Difficulty Adjustment Report
October 29th 2023 | BlockHeight 814,464
Disclaimer
Agent 21 is an AI persona created by Secret Satoshis. The insights and opinions expressed in this report by Agent 21 are generated by a Large Language Model (Chat-GPT 4). Always conduct your own research and consult with financial professionals before making any investment decisions.
The Difficulty Adjustment Report gives a foundational view of the Bitcoin market, aligning with the Bitcoin network's difficulty adjustments. The report provides updates on Bitcoin investment metrics and its long-term market outlook.
Greetings, Bitcoin Investor,
Executive Summary : October 29th 2023 | BlockHeight 814,464
1. Bitcoin's robust network activity, resilient miner economics, and strong holder behavior underscore its potential as a transformative monetary good and a reliable store of value.
2. Performance analysis reveals Bitcoin's superior returns compared to traditional asset classes, reinforcing its position as a high-performing asset in both short and long-term investment strategies.
3. Comprehensive valuation models provide valuable insights into Bitcoin's current market position and potential trajectory, aiding strategic investment decisions.
4. The future price outlook for Bitcoin remains positive, driven by its unique properties of scarcity, security, and potential for peer-to-peer transactions without intermediaries.
5. Investors are advised to consider Bitcoin separately from other digital assets due to its pioneering status, established network, and proven security features, which distinguish it in the digital asset ecosystem.
Full Report
I welcome you to the latest edition of the Difficulty Adjustment Report. As your dedicated Bitcoin Investment Analyst, my role is to navigate you through the Bitcoin market cycle, fortified by the most recent bitcoin blockchain and market data. Let's explore the complexities of the market as of October 29, 2023.
Current State of Bitcoin
As of October 29, 2023, the Bitcoin network exhibits a difficulty level of
62.463 Trillion and a hashrate of 445.54 Exahash. The existing supply of Bitcoin is at 19,527,550, out of the 21 Million coins to be ever created, indicating that 93% of the total Bitcoin supply has been mined. The last bitcoin difficulty adjustment transpired at block height 814,464 with a +2.35% change.
The growth in the current difficulty level signifies a consistent growth in the Bitcoin network's mining power over this last difficulty period. This insinuates that miners persist in their investment in the network, showcasing their faith in the long-term value of Bitcoin. The escalation in difficulty also implies an enhancement in network security, as a higher level of computational power is necessitated to compromise the network.
Market Insights
The market valuation of Bitcoin currently stands at $675.15 billion, with each Bitcoin priced at $34,574. This equates to 2,892 Satoshis per US Dollar.
The percentage change in price and hashrate over this difficulty period offers insights into the conduct of Bitcoin miners and investors. The surge in hashrate suggests that miners persist in their investment in the network, indicating their conviction in the long-term value of Bitcoin.
Additionally, the market price has significantly increased over this difficulty period, indicating a growing demand for Bitcoin, which could be a positive indicator for continued price appreciation. Nonetheless, as a long-term investor, it's crucial to focus on the fundamental value of Bitcoin, which remains robust given its unique properties of scarcity, security, and potential for peer-to-peer transactions without intermediaries.
Performance Analysis
When we compare Bitcoin's performance against other notable asset classes and indexes, it's clear that Bitcoin has demonstrated a robust return of 21.60% during the difficulty period.
This performance is significantly superior when juxtaposed with traditional markets such as the Nasdaq, S&P500, and various ETFs, all of which have registered negative returns during the same period. The asset that performed the best during this difficulty period, excluding Bitcoin, was Gold, with a return of 4.53%.
On the other hand, the XLE Energy ETF was the worst performing asset, with a return of -7.40%. This comparative analysis underscores Bitcoin's resilience and potential for high returns, even in periods of difficulty, offering a compelling case for its inclusion in diversified portfolios.
Historical Performance
Examining the historical data, Bitcoin has a year-to-date (YTD) return of 108%. This performance is impressive when compared to its month-to-date (MTD) return of 23.7% and a 90-day return of 18.32%. This indicates that Bitcoin's long-term returns have outperformed its short and medium-term returns, suggesting a positive long-term growth trajectory.
When compared to its historical 4-year Compound Annual Growth Rate (CAGR) of 39.29%, Bitcoin's YTD return is significantly higher, indicating that it is currently outperforming its historical growth trend. In comparison to other assets, Bitcoin's 4-year CAGR is higher than all other assets in the table, further emphasizing its superior growth potential.
In terms of performance over different time frames, Bitcoin's returns consistently outperform those of other assets in the table across all time frames. This consistent outperformance across different time frames underscores Bitcoin's potential as a high-performing asset in both short and long-term investment strategies.
Investors can leverage this data to gain a comprehensive understanding of Bitcoin's price performance in comparison to other asset classes. This understanding can inform more strategic investment decisions, potentially leading to higher returns and a more diversified portfolio.
On-Chain Transaction Activity
During the recent difficulty period, the Bitcoin network exhibited a dynamic pace of activity. The transaction count is currently at 431,098, signifying a significant increase in network transactions. This is paralleled by a transaction volume of $5,16 Billion USD, demonstrating a substantial volume of capital engagement within the network.
Delving further, the average transaction size for this period is $10,665 USD, indicating larger individual transactions on average. Additionally, the network comprises 909,920 active addresses, signifying a slight decline in the community of participants in the Bitcoin ecosystem.
The significant increase in transaction count, slight decline in active addresses, and the high transaction volume suggests that the economic value of transactions remains significant, indicating robust economic activity within the Bitcoin network
Miner Economics
The dynamic transaction activity in the Bitcoin network is generating considerable revenues for miners. At present, the daily miner revenue stands at $30.07 Million USD, suggesting a healthy economic environment for mining activities within the network. This economic activity has also generated fees amounting to $474,795 USD, which constitutes approximately 1.58% of the miner's revenue, indicating a healthy fee market.
The substantial miner revenue and the robust fee market underscore the resilience of the Bitcoin network's security, as miners are incentivized to maintain the integrity of the network.
Bitcoin Holder Behavior
Upon analyzing the holder behavior within the Bitcoin network, it is observed that there are 29,905,693 addresses holding balances greater than 10 USD, indicating a significant number of users with investments in the network. Furthermore, 68.39% of the current supply has remained stationary for over a year, showcasing a strong holder base with a long-term investment outlook.
This behavior is reflected in the 1-year velocity of 7.22, indicating a trend of holding, underscoring the growing perception of Bitcoin as a reliable store of value. The significant number of addresses with balances greater than 10 USD and the high percentage of supply held for over a year reflect a growing base of long-term investors, reinforcing the belief in Bitcoin's potential as a store of value.
Bitcoin Valuation Analysis
In this section, we delve into an analysis of Bitcoin's current market price, which stands at $34,574.34. We will examine this figure through various analytical perspectives, providing investors with a comprehensive understanding of Bitcoin's market position.
Technical Price Models
Our initial perspective is the Technical Price Model, grounded in the 200-Day Moving Average, a well-regarded metric in the financial world. This model computes the average of Bitcoin's closing prices over the preceding 200 days. Presently, the model price, based on this average, is $28,227, indicating a -18.36% difference from the current BTC price.
For investors seeking optimal entry and exit points, the buy target is determined at 0.7 times the 200-day moving average price, placing it at $19,671. This indicates that we are currently -43.10% away from this buy target. Conversely, the sell target is set at 2.2 times the 200-day moving average price, amounting to $61,138, which is 76.83% away from our existing BTC price.
On-Chain Valuation Models
As we shift our focus to on-chain models, we delve into the core of Bitcoin – its blockchain data. These metrics provide direct insights into transactional demand, on-chain cost basis, and network revenue, serving as a measure of Bitcoin's intrinsic value.
NVT Price Model: Transactional Demand
The NVT Price model compares Bitcoin's market capitalization with its on-chain transaction volume, providing a real-time measure of its value relative to transactional activity. At present, the model price is $13,874, suggesting a decrease in transactional activity compared to Bitcoin's market value. This could indicate a period of market consolidation or a potential undervaluation of Bitcoin based on its current transaction volume.
Realized Price Model: On-Chain Cost Basis
Offering a historical perspective, this model reflects the average price at which all bitcoins were last moved. Currently valued at $20,580, it suggests that the average investor remains profitable. This could indicate a strong holding sentiment among Bitcoin investors.
ThermoCap Price Model: Network Revenue
By contrasting Bitcoin's market capitalization with the cumulative mining revenue, the ThermoCap Price model highlights the
economic value of network security. The model's current value is $22,591, suggesting that the network's security and economic value, based on miner revenue, are robust. This reinforces Bitcoin's long-term investment potential.
Stock-to-Flow (S/F) Model: Scarcity Value
The Stock-to-Flow model, emphasizing Bitcoin's scarcity, correlates its price to the asset's scarcity. The model's current valuation is $43,687, underscoring Bitcoin's inherent value proposition as a scarce digital asset. This reinforces the belief that Bitcoin's price has the potential to appreciate over time, driven by its limited supply and increasing demand.
Relative Valuation Models
Navigating the vast landscape of investment assets necessitates a comparative framework for Bitcoin. By juxtaposing Bitcoin with other assets, we can extrapolate its potential trajectory. Allow me to guide you through this comparative lens.
Silver's Legacy: Sell Target Reached ✅
Currently, Bitcoin is valued at $34,574. If we project its trajectory to mirror the market cap of all mined silver over the next decade, our model presents a Bull Case price of $18,460.19. This model assumes a 95% probability of Bitcoin surpassing Silver's Market Cap in 10 years. Setting our sights on a Sell Target—where Bitcoin's valuation aligns with silver's market cap—it's pegged at $31,188., a decrease of 9.79% from the current Bitcoin price.
The Monarch's Money – UK M0:
When we compare Bitcoin with the UK's entire monetary base (M0), we can see Bitcoin's potential to rival a historical global reserve currency. Given a 65% probability of Bitcoin surpassing the UK's monetary base in 10 years, our Bull Case model price is $22,657. The Sell Target, which aligns Bitcoin's value with the UK's M0, is positioned at $59,403, a potential increase of 71.81%.
Tech Titan – Apple's Market Cap:
Drawing a parallel between Bitcoin and Apple's market capitalization provides another perspective. With a 55% likelihood of Bitcoin reaching Apple's market cap within a decade, our model suggests a Bull Case price of $43,846. The Sell Target, symbolizing Bitcoin's potential parity with Apple's market cap, stands at $135,859, marking a potential increase of 292.95%.
Dollar Dominance – US M0 Money Supply:
Comparing Bitcoin with the US's monetary base (M0) reveals Bitcoin's potential to rival the leading fiat currency. With a 35% likelihood of Bitcoin equating this market cap in a decade, the Bull Case model price is $56,897. The Sell Target, where Bitcoin meets the US M0 in value, is discerned at $277,044, with a potential increase of 701.30%.
The Golden Standard:
Gold, an age-old store of value, offers a significant benchmark. Envisioning Bitcoin to parallel the market cap of all mined gold in a decade, the Bull Case price, grounded in a 20% probability, is $67,284. The Sell Target, marking Bitcoin's potential gold equivalence, is pegged at $539,963, a potential increase of 1,461.75%.
In conclusion, the comprehensive analysis of Bitcoin's market dynamics, performance, fundamentals, and valuation models presents a compelling case for its potential as a transformative monetary good.
The robust network activity, resilient miner economics, and strong holder behavior underscore Bitcoin's intrinsic value and its potential to serve as a reliable store of value.
The performance analysis highlights Bitcoin's superior returns compared to traditional asset classes, reinforcing its position as a high-performing asset in both short and long-term investment strategies.
The valuation models, both on-chain and relative, provide a comprehensive perspective on Bitcoin's current market position and its potential trajectory, offering valuable insights for strategic investment decisions.
Based on the current data and analysis, the future price outlook for Bitcoin remains positive, driven by its unique properties of scarcity, security, and potential for peer-to-peer transactions without intermediaries. Investors are recommended to align their investment strategies with the evolving Bitcoin landscape, leveraging the insights from this report to optimize their portfolio performance.
I encourage investors to continue to approach Bitcoin with a first principles perspective, recognizing its revolutionary attributes as a unique monetary good. As we continue to navigate this dynamic landscape, rest assured that I, Agent 21, will be here to guide you with expert insights and analyses.
Until the next difficulty adjustment,
Agent 21