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Bitcoin: NVT Retracement, High Google Trend Score in Nigeria, GrayScale’s Investor Survey, Tech Retailer Provides Crypto Payments, Venezuela Government

Biweekly update 16th July — 30th July

Hi, everyone. We are happy to present to you our latest regular update on Bitcoin. Last two weeks have been overwhelming, and we have much news we want to share. Every story demands attention, and we hope you’ll find them excellent too.

First, at the end of June, It was a time when we saw the high of Net Value to Transaction, and it could be interpreted as a signal to sell BTC. On 28 June 2019, it was 112. Today, 30 July, it is 68,9. So, we see the retracement of NVT. It falls into its average level. Of course, it can be viewed as a signal that Bitcoin is no longer overbought.

Second, by the way, the impressive thing is the fact that the regions with the most significant Google Trend score are Nigeria, South Africa and Ghana. We find it fascinating and associate it with the soft currencies in these countries. For example, the exchange rates were as follows: 170–199 Naira per US$ in 2014, 390–489 Naira per US$ in 2016 and 362 Naira per US$ today, on 30 July 2019. It seems that the high volatility and inflationary expectation of Naira reflect on the demand for universal currency and new store of value. Furthermore, according to Numbeo, Nigeria is one of the most criminal regions. It seems that since the crimes, as we know, have the urge to launder money and make untraceable transactions, they find BTC the most proper method to do it. Must admit, we do not support such ways of using Bitcoin. Anyway, these countries arouse interest to take advantage of cryptocurrencies, and we should take it into account. If you search out other reasons, we will be glad to talk about it.

Third, you should remember we track the CME Bitcoin futures. The primary metric is the volume of futures contracts on Bitcoin. On 18 June 2019, it was only 8 thousand futures. Today, the volume is only 3500 futures. In our opinion, the fading popularity can be explained by the latest retracement of Bitcoin. We think that there is an apparent correlation between Bitcoin price and volume on the CME Group.

Moreover, we take notice of the correlation between Bitcoin price on the crypto exchanges and futures price. So, if you don’t trust crypto exchanges, but want to invest in Bitcoin, you can try futures contracts on a typical stock market. Must admit, futures contracts on CME do not have all the advantages of Bitcoin, and it is just speculative.

Fourth, there is news from GrayScale, a large crypto fund. Its “Bitcoin 2019 Investor Survey” revealed that, in a pool of 1,100 U.S. investors, more than a third (36%) of U.S. investors would consider an investment in bitcoin. Assuming there are 63 million investors in the U.S., bitcoin-curious investors represent a potential market of over 21 million investors. We agree with GrayScale and believe that the number of crypto-investors is going to grow near time rapidly.

Fifth, we expect you have heard the news about Venezuela and know its economic crisis. So, in a bid to circumvent U.S. sanctions, the government of Venezuela has begun its first experiments with a program to convert tax revenue into bitcoin and trade it for fiat currency at foreign exchanges. The details of this plan were revealed in a report from the Spanish-language ABC International, which claimed that the Venezuelan government is currently only testing the project at the Maiquetía International Airport (IAIM). We consider that crypto-currencies can be helpful and accessible in countries such as Venezuela where local currency is soft and need for short-term replacement.

Sixth, there is one more business adoption we like. Popular computer hardware retailer Newegg announced a significant step toward crypto adoption, confirming that it will be providing bitcoin payment options to consumers in 73 countries. Anthony Chow, Newegg’s president of global sales, said that the move is in line with its objective to drive innovation within the e-commerce industry. All right! In our view, the market is ready and need for new ways for billing. Of course, we are looking forward to becoming crypto payments accepted in more number of shops.

To conclude, the Bitcoin community is still growing and not going to stop. We like it and find it right. In our point of view, there is a bull run followed by the development of investment, ecosystem, etc.

Disclaimer

Trading and investing in digital assets like bitcoin is highly speculative and comes with many risks. This article and information below and above are for informational purposes and should not be considered investment advice. They should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.

Development

GitHub metrics:

Developer activity (from Coinlib.io):

Since the latest Bitcoin Core 0.18.0 which was published on May 02, 2019, there are no updates, according to the Bitcoin Core. However, the commits are published every day and the issues become closed.

Finance

To start analyze Bitcoin’s finance, we should admit that there is a lot of fundamental metrics which can help us make a decision, but metrics are just metrics and there are risks associated with investing in crypto assets. All metrics can only show general market and user sentiment in past and present, not in the future.

We use fundamental analysis as one of several aspects in our approach to investing. For instance, we use the following indicators and ratios.

  • Active Addresses (Daily) — indicator
Source: bitinfocharts

The graph above shows the average number of active addresses used on the Bitcoin blockchain in the last 30 days. It is obvious that the increase in the number of active addresses reflects the growth of the activity of the entire Bitcoin network. Now we are seeing this growth which is accompanied by a trend change to bullish.

  • Average Transaction Value (Daily MA30) in USD

This graph reflects the average transaction value in the previous 30 day, and, as previous graph, shows a rise in network activity. There is no one man who can deny the trend change, because even transaction value is rising — more rich people want to buy and hold it waiting for the new high price.

  • Mining profitability in USD

No one PoW blockchain can be working without its main power — miners. And the mining profitability can indicate the interest of miners. There is a graph which indicates mining profitability per one day and it can tell us that it can be a nice idea to return to mining business — profitability has doubled in several months.

  • Network Value to Transaction Value
Source: charts.woobull.com

At the end of June, It was a time when we saw the high of Net Value to Transaction, and it could be interpreted as a signal to sell BTC. On 28 June 2019, it was 112. Today, 30 July, it is 68,9. Now, we see the correction of NVT. It falls into its average level.

To be honest, it is not just technical indicator, it is the fundamental indicator which shows the overbought of Bitcoin on the market because NVT displays that the value exceeds usage.

NVT ( Network Value to Transaction Value) = Network Value (Market Cap.) / MA 90-days Transaction Volume

  • Average fee in USD

As we know, every transaction includes fee which is paid to the miners for write this to the ledger, but because of low Bitcoin TPS (Transactions per second), there is a lot of unconfirmed transaction and if any user wants to make his/her transactions confirmed faster he/she is able to pay higher transaction fees. It is obvious that the growth of commission is due to increased activity. And today this fact can be seen on the chart above.

Monetary properties:

  • 30-day Volatility — 29%

Volatility is a statistical measure of the dispersion of returns for a given security or market index over a given period of time. Generally, this measure is calculated by determining the average deviation from the average price of a financial instrument in a given time period. We use standard deviation whose using is the most common, but not the only, way to calculate historical volatility. The higher the historical volatility value, the riskier the asset (in our case, Bitcoin). However, that is not necessarily a bad result as risk works both ways — bullish and bearish. But there is an important point for long-term crypto-investors — Bitcoin volatility is decreasing, however S&P 500 volatility is increasing. In our view, one of the reasons is Trade War — investors might prefer to invest in digital assets, not in Equity, which depends on the policy. Nevertheless, everybody, interested in crypto currencies, must remember that investing in digital assets like bitcoin is highly speculative and comes with many risks, but according to Hawley, professor and economist, the higher the risk in business, the greater the potential financial reward is for the business owner.

  • Bitcoin Inflation — 4.11%

When we talk about Bitcoin Inflation Rate, we do not mean the purchasing power of money, we mean the average mined bitcoins. There is a fixed amount of 21 million Bitcoin that can be minted, which means that no coins can be minted once this amount is reached. Approximately 80 percent of the total amount of Bitcoin has already been minted. Bitcoin’s algorithmic inflation rate since 2010 is displayed in the figure below and is explained in the original white paper written by Satoshi Nakamoto.

Inflation rate

Today, 2nd July, the inflation rate of Bitcoin is 4.11 percent. And it isn’t more than last week.

The difficulty re-adjustment makes it impossible to simply mine more Bitcoin by allocating more computer resources to the network. As more people try to mine Bitcoin, the software automatically increases the difficulty of successfully mining a Bitcoin and vice-a-versa.

Once the inflation rate reaches zero, miners will no longer be able to earn money from minting newly created bitcoins. Instead, transaction fees will have to increase or the number of transactions will have to increase.

To conclude, we must admit that Bitcoin Block Reward Halving Date approaches — 21 May 2020. According to the history prices and previous halving, we believe that after this date Bitcoin’s price will incredibly rise, because the inflation rate will drop by half.

  • Bitcoin Future on the Chicago Mercantile Exchange
Source: CME Group

The CME was created in 1898 as a commodities exchange for butter and eggs. It is now one of the biggest financial exchanges in the world, specializing in futures and options across industries, from agriculture to metals to real estate.The CME launched Bitcoin futures trading in December 2017, and volume on the exchange has been rising since then.

On May 13, 2019, the Chicago Mercantile Exchange (CME) reported a daily volume of over $1.3 billion in notional value for Bitcoin futures contracts traded. The CME is a regulated exchange based in the United States, but unregulated exchanges outside of the U.S. report even higher volumes for futures trading. On the same day, BitMEX reported $13 billion in notional value traded. However, on May 28,2019, the volume raised 21 thousand futures. On 18th June 2019, it was only 8 thousand futures. Furthermore, today, it is only 3500 futures.

Source: CoinMarketCap

Ecosystem

Brazil’s fifth-largest city by population is taking a major step for bitcoin adoption.

On July 25, 2019, local news outlet outlet O Povo confirmed that Fortaleza, the beachfront capital city of Ceará, could support bitcoin payment for bus riding by the end of the year. The outlet notes that the Ceará State Co-operative Autonomous Passenger Co-operative (Cootraps) will provide residents the option to buy tickets with cryptocurrency using their mobile phones — with an app and scannable barcode simplifying how payments are made.

Carlos Robério Sampaio, the chief financial officer of Cootraps, said that the cooperative is looking to reduce bureaucracy and improve the acceptance of bus payments by more citizens. He forecasted an influx of people into bus transport, adding that they will be working to ensure a seamless experience for every user.

In a bid to circumvent U.S. sanctions, the government of Venezuela has begun its first experiments with a program to convert tax revenue into bitcoin and trade it for fiat currency at foreign exchanges.

The details of this plan were revealed in a report from the Spanish-language ABC International, which claimed that the Venezuelan government is currently only testing the project at the Maiquetía International Airport (IAIM). IAIM is the largest airport in Venezuela for international flights, and all international flights are required to pay a specific tax to the Venezuelan government.

To maximize the productivity of this tax revenue, these taxes are run through an app using the Jetman Pay system, which uses a digital wallet to automatically convert these gains into bitcoin. The bitcoin is then traded at exchanges in various rival nations to the United States, such as Russia and China, for a steady influx of USD that international sanctions cannot touch.

The usage of bitcoin as a way to circumvent international sanctions is by no means a novel concept in the crypto space. The thoroughly sanctioned nation of Iran, for example, has become such a hotspot for mining operations that the government had to pass tariffs to discourage the practice’s impact on the power grid.

Ordinary Venezuelan citizens have been employing bitcoin to circumvent sanctions for several years now, but the government’s scheme is a particularly unique case. Having launched an oil-backed cryptocurrency, the Petro, in 2018, this airport scheme is now an attempt to circumvent sanctions using the tried-and-true international reliability of bitcoin.

ABC International’s report mentioned that there are currently plans to expand this endeavor in two important ways. Not only is the Venezuelan government planning to expand this tax-to-bitcoin operation plan at all major airports in the country, but it is also set to use something similar for international flights attempting to refuel. Planes stopping at these airports nationwide will have to fill their tanks courtesy of the state-run oil company, which will also be plugged into this Jetman Pay app.

With the value of the bolivar fluctuating so wildly, this will give the Venezuelan government a steady access to the world’s reserve fiat currency, regardless of what the United States government has to say on the matter.

Popular tech retailer Newegg announced a significant step toward crypto adoption, confirming that it will be providing bitcoin payment options to consumers in 73 countries.

Anthony Chow, Newegg’s president of global sales, said that the move is in line with its objective to drive innovation within the e-commerce industry.

“Broadening the ability to pay with Bitcoin to the majority of our global network underscores our commitment to bring innovation to the online shopping experience, and answers customers’ growing preference for our Bitcoin payment option,” Chow said, per a press release.

With this move, the U.S.-based retailer, which has been accepting bitcoin payments from U.S. and Canadian shoppers since 2014, is now making the payment option available in the vast majority of countries it serves.

Cryptocurrency payment processor BitPay will facilitate all bitcoin transactions on Newegg’s platform, according to the announcement.

Earlier in 2019, telecom giant AT&T added bitcoin support for customers to settle their bills online. The Dallas-based mobile carrier also teamed up with BitPay to offer customers the option.

  • Bitcoin ATM Network
Source: coinatmradar.com

First, there is the robust growth in Crypto ATM Installations. Now there are 5 054 installations and it seems went fine.

There is the pie chart above which reflects the distribution by manufacturer. The biggest players are General Bytes and Genesis Coin. Must admit, the average transaction fee continues to be pretty high — about 8%.

Moreover, most of them are located in North America. It means that there remains much to do in order to make Crypto ATM as usual as our ordinary ATMs.

Lightning Network

Source: explorer.acinq.co

The Lightning Network is a “Layer 2” payment protocol that operates on top of a blockchain-based cryptocurrency (like Bitcoin). It enables fast transactions between participating nodes and has been touted as a solution to the Bitcoin scalability problem. It features a peer-to-peer system for making micropayments of cryptocurrency through a network of bidirectional payment channels without delegating custody of funds. Lightning Network implementation also simplifies atomic swaps.

Normal use of the Lightning Network consists of opening a payment channel by committing a funding transaction to the relevant base blockchain (Layer 1), followed by making any number of Lightning transactions that update the tentative distribution of the channel’s funds without broadcasting to the blockchain, optionally followed by closing the payment channel by broadcasting the final version of the transaction to distribute the channel’s funds.

  • NodesNumber of nodes with and without channels.
Source: BitcoinVisuals node (lnd)

This chart shows the number of nodes with and without channels. Lightning nodes open payment channels with each other that are funded with bitcoin. When transactions are made across those channels, the channel balance is reflected without having to broadcast a transaction on chain. This creates a second layer on top of the bitcoin network that expands it capabilities.

Blue — with channels. Red — without channels.

  • Channels
Source: BitcoinVisuals node (lnd)

Unique (blue) = channels connecting nodes directly for the first time. Duplicate(red) = channels between nodes that are already connected.

  • Network Capacity
Source: BitcoinVisuals node (lnd)

This chart shows cumulative bitcoin capacity across all channels. Lightning nodes open payment channels with each other that are funded with bitcoin. When transactions are made across those channels, the channel balance is reflected without having to broadcast a transaction on chain. This creates a second layer on top of the bitcoin network that expands it capabilities.

  • Network Capacity per Channel
Source: BitcoinVisuals node (lnd)

Daily median capacity per channel statistics. Blue — average, Red — 90th percentile, Green — 50th percentile, Yellow — 10th percentile.

These and other graphs can be found here.

Rumors

  • Grayscale Survey Sheds Light on the Market of Potential Bitcoin Investors

Grayscale’s “Bitcoin 2019 Investor Survey” revealed that, in a pool of 1,100 U.S. investors, more than a third (36 percent) of U.S. investors would consider an investment in bitcoin. Assuming there are 63 million investors in the U.S., bitcoin-curious investors represent a potential market of over 21 million investors.

WHO IS INTERESTED IN BITCOIN?

According to the data from the survey, the profile of bitcoin-interested investors is mainly those that are middle-aged, middle-class and from the suburbs. Of these bitcoin-interested investors, 70 percent are parents with children, 49 percent make less than $100,000, and 42 percent view bitcoin as both a long- and short-term investment.

Compared to the average U.S. investor, these investors tend to be slightly more risk-tolerant. Beyond that, profiles between the two groups are largely similar, including demographics based on

  1. Age: slightly younger (42) than the average U.S. investor (45).
  2. Political affiliation: slightly more Republican than Democratic
  3. Income: similar income distribution, with earnings on the higher end ($100,000+)
  4. Gender; both women (51 percent) and men (49 percent) are overall investors, and of those, 43 percent of women and 57 percent of men are interested in bitcoin

WHAT IS THE APPEAL OF BITCOIN?

Based on the information collected in the survey, there are three main reasons as to why investors are interested in bitcoin:

  1. Investors can start small: 83 percent of survey takers indicated that the benefit of investing in bitcoin was the ability to invest a small amount, observe the performance and choose to build upon their investments in the future.
  2. Bitcoin has significant growth potential: 73 percent of bitcoin-curious investors are intrigued by bitcoin’s rapid development.
  3. Scarcity creates value: 73 percent of bitcoin-interested investors compare the value of bitcoin to gold because of the limited number of bitcoins available, a quality which increases the value of bitcoin as competition grows.

REASONS FOR NOT INVESTING IN BITCOIN

The survey also highlighted some common reasons as to why there is hesitation among the 64 percent of investors who are not interested in bitcoin. The four main reasons include

  1. Hacking and Fraud: Due to the widely publicized hacks of exchanges and thefts that occur in the world of bitcoin, 75 percent of all investors and 68 percent of bitcoin-interested investors are concerned with the risk of digital crime. This is the number one investment fear related to bitcoin.
  2. Lack of Regulation: While some crypto fanatics are against the idea of government regulations, an unregulated market is the second largest cause for concern that 65 percent of investors overall and 53 percent of bitcoin-interested investors have when it comes to digital currencies.
  3. Lack of Education: 89 percent of people surveyed said they would feel much more confident about investing in bitcoin if they had a better understanding of it. Better educational resources would make them more likely to invest in the currency, according to they survey.
  4. Need for Guidance: The lack of trusted third parties that have an understanding of bitcoin is also a reason as to why many investors hesitate to invest. Based on the survey results, investors said working with an advisor (78 percent) or with a familiar firm (77 percent) would make them more likely to invest in bitcoin.

Grayscale’s survey highlighted that one area of improvement when it comes to encouraging investors to invest in bitcoin is education. With the proper advisors and educational materials, investors will turn to bitcoin as the future of investing continues to become digital.

Social media metrics

Social media activity:

  • Google Trends
Source: Google Trends

Another one symptom of a bullish trend, in our view, can be an increasing Google Trends Score (0–100). But as we can see, after the pump there is a decrease again. It seems there is a correlation between Google Trends and BTC price.

“Numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular. A score of 0 means that there was not enough data for this term. “

By the way, the most exciting thing is the fact that the regions with the most significant Google Trend score are Nigeria, South Africa and Ghana. We find it fascinating and associate it with the soft currencies in these countries. For example, the exchange rates were as follows: 170–199 Naira per US$ in 2014, 390–489 Naira per US$ in 2016 and 362 Naira per US$ today, on 30 July 2019. It seems that the high volatility and inflationary expectation of Naira reflect on the demand for universal currency and new store of value. Furthermore, according to Numbeo, Nigeria is one of the most criminal regions. It seems that since the crimes, as we know, have the urge to launder money and make untraceable transactions, they find BTC the most proper method to do it.

  • Tweets
Source: Twitter

The graph above reflects number of tweets with hashtag #bitcoin. We consider that this index shows the popularity of Bitcoin and the rise, observed nowadays, could predict the larger demand for Bitcoin and other cryptocurrencies.

The graph above shows the dynamics of changes in the number of BTC Reddit subscribers and Facebook likes. The information is taken from Coingecko.com.

This is not financial advice.

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Paradigm is an ecosystem that incorporates a venture fund, a research agency and an accelerator focused on crypto, DLT, neuroscience, space technologies, robotics, and biometrics — technologies that combined together will alter how we perceive reality.

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