Bitcoin (available on Coinbase) (BTC) recovered a little over 10% in a recent rally, having established a local bottom on August 13th, but is currently down 68% from the record high in December. The market cap stands at US$109.93 billion, with US$1.65 billion traded in the past 24 hours.
The number of Bitcoin (available on Coinbase) transactions per day has been slowly increasing since April and has averaged between 180,000 and 220,000 since June. This key metric has declined significantly for a number of leading cryptocurrencies throughout the year. Transaction costs have also declined significantly, as has the average transaction value in USD, which can be partially attributed to the decline in the price of Bitcoin (available on Coinbase). Unconfirmed transactions have also declined dramatically this year. There are currently less than 3,000 transactions pending confirmation, most of which were sent with a fee below 4 sats.
Using a network value to transactions (NVT) ratio, BTC remains in the upper-third of its historical range with the 28-day average beginning to decrease. Although NVT is difficult to compare between coins that use different transactions types, the ratio can be used to assess a network’s relative utility over time. NVT has not been this high since January 2015, which suggests decreasing on-chain network usage based on the dollar amount being transacted.
Additionally, inflection points in NVT can correlate with extreme highs or lows in price. With the rise of alternative on and off chain mETHods to send transactions, such as batching and Lightning Networks, the new normal for NVT may take many months to determine.
However, on-chain transactions per day have not only declined due to a lack of network use but also transaction batching, where one transaction is sent to many addresses at once instead of each transaction being sent individually. The ratio of outputs per transactions has averaged 2.7-2.9 outputs per transaction over the course of the year, suggesting the practice has become a mainstay. There have also been several days this year with a spike in outputs, indicating a concerted effort towards increase transaction efficiency.
Additionally, the protocol upgrade SegWit, which currently accounts for ~40% of transactions, has also been a significant contributing factor in the average fee decline. A SegWit transaction occupies less block space than a traditional transaction, allowing SegWit users to pay less in accumulated fees to achieve the same number of transactions.
The SegWit soft fork also enabled the possibility of further second layer network upgrades like the Lightning Network (LN), which enables trusted, bidirectional, off-chain, hub and spoke payment channels. This also paves the way for the possibility of instant payments, microtransactions, and increased scalability.
Since going live on March 15, the LN has continued to gain traction. The channels work much like a tab at a restaurant, which remains open until the client settles the bill. This format allows for numerous transactions to occur without a network fee, until the channel is closed.
Jack Mallers and the Zap team continue to release updates for their LN wallet. On the testnet, Zap has also worked for WooCommerce payments, an eCommerce plugin for WordPress, which accounts for more than 28% of all online stores.
Further, the networks hash rate and difficulty continue to post record highs, pushing mining profitability toward record lows. While many factors influence mining profitability, such as price, block times, difficulty, block reward, and transaction fees, decreasing profitability adds to the risk of further centralizing mining, both through mining pools and geographically. The next Bitcoin (available on Coinbase) block reward halving is slated for May 2020.
The core of mining is solving Proof of Work (PoW), which has lead to ASIC proliferation throughout the network, and has also been the focus of criticism due to the amount of energy being utilized by the network. Current estimates on Digiconomist show an annual energy consumption of 73.12 TWh. This would place the network between the Philippines and Austria in terms of energy consumption by country per year.
Others see this energy consumption as an opportunity. Peter Van Valkenburg of CoinCenter, a non-profit research and advocacy center focused on the public policy issues facing cryptocurrency in Washington D.C., has argued that instead of destroying the planet, Bitcoin (available on Coinbase) will push the energy market towards more sustainable alternatives, driving an energy revolution.
Bitcoin (available on Coinbase) advocate Andreas Antonopoulos shares this view and has questioned the hidden resource needs required by other payment platforms. This week, the U.S. Senate Committee on Energy and Natural Resources will have a committee hearing on “Energy Efficiency of Blockchain and Similar Technologies” to discuss the matter.
There is also another decision from the U.S. SEC, due on August 23rd, regarding a BTC price following fund. Similar to the announcement for the SolidX/VanEck ETF, this decision will likely be delayed another 45 days or denied outright.
BTC exchange traded volume over the past 24 hours has been led by the USDT and the United States Dollar (USD) markets for the twelfth consecutive week, mostly on Binance, OKEx, Huobi, and Bitfinex. In Asia, the Japanese Yen (JPY), Korean Won (KRW), Chinese Yen (CNY) volumes have remained subdued compared to last year.
Globally reported over the counter (OTC) volume, from LocalBitcoin (available on Coinbase)s.com, has been trending downward throughout the year but has seen an uptick in volume over the past two weeks. LocalBitcoin (available on Coinbase)s volume has essentially followed Bitcoin (available on Coinbase) price action over the past few years. In January, LocalBitcoin (available on Coinbase)s implemented mandatory Know Your Customer and Anti Money Laundering (KYC/AML) requirements. While this may provide increased legitimacy going forward, it will also push so-called dark money transactions onto other platforms.
Venezuelan Bolivar (VEF) trading volume continues to post record highs, fueled by hyperinflation in the region. On Friday, Venezuela’s president Nicolas Maduro announced a 96% devaluation of the VEF. The devaluation occurred through pegging the currency to the Petro cryptocurrency. The Petro had an ICO that ended in late March, and raised US$5 billion according to Maduro. The entire balance of Petros remains in a single NEM address.

Technical Analysis
The macro trend remains bearish with short positions continuing to rise despite price near local lows. The strength or weakness of the current trend can be analyzed with the Wyckoff METHod, Pitchforks, exponential moving averages (EMAs), Ichimoku Cloud, and chart patterns. Further background information on the technical analysis discussed below can be found here.
The Wyckoff METHod can be used to help determine where price sits within a cyclical pattern. Price structure on the daily chart continues to correlate highly with a typical Wyckoff Accumulation phase. An accumulation phase occurs before a new markup phase. BTC experienced one of these classic accumulation periods throughout 2015. A successful accumulation period would be highly indicative of a prolonged bull trend.
BTC price structure has now formed a Wyckoff style low-volume spring, followed by a Sign of Strength (SOS). A break below the previous resistance at US$6,800 is potentially a support test or second spring. Price also sits within a large Falling wedge, making successive lower highs and lower lows. This pattern can represent a bullish reversal pattern, and typically resolves when ¾ full.
Turning to the upward trending Pitchfork beginning in 2015, with anchor points in January, May, and August of that year, price has fallen below the median line (ML). Price will continually attempt to return to the ML throughout any given trend. Price broke North of this trend in October 2017. This is the first time price has fallen below the ML for a prolonged period of time since July 2017. A price rise above the ML would likely have a maximum upside target of ~US$10,000-US$12,000.
On the two-day chart, price has once again fallen below both the 50EMA and 200EMA. The current 50/200EMA cross is bullish and bullish continuation would be likely if the EMAs touch but fail to cross. This would be the first bearish 50/200EMA cross since December 2015. The 50 and 200EMAs on the daily chart remain bearishly crossed (not shown) with price below the 50 and 200EMA.
Turning to the Ichimoku Cloud, there are four key metrics; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.
On the daily chart, the Cloud metrics are bearish; price is below Cloud, Cloud is bearish, TK cross is bearish, and Lagging Span is below Cloud and price. A long entry based on traditional Cloud strategy does not trigger until price breach’s the Cloud. Both the long flat Kijun and long flat Kumo paint sTron (available on Binance)g resistance targets should price move North.
On the four hour chart, the Cloud metrics are neutral; price is in Cloud, Cloud is bearish, TK cross is bullish, and Lagging Span is below Cloud and above price. As price enters Cloud, a bullish ‘Edge to Edge’ trade entry triggers, with a target of the opposite edge of the Cloud around US$7,100.
Additionally, price has formed a multi-shouldered inverted Head and Shoulders bullish reversal pattern with a descending volume profile. A break above US$6,550 will likely confirm the pattern, which has a 1.618 fib extension and measured move of US$6,950 and US$7,150 respectively.

Conclusion
Despite continued bearish price momentum, hash rate has continued to increase with mining profitability continuing to decrease. Segwit and continued use of batching suggest the network has gained enormous efficiency over the past six months. Transactions per day have begun rising over the past four months with NVT beginning to decrease, suggesting increasing economic throughput.
Technicals suggest price is currently sitting on support and setting up for a bullish trend reversal in the short term. High timeframes continue to suggest an active bear trend with the potential for an ongoing eight-month Wyckoff accumulation phase. There is a sTron (available on Binance)g possibility of a short squeeze, or short sellers covering their position, if  Bitcoin (available on Coinbase) reaches more than US$7,100.