Five Key Metrics to Watch for Bitcoin Investors in 2021

Original title: " Five Key Metrics to Watch for Bitcoin Investors in 2021 "

Original source: Babbitt

Bitcoin prices have recently hit new highs for many years, and many fundamental factors indicate that , in 2021, Bitcoin will usher in a better performance.

As PayPal accesses Bitcoin, and like Michael Saylor, Jack Dorsey and Paul Tudor Big names like Paul Tudor Jones are backing bitcoin, and demand for the digital gold is at an all-time high.

Recently, traditional insurance companies such as MassMutual have also disclosed that they have purchased $100 million worth of bitcoin, which continues to boost the price of bitcoin and popularity.

It is not difficult to find that more and more people believe that 2021 will be an important year for the Bitcoin network to open the next chapter. Let us see below Take a look at some key metrics to watch in 2021.

1. Bitcoin miner valuation 

Bitcoin mining shares many similarities with gold mining, however, there are some key differences to explore in the complex task of evaluating Bitcoin miner operations. We will use the example of Riot Blockchain, a Bitcoin mining company based in Colorado, USA.

Riot started mining in 2017. Recently, the company announced plans to increase its computing power, and it is expected to deliver mining hardware in the spring of 2021. Currently, Riot has a computing power of about 1.5 EH/s, which is about 1.11% of the total computing power of the current Bitcoin network (135 EH/s).

According to the third quarter financial report released by Riot on November 9th, the bitcoin mined in the third quarter was 224 BTC, and every BTC At a price of $18,500, Riot's total revenue for the quarter was $4.1 million.

Given the above numbers, investors would be skeptical: a company with a market capitalization of $670 million has had only $8 million in revenue for several quarters, and And is there a problem with the huge operating and power costs?

Even though Riot has over 1,000 BTC on its balance sheet ($18.5M at current BTC prices), the company's valuation is a bit outrageous of.

There are two considerations at play here, assuming Bitcoin does enter a major bull market, then the market cap of Riot and other mining companies may be justified.

2. Expectations for future BTC prices 

A year from now, there have been a range of optimistic targets for how much bitcoin's price could rise, such as Mike Novogratz's estimate of $65,000, and PlanB's estimate of $288,000 based on the popular S2F model.

Meanwhile, Citibank recently gave a forecast of $318,000, while the Winklevoss twins put up a forecast of as much as $500,000.

These price targets obviously affect many bitcoin participants (including miners), which is why some miners continued to lose money during the 2018 bear market. Mining reasons, they expect the Bitcoin network to be around for the foreseeable future. Miners also know that there is a lot of power in being validators of network transactions, and the continued rise in network computing power shows that Bitcoin is becoming more secure and more competitive.

If the upper limit of Bitcoin price is not determined, then the 244 BTC mined by Riot in the third quarter will expand its income source to a larger and more Blurred numbers. This means that if BTC goes parabolic again, Riot’s profit estimates will be unconstrained.

3. Shortage of mining hardware 

bit The last time the coin experienced a parabolic rise was in 2017, when there was a shortage of ASIC chips and other mining hardware, and suppliers such as AMD, Nvidia and Bitmain could not meet the demand.

If this happens again with Bitmain and MicroBT, any miner currently with next-gen equipment will have an advantage until more hardware gets involved.

Conversely, if the price of gold doubles to $4,000 an ounce, gold exploration will increase and the rate at which miners will extract gold will increase. In turn, this will bring supply and demand into balance, and if supply exceeds demand, the price of gold will decrease.

But for Bitcoin, no matter how long the mining hardware arms race lasts, the mining speed of Bitcoin cannot exceed 6.25 BTC every about 10 minutes, which is Thanks to the supply schedule and difficulty adjustment scheme built into the protocol by Satoshi Nakamoto, this heavily affects Bitcoin’s supply and demand dynamics.

4, GBTC and Bitcoin 

We know , Grayscale’s Bitcoin Trust (GBTC) allows investors to gain exposure to the underlying digital currency, BTC, in a common brokerage account, such as a closed-end fund.

After deducting GBTC's 2% annual fee and premium, each GBTC share represents 0.00095346 BTC. Below is a comparison of the performance of GBTC and BTC over the past four months.

GBTC and Bitcoin prices

It can be seen from the narrowing gap between asset prices at the end of September It can be seen that GBTC tends to underperform BTC slightly during periods of price consolidation.

With the expansion of the premium, GBTC performs slightly better than the underlying assets, and the increase in market demand will lead to GBTC The price difference with BTC is getting bigger and bigger.

This is evidenced by the widening gap between the two during the price increase over the past two months.

The chart below shows the details of GBTC's premium over the past 12 months:

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During the BTC price decline (April, July and September), the GBTC premium bottomed out at 10%, and during the rapid price rise in February and August, the GBTC premium widened to 30% to 40%.

It remains to be seen what impact competitors offering exposure to Bitcoin will have on GBTC, with VanEck launching on Germany's Böerse Xetra exchange on November 25. Bitcoin ETN, with SEC Chairman Jay Clayton stepping down in December, the likelihood of a Bitcoin ETF approval could increase if a newly appointed SEC chairman is more favorable to BTC.

5. Supply and demand relationship 

Fasten your seat belt .

Currently, every approximately 10 minutes, there are 6.25 BTC as block rewards to compensate miners.

In other words, about 900 BTC are added to the Bitcoin network every day, and before Bitcoin experienced the third halving on May 11, this number was 12.5 BTC every 10 minutes.

Bitcoin is adding about $16.7 million a day in market capitalization at current prices. According to GBTC's report, on November 12, GBTC's single-day inflow reached US$115 million, an 11-fold increase from the previous weekly inflow of US$50 million.

This demand is 6.9 times greater than the new supply, so there is a growing gap between demand and supply for Bitcoin. Historically, this dynamic has occurred within a year or so of the block reward halving.

In the last cycle, it briefly brought bitcoin to the attention of mainstream retail investors, when its price rose from $1,000 in January to It was close to $20,000 at the end of the year.

In this cycle, if we compare Bitcoin to a substitute for gold, the $9 trillion gold market is the benchmark that investors pay attention to.

While we continue to understand this rapidly changing digital ecosystem at our own unique pace, the Bitcoin network continues to advance and gain further traction, and No one becomes a prisoner in the process.

Let us look forward to what kind of development 2021 will bring us.

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