Bitcoin price remains far below investors expectations but the stock-to-flow model suggests nothing extraordinary has occurred yet.
Bitcoin (BTC) price dropped to $3,700 for a brief period on March 12, ending the day at $4,970. By March 13, the price recovered from the major downtrend, ending the day at $5,563 and showing an impressive return of over 11%.
Cryptocurrency market daily performance. Source: Coin360
The recent market turmoil, whether in traditional markets or the crypto space, has raised questions on the price evolution for Bitcoin, as well as its crucial network features. Let’s take a look at four key Bitcoin price and network metrics in order to gain some insight into the future of the crypto market’s largest asset.
Stock-to-flow model remains intact
Looking at the stock-to-flow model – a Bitcoin price forecasting model based on the available circulating supply (stock) and the new production output (flow), Bitcoin’s actual price on Thursday is below the forecasted line but within the expected thresholds.
Bitcoin stock-to-flow price model. Source: PlanB/ Twitter
This is not the first time that Bitcoin’s price fell below the 365-das price model, as it happened for 6 months (between mid-November 2018 and mid-May 2019), bouncing over the forecast since then.
Bitcoin stock-to-flow price model from July 2018 – December 2021. Source: lookintobitcoin.com
In a tweet on Mar. 13, stock-to-flow creator PlanB said that “bitcoin oscillated nicely around model value”. Thus, according to PlanB, the forecast price hasn’t changed considering the proximity of the next halving event. The current 365-day average model predicts a price of $8,426 at the estimated time for the halving – May 9, 2020.
On Sunday, Bitcoin’s price hovers around $5,400, while its realized price on the NTV signal is at $5,596, suggesting the asset is in a purchasing zone after the dump in price on Thursday. Currently, the NTV signal is at 49.5 with 45 representing an oversold scenario.
For traders considering a short-term purchase, the model suggests that there’s an opportunity for a quick profit based on the realized price and the 200 week average. Considering the 200 day average price at $8,587, Bitcoin shows room to grow over the long-term and the upcoming halving event in May adds to this bullish narrative.
Bitcoin NVT Signal. Source: http://charts.woodbull.com
What about the hash rate?
When it comes to the hash rate – the computational power miners need to employ to confirm transactions on the Bitcoin blockchain–, it has been going down since March after reaching historical levels. Nevertheless, since March 11, it has been in a slightly increasing trend, even after the massive 50% drop that took place on March 12.
Hash Rate (quintillion hashes per second) from Feb. 23, 2020 – March 13, 2020. Source: Bitinfocharts
On March 13, the hash rate was near 110.38 quintillion hashes per second, the same levels seen in late February. However, the recent corrections seen in February have not stopped the long-term increasing trend since historical hash rate values have been set since the start of the year.
Increasing difficulty typically leads to higher prices
The difficulty, meaning, the effort miners need to employ to validate Bitcoin’s blockchain, keeps on an increasing trend as it has been the norm. Difficulty increased on March 8, amid the negative price action meaning a higher mining involvement despite the unfavorable nature of recent market conditions.
Average difficulty from January 2020 – March 13, 2020. Source: Bitinfocharts
Transactions spiked on March 12
The number of Bitcoin transactions spiked on March 12 as is typical when big swings in the market take place. There was also a spike in the amount of Bitcoin sent in USD on March 13, and the daily number of transactions decreased to late-February levels around 277,000 transactions, maintaining a regular pattern since the start of the year.
Daily transactions from Feb. 23, 2020 – March 13, 2020. Source: Bitinfocharts
As comments around investors’ confidence in Bitcoin raise doubts, Bitcoin’s underlying network features reveal consistency even though the entire market is plagued by turmoil and uncertainty.
Looking forward, with such levels of fear in the market, strong hands may be looking into the opportunity to buy at low prices shooting for a long-term positive outcome.
Nevertheless, the worldwide propagation of COVID-19 may continue to cause short-term liquidity issues in the market and ultimately lead to severe bearish economic conditions as a result.
In addition to the analysis of the Bitcoin network’s fundamentals, the digital asset’s safe-haven association to gold may sustain investors over the current medium-term crisis period even if it is currently undergoing a down-trend.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.