Bitget Newsletter 4

This week we start of by diving into the latest on-chain data, as we discuss the notable decrease in Bitcoin stored on exchanges and the increase in active addresses, highlighting a potential shift in market dynamics that could signal an upcoming bull run. We also address the mixed views on the current rally, with a special look at Bitcoin's relationship with the True Market Mean Price.

We also cover significant developments in crypto adoption, like Lugano's decision to accept Bitcoin and Tether for tax payments, further solidifying cryptocurrency's role in the mainstream financial landscape. Additionally, we touch upon LayerZero's introduction of the ZRO token and Google's new policy on cryptocurrency trust ads in the US, both indicative of the growing integration and acceptance of digital currencies.

What’s On-Chain Data Telling Us?

This week, I'll begin by diving into on-chain data. While it's tempting to focus solely on the price movements, especially during uptrends, it's equally crucial to grasp the underlying dynamics.

First, it's important to highlight that the quantity of Bitcoin on exchanges is at its lowest since early 2018. Since 2020, we've observed a consistent decline in Bitcoin held on exchanges. Concurrently, there's an uptick in the number of addresses with non-zero balances. This increase suggests more on-chain activity is occurring. Therefore, while the supply is falling, demand appears to be rising. This can only be seen as a bullish signal and is why we believe the upcoming bull run will likely be much more explosive than previous ones.

Despite these metrics, it may surprise you that many are skeptical about this rally and that more pain is coming. However, the chart below (which shows Bitcoin’s price action and The True Market Mean Price) suggests this bull run is only getting started. Before I continue, I just want to state that Bitcoin could experience a correction at any time, I’m simply suggesting that we don’t see anything major (unless we see another Black Swan event).

Despite these promising metrics, there's a noticeable skepticism about the current rally, with some predicting new cycle lows. Yet, the chart below, illustrating Bitcoin's price movements alongside the True Market Mean Price, hints that this bull run might just be in its early stages. It's important to note, however, that Bitcoin is always subject to potential corrections. My point here is not to rule out any corrections but rather to suggest that we don’t see Bitcoin fall below The True Market Mean Price, which currently sits at $31,500.

What is The True Market Mean Price?

The True Market Mean Price, or the Active-Investor Price, is a representative cost basis model for all coins acquired on secondary markets. We argue that this on-chain cost basis is one of the most accurate models available for on-chain analysts seeking the aggregate average on-chain acquisition price by investors, and thus a likely reference point for mean reversion models.

In layman terms, it’s a metric that attempts to determine whether active investors are in profit.

Based on the chart above, it's evident that when Bitcoin's price surpasses The True Market Mean Price, excluding the anomaly during the Covid period, it typically indicates the commencement of a bull run. Conversely, when Bitcoin dips below this mean price, it often signals the beginning of a bear market. Notably, Bitcoin has recently risen above The True Market Mean Price. Does this movement imply that we're on the cusp of another bull run?

Swiss City Lugano Adopts Bitcoin and Tether for Tax Payments

In a significant move towards cryptocurrency adoption, the Swiss city of Lugano announced on December 5, 2023, its decision to accept Bitcoin (BTC) and Tether (USDT) for the payment of municipal taxes and other city fees. This initiative places Lugano alongside three other Swiss cities and cantons that have already integrated cryptocurrency into their financial systems.

Previously, Lugano allowed cryptocurrency payments exclusively through its official online portal. The recent development broadens this scope, enabling the use of Bitcoin and Tether for all types of invoices, irrespective of their nature or amount. Residents and businesses in Lugano can now effortlessly pay their dues by scanning an invoice QR code using their preferred mobile wallets. This integration of Bitcoin, a leading cryptocurrency, and Tether, a prominent stablecoin, reflects Lugano's forward-thinking approach in financial technology.

Lugano's adoption of cryptocurrency for tax payments follows the footsteps of other Swiss regions. Zug City, for instance, began accepting Bitcoin and Ethereum for tax payments as early as 2021. Similarly, the Canton of Zug and the municipality of Zermatt have also integrated crypto payment systems. Switzerland has consistently been at the forefront of embracing cryptocurrency assets.

Recently, St. Galler Kantonalbank, one of the largest Swiss cantonal banks, introduced Bitcoin and Ethereum trading and custody services for its clients, marking another milestone in Switzerland's cryptocurrency journey.

Lugano's decision to accept Bitcoin and Tether for tax payments is a testament to the growing acceptance and integration of cryptocurrencies in mainstream financial systems. This move not only legitimizes cryptocurrencies as viable payment options but also encourages their wider adoption. By incorporating cryptocurrencies in municipal operations, Lugano demonstrates the practicality and efficiency of digital currencies in everyday transactions.

LayerZero to Introduce ZRO Token with a $3 Million Airdrop Initiative

LayerZero Labs recently announced the launch of its own cryptocurrency token, ZRO, which is expected to come at the first half of 2024. This decision, emerging from extensive community speculation and dialogue, marks a significant step in the company's evolution.

LayerZero also announced that they will airdrop $3 million of ZRO tokens to its community. To be eligible for this airdrop, users must have conducted a minimum of ten transactions on the Ethereum mainnet from Q1 2023 to Q3 2023. The allocation for each participant will be based on their wallet activity level. This move is aimed at rewarding and incentivizing active community members. Those who are interested can register for the airdrop until December 15, 2023, through various wallets including MetaMask, Coinbase Wallet, Trust Wallet, Binance Wallet, or via QR Code using WalletConnect.

The launch of LayerZero's ZRO token and the accompanying airdrop are likely to have a significant impact on the cryptocurrency space. By introducing its own token, LayerZero emphasizes the importance of cross-chain interoperability, a critical aspect for the future of decentralized applications. This move could inspire other blockchain projects to explore similar initiatives, potentially leading to more integrated and efficient blockchain ecosystems.

Google's New Policy Opens Doors for Crypto Trust Ads in the US

Something else interesting happened this week. Google has announced that starting January 29, 2024, it will permit advertising for US-based cryptocurrency trusts on its platform. This change is seen as a strategic move by Google, aligning with the growing optimism in the cryptocurrency sector over the potential approval of spot Bitcoin exchange-traded funds (ETFs) in the United States.

Under the new policy, advertisers looking to promote cryptocurrency trusts will be required to undergo a certification process with Google. This process mandates that advertisers must have the appropriate licenses from relevant local authorities and comply with all applicable legal requirements. The policy is designed to be globally applicable, requiring adherence to local laws in the targeted regions.

The policy revision coincides with increasing market expectations for the approval of spot Bitcoin ETFs in the US. Bloomberg’s ETF analysts have estimated a 90% likelihood of such an approval by January 10, 2024.

As we mentioned last week, there are 13 Bitcoin ETF applicants, including major financial players like BlackRock, Grayscale, and Fidelity. These firms are actively engaging with the SEC, discussing technical details pertinent to their ETF proposals.

Google's policy update is a significant indicator of the growing mainstream acceptance of cryptocurrencies. By allowing crypto trust ads, Google not only acknowledges the legitimacy of these financial products but also contributes to enhancing their visibility and appeal. This move could lead to increased investor interest and confidence in cryptocurrency as a legitimate asset class, potentially catalyzing market growth.

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