On-Chain Commentary
- Bearish lows have been swiftly retraced with a shift in sentiment
- Daily trend technicals for most large cap digital assets have flipped bullish
- Bitcoin’s network hash rate and network difficulty have begun to rise
As the S&P bulls were celebrating another attempted breach of 4k last week, Bitcoin and other digital assets were off to the races. The DXY also provided a bullish tailwind, down over 10% from the mid-year highs. Thanks to returning risk-on tradfi conditions, in combination with sustained buying volume, short liquidations, and a shift in sentiment, both Bitcoin and Ethereum rose over 20% over the past week, marking one of the strongest weekly rallies since late 2020. A majority of the recent crypto rally occurred during Asia trading hours, as well as during the long three-day weekend.
The bearish trend technicals of nearly all large market cap digital assets held below throughout 2022 have been breached. Specifically, the 200-day moving average and Ichimoku Cloud, which may begin to act as a support level rather than a resistance level. Although a definitive trend reversal is likely too early to declare, strong volume above multi-month resistance levels is a good start. If Bitcoin can hold above the psychological level of $20,000 throughout the week, bullish kismet continues to bloom. Ethereum and the ETH/BTC pair also continue to show signs of potential outperformance in the next few months. Thanks to a token burn mechanism based on transactional activity, Ethereum’s network issuance has slipped deflationary in recent days.
Bitcoin’s hash rate, or computational power, has also continued to increase again, a sign that efficient miners may be finding higher profitability margins again in the current market conditions. Bitcoin’s network difficulty, or the effort needed to solve for the block reward, has hit a new all-time high. Difficulty adjusts approximately every two weeks and retargets for a 10 minute block time. Before an adjustment, if network block time is less than 10 minutes, difficulty increases, and if block times are greater than 10 minutes, difficulty declines. Hash rate is a fuzzy estimate of computational power at any given time whereas difficulty adjustments represent an exact snapshot. Rising Bitcoin prices and newly released ASICs from Bitmain and MicroBT are potentially helping fuel the rise in hashing power.
