Social sentiment data, maturation and chain analysis suggest that Bitcoin is on the brink of a 2017-style bullish run.
Last week, Bitcoin (BTC) saw its price rise 6.95% from $10,804 on October 5 to $11,555 on October 12. The increase marked the week of best performance for the Bitcoin price since July and the data shows a perceptible change in market sentiment about the digital asset.
According to data from TheTie, an alternative data provider for digital assets, the daily sentiment score for Bitcoin reached 62.4. The metric measures the tone of Twitter conversations to derive a positive or negative market sentiment, and any score above 50 indicates that the market sentiment is positive.
Bitcoin Price vs. Sentiment
Bitcoin and the rest of the crypto industry suffered from a series of negative news in early October. CFTC and DOJ advanced on the BitMEX exchange, accusing the company of illegally operating a derivatives exchange on October 1 and the UK FCA banned cryptomime derivatives in retail on October 6.
However, none of these events produced the negative results that many investors expected. In addition, the negative news was followed by good news, such as Square allocating 1% of its assets to Bitcoin.
Generally, bullish signals continue to accumulate for Bitcoin and as the digital asset rose to $11,500, the total market capitalization of the entire sector increased 6%, from $339 billion to $359.
In addition, a recent report surveying more than 30 panel members, including eToro crypto commentator David Derhy, CEO of Alpha5, Vishal Shah and LMAX Group currency strategist Joel Kruger, predicts that Bitcoin should reach $14,283 by the end of 2020, according to the average of commentators
Blockchain activity follows optimism
Several chain metrics also correspond to the positive feeling around Bitcoin. Although investor activity has increased, the price is still to come. According to cryptomeda analyst Willy Woo, this signals an increase in „investor activity“, which has not yet been accounted for in the Bitcoin price. Woo said:
„The ‚investor activity‘ is based on the network volume. This is because when BTC moves between portfolios between two different participants, we assume that there has been a payment for it outside the chain (fiat or alternative currency). This is an imperfect measurement, but it comes close to what is happening. ”
Bitcoin NVT (Transaction volume vs price)
Not only has activity increased, but the number of currencies held in exchanges has decreased continuously, with the trend of change similar to the period of accumulation that occurred before the market rose in 2017.
While fundamental and technical analysis paint an optimistic picture amid the current political and financial turmoil, a perfect storm seems to be brewing for Bitcoin.
DeFi Recovery on the Way
In 2020, DeFi played a key role in revitalizing the enthusiasm surrounding cryptomorphs and the price of Ether (ETH), but in the past two months most DeFi tokens have lost value.
DeFi Pulse data show that the total value locked in DeFi is $10.89 billion. Meanwhile, Uniswap has $2.6 billion in total value locked and the decentralized exchange has continued to see a steady increase in turnover.
Total Value Locked in DeFi
According to Flipside Crypto data, about US$ 300 million in tokens are sent to DeFi dapps every day. The value exceeds centralized exchanges, which currently record a daily inflow of about US$ 156 million.
Currently, Uniswap is responsible for 70% of the inflow from the DeFi sector, with US$ 211 million going to its liquidity pools every day.
All Ethereum network activity
The growth of DeFi protocols has brought renewed attention to Bitcoin and so far over $1.1 billion in BTC has been converted into tokens in the Ethereum blockchain through the BTC Wrapped alone.
Flipside Crypto noted that about $385 million in wBTC and renBTC changed hands in September.
Important Obstacles Ahead
Although many factors point to a hectic year end for Bitcoin, it is important to note that significant obstacles lie ahead. Historical data shows that Bitcoin sold $12,000 at least three times this year, while miners and whales make a profit. With the price again approaching the level of US$ 12,000, there is the risk of this happening for the fourth time.
There is also the growing spectrum of regulatory restrictions on the decentralized financial sector. While it is difficult to apply a general ban on DeFi, centralized domains are not yet in place.