Coin Metrics Weekly Report: Bitcoin's correlation with gold hits all-time high, retail investors continue to increase their holdings in Bitcoin.

Over the past week, although Bitcoin failed to hold above the $7,000 level, on-chain data has shown signs of recovery. According to the latest network data from the crypto research firm Coin Metrics, the overall market has been trending upwards recently, gradually recovering from the sharp drop on March 12th, with concerns that market sentiment is decreasing month by month.

• Significant growth in Bitcoin "hodler" addresses
• Continued increase in the proportion of Ethereum held by exchanges
• Historic high in correlation between gold and Bitcoin

Active Addresses

Bitcoin mining over the past week has shown signs of healthy recovery, with an estimated 7.3% increase in hash rate. Inefficient mining machines may have been phased out by the market, replaced by more efficient miners, which could contribute to the long-term health of the network.

The number of active Bitcoin addresses has also been on the rise, increasing by 6.3%. However, Ethereum (ETH) active addresses have been declining in contrast to Bitcoin, decreasing by approximately 13.4% weekly. ETH daily active addresses peaked at 537,000 on March 21, the highest since May 2018, but have been decreasing since then, with active addresses at 310,000 on April 5.

Network Highlights

Since the crypto market crash on March 12, the number of addresses holding relatively small amounts of Bitcoin has been steadily increasing.

Within the past 90 days, the number of addresses holding between one-billionth and one-hundred-millionth of the total Bitcoin supply has increased by around 6%. Similarly, the number of addresses holding between one-hundred-millionth and one-ten-millionth of the total supply has increased by about 4%.

Starting around March 12, the growth rates for both have significantly increased. This uptick may indicate growing adoption as new users acquire relatively small amounts of BTC.

In contrast to Bitcoin, the amount of ETH held by exchanges has increased, while the amount of BTC held by exchanges has decreased relatively.

ETH has seen an increase of about 5%, while the amount of BTC held by exchanges has decreased by around 3%. The decrease in BTC is mainly due to a rapid decline in supply held by BitMEX.

The following chart shows the 30-day growth curve of exchange-held circulating supply for Bitfinex, Binance, Bitstamp, Bittrex, Gemini, Huobi, Kraken, BitMEX, and Poloniex.

Among all exchanges, Bitfinex has the largest proportion of ETH held. Over the past 30 days, the amount of Ethereum held by Bitfinex has increased by around 17%, while the growth for other exchanges remains below 10%.

Market Data Insights

Over the past week, the market has seen a sharp uptrend, beginning to recover from the losses on March 12. Previous research indicated that the selloff at that time was driven by short-term holders and exacerbated by the BitMEX liquidation crisis. Crypto investors generally believe that the March 12 selloff merely reflected the selling pressure in traditional markets, with technical mishaps in the crypto market (such as BitMEX) also playing a part. Increased trading activity on Coinbase also suggests that retail investor sentiment remains unaffected.

The debate over Bitcoin as a "risk asset versus a hedge asset" continues. Some market participants have noted that the narrative of Bitcoin as a hedge asset collapsed over the past three months, reducing institutional investors' willingness to enter the market.

A closer examination of Bitcoin and gold can demonstrate that the hedge asset argument is not only intact but may be more valid than ever before. While Bitcoin did indeed experience a selloff alongside the stock market, almost every financial market underwent forced liquidations, and gold was not spared either. Since then, both Bitcoin and gold have recouped some of their losses.

Measured over the past 30 days, the correlation between Bitcoin and gold has been at historically high levels. Nearly every country is justifying unprecedented monetary policies and fiscal stimulus measures, which could significantly increase the risk of financial imbalances and the likelihood of long-term rising inflation. While these concerns did not materialize during the 2008 financial crisis, the conditions for these worries to resurface seem to be ripe.