In the second quarter, bitcoin hit an all-time high of $64,888.99 in the third quarter, but closed the quarter at $35,046.22, down 46 percent from that high. The dip prompted our experts to declare in a previous edition of Crypto Long & Short that cryptocurrencies are definitely in a bear market, citing a number of factors.
Price falls attract cynics in droves, and once-cocky, paper-rich day traders are now “in it for the tech,” but a bear market does not have to mean disaster for institutional investors. Bear markets shed a spotlight on tools and measures essential for gauging market sentiment and establishing a long-term investing plan for investors who believe in the intrinsic worth of bitcoin, ether, and other cryptocurrencies.
MVRV, or “market value to realised value,” is one of those metrics that has yet to reach the highs it has in the past before profit-taking, implying that there are still unrealized gains in the crypto markets that traders might profit from. Furthermore, the “Puell Multiple,” which is derived by dividing the total dollar value of bitcoin produced in a single day by its 365-day moving average, recently sank to a one-year low, signifying undervaluation of BTC and a possible slowing of bearish market momentum.
Before moving on from the topic of pricing, it's worth noting that the price of ether climbed by 20% in the second quarter, while the price of bitcoin fell by 40%. Since the start of CoinDesk's Ether Price Index (ETX) in 2016, the two assets have only had mixed quarters four times. Despite the split, the 90-day correlations of daily log returns for BTC and ETH remained high and unaffected throughout the quarter, hovering around 0.75.
Bitcoin vs. China
In other noteworthy events from the last quarter, the Chinese authorities tightened down on bitcoin mining. Again. However, this time feels different. For a long time, there have been whispers about a possible “east-to-west” bitcoin mining migration, but this is the first evidence that it is actually happening.
Multiple Chinese mining pools were forced to stop down or reduce back operations in May and June due to regulatory crackdowns in Qinghai, Inner Mongolia, Yunnan, and Sichuan. Bitcoin's hashrate — a measure of how much computational power miners expend – was negatively affected after each event. In the second quarter, hashrate topped 200 million terahashes per second before falling to slightly under 90 million.
As China-based miners transfer their operations, hashrate is likely to grow again. The true takeaway is right there. What are the plans for these miners? Are their rigs being airlifted to Maryland? Is it possible that they are relocating their business to Kazakhstan? Are they hoping that the government's present anti-bitcoin position will be lifted soon? We don't know for sure right now, but where these miners end up will have a significant impact on bitcoin mining's energy mix, and in the next months, it'll be a storey to keep an eye on.
Bitcoin is not a ‘boomer coin’
Aside from market volatility and regulatory crackdowns on bitcoin mining, Bitcoin demonstrated in the second quarter that it is a technology worth iterating and innovating on.
Miners announced their support for Taproot, a technological improvement to Bitcoin, on June 12. Taproot is a collection of three improvements designed to boost network security, privacy, and scalability. Since the activation of Segregated Witness's block capacity boost in 2017, Taproot is the most significant upgrade to the Bitcoin network.
Bitcoin has been dubbed the "boomer currency" by some Twitter users because it is a "old, bulky, and slow technology." True, bitcoin's "digital gold" storey has evolved more toward "gold" than "digital" over the years, but bitcoin is no longer a boomer currency, with Taproot set to launch in November. Bitcoin is currently a thrilling and enjoyable technology!
Apart from the jokes, Bitcoin's ability to develop within the constraints of broad, decentralised consensus is noteworthy. Big changes to Bitcoin don't happen very often, and the handful that do make it through the network's arduous and delayed governance process are worth learning about.
For the time being, bitcoin retains its reputation as digital gold while expanding its applications well beyond what gold could ever envision. So says the pessimist.
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