Bitcoin is unlike any other financial asset that has come before it. And since its debut, an entire ecosystem of cryptocurrencies has been created. Its emergence has also caused the long standing fiat currencies of the world to consider going digital for the first time in history. There is no denying its disruptive power at this point.
What is less clear, is how to read the asset from a fundamental standpoint. The stock market has been around for ages, and the commodities business has clear supply and demand that can clue investors in on any big trend changes. With crypto there is no business behind the coin, rarely executives involved, and there are no quarterly earnings to pay attention to.
Instead, cryptocurrency fundamental analysis looks at the total coins held by entities of various sizes, how active the underlying network is, and how healthy the hash rate is. If all of these various health metrics are increasing, it suggests there is adoption in Bitcoin and given the scarce supply, price will naturally increase.
Here is a closer look at the various bullish Bitcoin fundamentals and what this could mean for the cryptocurrency market for the rest of 2021 and beyond.
The Beauty Of Blockchain Is The Transparency And Visibility
To begin, we will start from the ground up. The beauty of blockchain technology is that all transactions, all wallets, and the amount of crypto stored in them, is public for all to see and verify publicly. Distributed ledger technology of this kind is being applied to all sorts of industries, but it was born with Bitcoin.
With all the visible data, anyone can see what’s going on around the network. When the network is most active, adoption is clear. But when Bitcoin falls into a bear market, the network cools off. Currently, the cryptocurrency is showing ultra bullish fundamentals, all while the price per Bitcoin remains down nearly 40% from the all-time high set in April 2021.
Crypto is a very different beast than other markets. For example, there is very little regulation, the market never sleeps, not even on weekends or holidays, and it is dominated by retail investors. The small number of institutions and corporations that bought in in early 2021 are all responsible for the large rally that occurred. However, retail has only increased suggesting they’ve bought the recent dip.
Fundamental Data Shows Retail And Strong Hands Buy The Dip In Crypto
It isn’t just retail investors who bought the dip, blockchain data shows. Another fundamental tool involves looking at the illiquid Bitcoin supply, who is essentially the whales with diamond hands. These long-term holders have returned to levels from around $60,000, yet price remains $20,000 lower.
Larger investors have a much longer time horizon with their investments. These whales aren’t buying Bitcoin for a short term trade, although some profit taking has clearly occurred. These smart investors sold high and rebought lower, adding to their long term holdings for what appears to be a final leg up in the crypto bull market, after what has been a dramatic shakeout.
The chart below demonstrates the direction that Bitcoin price could be headed, with so much illiquid supply being added by the strongest hands around.
Willy Woo Says A Supply Shock Is Coming, Be Prepared
In addition to liquid coins moving to stronger hands, and exchange supply dwindling, Bitcoin expert Willy Woo believes that price will soon follow as he points out in a chart shared below.
Willy Woo is a crypto fundamental expert that focuses on developing tools that are used to determine where Bitcoin is in a market cycle, along with how to spot tops and bottoms. Some of his more popular tools include the NVT ratio, which looks at the total value of the Bitcoin network versus the total amount of value transacted across it.
The NVT ratio was overheated at the most recent peak, much like it was around the June 2019 peak, but the indicator has since cooled off and this might indicate a rally will resume. If it does, Bitcoin price could follow the pattern of the ongoing supply shock, highlighted in Woo’s comparison chart below.
Stock-To-Flow Deflection Suggests A Storm Is Coming Soon
Finally, the Bitcoin stock-to-flow deflection shows a touch of a trendline that in the past has sent Bitcoin on some of its greatest rallies on record.
The stock-to-flow model is a valuation model for Bitcoin based on the scarce BTC supply and its distribution protocol and halvings. The model predicts that now that the most recent halving has passed, Bitcoin is well on its way to more than $100,000 per coin based on scarcity and math alone.
The stock-to-flow deflection tool shows any situations where Bitcoin price has diverged substantially from what the stock-to-flow model projects. It suggests that Bitcoin price is significantly undervalued from a supply standard. Although the cryptocurrency took a short term bearish turn, it is still bullish for the long-term and when the supply shock resumes, demand could quickly cause FOMO once again.
Bitcoin Bull Run Has Much More Room To Grow, Fundamentals Say
Fundamentally, more signs point to the top not yet being in than even technicals suggest. What is interesting, is that technicals also indicate that there is more room left for upside in Bitcoin.
If Bitcoin can resume its uptrend and reclaim $65,000 and set a new all-time high, it could very well set its sights on $100,000 per coin next. Bitcoin price predictions on PrimeXBT – a platform that makes it easy to trade Bitcoin – reach as high as $500,000 per BTC according to a panel of experts that include the likes of Tim Draper and Cathie Wood.
When Bitcoin moves, it does so rapidly so even though the asset is currently trading around $40,000 once again, it could very well reach such highs before year’s end. And if the current stimulus and low interest rate environment remains, the upside could extend for years to come as the fiat system finally fails once and for all.