Who benefits from Bakkt? Bitcoin Price Analysis

LinkCoin.pro
Sep 27, 2019 · 5 min read

Our analysis last week concluded that the price of Bitcoin would dip again. Shortly after our article, the price of Bitcoin tested area below US$9,600. Before we proceed to this week’s analysis, let’s talk about Bakkt.

The Intercontinental Exchange launched physically-settled bitcoin futures trading through its Bakkt platform on September 23. However, the long-anticipated Bakkt debut showed a sluggish start. In their first 24-hours of trading, Bakkt’s new monthly and daily futures contracts, which allow investors to bet on the digital currency’s price movements, totaled just 73 contracts worth a Bitcoin apiece in volume. Yet, there is no need to dismiss the impact of Bakkt. We believe that Bakkt will have a positive impact on the price of Bitcoin in the long run.

First, the legitimization the cryptocurrency trading market will show Bitcoin disbelievers the value of Bitcoin.

Second, Bakkt’s futures will be physically settled, which is a game-changer and could bring in more institutional volume. This is due to the fact that physically delivered futures require the actual purchase of bitcoins. If investors want to go long, they would need to have enough funding. If they want to go short, they would need to have enough Bitcoin. This model seems fair but in reality it is skewed towards long position. For instance, short position requires having Bitcoin as your proof of asset; if you profit from going short, then it also means that the value of Bitcoin decreases. In the case of long position, you not only profit from the growth of transaction but also from the value of Bitcoin itself. In the long run, Bakkt benefits those who hold their Bitcoin.

Last but not least, the core of Bakkt is institutionalization. As an emerging financial asset, people are mostly worried about the security and legality of digital asset. Bakkt has provided a solution to these worries. As it matures, it is just a matter of time we will see a wider institutional adoption.

Daily trading volumes

Source: Tokenview

The daily trading volume went up and then down throughout the week. It reached a high of 363,000 and a low of 307,000. The numbers weren’t great but they were not desperate either.

The daily trading volume has been on a slow increase since February 2018. It shows the core value of Bitcoin and is the fundamental support for Bitcoin price.

Daily Average Hashrate

Source: Tokenview

The hashrate for Bitcoin reached a new high and soon hit a plateau. It averaged at around 93EH/s. Computing power (aka mining hashrate) is a key market metric as it illustrates the networks transactional demand.

According to a recent report published by independent research boutique Fundstrat, bitcoin mining is still profitable at the moment, as the total cost to mine one Bitcoin using Bitmain Antminer S9 is around US$8,500. Yet, the cost of electricity to mine Bitcoins might outweigh its profits and put heavy selling pressure on Bitcoin if there is no price breakthrough in the near future.

Active & New Addresses

Source: Tokenview

Active Addresses refer to the number of unique “from” or “to” addresses used per day. New Addresses refer to the number of addresses used for first-time transaction per day. We saw an evident decrease in the two figures last week.

USDT Snapshot

Source: CoinGecko

USDT and the trading volume continued to decrease last week. There is no enough fund in the field.

Google Search Trend

Looking at the past-30 day Google search trend for “Bitcoin” and related terms, we found that the global search for “btc” has died down, meaning that the public’s enthusiasm for Bitcoin has cooled off a bit.

Fear & Greed Index (FGI)

FGI was at 41, meaning that the market still shows fear sentiments.

Long/Short Position Ratio

Source: OKEx

We will add a new index to our analysis this week. Having a “long” position in a security means that you own the security. Investors maintain “long” security positions in the expectation that the stock will rise in value in the future. The opposite of a “long” position is a “short” position. A “short” position is generally the sale of a stock you do not own. Investors who sell short believe the price of the stock will decrease in value.

In the market of contracts, the total positions of long and short are equal. For each long position, there is a short position. If the long/short position ratio is high, then it means that there are fewer people who go long than those go short. According to past experience, if the ratio is too high it is highly likely that we will see a market correction. Currently this ratio is at 1.88, which is a relatively high number and we need to watch out for a correction.

Conclusion

In sum, all the fundamental indexes has not shown signs of recovery. Secondary market continued to shrink and shock. The long/short ratio is at a high point and we might see a market correction soon. We suggest that you hold your position and don’t rush to buy at bottom.

For the details of Bitcoin trading on LinkCoin, please contact Managing Director: Leon Tang, leon@yesbit.ca

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