Bitcoin Research Report - May 20th 2024
John Barry | Mon May 20 2024
This is a special free verion of a research report for Quantify Crypto Gold Subscribers.
Background
Bitcoin is the first cryptocurrency, founded in 2009 by an individual or group using the pseudonym Satoshi Nakamoto. The market cap of Bitcoin represents approximately 51.5% of the total market cap of all cryptocurrencies. Being the largest and oldest cryptocurrency, it earns the highest ranking and safety scores for this reason. The performance of Bitcoin is crucial for the entire cryptocurrency market, as it is uncommon to see Bitcoin in a downtrend while the rest of the crypto market is on the rise. The saying 'Bitcoin leads and the altcoins follow' is an important concept for the overall performance of the crypto market.
Fundamentals
The 2024 Bitcoin Halving occurred on April 19th, 2024. Bitcoin halving events are pre-programmed adjustments that occur approximately every four years in the Bitcoin network's protocol. During a halving event, the block reward given to Bitcoin miners for successfully validating transactions and adding them to the blockchain is reduced by half. This mechanism is designed to control the issuance of new Bitcoins and ensure a limited supply over time.
Historically, Bitcoin halvings have had a significant impact on the price of Bitcoin. The reduction in block rewards affects the supply dynamics of Bitcoin. With fewer new Bitcoins entering circulation, the rate of inflation decreases, which can create upward pressure on the price due to the increased scarcity.
The first Bitcoin halving occurred in November 2012, when the block reward was reduced from 50 to 25 Bitcoins. Following this event, Bitcoin experienced a substantial price increase in the ensuing months and years. The subsequent halvings took place in July 2016 and May 2020. Similarly, the price of Bitcoin surged after each halving event, eventually reaching new all-time highs. Detailed analysis on this topic can be found in the Quantify Crypto blog under the title "Bitcoin Halving – History and Future Price Analysis”. After the 2024 Bitcoin halving, the block reward will be reduced from 6.25 to 3.125 Bitcoins per block.
As depicted in the chart above, based on historical price reactions to previous Bitcoin halvings, significant price surges have typically occurred within three to nine months following the halving event.
Significant news and upgrades
US Senate Resolution 109: On May 16th, the resolution opposes the SEC's rule that could impose burdensome accounting practices on companies dealing with digital assets. This decision supports the growth of cryptocurrencies by preventing restrictive regulations, although President Joe Biden is expected to veto it. This resolution passed by a vote of 60 to 38, with 11 Democrats joining all but two abstaining Republican senators to reject the rule despite Democratic party leaders opposing the resolution.
Donald Trump's Statement: During a May 8th speech, former President Donald Trump, who will be running against Joe Biden in the Nov 2024 US presidential election, made a clear message about cryptocurrency. President Joe Biden “doesn’t even know” what crypto is. “The Democrats are very much against it [crypto]. And I say this, a lot of people are very much for it ... and I'm fine with it. I want to make sure it's good and solid ... but I'm good with it. If you like crypto in any form, and it comes in a lot of different forms, you better vote for Trump".
SEC Approval of Bitcoin ETFs: On January 11th, the U.S. Securities and Exchange Commission (SEC) has officially approved the first regulated spot Bitcoin Exchange-Traded Funds (ETFs) in a significant move for the cryptocurrency market. This approval encompasses 11 applications from major financial institutions, including BlackRock, Ark Investments/21Shares, Fidelity, Invesco, and VanEck.
This provides Wall Street investors access to Bitcoin without the need to directly hold the cryptocurrency. This development is expected to attract substantial investment. During its first 19 days of trading, 2 Bitcoin Spot ETFs already represent the 5 and 9 most traded ETFs. This historic decision by the SEC is viewed as a major positive for the institutionalization of Bitcoin as an asset class,
MicroStrategy Bitcoin purchases - Michael Saylor's company, MicroStrategy, continues to make significant Bitcoin purchases monthly. MicroStrategy now holds 214,400 Bitcoins.
Price Analysis: (Monthly Price Chart 2010 - 2024)
For those who invested in Bitcoin prior to 2018, it has proven to be an exceptionally rewarding investment, significantly outperforming other assets since then. The monthly price chart clearly shows the volatility of Bitcoin. Turning the focus to the past two years, at the end of the crypto winter of 2022, Bitcoin traded between $15,500 and $18,350, setting the stage for a strong start in 2023. The next price chart shows the four significant price trends that have occurred during the past two years.
Two Year Price Chart
December 27, 2021 (Bearish Signal at $48,961) – As the Sam Bankman-Fried scandal intensifies during the end-of-year 2021 bear market, the Quantify Crypto (QC) daily trend algorithm turns bearish and remains bearish throughout 2022. Bitcoin hits a low price of $15,529 on November 22, 2022.
January 14, 2023 (Bullish Signal at $19,418) – Bitcoin and the crypto market start strongly in 2023 after a slow price buildup in December. On January 14th, the QC daily trend score goes above 70 for the first time in over a year. Bitcoin reaches a high price of $31,815 on July 14th during this cycle.
August 23, 2023 (Bearish Signal at $25,995) – Following a steady price decline from July 14th through August 15th, Bitcoin's price drops from $28,784 to a low of $25,152 on August 16th. After a few more days of mostly decline, the QC daily trend algorithm turns bearish. Bitcoin trades sideways for the next month, reaching a low of $25,332 on September 11th.
October 2, 2023 (Bullish Signal at $27,511 – current) – Since September, Bitcoin has been on a very strong run, increasing by over 185% in five months to a peak price of $76,300 on March 14th.
Fundamental Score: Highest (1)
Quantify Crypto provides rankings of the top cryptocurrencies, categorizing them into five levels: Highest, Above Average, Average, Below Average, and Lowest. Cryptocurrencies are researched and evaluated evenly, ensuring that each fundamental level contains approximately 20% of the cryptocurrencies analyzed.
Several factors contribute to Bitcoin earning the highest fundamental score:
Market Dominance – Bitcoin accounts for 52% of the overall market cap for cryptocurrency, it is the clear leader of this asset class.
First to Market Innovation – Innovative products that create change in a positive way historically turn into the best multi-year and multi-decade investments. Bitcoin clearly fits this elite category as evidenced by the wave of cryptocurrencies that have been successfully launched after the Satoshi whitepaper was published.
Wall Street Access – When the SEC approved the Bitcoin ETF it cleared the way for many high wealth hedge funds, money managers and professional traders to invest in Bitcoin.
Extremely Low Regulation Concerns – The US SEC, led by Gary Gensler, is critically scrutinizing all cryptocurrencies and crypto exchanges for violations of security law. Thankfully Bitcoin has been most exempt from this scrutiny, as the SEC approved the Bitcoin ETF on January 11th, representing a rare approval for anything crypto from the SEC.
Future Regulation Help – In the aftermath of the FTX/Sam Bankman-Fried scandal, several crypto exchanges have begun generating “Proof of Reserves” reports. This appears to be an area that regulators in many countries are closely examining. Many expect and hope for improved and smarter regulations for crypto exchanges.
Final Thoughts
It appears Bitcoin and cryptocurrency will be significant talking points in the U.S. elections in November 2024. Regardless of the outcome, the publicity, media discussions, and focus will undoubtedly be a win for cryptocurrency awareness and use cases. This increased visibility is another positive step towards mainstream adoption and will add pressure on U.S. politicians to provide regulatory clarity, further legitimizing the cryptocurrency market.
The importance of Bitcoin for the cryptocurrency market cannot be understated. The overall crypto market has historically performed best when Bitcoin is in a bullish or neutral market, leading to the phrase “Bitcoin leads and altcoins follow.” During bear markets, altcoins often pose a much higher risk for price drops than Bitcoin. While Bitcoin is a high-risk asset, altcoins are even higher-risk assets. If you own altcoins but do not own Bitcoin, it is still best practice as a crypto holder to know the price direction Bitcoin is moving in.
Disclaimer
Quantify Crypto is an informational website that provides market data, technical analytics and links to news and commentary sources. Information published on Quantify Crypto platform should not be taken as investment advice in any way. Quantify Crypto is not an investment adviser and you agree to not site the Quantify Crypto platform or content as the reason or cause for making any trading decisions. Quantify Crypto is not accountable, directly, or indirectly, for any damage or loss incurred, alleged or otherwise, in connection to the use or reliance of any content you read on the site. You agree not to consider the information on Quantify Crypto platform as a solicitation to invest in any cryptocurrencies, initial coin offerings, or other financial instruments.