Bitcoin’s recent price struggles have sparked debate amongst analysts. Jurrien Timmer, director of global macro at Fidelity Investments, believes the culprit might be a slowdown in network growth.
Timmer compares Bitcoin to “exponential gold,” highlighting its potential as a long-term store of value. However, he argues that Bitcoin’s price movements are heavily influenced by network growth, due to its capped supply and its connection to the fiscal policy cycle.
This relationship seems to be holding true lately. Timmer observes a recent divergence between Bitcoin’s price and network growth. While the price did reach a peak of $73,737 in March, it hasn’t been able to break new records.
Historically, Bitcoin’s network growth has followed a predictable pattern, with the number of active addresses increasing exponentially. Bitcoin’s price has typically fluctuated around this growth curve.
However, Timmer points out a concerning trend. Despite the recent price increase, Bitcoin’s network growth seems to be stagnating. This sluggish network expansion, he argues, could be a major reason behind Bitcoin’s inability to reach new highs.
Timmer suggests that renewed network growth is crucial for Bitcoin to regain momentum. He speculates that the next phase of the fiscal policy cycle, particularly a period of monetary tightening, could trigger this acceleration.
Further complicating the picture are external factors like lower US inflation rates and comments from Federal Reserve Chair Jerome Powell, which have also contributed to Bitcoin’s price volatility.
Timmer’s analysis sheds light on the intricate relationship between Bitcoin’s network health and its price performance. As the cryptocurrency market matures, understanding these dynamics will be crucial for investors and analysts alike.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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