1 Graph of the week

Series of negative news in December put downward pressure and brought Bitcoin to a 15 month low. However, at that point 200 week moving average has been hit, for the third time in the past 4 years, which served as a resistance level and prevented price from falling further. Moving average with such a large period allows to see price action on a macro level and not be driven by availability bias.

2 Difficutly

Difficulty: is a number that regulates how long it takes for miners to add new blocks of transactions to the blockchain. If difficulty is high, it means that computational power needed to slove mathematical puzzles to verify transactions is high and since by design block exploration is fixed at around 10 minutes, difficulty automatically adjusts to keep the new block generation rate constant. Since miners are paid in crypto they mine, depreciation of dollar price of crypto has a negative effect and makes mining less profitable. Substantial drop in Novemeber to December period was mainly price action driven. Bitcoin dropped by about 38% in two months so many miners switched off their machines which brought the difficutly down. However, since then, price corrected and briefly stabialised at around $4,000 level which brought hope to miners and influx set a positive trajectory for difficulty by increasing it by 19% from the trough. This is a bulish signal, as it implies that November-December price drop has been fully factored in and even without substantial price appreciation inflow of new and returning miners continues to bring the difficulty up. Overall, this signals either shift in efficiency and / or cost of mining or improvement in the sentiment of bitcoin price. In either way, miners are crucial to the health and stability and security of the bitcoin environment.

3 Number of transactions

All of the transactions that are happening are either recorded in private (e.g. on centralised exchanges only deposit and withdrowal is recorded on the public blockchain, while actual transaction on the platform are not) or on the public ledger. For example, if you have btc and transact with one of these companies this transaction is going to be verified by miners (how mining works) and recorded on the public blockchain. The total number of transactions per day signals how widely and frequently bitcoin is used. Thus, the number of transactions on blockchain is a good barometer of the general health of the system and broader adoption of the bitcoin as a platform for money transfers.

After chieving all time high of close to half a million transactions per day, there was a steady decrease until the bottom has been hit in early April of 2018. After that number of transactions formed a positive trend and is currently at the one year high at 350k transactions per day.