Disclaimer
The on-chain data I use (BitInfoCharts, Coinglass, CoinMarketCap) to compile the tables and graphs contained in this analysis do not always align with the on-chain data found via others sources like Glassnode and CryptoQuant. I cannot fully explain the reason for the differences nor can I confirm which sources are most accurate. For this and other reasons, I have come to trust only the on-chain data I collect when trying to explain and/or predict Bitcoin’s future price action (PA). Whether you too find my analysis useful is for you to decide, but I can assure you that some of my observations and/or predictions will differ, often markedly, from other observations and/or predictions you will see on Crypto Twitter (CT) and elsewhere.
Price Action
December PA was yet another disappointment to many, the second consecutive down month despite very high hopes for Q4 2021. The month opened at $56,988 (on Coinbase) and more or less traded down right into month-end (excluding a very brief post-Christmas rally), closing at $46,211, a drop of 18.9%. Still, Q4 closed UP 5.4%, which may come as a surprise to many given the doom and gloom so pervasive on CT and elsewhere these days.
Looking out even further on the horizon, 2021 ended the year up 59.6%, which again will likely surprise many given that BTC was 31.6% higher than today only seven weeks ago, when it reached a new daily-close all-time high (ATH) of $67,555 on November 8.
The tables below contextualize the performance of BTC during Q4 and 2021 as a whole.
Below is also a table of this halving cycle’s monthly performance thus far compared to the two previous cycles:
Below are graphs of BTC’s monthly performance since 2014 and weekly performance since March 2020.
When viewing BTC’s performance from these longer-term perspectives, it is clear that it continues to perform exceptionally well over time, having out-performed most other non-crypto assets not only over its lifetime but even in 2021. In short, yes, December 2021 and Q4 2021 failed to achieve the milestones we BTC bulls had hoped, but big picture, Number Go Up (NGU) technology is very much alive, most fundamentally due to continuous network adoption.
Distribution Changes
To illustrate just how robust network adoption is, look at the changes in the number of addresses in the first table below:
As shown, a net of 6.521M investors joined the BTC network in 2021. That is a staggering number, and one that will grow exponentially in the years ahead due to BTC’s innovation diffusion, network effect, Metcalfe’s law and Lindy effect. i.e., Short of a fatal network flaw, adoption will continue unabated for the foreseeable future, which means price will continue increasing a very long time.
That said, it is discouraging that there was a contraction across all address tiers except for Minnows in 2021. As I explained here and here, the most substantial and sustainable price increases occur when new whales enter the market, especially with BTC’s price in the mid five figures. Retail buyers simply no longer have the power to move the market in a sustainable way except over very short time periods (when they experience a fear of missing out, FOMO). Still, when MILLIONS of new retail buyers enter the market, price does go up, with or without new whales, which is why price is 60% higher today than it was a year ago despite the late-year faceplant. In fact, the most patient among us should root for increased Minnow adoption with a lack of new whale adoption because such a trend would lead to a greater distribution of Satoshis (Sats: 1 BTC = 100,000,000 Sats), meaning the network would become both more decentralized and more democratized, something I think benefits us all.
To Be Continued…
I have MUCH more I want to share about December’s on-chain data as well as PA for Q4 and the entire year. However, time with family will continue to take precedent for the time being, especially with our boys on an extended school break. That said, I’ll keep adding to my analysis when time permits and tweet when I do. In the meantime, I wish everyone a happy and healthy new year and look forward to more frequent communications with you all in the months and years ahead.
Go #BTC.