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Bitcoin Transaction Volume is Down – Should You Be Worried?

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Decline

Needless to say by now, the price of bitcoin has been struggling this year. Since the record highs from December last year, prices are now down by more than 60%. Meanwhile, the number of transactions per day on the bitcoin network has also shown lacking momentum, causing FUD among investors.

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Looking at the number of daily bitcoin transactions reveals that the number hasn’t been this low since February 25 when it slipped to 144,000 transactions per day. With some investors now questioning the future of bitcoin, many are looking to the transaction volume for clues on where the price might be heading next.

Following the low on February 25, the number of transactions briefly shot up again before it fell back down. At the time of writing, the daily number of transactions is again close to the low from February, with 164,400 confirmed daily transactions.

Relationship between value and transactions

I recently came across an article on Forbes that outlined a model developed by a group at Trefis.com for estimating the price of bitcoin with an amazing accuracy of 96% on historical data. Specifically, the they looked at the number of active bitcoin users and the daily transaction volume in USD terms, using a model based on Metcalf’s Law, which is something we have previously covered here on Hacked.com.

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Judging from the group’s findings, it appears very likely that the number of bitcoin users, transaction volume, and price are all directly linked. It clearly shows that there is a direct relationship between bitcoin adoption and price.

Number of transactions is not the whole story

Still, not everyone agrees that the lower number of bitcoin transactions is necessarily a bad thing. It can be argued that the lower number of bitcoin transactions per day is in fact a consequence of new solutions such as SegWit and batching of transactions being implemented by exchanges. These are all solutions that are implemented to improve the usability of bitcoin by lowering transaction fees and network congestion.

Some are also questioning whether the price of bitcoin is a function of transaction volume, or if it is the other way around. One can argue that in bull markets, more and more people are jumping on the bandwagon, generating lots of transactions between exchanges. Rising transaction volume would in that case come as a consequence of the rise in price.

Regardless of whether the chicken or the egg came first, one important thing to note here is the difference between the confirmed transactions per day and estimated transaction value. So whereas batching of transactions definitely lowers the number of confirmed transactions, it should in theory not affect the total value of transactions.

As we can see from the graph below, the drop in the number of confirmed transactions per day has been rather sharp since it reached an all-time high back in mid-December last year.

transactions per day

When we look at the estimated transaction value, however, we can see that the drop has not been quite as dramatic.

estimated transaction volume

Bitcoin price action aside, the above graphs confirms that looking at the number of daily transactions alone does not give the full picture of the extent to which bitcoin is being used.

So whether price is a function of transactions or not, it leads us to the conclusion that transaction batching and otherwise better management of transactions is having an impact on the transaction count. The sharp drop we have seen here recently therefore should not be a major cause of concern for bitcoin investors going forward. Instead, it indicates that transaction batching has been a success, improving scalability with lower fees and faster transaction times for everyone.

Featured image from Pixabay.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term trading.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 28 rated postsFredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He closely follows stocks, forex and cryptocurrencies, and is always looking for the next great alternative investment opportunity.




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  1. embersburnbrightly

    March 19, 2018 at 4:35 pm

    Well-reasoned article, thank you!

  2. beautyreformed2017

    March 19, 2018 at 4:42 pm

    Just “BE STILL”. Do not buy or sell. #truth

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Analysis

Crypto Update: Ethereum Tops $550 as Altcoins Hit New Rally Highs

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The major coins are having another bullish day after a consolidation period with all of the top 10 cryptocurrencies sporting meaningful gains. Altcoins are leading the charge higher, as the switch in relative strength that we pointed out several times seems to be a lasting phenomenon, with the ETH/BTC pair confirming a short-term uptrend.

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BTC/USD, 4-Hour Chart Analysis

Bitcoin is also up today, but while the majority of altcoins are trading on new rally highs, BTC is stuck below the prior swing high at $8400, which is also a previously established resistance level. The dominant declining trendline is also in that area, and that strong zone could hold back the largest coin for a longer period. A breakout would confirm a new rising short-term trend, with the next major resistance zone ahead between $9000 and $9200.

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ETH/USD, 4-Hour Chart Analysis

Ethereum is among the strongest coins short-term, and with smaller cap altcoins also joining the rally, the whole segment could be ready for a move higher. That said, the broader declining trend is still intact with the coin trading in a strong resistance zone between $555 and $575. A new short-term uptrend is now confirmed but with the declining trendline just ahead, the coin could be in for volatile swings in the coming days. The next target zone is at $625, while support is found at $500 and $450.

Broad Altcoin Rally Lifts All Ships

XRP/USD, 4-Hour Chart Analysis

Ripple, which was among the weakest majors for a prolonged period is one of the leaders today, climbing above $0.75, and eyeing the next major level at $0.84, with tbe coin already being above the previously dominant declining trendline.

On a slightly negative note, correlations are still high between the majors, but there are standout performers despite the concerted rally. Among the long-term leaders, Litecoin is trading near $150, while Monero added to yesterday’s gains, and it’s testing the $240 resistance as we speak.

The early leaders of the rally are slightly lagging in the current short-term swing, but that is likely a sign of rotation, as the likes of EOS, NEO, and IOTA are also higher today, while holding up wrll above the correction lows.

With all of the majors on buy signals in our trend model, we expect the rally to continue even as strong resistance zones are ahead and the road will likely be bumpy after the steep and lengthy downswing.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Bitcoin Prices and Whale Sightings: Evaluating the Latest Trends

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Bitcoin’s value has skyrocketed 20% over the past eight days, but some say the upward trajectory isn’t as linear as it should be given the length of the most recent correction. The market’s sudden gyrations have left us with only one explanation: the bitcoin whales are back.

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Whale Spotting

It has been reported that the so-called bitcoin whales (those who hold oversized positions in the digital asset) dumped $100 million worth of BTC in less than 24 hours. For example, the anonymous balance of wallet 3D2oetdNuZUqQHPJmcMDDHYoqkyNVsFk9r declined by 6,500 BTC on Tuesday, which is equivalent to $50 million. As a result, bitcoin fell more than $200 on the major exchanges in just a few minutes.

Just one day earlier, bitcoin’s third-biggest wallet shed 6,600 units of the virtual currency at an average price of around $8,026.

Interestingly, a whale may have been responsible for the initial spike in BTC just one week ago. As we reported, a large order on Bitfinex triggered the initial spike in BTC as prices crossed $7,000 on the exchange. For the next two days, bitcoin would surge double-digits to breach $8,000 for the first time since late March.

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Investors are also keeping tabs on a high-profile whale based out of Tokyo, Japan. Nobuaki Kobayashi is in the process of liquidating billions of dollars on behalf of Mt Gox creditors. At last check, the trustee had sold about $400 million in bitcoin for an average sales price of $10,105. He’s expected to offload another $1.9 billion.

Speculation Grows

While advocates of bitcoin’s long-term value have barely flinched amid the latest downturn, speculators all but disappeared from the market. A simple analysis of Google search trends also reveals that laypeople have been losing interest in digital currencies since early February.

All that could be changing.

Cryptocurrencies have added nearly $100 billion to their market cap over the past week, with bitcoin doing much of the work. This appears to have compelled bitcoin’s large owners to sell their assets for reasons that are not yet unclear.

Of course, the multiple selloffs could just be coincidence or a bet that future prices will fall again. In the eyes of leading analysts, the latter appears to be less likely.

The head of Pantera Capital, who rarely predicts bitcoin’s future and is thus never wrong when he does, recently told clients that the digital currency has already bottom. Appearing on CNBC’s Fast Money, Dan Morehead said bitcoin’s bear market was just about over and that prices would continue rising from here on.

That said, choppy trading for bitcoin is hardly unusual and has come to be expected in a market that still lacks maturity. Whales or not, recent moves have made it harder to gauge the strength of the recovery.

That’s the message Thomas Lee of Fundstrat Global Advisors recently shared, according to Bloomberg.

“I think it feels off right now because, you know, we’ve been on a down trend since December, and now, even though the volatility hasn’t changed much, it’s hard to tell if bitcoin is trying to stage a recovery or if it’s continuing its down trend,” he said.

At the time of writing, bitcoin was valued at $8,175, having gained 3% over the past 24 hours.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 335 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Crypto Update: Monero Price Jumps above $225 as Coins Hold Their Ground

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The cryptocurrency segment is having a mixed but encouraging session so far, as the sudden selloffs of the last couple of days were all bought and the short-term correction lows held up.  Although most of the major cryptocurrencies are trading below their breakout highs as of now, there are standout performers, like Monero, Stellar, and Bitcoin Cash, and the early leaders of the rally are also showing stability.

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These signs of bullish rotation are positive, and as the short-term momentum indicators are back to neutral territory with regards to most of the majors, the segment could be ready for another leg higher in the coming days. That said, as the broad declining trend channels are still intact in both Ethereum and Bitcoin, a trend change is not yet confirmed and short-term trades should still apply strict risk management.

BTC/USD, 4-Hour Chart Analysis

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Bitcoin held up above the key support zone near $7650, despite the spikes lower, and the low volume consolidation continues to be the dominant pattern. The $8400 resistance is now perfectly aligned with the declining trendline that capped rally attempts all year, and a crucial test of that zone is likely this week.

Long-term investors could still add to their holdings, while our trend model also turned bullish again today. The $9000-$9200 zone is the next target above $8400, while further support found at $7300.

ETH/USD, 4-Hour Chart Analysis

Ethereum is trading in a similar short-term pattern, with the declining trendline also ahead as strong resistance for the second largest coin. Although ETH lost some of its relative strength against BTC, its stability in a very positive sign for the whole market, and the coin could resume the recovery in the coming days. Resistance is ahead at $535, with further zones between $555 and $575 and near $625, while support is found at $500 and $450.

Monero Surges as Litecoin also Shows Strength

XMR/USDT, 4-Hour Chart Analysis

The long-term leaders of the segment, XMR and LTC are finally pulling their weight again, as Monero left the short-term consolidation zone with a bang today, while Litecoin is also close to hitting new rally highs, despite yesterday’s dip. XMR still faces strong resistance at $240 and $300, but today’s move confirmed a new short-term uptrend.

Ripple, Stellar, ETC, Dash, and Bitcoin Cash are also benefiting from the bullish rotation, but EOS, NEO, and IOTA are also looking bullish after leading the market higher last week. Al in all, price action in the segment is I line with the continuation of the broad rally, even as a new uptrend is still not yet established and correlations between the coins remain above healthy bull market levels.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 225 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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