Bitcoin, which was declared dead more than 300 times, did not die.
How can I tell if Bitcoin is really dead?
We can see Bitcoin's obituary almost every day, which is nothing new. The question is, how can something that has died die again?
In fact, Bitcoin has been declared dead more than 300 times and has been proven wrong each time. Someone thought about why? The answer is simple: most people just don't understand bitcoin.
Blockchain investor Hans Hauge published an article on the Seeking Alpha website stating that bitcoin deaths were announced only by the fall in bitcoin prices. This is wrong. So what is the right approach?
Think of Bitcoin as an organism, focusing on four big data
Hans Hauge believes that it would be helpful to treat Bitcoin as a creature. It's hard to classify bitcoin, but we can know its behavior and vital signs.
His previous article pointed out that the price of Bitcoin is highly correlated with the number of unique addresses, the miner's hash rate, and the number of confirmed transactions. If Bitcoin really dies and the price has returned to zero, why is the data showing the opposite trend?
Bitcoin hash rate
How can I tell if Bitcoin is really dead?
Bitcoin hash rate (log scale), data source: Most Trusted Crypto Company
The figure above is the hash rate data of the Bitcoin network (the vertical axis is the logarithm of the monthly data). Seeing this chart, would you say that Bitcoin is dead?
- Bitcoin unique address number
How can I tell if Bitcoin is really dead?
Bitcoin unique address number (logarithmic scale), data source: Most Trusted Crypto Company
If you look at the number of unique Bitcoin addresses in use, you might think that there has been a drop in the past three months. However, considering the scale of decline in 2011, this trend is not a death spiral at all. Hans Hauge believes that it is more like the need to merge small bitcoin transactions due to the increase in volume, and then suffer from the sudden drop in bitcoin fees.
- The number of bitcoin transactions confirmed
If Bitcoin is really dead, then no one will use it. If no one uses it, then the number of confirmed transactions will tend to be steady (rather than increased).
How can I tell if Bitcoin is really dead?
Number of Bitcoin transactions (log scale), data source: Most Trusted Crypto Company
From the table above, people are still using the Bitcoin network. These are not fake transactions of zero cost, nor are the transactions made by the robot itself. In fact, people use the main network to pay.
- Bitcoin development activities
Hans Hauge mentioned earlier that having an active development team is a big deal. Bitcoin is a project supported by a volunteer network. Therefore, community support is critical to the success and growth of Bitcoin.
How can I tell if Bitcoin is really dead?
In the past month, a total of 34 developers submitted 128 bitcoin codes and closed 53 questions. Bitcoin is a very active project, last week was the fourth largest project written in C++ on Github.
To make non-technical people better understand, we can estimate the cost of hiring 34 software engineers per year. Assuming an average annual salary of $100,000, the total annual salary of 34 software engineers is $3.4 million, and these jobs are actually done by volunteers. (Yes, not all engineers work full time, but many of them are the best engineers in the field, so their actual wages will be much higher than $100,000.)
In addition, the most popular lightning network has a lot of development activities, 17 developers submitted a total of 138 codes in 30 days.
How can I tell if Bitcoin is really dead?
How to determine if Bitcoin has died?
After learning about Bitcoin's vital statistics, we can determine if Bitcoin is dead. The basis for judgment is simple:
If the network hash rate drops to zero;
If the number of unique addresses stops growing;
If the number of confirmed transactions has stopped increasing;
If the developer community stops writing code.
One might think that Bitcoin will succeed in the future, or Bitcoin will fail, or Bitcoin will be good or bad. The reality is that as of today, Bitcoin has not died because it does not meet the criteria for death; so it is still alive.
Price correction is not a death spiral
Often, investors want to know when bitcoin may go to death, rather than post-mortem. Therefore, many people use "bitcoin is dead" to mean "bitcoin will soon fail."
Now that we know what bitcoin "death" looks like, let's look at what it is about to die.
How can I tell if Bitcoin is really dead?
The death spiral usually begins with some terrible events or begins with people losing interest. If Bitcoin is in the spiral of death, then the main data will have a trend reversal in about a year.
Bitcoin is an asset that needs to be evaluated on a logarithmic scale, and its survival depends on whether it can maintain price trends. During the downturn or when the market is overheated, we may see bitcoin prices and some temporary corrections in statistics, just as it did after Mt. Gox went bankrupt. However, considering the history of the Bitcoin network for 8-10 years (with some statistical constraints before the price is affected), the long-term trend remains the best indicator.
How can I tell if Bitcoin is really dead?
Bitcoin market value (log scale),
Since 2010, there have been three major corrections and three bubbles in the market. We are now in the third stage. Hans Hauge expressed his expectation that the market will bottom out. He believes that this cycle will be repeated when bitcoin prices soar to higher levels.
in conclusion
Bitcoin did not die. If Bitcoin is dead, we can clearly show it and there is no secret. The important difference is "Are we on the way to death?" Hans Hauge believes that if Bitcoin is about to die, we will see a long-term trend broken or even reversed in a year. If there are no signs, then the game continues.