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Bitcoin is often compared to gold and praised as a store of value, yet its volatility sparks debate. This leaves many investors and traders asking: How do we determine Bitcoin’s true value?

Enter fundamental analysis.

A strong understanding of Bitcoin’s fundamentals provides deeper insight into its value—both for traders and long-term investors. To apply this effectively, it’s crucial to grasp what fundamental analysis is and the key factors shaping Bitcoin’s market performance.

What Is Bitcoin Fundamental Analysis?

Bitcoin fundamental analysis examines the forces shaping its value, including fixed supply, network activity, and market dynamics.

Unlike price charts, it focuses on factors like user adoption, mining incentives, regulations, and sentiment—key drivers of demand and long-term trends.

While no single metric predicts future prices, understanding these fundamentals helps investors assess Bitcoin’s role in their strategy.

Growth Metrics to Watch

Transaction Volume and Network Activity

On-chain analysis helps gauge Bitcoin usage. High transaction volume signals strong interest and adoption, while lower activity may suggest waning demand. Major market events can trigger sudden spikes, increasing network activity.

Key Metrics:

• Active Addresses: A measure of network usage. While users may own multiple addresses, a rising count suggests growing adoption.

• Network Fees: An indicator of demand. Fees rise when activity surges, prompting users to seek alternatives like off-chain transactions.

Mining and Hash Rate

Hash rate reflects the computational power securing Bitcoin. A rising hash rate indicates miner confidence and network strength. Key factors influencing hash rate include mining hardware upgrades, Bitcoin halvings (most recently in 2024), and regulatory changes.

One of the largest disruptions occurred in 2022 when China banned Bitcoin mining, causing hash rate to drop over 50% as miners relocated.

Interested in learning more about Bitcoin’s numerous valuation models? Read the full post here to find out more.

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