Bitcoin's Usage Is Growing Faster Than Its Price According to Research Indicator

Bitcoin price hit an all-time high in December of 2017, as it briefly broke $20,000. Since then a year-long bear market saw it lose over 80% of its value, but in recent months it’s been recovering. A real-world usage indicator suggests the bitcoin price may be undervalued compared to its growing usage.

Since the recovery started, bitcoin’s usage has seemingly been growing more than its price – a trend we saw back in 2017, a year in which the cryptocurrency surged 1,400%.

According to Thomas Lee, the co-founder of independent research boutique Fundstrat Global Advisors, certain events have “confirmed” the cryptocurrency bear market is now over. Factors including improving fundamentals, the market’s reactions to negative news, and increasing trading volumes point that way.

Since the market has seemingly turned around, traders and investors are now looking at the market to look for indicators that may help them navigate the next cycle, and there’s no shortage of theories.

While some take a bearish stance and believe the recent recovery is a dead cat bounce that’ll see us keep on dropping, others are pointing upwards. Billionaire investor Mike Novogratz revealed he believes it’ll consolidate between $7,000 and $10,000.

Fundamentals, such as Bitcoin’s mining difficulty reaching an all-time high as miners show renewed confidence, are most important, while others look at charts to analyze what they can get from historic patterns.

One indicator that’s often overlooked is how people are using the flagship cryptocurrency, and its economic activity. DataLight Laboratory has recently launched a Real Usage Index, which measures how blockchains are used by calculating the number of active addresses and multiplying it by the number of transactions.

The Real Usage Index seemingly shows that so far this year, activity on the Bitcoin blockchain has grown more than the cryptocurrency’s price – just like it did in 2017. In fact, the index is approaching November 2017 values, when BTC started surging to its $20,000 all-time high.

This essentially means that while BTC’s price has seen a significant rise so far this year, it hasn’t been able to keep up with actual usage metrics suggesting that the bitcoin price may be undervalued. The cryptocurrency ecosystem’s bull run in 2017 could, however, have been an exception.

Any analyst will make it clear that past events aren’t indicative of future performance, and that no indicator is bulletproof. However, the index is a handy tool for traders and investors to gauge how active a blockchain really is, looking beyond the hype on social media.

Crypto Trading Volumes Plummet in June, CryptoCompare Report Shows

Cryptocurrency trading volumes plummeted in June to “roughly half of the daily volumes” seen in May, according to the CryptoCompare June 2020 Exchange review report.

The report found that top-tier cryptocurrency exchanges, those with a high ranking on CryptoCompare’s Exchange Benchmark,  saw their trading volumes saw their spot trading volumes drop by 36% last month to $177 billion, while lower-tier cryptoassets exchanges saw their trading volumes drop by 53% to $466 billion.

unnamed.pngSource: CryptoCompare

CryptoCompare notes that last month the highest recorded trading volume in a single day on top-tier exchanges was of $9.26 billion. In comparison, in March’s Exchange Review, the cryptoassets data provider revealed that the March 12-13 crypto market crash led to high in daily trading volumes, as $75.9 billion were traded across exchanges in a single day. Top-tier exchanges traded $21.6 billion that day.

It’s worth noting that the spot volumes did not hit an all-time high, even during the March market crash. In July 2019 and December 2017, when the price of bitcoin hit its all-time high near $20,000, spot volumes hit record highs.

In June, cryptoassets trading platforms charging traditional taker fees represented 76% of the total exchange volumes, while those implementing the tans-fee mining (TFM) model represented less than 23% of the cryptocurrency space’s spot volume.

Fee-charging exchanges, the report adds, traded a total of $455 billion in June, as their trading volume dropped 48% since May. Trading platforms using the trans-fee mining model saw their volumes drop 45% since May, as they traded $141 billion.

Exchanges using the TFM model are seemingly gaining market share. While in March they represented less than 20% of the spot trading volume, in June their market share was of 23%.  As CryptoGlobe reported, these trading platforms often have unusually thin order books and low traffic.

FCoin, the cryptocurrency exchanges that started using TFM, has passed trading and withdrawals earlier this year over the shortage of crypto worth up to $130 million. The firm’s founder revealed that the platform was not hacked, but instead an internal system error gave users more rewards than they should have received.

Featured image by Austin Distel on Unsplash.