Many predictions have been made about various cryptocurrencies for the year that lies ahead. While predictions cannot be counted on with absolute certainty, professional researchers often get the forecast right to an extent.
Bottom calling is a truly useful insight, as it gives traders an idea as to when the darkest days may be over for their commodity of choice, and how they should trade accordingly. In this case, the company that made this particular prediction is none other than Delphi Digital, a prestigious research company based in New York. It was a few months ago that they first made the prediction that Bitcoin would bottom out in the first quarter of 2019, and Delphi Digital reconfirmed their prediction midway into the second week of this year.
In their new analysis, Delphi Digital found, through their research that the pressure put on long-term Bitcoin holders to sell, had begun to taper off and it is expected that most holders will keep their Bitcoin funds for a good while to come. Delphi does not reach their predictions by guesswork. They use a complex system called UTXO age dynamics to determine when selling pressure for long-term holders will subside. What does UTXO stand for? It is an acronym for unspent output from Bitcoin transactions. The age aspect of this allows researchers to study when last the particular Bitcoin was moved.
“Bitcoin’s aggregate UTXO age distribution over time provides insight into buying and selling patterns through previous market cycles, along with where we stand now, and what we can likely expect moving forward,” Delphi Digital’s researchers explained in their analysis. Bitcoin holders were separated into those that had moved their funds within the last year and those who had held their Bitcoin funds for a longer time period. Through their research, the team at Delphi also found that the majority of selling pressure came from Bitcoin holders who had held onto their funds for between 3 and 5 years.
But what happens to the coins that are over 5 years old? The research company explains on Twitter: “An important understanding that allows this to work is that a large portion of the coins in the 5 year+ bands is lost. Please refer to the full report for an explanation of each assumption.” In their research paper, they also explain that it is assumed that older holders have drained most of their efforts in terms of selling or sales. This explains why many of the older UTXO bands seem so ‘flat’.
If you study the graphs in Delphi Digitals’ most recent report, you’ll notice that the patterns are very similar to those created in 2014, where a bottom out also occurred. There have also been parallels between the years 2013 and 2017, where prices rose and the market experienced a period of peak value. In an unofficial survey last year, Wall Street investors and researchers predicted a bottom for Bitcoin. However, Twitter revealed that the vast majority of users were far more skeptical.
While it can be discouraging to see Bitcoin prices so low, there are many crypto enthusiasts, researchers, and authority figures that remain optimistic. One such person is Jeremy Allaire, who suggests that the market is in an oversold state and therefore is undervalued. He goes on to say that he views factors such as the hash rate health and on-chain activity as key elements of usage, adoption, and underlying unit economic support.
Although the research does not give an exact day, week, or month, it does certainly appear plausible that Bitcoin will experience a bottom out in the first quarter of 2019. There are still a few months to go to prove whether Delphi Digital has been correct in its predictions or not.
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