Lifting the Offer is itBit's weekly primer for bitcoin investors. Released every Monday, Lifting the Offer provides key market data, macro analysis and price outlooks to prepare you for the week ahead.
Bitcoin by the Numbers
Best Bits from Last Week
- Inquiry of Silk Road Website Spurred Agents’ Own Illegal Acts, Officials Say
- Overstock Invests $5 Million in Peernova in First Bitcoin Investment
- $1 Million Legal Fight Ensnares Ripple, Bitstamp and Jed McCaleb
- Factom Raises $140k in First Day of 'Software Sale'
- Big Investor Involvement Could Boost Bitcoin
The Macro View
Regardless of intra-day price movements, Bitcoin is growing. A rise in fundamental Bitcoin adoption metrics such as exchange-traded volume, number of outstanding wallets and number of nodes in the network serve as good indicative signals of Bitcoin’s growth. However, the best Bitcoin network measuring stick is the average amount of data (transactions) being broadcast over the network within each block.
Before jumping into the numbers, it’s important to understand how the approximate data size of a block is calculated in megabytes (MB). In short, block sizes are determined by the number of inputs and outputs (or transactions) within each block. Getting technical, the exact formula is: “[(x*148) + (y*34)] + 10 +/- x”. “X” represents the number of inputs and is multiplied by the number of bytes for each input (148). “Y” represents the number of outputs and is multiplied by the number of bytes for each output (34). “10” is the default number of bytes for each block header.
As the graph below shows, the average block size has increased dramatically each year since the first block was recorded in 2009. Over the last year alone, the average block size contains 55% more data:
The growth in average block size reflects the significant increase in activity traveling on and across the Bitcoin network in each block and helps build the case for the sustainability of the network going forward. The data also reveals the potential limitations of a budding technology as each block has a definitive one MB cap to the amount of data it can house. As the network continues to expand, hitting these “growing pains” should serve as a net positive event as Bitcoin’s core developers are already looking at potential solutions around the one MB ceiling.
Bitcoin Price Outlook: Bullish
Over the past week, the market was up 4.89% driven primarily by Easter Sunday momentum. Weekends tend to be quiet from both a price and volume perspective, but Easter Sunday saw a 2.29% increase in the bitcoin price. We can speculate that the positive story that ran in the WSJ on Sunday, Big Investor Involvement Could Boost Bitcoin, was a catalyst to the price jump along with Asian investors getting their week started and buying in the open market.
The tight price movements over the past few weeks have created definitive support and resistance levels for the near-term. Traders can look for support at $240 with resistance at $265. Intra-week pricing could intermittently break these levels, but these prices will need to be sustained for traders to feel confident that the market is building new, observable levels.
Another key price to watch this week is $250. Over the past four days, the bitcoin price has consistently closed above this level. Should we close below $250 in the coming week, the probability of hitting the previously mentioned support level increases.
This Week in Bitcoin’s (Limited) History
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Bobby Cho is the Director of the Institutional Client Group at itBit. Previously, Bobby was Vice President of Trading at SecondMarket specializing in trading bitcoin and illiquid asset-backed securities.