The event that should have shaken up the Bitcoin market by triggering a massive rally – the Bitcoin halving occurred on May 11, 2020 – put any bullish hopes to sleep.
The next couple of months were as boring as the event itself in terms of price movement with BTC reaching yearly volatility lows in late June. After a rally from around $8,500 on halving day to around $9,800 three days later, Bitcoin hit the $10,000-mark a couple of times in June before consolidating at around $9,200 - $9,400 price range.
Nevertheless, the consolidation isn’t necessarily a bad thing for all the HODLers out there. It could actually signal a massive rally ahead that could extend deep in 2021 when many believe a new all-time high might happen.
If you do not believe us, we have these stats to back up our story.
What is HODLing? Investing in Bitcoin long-term without taking into consideration any short-term price fluctuations, upward or downward.
The HODL mentality emerged after the first serious crash caused by the Mt Gox demise, in late 2013 and early 2014. Back then, a self-proclaimed intoxicated user from Bitcointalk forums mistyped the word ‘hold’ and write instead ‘hodl’ in an attempt to express his frustration over a price crash.
Since then, many are of the opinion HODL is indeed the best strategy. How many? According to the CTO of Glassnode – a blockchain market analysis platform – 61% of Bitcoin’s total supply hasn’t moved in over a year, an all-time high.
2/ First, the obvious one:— Rafael Schultze-Kraft (@n3ocortex) June 26, 2020
61% (!) of #Bitcoin supply that hasn't moved in over a year – that's an all-time high.
Moreover, 44% hasn't moved in 2+ years (approaching ATH), and almost 30% hasn't moved in 3+ years.
Loads of hodling here.https://t.co/MrE4EcwGhH pic.twitter.com/79wulhMT2T
Bitcoin investor Alistair Milne compared this year’s HODLing data to the past and found similar levels when the BTC price was over $400 before the start of the big rally that took the digital currency to unfathomable levels close to $20,000.
HODL'ing for a year or more just made a new ATH of 62%— Alistair Milne (@alistairmilne) June 30, 2020
Similar levels of HODL last seen during a 3-month consolidation at around $400 before starting a two year bull run
Guesstimate that this cycle will peak around 70%??#Bitcoin pic.twitter.com/eEbUfka83V
Could history repeat itself in 2021 and beyond?
Not only investors are thinking long-term, but also the people that make it all possible by solving the Proof-of-Work and adding blocks of transactions into the blockchain – the Bitcoin miners.
They suffered a big blow in May, at the time of the BTC halving event when their mining rewards were cut in half from 12.5 BTC to 6.25 BTC per block mined. The price remained pretty much the same, therefore their profits were also slashed in half.
Did they shut down their mining rigs and looked elsewhere? Not by a long shot. Like always, there was a hashrate (the computational power invested to mine Bitcoin) crash after the halving event – that’s what usually happens with all halvings – yet, the network recovered fairly quickly & in just two months, the total hashrate is close to the local all-time high, at around 123.5 exahash per second.
In other words, even the Bitcoin miners are confident about a bull run that might happen late in 2020 or 2021.
Last but not least, there is another indicator that stirred up some healthy debates in the crypto-sphere over the last several days.
It may be controversial and not-that-reliable for some, but it puts things into perspective for scarce assets like gold and Bitcoin.
We are talking about Stock-To-Flow or S2F Ratio brought forward by Bitcoin enthusiast and libertarian ‘PlanB’.
S2F basically quantifies the scarcity of a given asset. Stock is all about current supply or reserves available worldwide while Flow is the yearly production. Currently, the Bitcoin supply in circulation is over 18.4 million, according to CoinMarketCap. The yearly production was fairly easy to calculate and before the last halving stood at around 657,000 BTC per year (around 12.5 BTC per block mined every 10 minutes x 6 per hour x 24 per day x 365 per year).
After the halving, the yearly production will be at approximately 328,500 BTC per year. Since this is a transitional year, the estimated flow for 2020 is 440,000 BTC per year. Therefore, the S2F ratio for 2020 will be 42. In 2021, the S2F ratio will increase to over 50.
As a comparison, gold has a S2F ratio of 62 while silver has 22.
What does this mean for the number one cryptocurrency? A S2F spike could be translated to increased scarcity and decreased supply. Even if the demand is at the same levels, the decreased supply could trigger a new price spike in 2021.
#Bitcoin S2F chart update .. RED DOT #2