Finance

To start analyze Bitcoin’s finance, we should admit that there is 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. Previously, we were seeing this growth which was accompanied by a trend change to bullish. However, now we are observing the fall in a number of daily active addresses.

Average Transaction Value (Daily MA30) in USD

This graph reflects the average transaction value in the previous 30 day, and, as previous graph, shows a rise in network activity. There is no one 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

No one PoW blockchain can be working 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

At the end of June, It was a time when we saw the high of Net Value to Transaction, and it could be interpreted as a signal to sell BTC. On 28 June 2019, it was 112. On 30 July, it is 68,9. On 13 August, it is roughly 79. Today, on 27 August, it is roughly 69. So, now we see the correction of NVT. It fell into its average level.

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.) / MA 90-days Transaction Volume

Average fee in USD

As we know, every transaction includes fee which is paid to the miners to write this to the ledger, but because of low Bitcoin TPS (Transactions per second), there is a lot of unconfirmed transactions 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:

60-day Volatility — 8.08%

Red — BTC/USD Volatility Blue — USD/EUR Volatility

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 whose using 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. But there is an important point for long-term crypto-investors — Bitcoin volatility is decreasing, however USD/EUR volatility does not change. 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 — 3.77%

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, on 27 July, the inflation rate of Bitcoin is 3.77 percent. And it is less than last week.

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. On 18th June 2019, it was only 8 thousand futures. Furthermore, yesterday, it was only 5080 futures.

Bakkt has announced that it will be launching its bitcoin futures trading platform in September 2019.

In a blog post published on August 16, 2019, the cryptocurrency trading company announced that its long-anticipated futures product will be going live on September 23, 2019, following approval to create a qualified custodian trust company from the New York State Department of Financial Services (NYSDFS)

The anticipation for Bakkt’s physically delivered futures has been high for quite some time. The company initially announced that it would launch the platform in August 2018, but it had to delay the launch several times due to issues with regulators.

It has had problems satisfying the requirements of the U.S. Commodity Futures Trading Commission (CFTC), though testing on the platform started back in July 2019.

According to the announcement, the company has recently hosted several events in Chicago and New York City, two strategic markets for futures trading in the U.S. It has also had several meetings with members of the CTFC and the U.S. Securities and Exchange Commission (SEC).