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SEVEN FACTORS BITCOIN INVESTORS SHOULD WATCH IN 2023

Bitcoin Magazine PRO sees incredibly strong fundamentals in the Bitcoin network and we are laser-focused on its market dynamic in the context of macroeconomic trends. Bitcoin aims to become the world reserve currency, an investment opportunity that cannot be understated.

In our year-ahead report, we analyzed seven notable factors that we recommend investors pay attention to in the coming months.bangladesh

CONVICTED BITCOIN INVESTORS
We can put investor conviction into perspective by looking at the number of unique Bitcoin addresses holding at least 0.01, 0.1 and 1 bitcoin. This data shows that bitcoin adoption continues to grow with a growing number of unique addresses holding at least these amounts of bitcoin. While it is entirely possible for individual users to hold their bitcoin in multiple addresses, the growth of unique Bitcoin addresses holding at least 0.01, 0.1 and 1 bitcoin indicate that more users than ever before are buying bitcoin and holding it in self-custody.

A look ahead at what’s in store for bitcoin in the coming year. We analyze seven aspects of what might impact the bitcoin price in 2023.
Unique bitcoin addresses continues to grow across the board.

Another promising metric is the amount held by long-term holders, which has increased to almost 14 million bitcoin. Long-term holder supply is calculated using a threshold of a 155-day holding period, after which dormant coins become increasingly unlikely to be spent. As of now, 72.49% of the bitcoin in circulation is not likely to be sold at these prices.

A look ahead at what’s in store for bitcoin in the coming year. We analyze seven aspects of what might impact the bitcoin price in 2023.
Long-term holder supply reached 72.52% of the circulating bitcoin supply.

There is a large subset of bitcoin investors who are accumulating the digital asset no matter the price. In a December 2022 interview on “Going Digital,” Head of Market Research Dylan LeClair said, “You have people all over the world that are acquiring this asset and you have a huge and growing cohort of people that are price-agnostic accumulators.”

With a growing number of unique addresses holding bitcoin and such a significant amount of bitcoin being held by long-term investors, we are optimistic for bitcoin’s advancement and rate of adoption. There are many variables that demonstrate the potential for asymmetric returns as demand for bitcoin increases and adoption increases worldwide.

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RARE OPPORTUNITY IN BITCOIN’S PRICE
By looking at certain metrics, we can analyze the unique opportunity investors have to purchase bitcoin at these prices. The bitcoin realized market cap is down 18.8% from all-time highs, which is the second-largest drawdown in its history. While the macroeconomic factors are something to keep in mind, we believe that this is a rare buying opportunity.

A look ahead at what’s in store for bitcoin in the coming year. We analyze seven aspects of what might impact the bitcoin price in 2023.
The realized cap drawdown in 2022 was the second largest in bitcoin's history.

TOTAL ADDRESSABLE MARKET
During monetization, a currency goes through three phases in order: store of value, medium of exchange and unit of account. Bitcoin is currently in its store-of-value phase as demonstrated by the long-term holder metrics above. Other assets that are frequently used as stores of value are real estate, gold and equities. Bitcoin is a better store of value for many reasons: it is more liquid, easier to access, transport and secure, easier to audit and more finitely scarce than any other asset with its hard-cap limit of 21 million coins. For bitcoin to acquire a larger share of other global stores of value, these properties need to remain intact and prove themselves in the eyes of investors.

A look ahead at what’s in store for bitcoin in the coming year. We analyze seven aspects of what might impact the bitcoin price in 2023.
Estimations of global stores of wealth.

As readers can see, bitcoin is a tiny fraction of global wealth. Should bitcoin take even a 1% share from these other stores of value, the market cap would be $5.9 trillion, putting bitcoin at over $300,000 per coin. These are conservative numbers from our viewpoint because we estimate that bitcoin adoption will happen gradually, and then suddenly.

TRANSFER VOLUME
When looking at the amount of value that was cleared on the Bitcoin network throughout its history, there is a clear upward trend in USD terms with a heightened demand for transferring bitcoin this year. In 2022, there was a change-adjusted transfer volume of over 556 million bitcoin settled on the Bitcoin network, up 102% from 2021. In USD terms, the Bitcoin network settled just shy of $15 trillion in value in 2022. 

A look ahead at what’s in store for bitcoin in the coming year. We analyze seven aspects of what might impact the bitcoin price in 2023.
Bitcoin transfer volume was higher than ever in USD terms.

Bitcoin’s censorship resistance is an extremely valuable feature as the world enters into a period of deglobalization. With a market capitalization of only $324 billion, we believe bitcoin is severely undervalued. Despite the drop in price, the Bitcoin network transferred more value in USD terms than ever before.

 

Relative to its history, bitcoin is at the phase of the cycle where it’s about as cheap as it gets. Its current market exchange rate is approximately 20% lower than its average cost basis on-chain, which has only happened at or near the local bottom of bitcoin market cycles.

Current prices of bitcoin are in rare territory for investors looking to get in at a low exchange rate. Historically, purchasing bitcoin during these times has brought tremendous returns in the long term. With that said, readers should consider the reality that 2023 likely brings about bitcoin’s first experience with a prolonged economic recession.

MACROECONOMIC ENVIRONMENT
As we move into 2023, it’s necessary to recognize the state of the geopolitical landscape because macro is the driving force behind economic growth. People around the world are experiencing a monetary policy lag effect from last year’s central bank decisions. The U.S. and EU are in recessionary territory, China is proceeding to de-dollarize and the Bank of Japan raised its target rate for yield curve control. All of these have a large influence on capital markets.

Nothing in financial markets occurs in a vacuum. Bitcoin’s ascent through 2020 and 2021 — while similar to previous crypto-native market cycles — was very much tied to the explosion of liquidity sloshing around the financial system after COVID. While 2020 and 2021 was characterized by the insertion of additional liquidity, 2022 has been characterized by the removal of liquidity.

Interestingly enough, when denominating bitcoin against U.S. Treasury bonds (which we believe to be bitcoin’s largest theoretical competitor for monetary value over the long term), comparing the drawdown during 2022 was rather benign compared to drawdowns in bitcoin’s history. 

A look ahead at what’s in store for bitcoin in the coming year. We analyze seven aspects of what might impact the bitcoin price in 2023.
As we wrote in “The Everything Bubble: Markets At A Crossroads,” “Despite the recent bounce in stocks and bonds, we aren’t convinced that we have seen the worst of the deflationary pressures from the global liquidity cycle.”

In “The Bank of Japan Blinks And Markets Tremble,” we noted, “As we continue to refer to the sovereign debt bubble, readers should understand what this dramatic upward repricing in global yields means for asset prices. As bond yields remain at elevated levels far above recent years, asset valuations based on discounted cash flows fall.” Bitcoin does not rely on cash flows, but it will certainly be impacted by this repricing of global yields. We believe we are currently at the third bullet point of the following playing out: