volatility is a statistical measure of the dispersion of returns for a given security or market index over a given period of time. Generally, this measure is calculated by determining the average deviation from the average price of a financial instrument in a given time period. We use standard deviation which is the most common, but not the only, way to calculate historical volatility. The higher the historical volatility value, the riskier the asset (in our case, Bitcoin). However, that is not necessarily a bad result as risk works both ways — bullish and bearish. Nevertheless, everybody, interested in crypto currencies, must remember that investing in digital assets like bitcoin is highly speculative and comes with many risks, but according to Hawley, professor and economist, the higher the risk in business, the greater the potential financial reward is for the business owner.

Bitcoin Inflation — 3.96%

When we talk about Bitcoin Inflation Rate, we do not mean the purchasing power of money, we mean the average mined bitcoins. There is a fixed amount of 21 million Bitcoin that can be minted, which means that no coins can be minted once this amount is reached. Approximately 80 percent of the total amount of Bitcoin has already been minted. Bitcoin’s algorithmic inflation rate since 2010 is displayed in the figure below and is explained in the original white paper written by Satoshi Nakamoto.

Inflation rate

Today, 2nd July, the inflation rate of Bitcoin is 3.96 percent. And it is more than last week. It is obviously, because BTC pumped to $13.5K. The difficulty re-adjustment makes it impossible to simply mine more Bitcoin by allocating more computer resources to the network. As more people try to mine Bitcoin, the software automatically increases the difficulty of successfully mining a Bitcoin and vice-a-versa.

Once the inflation rate reaches zero, miners will no longer be able to earn money from minting newly created bitcoins. Instead, transaction fees will have to increase or the number of transactions will have to increase.

To conclude, we must admit that Bitcoin Block Reward Halving Date approaches — 21 May 2020. According to the history prices and previous halving, we believe that after this date Bitcoin’s price will incredibly rise, because the inflation rate will drop by half.

Bitcoin Future on the Chicago Mercantile Exchange

The CME was created in 1898 as a commodities exchange for butter and eggs. It is now one of the biggest financial exchanges in the world, specializing in futures and options across industries, from agriculture to metals to real estate.The CME launched Bitcoin futures trading in December 2017, and volume on the exchange has been rising since then.

On May 13, 2019, the Chicago Mercantile Exchange (CME) reported a daily volume of over $1.3 billion in notional value for Bitcoin futures contracts traded. The CME is a regulated exchange based in the United States, but unregulated exchanges outside of the U.S. report even higher volumes for futures trading. On the same day, BitMEX reported $13 billion in notional value traded. However, on May 28,2019, the volume raised 21 thousand futures. Today, 18th June 2019, it is only 8 thousand futures.

It seems that BTC Future Volume depends on BTC price.