QKL123 Research Report | Bears come to the cattle – Bitcoin opens a new cycle

The sun and the moon alternate and the four seasons reincarnation. Bitcoin has experienced many bulls and bears, but its fundamentals are still good. After the current bear market, the future will have a new round of bullish market. Judging from the historical indicators, the new cycle of Bitcoin has been opened. The main judgments include:

First, the bursting of the blockchain technology bubble is coming to an end, and the application of technology will bring about a new period of prosperity;

Second, the bitcoin whale is already in action, and the secondary market is in a lifetime;

Third, the technology continues to iterate, the miners are doing their best;

• The money is safely stolen, and there is a new solution to the problem of saving or failing in the water.
• 1.1 billion gray smoke is gone, EOS destruction is a child play or deliberate?
• From the data point of view, what does staking mean for the PoS network?

Fourth, the demand is basically oriented, and the indicators are steadily rising;

Fifth, there are many opportunities for detonation in future risks, which will provide a possibility for the opening of a new round of bull markets.

1 Trend is not very good

At present, no matter whether the blockchain technology is still on the edge of the bubble burst, it has spawned a lot of technical realization possibilities, which is precisely the best time for the growth of blockchain applications.

1.1 Emerging technology development trend

Gartner Technology Curve (2018 new edition) Source: Gartner, QKL123

According to Gartner's emerging technology curve, technologies such as Blockchain, IoT Platform and Deep Learning have reached the peak of expectations, and blockchain technology may not be available in the next five to ten years. To reach maturity. However, blockchain technology based on data security is still in a period of rapid growth, and it may reach maturity in the next five to ten years. In the top ten technology trends announced by Gartner in 2019, blockchain and smart space (Smart Spaces) are listed as network structure technology (Mesh), and pointed out that the pure blockchain model is immature and difficult to expand, but the business community The technology should begin to be evaluated because blockchain technology will create a commercial value of $3.1T by 2030.

This paper believes that when technology matures, it will bring about the outbreak of technology application. The market will enter the most prosperous moment in a certain period in the future, and the market saturation of application or the renewal of technology is the beginning of decline of the market. Time. Emerging blockchain technology and traditional Internet technologies are also the same.

At present, blockchain technology is on the verge of bubble burst, and the possibility of a large number of blockchain technologies is precisely the best time for application growth. In the future, with the maturity of blockchain technology and the large number of applications, it will surely usher in the prosperous period of blockchain technology application, when the new market bubble will reappear. Let's take a look at the Nasdaq Composite Index to reflect the bursting of the traditional Internet technology bubble and the maturity of technology application.

NASDAQ Composite Index

Source: yahoo. Finance, QKL123

The Nasdaq Composite Index was released in February 1971 with a base of 100 points. The index component is mainly a technology company. From January 1992 to December 1997, the Nasdaq rose from 584 points to 1,570 points, an increase of 168%. The leading sector was the Internet industry that rose to the US national strategy in 1996. By March 2000, although the Nasdaq had a sharp correction after the Asian financial crisis in 1998, it still rose to 5,049 points, up 764.55% from the beginning of 1992, while the S&P 500 gained only 260.8%.

However, in 1999, the Fed raised interest rates six times during the year, superimposed on negative news such as anti-monopoly law by Microsoft. The Nasdaq bubble shattered in 2000. The Nasdaq fell from a peak of 5,049 points in March 2000 to 1,114 points in October of 2002. The decline rate reached 78%. After completing a round of bull and bear cycles from 2002 to 2008, the Nasdaq opened a new cycle in 2009 after the subprime mortgage crisis. On April 30, 2019, the Nasdaq Composite Index and the S&P 500 Index both hit record highs. Among them, the Nasdaq reported 8,149.92 points, a 452.1% increase from the August 2008 low, while the S&P 500 only rose the most. It is 269.05%.

1.2 Blockchain industry trends

Encrypted asset market value trend Source: Coin.Dance, QKL123

The market value of crypto assets has generally improved, and it has shown a significant rebound in the near future. Over the past three years, the total market value of crypto assets has increased from $8.040 billion in March 2016 to $173.28 billion in April 2019, and reached a historical peak ($793.43 billion) in January 2018, with a total market value of three years. Nearly 22 times. Among them, the total market value of Bitcoin increased from 6.633 billion US dollars in March 2016 to 94.207 billion US dollars in April 2019, the total market value of the three years has more than 14 times; in addition to Bitcoin, the value of the encrypted assets (Altcoin) from 2016 In March of this year, 1.407 billion US dollars increased to 78.821 billion US dollars in April 2019, reaching a historical peak in January 2018 (US$ 508.068 billion), and the market value has more than 56 times in three years.

Number of encrypted assets listed in the past year Source: BitcoinVisuals, CoinMarketCap, QKL123

The logarithm of the secondary market transaction in the past year Source: BitcoinVisuals, CoinMarketCap, QKL123

The number of encrypted assets, the number of trading platforms and the number of trading pairs in the secondary market continued to increase. According to CoinMarketCap statistics, the number of trading platforms has increased rapidly, from 209 in early August 2018 to 257 at the end of April 2019, an increase of 27.27%. In the past year, the number of crypto assets in the secondary market has continued to increase, from 1,491 in early March 2018 to 2,143 at the end of April 2019, an increase of 43.73%. At the same time, the number of transactions in encrypted assets continued to increase, from 8,881 in early March 2018 to 18,002 at the end of April 2019, an increase of 102.7%.

1.3 Bitcoin historical trend

Bitcoin market share Source: BitcoinVisuals, CoinMarketCap, QKL123

Bitcoin's market share tends to decrease, and the recent share tends to increase steadily. From 2013 to 2014, Bitcoin's market capitalization ratio remained above 90%, and then declined slightly, and remained above 80% until February 2017, but then there was a rapid decline. During the bull market in July 2017, the market value of Bitcoin fell below 40%, followed by a rapid increase, but by December 2017, the market value of Bitcoin fell rapidly from 58% to the lowest point in January 2018. 33%, the bull market in the past round is nearing completion. Since the bear market, the market value of bitcoin has gradually increased to more than 50%, and the current market value has exceeded the peak (56%) since the bear market in October 2018.

Bitcoin price volatility

Source: Bitvol.Info, QKL123

The volatility of bitcoin prices has generally declined, and the recent volatility is at a historically low level. Between 2010 and 2013, Bitcoin’s 120-day price volatility remained at around 7.5 for nearly half of the period. After 2014, the price volatility of Bitcoin dropped significantly, especially during the 2015 and 2016 bear markets, the 120-day price volatility of Bitcoin fell below 2.5. During the bull market in 2017, bitcoin price volatility rose sharply, but it fell rapidly after the end of the bull market in 2018. The recent 30-day price volatility has fallen to below 2.5, and the 120-day price volatility has been close to 2.5, which means that the market consensus at the bottom of the bitcoin price has gradually reached.

Bitcoin price trend (in US dollars) Source: Woobul, QKL123

Looking at the historical price trend of Bitcoin, the future trend of the fit is still good. If Bitcoin's price history is divided into three major cycles: the first cycle, from July 2010 to December 2011, bitcoin prices will rise from around $0.05 and then fall to $2.29; Cycles, from December 2011 to August 2015, bitcoin prices fell from around $2.29 and then fell to $176.5. The third cycle, from August 2015 to December 2018, rose to $3,225.3. ?

Bitcoin prices have passed the bottom of the bear market? The answer to this article is: high probability. The following will be developed around this assertion.

2 investment is a must

The MVRV ratio was first proposed by Murad Mahmudov & David Puell and its expression is:

MVRV = Market Cap / Realised Cap

Among them, Realised Cap is the sum of the number of all coins on the chain multiplied by the "last market price"

According to CoinMetrics' calculations, the author believes that, in general, Realised Cap can approximate the opportunity cost of all bitcoin suppliers in the market (in extreme cases, there will be large deviations), and the MVRV ratio can reflect the bits in the secondary market. The imbalance between the supply and demand of coins.

Bitcoin MVRV ratio Source: Woobul, CoinMetrics, QKL123

MVRV has reached an all-time low, and the imbalance between supply and demand in the secondary market is more serious. Observing the above figure, we can find that the MVRV ratio has remained basically between 1-3 in the past ten years. The peak value is basically consistent with the peak of the bull-bear market, and whether the value is less than 1 can be used as the end of the two-round cycle bear market on Bitcoin. Sign. Around 2019, the MVRV ratio of Bitcoin also lasted for about two months and was below 1, which is close to the lowest level in history, indicating that the imbalance between supply and demand is more serious. At the beginning of April 2019, bitcoin prices rose 20%. The 200-day moving average was crossed the daily price line for the first time since the current bear market, while the MVRV ratio rose from 0.96 to 1.22, which completely broke the quiet market for a long time. Desperate investors have brought hope.

2.1 The second release of the coin is sufficient

Bitcoin Coindays Destroyed refers to the product of the number of Bitcoins traded on the chain and the number of days of Bitcoin holdings. Calculation formula:

Bitcoin Day Destruction = Number of Bitcoins in the Transaction * Number of days in which the Bitcoin is held during the transaction

Among them, the holding time of Bitcoin = the last trading time of Bitcoin – the last trading time of Bitcoin

Bitcoin Day Destruction Source: BlockChair, QKL123

In the past ten years, Bitcoin's currency-day destruction has been concentrated in five periods: July 2011 (beginning to the bear market after the peak of the bull market in June 2011); December 2011 (the bear market bottom point in December 2011) ; October 2013 to March 2014 (the peak of the bull market in December 2013, the bear market bottom point in January 2015); May 2017 to February 2018 (the peak of the bull market in December 2017); December 2018 to January 2019 (the end of the bear market in December 2019?).

The second full release of the coin, the bottom of the bear market is a big probability. Compared with the past three bull and bear markets, the number of currency days destroyed from May 2017 to February 2018 is similar to that in October 2013, and the concentration of coins was released before the bull market. From December 2018 to January 2019, it is more like the scene in December 2011. After the bull market, the second release of the coin will be released, and the bear market will have a high probability.

Bitcoin UTXO address distribution (classified by address age) Source: Unchained Capital, QKL123

The proportion of long-term holders has increased, and the market has entered a “returning state”. By classifying Bitcoin UTXO addresses by address age, you can see that the proportion of addresses that have been sleeping for more than 5 years has continued to increase; the proportion of 1-2 years of age is usually reduced at the time of the bull market (2014 and 2017), and is lower in the bear market. At the time of the point (2015 and 2019), the proportion of addresses in the June-December ages usually increases as the price rises and decreases as the price falls. At present, there is an inflection point in the market. The proportion of addresses in the following ages has risen rapidly, while the proportion of addresses in the 1-5 age has obviously rebounded to nearly 40%, which is close to the historical high point and indirectly reflects the bitcoin "selling sellers". The proportion increased.

2.2 Giant whale big fish concentrated action

The ratio of the sum of coins (Liveliness; Tamas Blummer, 2018), the sum of the number of coins destroyed, and the number of destroys in the largest currency, calculated as

Where [t_i, t_0] is the holding period and c(t) is the number of coins issued during the t period. Time data is measured by the differential of the number of out blocks.

The active number of coins can reflect the chain activity of the coin holders (long-term investors). This indicator increases, indicating that the activity of the coin chain increases, and vice versa, indicating that the activity of the coin chain is reduced.

Bitcoin currency activity Source: Adamant Capital, QKL123

The coin activity reproduces the inflection point, confirming the end of the big bear market. From historical data, Bitcoin's coin activity (red line) continues to increase, from less than 40% in 2012 to more than 50% in the near future. It reached its historical peak in February 2018, after which it showed a significant decline, and it increased significantly after reaching the bottom point in January 2019. The continued decline in the activity of the coin is a sign of the bear market stage, and the apparent increase after the continued decline in the activity of the coin is precisely the sign of the end of the bear market.

Long-term holders’ attitude changes Source: Adamant Capital, QKL123

HODLer Net Position Change, which uses the long-term holder (Savers) to earn and account for the amount of Bitcoin, and can provide action information for Bitcoin whales.

The whale is already in action and has recently bought in volume. During the period from the end of the bitcoin bull market in May 2014 to January 2017, a large number of bitcoins were bought by long-term holders. During the period from January 2017 to January 2018, the bitcoin bull market was large. Bitcoin was sold net by long-term holders; in March 2018, a large number of bitcoins were net-buy, but in January 2019, more than 200,000 bitcoins were net sold by long-term holders; Months, the bitcoin whale net buying activity is very concentrated, and there are about 150,000 bitcoins bought by long-term holders.

3 techniques continue to iterate

Big event about bitcoin technology Source: QKL123

Bitcoin is a distributed network maintained by users, developers, miners and service providers. Core developers propose and implement protocol upgrades through Bitcoin Improvement Proposals (BIPs), which provides a standardized process for technology developers to ensure improvements through consensus and collaboration, but the community has also split due to major differences in technology agreement upgrades. (such as Bitcoin Cash expansion plan).

At present, Bitcoin has successfully completed the upgrade of Segregated Witness and Lightning Network. The technical community's multiple proposals are still under development, such as Schnorr signature, Bulletproofs anonymity, etc., but the official has not announced the future. Development roadmap.

3.1 code is continuously updated

Bitcoin core code base information (May 06, 2019) Source: GitHub, QKL123

GitHub is currently the world's largest developer community, and the Bitcoin project is based on GitHub collaborative development. At the beginning of May 2019, bitcoin's core code library (Watch), number of tags (Star), and number of copies (Fork) were 3,539, 38,167, and 22,828, respectively, with a total of 672 unfinished questions submitted (Issues), 300 The number of unfinished merge requests indicates that the Bitcoin technology community is very hot.

The number of monthly contributors to the Bitcoin core code base Source: OpenHub, QKL123

Number of lines of code in the Bitcoin core code base Source: OpenHub, QKL123

The technical community is hot and recent developments are still active. Currently, the Bitcoin core code base has 621 code contributors, commits 20,245, releases 218, and 365, 684k. Historically, Bitcoin's core code base contributors and lines of code have continued to increase. In the past month, the core code base has a total of 27 active contributors, and the number of submitted code is 182, indicating that the technical development of Bitcoin is still active.

3.2 Miners are struggling to come

Bitcoin computing power growth

Source: Woobul, QKL123

With the soaring price of bitcoin and the development of mining technology, the computing power of Bitcoin has exploded. From January 2010 to January 2015, the bitcoin computing power rose from 6.997μTH to 229.514kTH, and the computing power turned nearly 33 billion times. After that, the growth rate of computing power showed a significant slowdown. In August 2018, the computing power reached the history. The peak is 61.866 MTH. In the case of certain mining techniques, the continuous increase in computing power indicates that the miners continue to join or invest, and the calculation power continues to decrease, indicating that the miners are continuously forced to withdraw or reduce investment.

The re-entry of the miners after their continued withdrawal confirms that the high probability has bottomed out. Price is the main factor affecting the income of miners. In history, bitcoin computing power has experienced two major corrections: in August 2011, bitcoin computing power fell from 13.427TH to the bottom point of 6.639TH in November 2011 (corresponding to bitcoin) At the bottom of the price, the computing power has dropped by more than 50%, and then slowly recovered; in September 2018, the bitcoin computing power dropped from 46.058MTH to the bottom point of December 31.998MTH (corresponding to the bitcoin price bottom point, a large number of miners) Opt-out, the power fell by more than 30%, and then slowly rose back to 43.978MTH.

Puell multiple of miner's income Source: BitcoinVisuals, QKL123

The Puell Multiple is used to measure the bitcoin mining cycle. The calculation formula is:

Puell multiple = mining income / 365 days mining revenue moving average

Among them, mining revenue includes block rewards and transaction costs. The smaller the Puell multiple of the mining revenue, the lower the relative profit of the miner.

The miners are hard-working, and the market can be expected. Observing Bitcoin's ten-year historical mining revenue, we can see that the Puell multiple of Bitcoin mining revenue is only at a very low level (less than 0.5) in three time periods: the first time is from October 2011 to November 2011. (The bitcoin price is at the end of November); the second is January 2015 (corresponding to the bitcoin price bottom); the third is December 2018 (corresponding to the bitcoin price bottom).

4 demand is steadily rising

Bitcoin supply curve and inflation rate (theoretical value) Source: QKL123

Bitcoin supply will tend to be constant, and demand will determine the height of future prices. Based on the code consensus, the supply increase of Bitcoin will be halved every four years, and the next block reward will be halved next year (corresponding to the inflation rate reduced to 1.79%), and eventually it will be constant at 21 million (2140). year). In the future, the growth of demand will determine the height of its price.

The following will analyze Bitcoin requirements from Bitcoin's chain address, underlying network transactions, lightning network usage, and actual users.

4.1 The underlying transaction is steadily picking up

Bitcoin 30-day active address on the chain Source: CoinMetrics, QKL123

The number of active addresses on the Bitcoin chain has fluctuated and has picked up recently. During the period from January 2011 to April 2019, there were three major corrections in the number of active addresses on the Bitcoin 30-day chain: the first was July 2011 (25,900) to January 2012 (11,900). The decline was nearly 50%; the second was from May 2013 (9.42 million) to July 2013 (6.15 million), a drop of nearly 30%; the third was December 2017 (1.095 million) to 2018 04 Month (547,400), a drop of nearly 50%. Recently, the number of active addresses on the Bitcoin 30-day chain was around 665,700, an increase of 21.61% from the recent near-end.

Number of transactions on the Bitcoin chain Source: Woobul, Bitcoin Visuals, QKL123

The number of transactions on the bitcoin chain has continued to rise in the past year. Since January 2016, with the hot market in the secondary market, Bitcoin’s chain transactions (excluding out-of-band transactions such as Lightning Networks) have continued to fluctuate until December 2017 (peak 402,000). , continued to fall to April 2018 (the bottom point of 169,000), and then continued to grow. Currently, the number of Bitcoin chain transactions fluctuates around 380,000, with the number of SegWit Tx transactions being 136,000. Since its activation in August 2017, the number of segregated witness transactions has grown steadily, with an average monthly increase of around 10,000.

Transaction amount on the Bitcoin chain (in US dollars) Source: CoinMetrics, QKL123

The bitcoin price rebounded to boost the trading volume on the chain. Looking at the historical data from May 2013 to April 2019, there were three distinct peaks in the amount of transactions on the Bitcoin chain: November 2013 ($3.148 billion), January 2016 ($2.572 billion) and 2017. December ($4.835 billion), mainly due to market prices. Since the bear market in 2018, the amount of transactions on the Bitcoin chain has continued to decline, dropping to a minimum of $1.553 billion in January 2019, and then rebounded significantly as the price of the secondary market rebounded (around $5 billion). In the future, as bitcoin prices rise and the number of transactions on the chain increases, the amount of transactions on the bitcoin chain is expected to grow rapidly.

4.2 Lightning network continues to improve

As the lightning layer of Bitcoin's second layer (Second Layer), the impact of its activated use on Bitcoin's demand mainly includes two aspects: First, lightning network can greatly improve the settlement speed of transactions, making bitcoin payment function. Greatly enhanced, this will increase the payment scenario and number of users of Bitcoin; second, the lightning network node needs to pledge bitcoin to provide payment services, which will also increase the demand for bitcoin.

Bitcoin lightning network node

Source: BitcoinVisuals, QKL123

The number of Bitcoin lightning network nodes (With Channels) increased rapidly from 64 in 2018 to 1,524 in July 2018. After that, there was a small decrease and the growth rate slowed down significantly until December 2018, but accelerated. It has slowed down yet. The possible reason is that the development of lightning network is not mature enough, and there are problems that the network needs nodes to be online at the same time. At present, there are 4,291 lightning network nodes, an increase of 70 from the previous month. Overall, the number is still good.

Bitcoin lightning network capacity

Source: BitcoinVisuals, QKL123

From the beginning of January 2018 to the beginning of December 2018, the bitcoin lightning network channel capacity increased from 1.23 bitcoin to 113.28 bitcoin, with little increase in the previous period. However, there was a straight rise in December 2018, after which there was a significant increase. Currently, the bitcoin lightning network channel capacity has reached more than 1,000 bitcoins, but it has seen a significant slowdown in the near term. With the improvement of lightning network technology and the increase of application scenarios, Bitcoin's lightning network channel capacity will continue to increase in the future.

4.3 Market demand continues to grow

Blockchain wallet users Source: Blockchain.info, QKL123

The number of Bitcoin wallet users continues to grow. According to incomplete statistics, there are currently more than 300 application wallet brands supporting Bitcoin on the market. Among them, Blockchain wallet is one of the most popular wallet applications. From January 2014 to January 2018, the number of Blockchain wallet users continued to grow rapidly, from 1,007,391 to 21,636,969, and more than 20 times in four years. At present, the number of Blockchain wallet users continues to increase, and the number of Blockchain wallet users has reached 36,772,309, an increase of 55.34% in the past year.

Global support for Bitcoin merchants (April 2019) Source: CoinMap, QKL123

The number of global Bitcoin support merchants has grown steadily. According to CoinMap statistics, there are currently 14,717 global merchants supporting bitcoin payments, mainly in the EU, the US and Japan. Observing historical data, we can see that the growth rate of Bitcoin merchants is not stable, but most of them have been maintained at around 50 per month in the near future, and the probability of future growth will continue to increase.

Dark space requirements for Bitcoin Source: Chainalysis, QKL123

The share of dark-line transactions is rapidly declining, but transaction demand is fluctuating. The proportion of Bitcoin transactions in the dark network rose from 2011 to 30% in 2012, and then fell rapidly. By 2018, its share was less than 1%. However, the actual demand for Bitcoin has continued to grow, from $25 million in 2015 to around $75 million in 2017, although it has plummeted after the successful crackdown on darknet operations in mid-2017, but still above 2,500. Ten thousand U.S. dollars. Overall, the demand for crypto assets continues to increase, but the market share of Bitcoin has fallen sharply, mainly because of: higher privacy (such as Monroe, Dash and Big Coin) and payment relative Convenient (such as Ethereum, Litecoin and Bitcoin cash) crypto assets are more widely used in this market, crowding out Bitcoin's dark market share.

5 opportunity risk dance

Bitcoin's Google Trends Source: Coin.Dance, Google Trends, QKL123

Google's overall trend is on the rise and is currently at a relatively low level in history. According to Coin.Dance data, Bitcoin's Google trend is generally on the rise, with four distinct peaks in history, corresponding to the influx of new traders: Google Trends 4% in June 2011 (2011) July price peak of $19.06); Google Trends 18% in April 2013 (price peak of $74.69 in April 2013); Google Trends 23% in November 2013 (price peak of $727.3 in December 2013); December 2017 Google Trends is 100% (the December 2017 price peak is $19,290). During the last round of bear market, the Google search trend in 2015 remained at 3%-4%, and has recently dropped to around 5%. Overall, it seems to be at a relatively low level in history.

So, for the bitcoin price, will the future be detonated again?

5.1 Future opportunities

Inflation rate in countries around the world (2018) Source: IMF, QKL123

After the 2008 subprime mortgage crisis, the first bitcoin payment system based on blockchain technology was born. In order to save the economic crisis, all countries have adopted a loose monetary policy, and the resulting currency oversupply has pushed up the general rise in prices. A benign inflation rate has a positive effect on economic development, but the large increase in the currency will inevitably dilute the purchasing power of the legal currency held by the individual, which weakens the credit property of the currency to some extent.

According to IMF statistics, countries or regions with an annual inflation rate of more than 3% in 2018 are mainly concentrated in Africa, Latin America and the Middle East, and most other countries have annual inflation rates below 3%. With the development of the Bitcoin payment system, Bitcoin has become a better confrontation tool when people face the expected inflation. Recently, the significant increase in Bitcoin's trading volume in Brazil is related to the continued surge in inflation in the country. Therefore, the global high inflation caused by the economic cycle is likely to be a tipping point in the future, and the halving of the blockchain reward will be a point of accumulation.

Researcher Tuur Demeester (2019) mentioned that there are three main factors driving the price of bitcoin in the future: the first category, the development of sidechain technologies such as lightning networks, including the development of existing lightning networks and Liquid sidechains, and existing Improve core protocols (such as Taproot, Schnorr, MAST, etc.); second, financial trends such as bitcoin futures, including traditional financial institutions to launch more bitcoin financial products (such as spot trading and futures trading), and even bitcoin As the global electronic gold or reserve assets; the third category, the millennial preference for bitcoin, with the accumulation of wealth in the millennial generation (born 1981-1996), bitcoin will get higher price expectations and adoption.

5.2 Future risks

In the future, there are still many uncertainties for investors. There are three main aspects: national regulatory policy risks, bitcoin project risks, and bitcoin theft risks.

State's regulatory attitude towards Bitcoin (April 2019)

Source: Coin.Dance, QKL123

At present, according to incomplete statistics (not counted in some African countries), 112 countries or regions in the world currently have relatively loose regulation of bitcoin in 251 countries and regions, including the United States, the European Union, Japan and other developed countries. However, most countries do not recognize the currency attributes of Bitcoin, but use it as an asset or commodity, which poses many risks for the large-scale use of the Bitcoin payment system. Moreover, based on KYC/AML considerations and financial risk concerns, some countries will have a boycott attitude.

Bitcoin is essentially a community-maintained blockchain project that faces competition from other cryptographic assets and needs to be continually technically iterated to meet the needs of target users. However, code consensus based on blockchain technology is easy to achieve, but the consensus on its improvement and upgrading is often not easy to achieve. The Bitcoin community has experienced core member withdrawal due to differences in development direction, and even caused community division (expansion caused by expansion) Bitcoin is hard forked. Although the possibility of splitting again in the future is small, the risks still exist and the consequences are more serious.

Number of Bitcoin nodes Source: Coin.Dance, QKL123

According to Coin.Dance data, among the ten bitcoin node client types, the bitcoin client type tends to be scattered from 2016 to 2017, but has been concentrated since 2017. At present, among the 9,390 bitcoin nodes in the world, 9,030 nodes use the Bitcoin Core client, accounting for up to 96%, which will increase the concentration of rights of the Bitcoin Core development team. At present, the sum of the computing power of the top four mining tanks of Bitcoin is as high as 50%. Although it plays a certain role check and balance, the excessive concentration of the power of the mining pool will increase the centralization risk of the project.

The risk of stolen Bitcoin (fraud, ransomware and illegal intrusions) Source: Chainalysis, QKL123

According to the data from Chainalysis, the amount of bitcoin thefts due to fraud (Scam), ransomware (Ransomware) and illegal intrusion (Hack) has been increasing rapidly from 2013 to 2017. In 2017, the stolen amount of Bitcoin reached $90 million, of which the amount of Bitcoin theft caused by illegal intrusion (Hack) was as high as $75 million, and the financial loss due to fraud was small (this may be subject to statistical data). Influence and underestimate). Bitcoin has plunged because of the Mentougou incident in 2014. In recent years, small exchanges have run or large exchanges have been stolen. These are also risks that investors need to consider.

After the note:

There are still many risks in investing in Bitcoin, such as competitive risk, technical risk, and volatility risk. It is not here to analyze the risks that need to be considered in the future.

Although this paper believes that the probability of bitcoin price is in the new round of market opening, but the market price is ever-changing in the short term, this article does not serve as an investment suggestion.

Reference material

1 https://chainalysis-blog.webflow.io/reports/report-the-changing-nature-of-cryptocrime

2 https://coinmetrics.io/realized-capitalization/

3 https://medium.com/@tamas.blummer/liveliness-of-bitcoin-174001d016da

4 https://medium.com/unconfiscatable/the-puell-multiple-bed755cfe358

5 https://www.adamantcapitalfund.com/bitcoin-a-primer-on-bitcoin-investor-sentiment-and-changes-in-saving-behavior/

6 https://www.adamantcapitalfund.com/bitcoin-in-heavy-accumulation/

7 https://www.gartner.com/smarterwithgartner/gartner-top-10-strategic-technology-trends-for-2019/

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