Academy Industry Analysis Article

Beyond Bitcoin’s Price: Fundamentals Show Notable Growth Between Halvings


Bitcoin (BTC) is unlike any other asset in the world when it comes to polarizing hype, celebrity endorsements, media coverage, regulatory challenges and performance over the last decade. While it has remained an intensely discussed topic for years now, the attention it receives invariably increases leading up to major events, such as last week’s halving.

A self-regulating measure built into Bitcoin’s code, the block reward “halving” cuts down the emission rate of new bitcoins by half roughly every four years. The third such event took place around 19:23 UTC on May 11, 2020.

The halving as a fundamental milestone

Even though many industry leaders believe Bitcoin and its underlying tech can change the world, there is, among the community, a fixation on the digital asset’s price. This, in turn, fuels speculation and the volatility that Bitcoin has become known for.

Short-term price targets and predictions aside, Bitcoin’s real value, experts argue, lies in its ability to hold and transfer value across the world in a flexible, transparent and reliable manner. Its value also comes from its built-in scarcity, which is a result of limited supply and a regularly slowing emission rate.

To this end, the halving is a significant fundamental milestone, reducing the emission rate and increasing Bitcoin’s scarcity, the impact of which is evaluated in analyst PlanB’s implementation of the stock-to-flow model.
While halving events have been widely discussed and scrutinized over their impact on Bitcoin’s price and future projections, a review of the leading digital currency’s fundamentals between the last two halvings can present a broader perspective of its growth over time.

Global interest in Bitcoin saw x8 growth

Over the last decade, Bitcoin has emerged from the dark web to make its presence felt on a global scale. As per Google Trends data, interest in Bitcoin has continued to increase over time, with sporadic peaks marking significant price surges, such as the one in December 2017.

bitcoin interest google trends
Bitcoin search term interest over time. Source: Google Trends

Since its previous halving, on July 9, 2016, interest in Bitcoin has risen nearly 8 times. While this is not a concrete metric in terms of growth, it indicates increasing acceptance and recognition for the digital currency around the world.

Number of non-zero balance addresses reached 30 million

Given the anonymous nature of Bitcoin wallets (and the ease with which they can be created), it is virtually impossible to know the exact number of existing Bitcoin “users” in the traditional sense of the term. However, one of the closest alternative metrics we have is the number of non-zero balance BTC addresses.

This number denotes addresses that are not empty and hold at least one satoshi, the smallest unit of a Bitcoin (0.00000001 BTC).

As shown in the chart below, at the time of the second halving, the total number of non-zero addresses stood at roughly 9 million. It has since grown more than three times to cross 30 million.

total btc non zero addresses
Number of non-zero BTC addresses. Source: Glassnode

Even though this figure does not reflect unique users, it does indicate a marked increase in their numbers since the last halving.

Daily active addresses more than doubled

Another, more focused on-chain metric that reflects Bitcoin’s usage, is the number of daily active addresses.

This number denotes unique addresses active on the network as senders or receivers and is a measure of the network’s utility and, consequently, its value.

btc active wallets
Bitcoin daily active addresses. Source: Messari

As shown in the chart above, the number of daily active addresses has more than doubled between the last two halvings. It stood at 434,000 at the time of the second halving and was nearly 1 million at the time of the third.

As compared to its December 2017 peak of 1.29 million, the number of daily active addresses on the network was only down by 22 percent on May 11, even though the price difference was greater than 50 percent.

However, it is important to note that this number typically peaks around key events and market movements, like the halving. Its growth is much more steady on a day-to-day basis, as indicated in the log scale version of the chart below.

btc active wallets log chart
Bitcoin daily active addresses on a log scale. Source: Messari

Transaction count up over 70%

Each new block added to the Bitcoin blockchain includes transactions between users — the number of successful transactions over the network compared across periods can represent growth in usage and utility.

As per the chart below, on the day of the second halving, the total number of successful transactions stood at 182,000. This number increased by over 70 percent to reach 312,000 for the third event last week.

bitcoin daily txn count
Bitcoin network daily transaction count. Source: Messari

Transaction volume over $1.5 billion per day

Different from the transaction count metric viewed above, the volume metric denotes the total value (in USD) of transactions on the Bitcoin blockchain on a given day.

The higher the volume, the more value is transferred using Bitcoin, making this a reliable measure of the network’s growth and appreciation over time.

btc daily transaction volume
Bitcoin transaction volume (USD). Source:

While the total transaction volume stood at $142 million at the time of the second halving, it came in at $1.69 billion for the third, marking an increase of over 1,095 percent.

Network hashrate increased 7,874%

At the core of any blockchain network, including Bitcoin, is its security and immutability, ensuring reliable and unalterable transactional records.

The Bitcoin hashrate represents the computing power allocated to the network and has a direct correlation with its security. 
The higher the hashrate, the more costly it becomes to attack the blockchain (see 51 percent attack) and alter new blocks and transactions.

bitcoin network hashrate
Bitcoin hashrate. Source: Messari

Bitcoin’s hashrate has grown significantly between the last two halvings, from 1.58 million terahashes per second (TH/s) on July 9, 2016, to 126 million TH/s on May 11, 2020 — an increase of over 7,874 percent.

With the current hashrate, the theoretical cost of attacking the Bitcoin network is more than $344,000/hour, compared to $11,500/hour and $6,454/hour for Bitcoin Cash (BCH) and Bitcoin SV (BSV) respectively.

The growth in hashrate (and the security it affords) presents Bitcoin as a reliable alternative payment method for large value transfers.

Network growth trumps price appreciation

By many accounts, the “true value” of a BTC is in its functionality, which is dependent on the network in which it operates. Bitcoin’s network is the reason why it is the leading digital currency and has remained as such, despite the introduction of technologically improved and advanced digital assets and tokens.

Apart from Bitcoin’s popularity, the metrics highlighted above are measures of the Bitcoin network’s growth, utility and security. These qualities are critical to its existence and survivability — to determining if, in the long run, Bitcoin has a real chance at global adoption. While these figures reflect varying degrees of growth over time, whether or not they justify a certain price valuation in terms of other currencies (such as USD) is a different discussion.

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