Healthy Pullback & Taproot Upgrade

Key Takeaways

• After Bitcoin reached a new all-time high of $69,000, we have seen a reset in futures funding markets, and spot demand start to waiver.
  
• These pullbacks are not uncommon in bull markets. Since June 2020, there have been 34 daily drawdowns (open to close) of over 5%, largest of which were 14% in May and 13% in January.
  
• On chain data further supports our view. As we noted last week, long-term holders have started to scale out of their positions into a strengthening market, with short-term holders re-entering the market at higher price ranges. 
  
• On November 14, the Bitcoin network implemented the Taproot Upgrade, its first software upgrade in four years. The update is part of a larger effort by Bitcoin developers to improve the scalability, privacy, and composability of the network. 
  
• Bottom Line: We view Bitcoin's 17% pullback this week as a healthy market pullback from overbought conditions - nothing structural has changed. Having said that, we believe the volatility from the past week has presented good buying opportunities across the majors. The Taproot upgrade also presents a long-term bullish case for Bitcoin, as it minimizes unnecessary data collection in the network and enables more complex transactions.

Bitcoin Taproot Upgrade Note