Weekly Onchain Insights: Q2 by the Numbers: A Bitcoin Recap

The IntoTheBlock newsletter highlights weekly interesting data points about the crypto markets. Sign up here. Every week the IntoTheBlock team publishes a newsletter that summarizes key data insights about the crypto market. Below is a quick summary.. You can subscribe at: https://share.hsforms.com/1BIGbqGDERICP-iS0RGI1eg39rm8Hey onchainers,. Welcome back to IntoTheBlock’s newsletter. We have created a different type of newsletter for crypto fans that is not about news, but about data and analytics. Every week, we deliver valuable data insights about the crypto market.. Q2 by the Numbers: A Bitcoin Recap. With a return of -40.25%, Bitcoin’s recorded its worst-performing quarter since 2018. The drop ended a four-quarter winning streak for the flagship cryptocurrency that saw prices rise above $60,000 for the first time in Bitcoin history.. Q2 has historically been a strong quarter for Bitcoin, recording positive returns in 6 out of 8 quarters and never falling below 6%. As can be seen in the graph below, in Q2 of 2019 and 2020, Bitcoin recorded impressive returns of 177.42% and 41.8% respectively.. But what started as a great quarter, with Coinbase’s IPO on April 14, in which Bitcoin’s price went as high as $63,000, quickly shifted to a record-setting drop in price over the past few months, as the sentiment around the market turned bearish.. There are several factors that influenced the sharp decline in price, weighted by China’s Crackdown on Bitcoin mining, lack of appetite from institutional investors, regulatory concerns, and Elon Musk’s constant FUD which started as Tesla announced that it would no longer accept Bitcoin payments due to environmental concerns.. In this week edition of on-chain insights, we analyze the quarter performance from 2 different perspectives:. China’s crackdown on Bitcoin mining and its effectsInstitutional adoptionMining crackdown and why it will be positive for Bitcoin. The dispersion of Bitcoin mining has certainly become disruptive, at least in the short term as we are currently experiencing the largest migration of hash-power in history. As China is finally cracking down on cryptocurrency mining, this brings several concerns to the market as people are speculating on short-term selling from miners, as they have to incur expenses to relocate their mining equipment outside of China.. But let’s start the analysis by looking at the Hash Rate, which has decreased by 40% in June, making it one of the sharpest drops in its history. But why is the decrease in hash rate is important?. As of July 2, 2021 using IntoTheBlock’s Bitcoin Network Indicators. A blockchain ’s hash rate is often associated with its security. This is the case as more computing power allocated to validate transactions makes it more expensive to attempt to attack the blockchain. Therefore, increases in hash rate can be interpreted as improvements in the underlying blockchain security.. Although this may seem worrying, Bitcoin has incentives in place such that more miners increase the hash rate again. Since Bitcoin’s price has dropped 6% while the hash rate decreased 40%, it is relatively more profitable to mine now than it was a month ago. This is the case as there is less competition to mine Bitcoin’s next block, but nearly the same reward (in dollar terms).. But what about the selling pressure from Bitcoin miners? Contrary to what people believe, although miners have been selling recently (and they may continue to cover the relocation costs), in proportion to the total Bitcoin volume, miners’ addresses only represent 6%.. Relative to May of 2021, looks like miners transferred out 37,000 more Bitcoin in the month of June, it the largest negative net flows in the past three months. This points to miners selling some of their holdings during the migration taking place in June.. But as previously explained, the percentage that miners’ total flows make out of the total on-chain volume on a given day represents less than 6%, which means that there was more speculation, panic, and profit-taking behind the recent sell-off. Even though the mining migration has led to many’s concerns, Bitcoin is heading to a more decentralized and resilient future.. Institutional adoption. Institutional adoption has already been a recurring narrative for Bitcoin in 2020 and 2021 and one of the main drivers of the recent bull-run. Lead by factors like the Grayscale’s GBTC fund, Microstrategy continuos debts issuing to buy more BTC, and an increasing number of institutions looking into Bitcoin. Within the past year, institutional heavyweights such as BlackRock, JP Morgan, BNY Mellon, and Morgan Stanley have made major steps towards providing Bitcoin investing with their own and their client’s funds.. Needless to say, the market has taken much more negatively following Tesla’s actions and institutional adoption seems to have slowed down considerably.. One way to track institutional adoption is by tracking the average transaction size recorded on the Bitcoin blockchain.. As of Jully 2, 2021 using IntoTheBlock’s Bitcoin Financial IndicatorsThe Average Transaction Size indicator provides an idea of what type of activity is happening on the blockchain and what type of users are transacting with this particular crypto-asset.. We observe that the average transaction size was remarkably high during the months of April and June and has since dropped sharply. This points to high amount of speculative activity taking place among whales and institutional players rushing to sell their positions.. As well, IntoTheBlock’s large transactions volume indicator aggregates the total volume sent in transfers worth over $100,000. Given the magnitude of this amount, large transactions volume act as a proxy to the level of institutional activity taking place on-chain.. As of Jully 2, 2021 using IntoTheBlock’s Bitcoin Financial IndicatorsThe total value transacted in these large transactions has seen a decline of 61.7% compared to the recent highs set in February of this year. And with the upcoming unlock of the 140,000 BTC in the Grayscale Bitcoin Trust, we might see a further decline. Looks like there aren’t a lot of institutions joining the Microstrategy “buy the dip” narrative.. Weekly Onchain Insights: Q2 by the Numbers: A Bitcoin Recap was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

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