[Big Mistake] 4,000 yuan is also said to be the beginning of the Bitcoin bull market

In October 2015, the price was 1,500 yuan

I posted two pictures in the answer of Zhihu What is Bitcoin? – Jiang Zhuoer

The exchange rate of Bitcoin is volatile and has experienced huge declines after three bubbles.

But statistics such as independent Bitcoin active addresses show that the number of Bitcoin users has been growing rapidly, basically ignoring exchange rate changes.

Note: The screenshot above is from October 2015. At that time, the number of active addresses was 250,000. Now it is 450,000.

In March 2016, the price was 2,700 yuan

I posted a picture in "【Basic Science】Can Bitcoin support all human transactions? - Coin Technology"

Finally, let me say something off topic. Value determines price. Bitcoin is valuable only when someone uses it. The more people use Bitcoin, the higher its value. Bitcoin that is only used by Satoshi Nakamoto himself is worthless. If all mankind uses Bitcoin, the total market value of Bitcoin may be comparable to that of gold. Dividing the total market value of gold of $7 trillion by 21 million Bitcoins, it is 2 million yuan per Bitcoin.

Post this picture again

① The surge in April 2011 was caused by the block growth rate in the previous year, which surged from 103% to 866%.

② The internal reason for the Cyprus market in January 2013 was that the growth rate of the block in the previous year did not decrease but increased to 702%. The Cyprus incident was just a trigger. Even if there was no Cyprus incident, there would be a Cyprus incident to trigger the bull market.

③ In February 2016, we may have already stood at the starting point of a bull market - the superposition of the 104% block growth rate (increased demand) and the halving of output (reduced supply) is self-evident.

As expected, the bull market arrived as expected :)

June 24, 2016

The price of the currency plummeted 32% from 5185 yuan to 3525 yuan

For long-time Bitcoin fans like me, making money is simple:
Buy Bitcoin when the price is below its value, and sell it when it is in a bubble.

So, what indicator is used to measure the "value of Bitcoin"?

Bitcoin is only valuable if someone uses it. The more people use Bitcoin, the higher its value.
The Bitcoin that only Satoshi Nakamoto plays with is worthless. If all mankind uses Bitcoin, the total market value of Bitcoin may be comparable to that of gold. Dividing the total market value of gold of 7 trillion US dollars by 21 million Bitcoins, the result is 2 million yuan per coin.

The number of Bitcoin users is difficult to count, but there is an indicator that is highly correlated with the number of users and can be accurately counted - the total number of unique addresses used on the Bitcoin blockchain.

Metcalfe's Law states:

The value of a network is equal to the square of the number of network nodes, and the value of a network is proportional to the square of the number of connected users.

However, Bitcoin is still far from forming a network effect - you can find anyone to add him on QQ, but you can't find anyone to transfer his Bitcoin - so at this stage, it would be better to change the square into √2, and then use "total market value (billion)" and "active addresses (10,000) ^√2" to make a graph. Without the coordinate translation, an extremely beautiful correlation appears.

Why did the decline of the third bubble stop at 933? Because the price has reached the bottom value. In the subsequent trend, the total market value and active addresses have maintained an extremely beautiful correlation. If the "total market value (billion)" is divided by the "60-day average active addresses (10,000) ^√2" as the "bubble index", the bubble index has always remained at a low point of around 1. Even at the peak of 5100 on June 19, the bubble index was only 1.6, which is far from the 9.5 bubble peak in 2013.

Regarding the positive effects of halving, many technical analysts believe that good news will eventually turn into bad news, and this round of bull market will end here - sorry, I don't understand the technical aspects, but I know that the fundamental effect of halving is a sustained positive effect . For example, if an oil company discovers a large oil field, will the company's stock price fall and remain low for a long time after the oil field is put into production because of "good news will eventually turn into bad news"? Obviously not, the stock price will only continue to rise with the exploitation of new oil fields and the accumulation of company profits and capital .

Furthermore, the current annual inflation rate of Bitcoin is actually quite high. Although the annual inflation rate is nominally only 4.2% with 12.5 coins per block after the halving and 15.75 million coins mined, there are a large number of early lost coins, long-dormant coins, and coins eliminated by diehards among the 15.75 million coins mined. Excluding these coins, the actual circulating coins in the market are estimated to be no more than 5 million, which means that the halving does not change the annual inflation rate from 8.4% to 4.2%, but from 26% to 13%.

therefore,

1. Is this bull market over?
Of course not, this is just a small fluctuation before the bull market.

2. How long will the price (total market value) remain close to the value (active addresses)?
Who knows? But it will definitely not always stick to its value. Something as interesting as Bitcoin will always have waves of bubbles (future value discovery).

3. How high will this bull market reach?
Let's make a blind guess - please note that it is a blind guess. I am not responsible for the direct or indirect consequences of this blind guess.
According to the current value of 3,200 yuan corresponding to 443,000 active addresses,
The bubble index of 3.94 on April 10, 2013 corresponds to 12,600 yuan.
The bubble index of 9.52 on November 30, 2013 corresponds to 30,500 yuan.

The peak of the second bubble (April 10, 2013) was $266, which was 8 times the peak of the first bubble (June 7, 2011) at $32. The peak of the third bubble (November 30, 2013) was $1,163, which was 4 times the peak of the first bubble (April 10, 2013) at $266. Therefore, the peak of the fourth bubble should be twice that of the third bubble, or it will reach 18,000:)

4. When will this bull market break out?
Why did this attempt to enter the bubble phase fail? There may be many technical explanations, but in my opinion, there is only one fundamental explanation:
Block size has been capped at 1MB since April 2016 (source)

The logic is very simple:
Block size is limited → Transaction number is limited (up to 250,000 transactions/day) → Active addresses/users are limited → Bitcoin value cannot increase → No future, price cannot enter bubble stage

Of course the Core development team will tell you:

It's okay. We have prepared a lightning network for users that can complete millions of transactions per second, so we do not plan to expand the block size. The 2MB hard fork code in July is no longer on the Core development agenda.

Huh? City officials tell you:

We plan to build a new vacuum tube maglev and have it completed in 10 years, so we do not plan to expand the existing ground roads which are already blocked.

Let’s not talk about when the Lightning Network will be actually available, whether it can replace the main chain, and whether it will bring about extremely serious power centralization and government audit issues. From an operational point of view, it is still a long way to go before the Lightning Network can form a practical network effect.

You can find anyone to add him on QQ, but you can't find anyone to transfer Bitcoin to him. You can find anyone to transfer Bitcoin (main chain) to him, but you can't find anyone to transfer Lightning Network to him.

The underlying conflict here is: Who has the power to decide the direction of Bitcoin’s development? The Core development team, or Bitcoin users?
If nothing unexpected happens, there will be a battle in July.

So, if you ask when this bull market will break out, I will give two conditions:
1. Halving
2. Completed 2MB expansion
(This also means that Bitcoin has the ability to solve the most dangerous centralization of power: centralization of development power)