The Ultimate Rebound Machine. September Market Outlook | by | @blockchain | Sep, 2021

1. Market Movements

Bitcoin saw a second consecutive positive monthly close for August, up +13% for the month. Ethereum was up an even more impressive +31% in August on the back of a resurgence in demand for non-fungible tokens (NFTs).

Equities (+3%) and the US dollar (+0.7%) were up for August (+2–4%), with long-dated US bonds (-0.5%) and gold (-0.2%) slightly down.

Table 1: Price Comparison: Bitcoin, Ethereum, Gold, US Equities, Long-dated US Treasuries, US Dollar (% Change)

As we discussed last month, government is arguably the last remaining major investor category missing from bitcoin’s incredible journey to becoming a new global reserve currency.

The launch of bitcoin as legal tender in El Salvador on Tuesday, alongside El Salvador becoming the first ever government to announce an investment in bitcoin, appears to have been a key catalyst behind BTC climbing back above $52,000 on Sept. 6th.

The flash crash crypto markets subsequently suffered on Tuesday Sept. 7th came as leveraged borrowing climbed and excessive exuberance returned to crypto futures markets, leading to rapid liquidation of speculative positions.

Looking ahead, perhaps the key question surrounding the outlook for crypto markets over the next several months is whether recent fundamental crypto demand drivers including:

  • mainstream crypto adoption
  • sustained growing interest in NFTs and DeFi
  • more sovereigns following El Salvador’s lead in adding bitcoin as a reserve asset and legal tender

will counterbalance some uncertain regulatory developments around several key crypto growth categories:

2. On-Chain Analysis

Each month we dive into on-chain data to explore interesting trends or movements on the Bitcoin network.

Overall, on-chain activity increased in the month of August (Table 2).

The average daily fees continue to drop from $4 / transaction to $2 / transaction. This trend has continued since May 2021.

Table 2: August vs July network activity

One topic we continue to follow closely is the evolving bitcoin mining landscape in the wake of the May-June crypto mining crackdown in China.

It appears from anecdotal reports and official announcements that a very significant share of crypto mining previously conducted in China has either relocated outside China or gone offline.

However, we are skeptical of claims that Chinese authorities were successful in eliminating all bitcoin mining in China.

Indeed, we see evidence that some large mining pools thought to include a very significant share of China-based miners, such as AntPool, have seen their market share maintained or even increase of late in spite of China’s mining crackdown (Figure 1).

Some mining analysts have quietly estimated as much as 30% of the pre-crackdown ASICs (crypto mining computing hardware) to be still either operating in China or waiting to come back online after the Chinese regulatory heat has cooled.

Figure 1: AntPool has seen a market share increase despite China’s mining crackdown


3. What we’re reading, hearing, and watching.


Beyond Crypto

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