Bullish Bitcoin: 3 Key Charts Explained

Bitcoin, the first and most well-known cryptocurrency, has long been the subject of considerable debate among investors and financial analysts. While some skeptics continue to view Bitcoin as a speculative bubble or a conduit for illicit transactions, a growing number of investors and enthusiasts argue for the long-term potential of Bitcoin as an asset class. This bull case is often supported by economic trends, technological advancements, and charts that demonstrate its potentially promising future. Here, we will explore three charts that attempt to strengthen the bull case for Bitcoin.

Firstly, let’s consider Bitcoin’s historical price chart. The trajectory of Bitcoin’s value is a testament to its growing acceptance and resilience as an asset. If one were to look at the long-term chart of Bitcoin’s price, it is evident that despite significant volatility, the overall trend has been upwards. From its inception in 2009 when it was virtually worthless, to its all-time high in late 2021, Bitcoin has experienced several cycles of dramatic rises and sharp corrections. Zooming out on this chart, long-term investors cite this pattern of “boom and bust” followed by higher plateaus as a signal of Bitcoin’s long-term upward potential, theorizing that each cycle garners greater attention, adoption, and Value stabilization.

The second chart worth scrutinizing is the Stock-to-Flow (S2F) model for Bitcoin, created by a pseudonymous investor known as PlanB. The S2F chart predicts Bitcoin’s price by assessing its scarcity, calculated based on the existing supply (stock) versus the production of new coins (flow). This model has historically been used to value precious metals like gold and silver. Because Bitcoin has a hard-coded limit of 21 million coins, its scarcity could drive value similar to gold. The S2F model has been remarkably accurate in predicting Bitcoin’s price trajectory in the past, and according to this model, the cryptocurrency is predicted to appreciate substantially in the long term. Followers of this model consider it a strong signal that Bitcoin is a sound investment with a predictable and appreciating future value.

Third on our list is a chart illustrating Bitcoin’s growing adoption curve. The number of Bitcoin wallet addresses with a non-zero balance continues to rise consistently, indicating that more people are entering the space and holding Bitcoin. An increased user base suggests a growing level of trust and reliance on the digital currency, often correlated with a rise in demand and, subsequently, price appreciation. Various regions, especially those with unstable currencies or financial systems, have seen accelerated adoption rates, reinforcing the narrative that Bitcoin can serve as a hedge against fiat currency uncertainty or inflation. As adoption grows and network effects take hold, the resulting increase in demand could significantly benefit those holding Bitcoin for the long term.

Systemic platform developments, such as improvements in scalability and network capacity, the Lightning Network for faster transactions, and the potential for privacy enhancements, contribute to bullish sentiment, although they might not be as easily represented in a single chart. These technical advancements demonstrate a maturing system capable of overcoming challenges and adapting to user needs.

Another perspective comes from the diversification of Bitcoin holders. Initially, the realm of enthusiasts and early adopters, Bitcoin ownership is diversifying with traditional institutional investors entering the space. This change demonstrates a shift towards mainstream acceptance and is often visualized in charts that track institutional holdings or the growth of Bitcoin trusts and funds. The belief here is that institutional investment can significantly reduce volatility and provide a more stable price floor for Bitcoin.

In considering the number of transactions and average transaction value, a chart of the Bitcoin network’s activity provides insight into real-world utility and transfer of value. While the total transaction volume shows the robustness of economic activity on the Bitcoin network, the average value per transaction provides understanding into how Bitcoin is used—whether for large-value transfers that hint at its ‘store of value’ proposition or for everyday purchases reflecting its ‘medium of exchange’ role. Growth in these areas can signal increasing utilization and an important foundation for the bull case.

Detractors might argue that these charts and models don’t take into account the broad spectrum of risks inherent in cryptocurrency as an asset class, including regulatory crackdowns, technological vulnerabilities, and market manipulation. Proponents would counter that these risks are present in varying degrees across all asset classes and that the potential rewards that Bitcoin offers, as illustrated by these three charts, warrant serious consideration for any diversified investment portfolio.

In summary, the long-term positive price trend, the Stock-to-Flow model’s scarcity-based prediction, and the consistent growth in Bitcoin adoption are all charts that embolden the bull case for Bitcoin. Supporters believe that these charts represent undeniable trends pointing towards a future where Bitcoin is a mainstream, stable, and valuable asset class, one that offers both innovative technological possibilities and financial opportunities. As with any investment, potential investors should conduct thorough research and consider all risks before making decisions, but for those with confidence in Bitcoin’s future, these charts spark considerable optimism.