Bitcoin (CRYPTO: BTC) has been a hot topic in the financial world lately, especially since the launch of the first spot Bitcoin ETF on Jan. 10. While there has been extensive coverage on the subject, the decentralized nature of Bitcoin can make it challenging to assess its current position and keep up with developments. That’s where Cathie Wood and her team at Ark Invest come in.
Each month, they publish a report that sheds light on the latest Bitcoin-related developments, providing both short-term and long-term information to help us gain a better understanding of the world’s most valuable cryptocurrency. As another month passes, it’s time to delve into the insights shared by the experts in their latest analysis.
An encouraging short-term outlook
Following a strong finish to 2023, Bitcoin has surpassed key indicators closely monitored by Ark Invest and its analysts. While these indicators are typically used for technical analysis and day trading, they can also be beneficial for investors implementing a buy-and-hold strategy.
One of the most interesting findings in the report is that Bitcoin’s recent resurgence resembles patterns seen before previous bull markets. As described in the report, Bitcoin’s reclaiming of critical technical levels suggests that it is in the early-to-mid stages of a bullish trend.
In addition to the short-term analysis, Ark found that long-term holders (investors who have not moved their coins in more than 155 days) are starting to take profits. These holders are known for their reluctance to sell, providing valuable insight into the dynamics of the Bitcoin market compared to day traders who buy and sell more frequently. While this selling is not extreme, it is the largest profit-taking seen since the spring of 2023, which is why Ark Invest remains bullish.
Furthermore, the report highlighted that at the end of December, 90% of the total Bitcoin supply was sitting at a profit. This could have various implications, but analysts believe it is generally positive as higher profitability at lower price points suggests that investors are comfortable holding until prices rise. This indicates that while profits are being realized, there may still be low selling pressure until investors are incentivized enough to sell their Bitcoin.
Long-term trends continue to solidify
At its core, Bitcoin is a decentralized network where users can make transactions, and miners are essential to its operation. Without miners, Bitcoin could not function, so the report evaluated the 7-day average miner revenue to assess the network’s strength.
The thinking is that as long as miners remain incentivized to fulfill their role, Bitcoin becomes more robust. Fortunately, miners have been profiting from a surge in transactions on the network in Q4; the report found that average revenue increased by 26% in December compared to November and over 200% compared to the previous year (December 2022).
This profit growth has also attracted more miners to join the network, as shown by a doubling in mining difficulty since December 2022. An increase in mining difficulty is a positive sign for Bitcoin’s security, as it indicates a growing number of miners actively participating and investing resources in validating transactions. This competitive environment ultimately strengthens the network, making it more resistant to attacks and ensuring the integrity of every transaction.
While the short-term outlook for Bitcoin looks promising, the significance of these security metrics cannot be overstated. They are the foundation of Bitcoin’s long-term value proposition. Sustained growth is crucial for Bitcoin’s value, as it solidifies its claim as the most secure and decentralized blockchain. The more secure and decentralized Bitcoin is, the more reliable and valuable it becomes over time.
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*RJ Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy. Here’s What Cathie Wood and Ark Invest Think About Bitcoin Today was originally published by The Motley Fool.
