Year-to-date, Bitcoin is down 39%, leading to a pile-on of naysayers pointing to red charts.
Price might be down, but almost all other metrics pertaining to the asset are up. Oftentimes, these metrics prove to be a better long-term barometer for measuring its success and adoption outside of price.
Bitcoin is well known for its issuance schedule. The current inflation rate is 1.7% lower than that of gold and most assets in the traditional financial system, and it's only going lower.
Visualizing the issuance rate, Bitcoin has already hit 90% of total minable Bitcoin, and it will take 118 years to mine the final 10%. This is all possible because of the predetermined halving schedule which cuts issuance in half every 4 years. The halving causes an exponential decay in issuance meaning Bitcoin becomes more scarce with each new block mined.
Lighting Network capacity
Programmable money isn't just a buzzword; it describes the possibility for new and exciting protocols to help scale Bitcoin. The most popular Bitcoin “second layer” is the Lightning Network (LN). With Lightning, transaction speeds are faster while fees are much lower – as low as 1 satoshi fee.
The capacity and adoption of the LN itself continues to grow, with almost 4,000 BTC locked into channels in just a few years. In 2021, LN adoption grew 750%, according to a recent report from Arcane Research.
Bitcoin’s hashrate is one metric that shows the amount of dedicated computing power to the network and is often used as a proxy for its strength. From a miner’s perspective, hashrate growth demonstrates long-term conviction as it takes a few years to see an ROI. The increase in hash toward 250 EH/s shows miners continue to see long-term value in the network, to the benefit of network security.
This metric shows how many wallet addresses have a non-zero balance and is a good gauge of adoption. While one caveat is that someone could have multiple wallets, Bitcoin can also consolidate into fewer wallets over time per entity. The metric shows over 40 million addresses and growing, but this doesn't count consolidated bitcoin on exchanges, so it is likely much higher. At Square’s recent “Investor day,” it was estimated that around 2% of the world has exposure to Bitcoin – some 158 million people.
Percent balance on exchanges
The last metric is the total number of Bitcoin as a percentage on exchanges. A reduction of Bitcoin on exchanges correlates with the reduction of total supply available to sell. Some analysts refer to drops in exchange balances as “the supply crunch,” which can squeeze prices up in some intervals. Since 2020, the total Bitcoin on exchanges has been falling, possibly showing that more people are putting Bitcoin into cold storage. Some critics of this metric say it is trivial to send your Bitcoin onto the exchange to sell. While this is true, it is also true that the metric shows the intent to hold one's Bitcoin and remove it from the exchange.
Price is normally the first thing that people see, and it is the thing that brings most people into Bitcoin in the first place. But price is not the only way to quantify Bitcoin, and many more insights can be gleaned from peering deeper into the transparent blockchain. Although Bitcoin seems to be in a bear market, the adoption clues found in these metrics show hope for a bright future.