Why Do You Think Bitcoin's Price Is Going Up?

Reflexivity Research’s Will Clemente put together an overview below of the bitcoin market that can help explain why the price has been rising in recent weeks, along with a few surprises to consider going into 2024.

According to Will: Over the last few weeks, the Bitcoin network crossed a major milestone with 50 million addresses with a balance of greater than 0 BTC. This perpetual rise is one way to measure Bitcoin’s accelerative growth as an emerging digital monetary network. User adoption is not the only thing growing in the Bitcoin ecosystem though.

This week Bitcoin transaction fees surged to their highest single-day reading of all time at $23.6 million.

What’s behind the spike in Bitcoin network transactions?

Ordinal inscriptions have caught a second wind, as shown in the daily and cumulative values of transaction fees derived from ordinal inscriptions which have generated more than $175 million in transaction fees for the Bitcoin network alone.

What are the implications going forward?

Bitcoin miner revenues are usually made up of the block subsidy that is paid out from the protocol as well as transaction fees paid by the users to enable them to get their transactions included in the next block on the blockchain network. While higher transaction fees on Bitcoin’s base chain may price out small purchases, more miner revenue up for grabs means that more miners will plug in machines to capture the surge in fees; ultimately making the network safer and secure.

Does this solve Bitcoin’s “security budget issue”?

This also brings into question the concerns some pundits have expressed around Bitcoin’s security budget issue; the theory that Bitcoin will run into a security issue once Bitcoin rewards are no longer being issued after the 21 millionth coin has been mined. It is also worth noting that should there ever be a substantial drop in miner revenues and the hash rate comes offline, the difficulty adjustment that takes place every two weeks would bring block times back in line with the amount of hash rate; the China mining ban of summer 2021 is a great example of this. The theoretical debate lies on whether there is a quantifiable threshold of “sufficient security”.

So, who is buying?

One interesting development to continue to keep an eye on is the trend within on-chain wallet cohorts by size. With the upcoming halving set to cut issuance in half, should accumulation from “fish”’ persist at current rates, this would offset the entirety of Bitcoin’s block issuance of the first sustained period ever.

It is compelling to see so much activity and adoption happening weeks before a potential spot bitcoin ETF and months before the bitcoin halving. These underlying metrics point to an increase in demand in various ways, which should only be amplified by the two events on the horizon.

The first half of 2024 should be packed with developments.