Kraken’s highly-anticipated monthly intelligence report is suggesting Bitcoin may be about to take a back seat as altcoins drive crypto momentum in Q3.
The 26-page dossier, chronicling all Kraken’s information on the crypto markets, also highlights the recent robust performance of Bitcoin, crediting a strong hash rate.
The hash rate – a measurement of the processing power of Bitcoin’s global network – has returned to levels similar to those last seen before cryptocurrencies went on an unprecedented bull run earlier this year.
On April 14, when BTC peaked with an all-time high of $64,899, the hash rate was also at its highest level. Things went south on that front when China embarked on a crusade to ban crypto mining – a process which, perhaps coincidentally, saw Bitcoin and its stablemates tumble. The original cryptocurrency fell below $30,000 at one point in July while Chinese miners scrambled to relocate their operations.
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Currently, that hash rate is now approaching the bottom end of April’s levels as it continues its ascending trajectory away from July’s low point. It’s now holding a rate similar to where it sat at the end of 2020 when Bitcoin made its startling move above $20,000 to record a series of all-time highs into the first quarter of 2021.
The level of the hash rate, suggests the Kraken report, is likely the catalyst to Bitcoin’s recent market strength.
“Bitcoin reclaiming $50,000 comes off the back of strong technicals and fundamentals, as well as miners coming back to the network two months after they were regulated out of China,” explained Pete Humiston, Manager at Kraken Intelligence.
“After hitting a three-year low in July, hash rate is now at the same level to where it was earlier this year.
“Higher hash rate makes the network more resilient and reflects stronger demand for Bitcoin, both of which bolster Bitcoin’s store of value narrative.
“Assuming the current trend persists, we could see more interest in owning Bitcoin as a safe haven asset, particularly with the short-term macro picture clouded by coronavirus variants, tightening monetary policy, and inflation uncertainty.”
While offering a deep and detailed analysis of historical data leading towards September, the report does place a warning flag on expectations for the coming months.
“As exciting of a month as it was for BTC and many altcoins, it’s unclear what to expect in September and the months ahead. For instance, September is the worst-performing and least volatile month on record for BTC,” it states.
“However, when looking at BTC open interest, weekly inflows to digital asset funds, Google Trends data, and subreddit subscriber data, one will see that overall market interest has yet to return to Q2 2021 levels despite the market’s latest rally.”
The intelligence report explains that, with BTC trading back above its Bull Market Support Band and a potential golden cross on the horizon, BTC could send the market higher by invalidating what has historically been a negative-yielding month.
“Although BTC has historically dictated the macro trend and remains the broader crypto market’s safe-haven crypto, September could consist of select altcoins dislocating from BTC amid neutral/positive price action,” it added.
ETH front and centre
“Over the past few months, various altcoins have stolen both market share and mind share from the digital gold. For instance, ETH was front and centre for many in August due to the protocol burning 155K ETH ($549M) in August and facilitating unprecedented NFT demand.”
Ethereum – together with stand-out performers Cardano and Solana – have led the line for altcoins as investment sentiment has seen a more even spread.
While much of the recent upside activity from Ethereum has been as a direct result of a boom in NFT interest, last month’s London hard fork appears to have successfully made Vitalik Buterin’s brainchild a more attractive proposition to investors.
“Volatility in Ethereum’s transaction fees long made the network unpredictable, with bottlenecking yielding abrupt spikes in fees,” explains Humiston.
“Under EIP-1559, where fees can only increase or decrease by 1.125x each block, bidding for block space is more predictable and fees are now nowhere near as volatile.
“Even with the recent boom in NFT activity, Ethereum’s fee volatility has continued to spiral downwards. It’s still early days, but the data suggests so far that the London hard fork has been a major step towards improving network efficiency, offering a better user experience, and capturing new users.”