This report from ARK Investment Management provides a review of Bitcoin's performance and on-chain metrics during December 2024, and an outlook for 2025. While December saw a slight price dip for Bitcoin, ARK maintains an overall bullish view for 2025, citing historical post-halving trends, strong long-term holder behavior, and potential for economic growth driven by productivity gains and shifts in macroeconomic indicators.
Key Themes & Ideas:
- Bitcoin Market Overview (December 2024):
- Price Dip: Bitcoin's price experienced a 3.2% drop in December, closing at $93,354, marking the first down month in over a quarter.
- Positive Indicators: Despite the dip, the price remained above key levels: the 200-day moving average, the short-term-holder (STH) cost basis, and the on-chain mean.
- Long-Term Holding Strength: 62% of the Bitcoin supply has not moved in more than a year, signaling strong long-term conviction amongst holders.
- Short-Term Overheating: Significant liquidations in the futures market suggested potential short-term market overheating.
- Bullish Outlook for 2025:
- Post-Halving Trend: Historically, all years following a halving event have resulted in positive returns and bullish momentum for Bitcoin. The last halving occurred in 2024.
- Historical Performance: Previous post-halving years (2013, 2017, 2021) saw Bitcoin price increases of 54.1x, 14.3x, and 1.6x respectively.
- Long Term Holding Behavior: A high percentage of bitcoin remains dormant across multiple year timeframes demonstrating faith in its long term potential.
- Volatility: Bitcoin's recent volatility spike is not considered out of the norm historically, suggesting further market expansion is possible.
- On-Chain Metrics:
- Network Security: Mining difficulty is up 52.4% year-over-year, indicating a strong and secure network.
- Miner Revenue: Remains stable at $44.3 million, but is down 8.2% year over year, a neutral signal.
- Network Usage: Both active owners and transaction volume are down on a monthly and yearly basis which is considered bearish.
- Holder Behavior: While long-term holder supply is down, the amount of illiquid (locked) supply is up. Also, Time-Weighted Turnover is up by a significant amount which signals overall bullish sentiment.
- Cost Bases: Both the market cost basis and short-term holder cost basis are up by a significant amount which are bullish signals for the asset.
- Market Sentiment: Both Perpetual and Expirational futures basis are deemed bullish.
- Macroeconomic Factors & Economic Growth:
- Metals-Gold Ratio: The metals-to-gold ratio has hit a historical low, signaling potential for lower interest rates or higher metals prices.
- Small Business Optimism: Small business optimism has increased significantly after the election, a positive sign for the economy.
- AI-Driven Productivity: The report suggests AI adoption could boost productivity and lead to significant growth in Real GDP.
- Correlation with Real GDP: Historically, productivity has been highly correlated with real GDP growth, particularly in times of new technology adoption.
- Discrepancies in Metals Ratio: The metals to gold ratio has become disconnected from the 10-year treasury yield, which could mean a correction is coming, to either the treasury or to the metals ratio, or a combination of both.
- News of the Month:
- Several significant news items occurred in December 2024, including:
- MARA proposes a $700 million convertible note offering to buy more Bitcoin.
- Trump selects Paul Atkins as the next SEC chair.
- Trump appoints David Sacks as AI and Crypto Czar.
- El Salvador to change Bitcoin law as part of a new IMF deal.
- Ripple secures NYDFS approval for its RLUSD stablecoin.
- Texas House introduces a bill to establish a strategic bitcoin reserve.
- MicroStrategy to join the Nasdaq 100 and heavily traded QQQ ETF.
