Market sentiment and fundamentals at BTC still favor the rise in Bitcoin prices

As Bitcoin briefly tops $13,000, its highest price for 2020, market sentiment and fundamentals favor a prolonged bull market.

Bitcoin’s price has seen a healthy rebound to $13,000 in Q4. At the beginning of the quarter, Bitcoin (BTC) was below $11,000 in the region, and from there, steady rises took the price to the $13,000 mark on October 21 for the first time this year.

The price rose to $13,217, a record for 2020, before falling to around $12,750. This upward movement in prices is certainly indicative of upward investor sentiment in today’s market.

Is the rise in the hash rate a bullish sign?

The Bitcoin hash rate has also been rising steadily since the end of Q2, reaching an all-time high of 157 exahashes per second on October 17th, according to BitInfoCharts. The metric estimates the number of hashes per second the Bitcoin Network has performed in the last 24 hours. It means the speed at which a miner reaches a certain hash, which is the number of times a hash function can be calculated per second.

Therefore, the more BTC is mined, the higher the hash rate increases. Jay Hao, managing director of OKEx, a Malta-based crypto-currency exchange, told Cointelegraph that the increase in the hash rate is good news for the network:

„It shows that the miners are confident about the direction of Bitcoin’s future price and are increasing the resources. They’re often good at predicting the price of BTC, although price increases don’t always follow hash rate increases. There’s no established link between the two. We may see the price increase especially if more miners hold back rather than sell their new currencies, but that’s not a certainty.

However, the increase in the hash rate also means that the miners will also need more computing power to be able to make mines profitable, due to increased competition in the network. Hao elaborated on these nuances, saying that more competition is likely to emerge in the long term, and that those with many resources will be more successful: „If the price of Bitcoin increases, this will generate more revenue for the miners, but if the price doesn’t increase and the hash rate increases, it will generate more costs for the miners.

Major traders say that the Bitcoin logarithmic chart points to a bullish cycle similar to that of late 2017

Agreeing with the idea that a rising hash rate indicates a rising sentiment, Tone Vays, the organizer of the Financial Summit, elaborated on what this could mean for the Bitcoin miners, including a comparison with the miners of the Ethereum network:

„An increase in the hash rate during consolidation or a slow upward trend in prices is always a positive for a further rise in prices. As the price rises, miners who invested in well-managed farms will benefit nicely. Bitcoin mining will always be more profitable than Ethereum mining in the long run for the obvious reason that Ethereum’s corporate management is on a mission to eliminate mining in favor of Proof-of-Stake.

Bitcoin distribution analysis reveals patterns

Since Bitcoin is becoming increasingly scarce, as there’s only a limited amount of coins that can be extracted, it’s important to also consider the role that distribution trends among BTC holders play in market sentiment. According to data published by the Blockchain Center, cryptomoney exchanges currently represent 12.62% of total BTC distribution, and this figure is decreasing.

The two main reasons for this may be that new owners are buying Bitcoin on the secondary market and storing it in cold wallets as a store of value, similar to what traditional investors would do with gold, and the DeFi boom, which may lead some investors to give a „tokenized“ Bitcoin to make quick profits in the DeFi markets instead of storing it. As this trend increases the cost of circulating Bitcoin, the price of BTC is bound to rise as the size of the exchanges in the token pool decreases.

Bitcoin is officially larger than PayPal by market cap

The second important figure is the amount of Bitcoin in the hands of institutional investors and whales, which stands at 3.74% and is increasing incrementally. These large institutional investors are increasing the percentage of Bitcoin in their portfolios,