The S2F better be right about 2021
Written by Eric Choy
YUEDU 4032.2
Chart 1 — The S2F is a love, hate relationship we can’t stop
The month of December has seen bitcoin continue to defy gravity in an act of kindness for the holiday season. An epic bull run that blows all other Santa Claus rallies out of the water. Prices nearly doubled from the beginning of the month to the time of this writing (January 4th, 2021) after first bursting through the 20k resistance level last felt in 2017, and then a matter of days later cutting through the 30k level. As great as it is for the bitcoin community, unfortunately every other 1k increment increase constitutes as a smaller percentage increase. Perhaps its more prudent to start celebrating every 10k price increment or every logarithmic 10% increase.
The ever popular Stock-to-Flow model, which pits bitcoin’s price trajectory on a logarithmic scale and maps out bitcoin’s future price movement, has us right where it wants us to be. At the time of this writing, the Stock-to-Flow ratio has us at $36,567 versus real time current readings of $32,621. If we continue to dance around this ratio, we’ll be looking at $100k by June of 2021. Looking back at November’s YUEDU 4032.1, all three of the charts published still give us a reading of an underwhelming gauge that we are nowhere near 2017’s bull run. New unique addressed are still flat from November oscillating around the 500,000 level, and Coin Days Destroyed is still well below 2017’s price top. The fundamentals are clearly way behind the recent run up in price but that’s only if you assume fundamentals push prices. But with bitcoin, the two can be reflexive.
Chart 2 — You’ve got to pay to play, right?
In sats, bitcoin fees have decreased from a month ago, surprisingly. The start of November saw us with an average transaction fee around 87,264 sats with current levels around 24,000 sats but fortunately and unfortunately, in dollar terms it’s still expensive to send transactions. Average transaction fees at the time of this writing would make a simple peer 2 peer bitcoin transaction set you back $10 about. Would this be detrimental to the usage of the Bitcoin network? Not at all. Miner’s are reaping in all these transaction fees along with their block rewards in an unprecedented time of mining profits to be seen.
Expect a surge in more institutional interest in mining for the year of 2021 as reports of rigs from Bitmain are on a year long back log for the newest generational S19s. Recently, stocks of public mining companies have soared as teams from Marathon Patent and Riot Blockchain have announced their purchase of 70,000 ASIC and 15,000 ASIC miners, respectively. Don’t be fooled by the sideways movement of hashrates and difficulty over the past month, movement is starting to heat up in anticipation to perhaps global hashrates hitting 200 EH/s later this year. *all data used in the graphics derived from Glassnode’s API
Chart 3–1MB, 2MB,…3MB?
Another interesting trend we see playing out over the past year is the slow increase in block sizes. Although block sizes can technically reach around 2 MB, we have seen higher lows of this trend play out as seen on the chart below. Block sizes in bytes are now reaching levels near 1.3 MB or even 1.4 MB. Hard to say what can transpire from this as this is seen as a good and bad. Good that more blocks are being used to capacity, but bad that this could spur up the whole block size debate we saw heatedly being conversed back a few years ago leading to significant forks of the Bitcoin network.
Both sides of the table have their legitimate arguments to put forth. Either way, staying true to the ethos of Bitcoin’s original creation is difficult considering Satoshi’s original implement of a 1 MB block size has already been changed. Regardless, 2020 was an unforgettable year on many fronts and a true comeback for all bitcoiners that stuck it out over the past 3 years. And if we circle back to our Stock-to-Flow model that we all hate and love, the year of 2021 looks promising.
Disclaimer: The article is published for information only and does not constitute investment advice. Investing in cryptocurrencies, Initial Coin Offerings (“ICOs”), Initial Exchange Offerings (“IEOs”), and/or Security Token Offering (“STOs”) are highly risky and speculative. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Please contact us to report any sensitive or inappropriate information.
About Tuoyuan Group
Tuoyuan Group is a boutique crypto think tank group that dares to touch on different narratives by unconventionally using the conventional on the unconventional.
