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Bitcoin Up in August as 'Impressive Divergence' Points to Gains Ahead

Cryptocurrency Aug 31, 2021 16:12
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By Yasin Ebrahim

Investing.com – Bitcoin is set to lock in double digit gains for August, but the latest findings show a meaningful pickup in activity on its blockchain hasn’t followed – and that could be a sign that strong gains are on the horizon.

Bitcoin fell 2.4% to $47,337.2, but is set to end the month of August up about 14%.

BTC's strong gains this month hasn't provided the expected shot in the arm for activity on Bitcoin’s network. This divergence has striking similarities to the mid-to-late 2020 rally, which saw the popular crypto increase four-fold.

“Active entities on the Bitcoin network is currently around 275k per day, around 35% below the January peak,” according to data earlier this week from on-chain analytics firm Glassnode.

This current on-chain activity levels marked an “impressive divergence” that “is similar to the stable pre-bull accumulation range established in mid to late 2020,” Glassnode added.

In another sign of improving fundamentals, the short-term holders of bitcoin -- who were blamed for panic selling during the recent crypto crash  -- are in decline.

Young coins, those younger than three months, now represent “only 15%% of the coin supply and a very strong downtrend is in play,” according to Glassnode.

The long-term bull case for the BTC has also been helped by entrants of institutional investors, albeit still at the early adoption stage, keen to leverage the diversification benefits of BTC in their investment portfolios.

"[T]here has been only moderate positive correlation between monthly BTC returns versus major equity indices, with Pearson’s coefficient over the last five years at c 0.27–0.29 (c 0.16–0.18 over 10 years), according to our calculations.” Edison Research said in a note.

“Together with BTC’s strong performance over a longer time horizon (despite c 80–90% de-ratings from previous peak during bear markets), this translates into a positive impact even for a small 1–5% allocation to BTC,” it added.

Bitcoin Up in August as 'Impressive Divergence' Points to Gains Ahead
 

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