From its humble beginnings when it traded for less than a penny to eventually reaching a staggering all-time high of over $68,000, Bitcoin's journey over the years has been nothing short of remarkable.
However, since that all-time high, Bitcoin's price has taken a hit and remains down about 60%. Despite this retreat, there is evidence that Bitcoin's network is still growing and has plenty of potential to keep up its momentum from the last 14 years. Three key metrics in particular highlight Bitcoin's current position and why today remains an enticing opportunity for long-term investors.
Growing block sizes
Just this year, the average size of a Bitcoin block hit an all-time high. Not only did it hit a new record, but it has been continuing to grow since Bitcoin went live in 2009.
Because each Bitcoin block is full of transactions and associated data, the average block size serves as a proxy to evaluate demand for Bitcoin. Typically, when there is more demand for Bitcoin, block size increases as more transactions occur. Evidence of this can be seen in the chart below with the surge in demand for Bitcoin block space as a result of the recent craze of Ordinals and BRC-20 tokens.
Growing block sizes benefit long-term investors in two key ways. First, they signify increasing demand for Bitcoin, indicating its growing recognition and adoption. Second, this trend has persevered through multiple bear markets, meaning even if Bitcoin's price is down, demand is steady.
Holders keep on holding
One of the most prevalent theses for investing in Bitcoin to arise in the last 14 years is its use as a store of value. Like gold and other assets, Bitcoin appreciates with time, and Bitcoin investors have typically employed a strategy of buying and holding. Evidence of this can be found when we take a look at the number of bitcoins that haven't moved in more than a year. Today, nearly 68% of bitcoins in circulation have remained dormant for at least a year, another new all-time high.
For long-term investors, this should be especially welcoming for two particular reasons. First, when a significant portion of bitcoins remains untouched for an extended period, it signals that investors have confidence in the future value and potential of Bitcoin. It suggests that they are willing to hold onto their bitcoins, as a sign of confidence, expecting a favorable return in the long run.
Second, bitcoins that are not being actively traded or sold contribute to a decrease in selling pressure on the market. With fewer available bitcoins in circulation, there is less supply being offered for sale, which can potentially contribute to price stability and even rising prices. This aspect of scarcity, combined with increasing demand, can have a positive impact on Bitcoin's value over time.
Hash rate continues to climb
Last but not least, and perhaps my favorite metric, is Bitcoin's hash rate. The hash rate refers to the computational power dedicated to mining Bitcoin and securing its network. It plays a crucial role in maintaining the integrity and security of the blockchain. Despite experiencing several bear markets and price fluctuations, Bitcoin has consistently seen its hash rate increase over time. Like the other metrics covered, it notched a new all-time high recently.
With a greater hash rate, it becomes increasingly challenging for any individual or entity to control the majority of the network's computational power, which ensures that Bitcoin remains resistant to censorship and manipulation. This also makes it more difficult for bad actors to tamper with transactions or alter the blockchain's history.
The rise in Bitcoin's hash rate reinforces its value proposition as a decentralized and secure cryptocurrency, setting it apart from other digital assets. As the most decentralized and secure blockchain network, Bitcoin offers unmatched reliability and trustworthiness. This is especially significant for long-term investors seeking a digital asset that can withstand the test of time and maintain its value, particularly in light of potential threats, and the aftermath of the corruption and foul play that plagued the crypto industry in 2022.
