What is the State of Bitcoin’s Health After the Recent Declines? What are the Biggest Risks?

The DeFi Report (TDR), a cryptocurrency analysis firm, examined Bitcoin’s current state and potential future risks in its latest report. The analysis highlighted that Bitcoin’s fundamental indicators remain strong, but also drew attention to long-term strategic risks.

The DeFi Report experts have re-evaluated the thesis that Bitcoin is “digital gold.” Bitcoin’s hash rate, the most important indicator of network security, has increased 7.3 times compared to its price peak in 2021, and 4 times since 2023.

Spot Bitcoin ETFs have been described as the most successful financial products in history. ETFs currently hold approximately 6% of the total supply. The fact that investors are not selling their assets despite market volatility indicates the emergence of a “diamond-handed” investor profile.

Michael Saylor’s company, MicroStrategy, holds approximately 3.5% of the total supply. The company’s debt structure, based on long-term, unsecured bonds, makes short-term liquidation risk low.

The report clearly identifies the three main risks facing Bitcoin.

The halving of block rewards every four years reduces miner income. Currently, transaction fees account for only 0.4% of miner income. If the Bitcoin price doesn’t increase exponentially with each cycle, the incentive for miners who secure the network may decrease.

The potential for quantum computers to break Bitcoin’s encryption methods (ECDSA) between 2030 and 2035 is seen as a risk. However, experts believe the community will make the necessary updates to address this issue.

The fact that the number of active addresses has remained relatively flat since 2017 proves that Bitcoin is being used more as a “savings technology” than as a payment network.

Mike, an analyst at The DeFi Report, describes Bitcoin’s current market capitalization of around $2 trillion, compared to gold’s $30 trillion, as a significant opportunity.

*This is not investment advice.