The third quarter of 2020 officially closed as the second-best quarter in Bitcoin history, with the September candle at $10,776 recording a 17.9% quarterly gain.

Historical quarterly closing prices for Bitcoin. Source: Skew

The only time Bitcoin achieved a higher quarterly close was the fourth quarter of 2017, when the Bitcoin price gained over 210% over the course of three months and closed at around $13,660.

Despite the red monthly candle close in the month of September, traders generally remain neutral or cautiously optimistic.

Potentially Optimistic Fundamental Factors For Bitcoin in Q4

Bitcoin enters the fourth quarter with significant uncertainty in the broader financial market. The U.S. economy is gradually recovering from the pandemic-induced downturn but faces several key risks.

Most notably, the resurgence of COVID-19 cases in the U.S. has intensified the nervousness in the stock market. Since the September 2nd peak, the S&P 500 dropped by 6.08%, data from Google Finance shows.

The stimulus stalemate and the lack of clarity around vaccines are placing additional pressure on equities.

Whether Bitcoin could perform strongly despite the stock market slump in the fourth quarter remains the major challenge.

Bitcoin has numerous fundamental catalysts that could buoy its price in the medium term. Its hash rate is at an all-time high, which is positive as it comes after Bitcoin's third block reward halving on May 11th. A halving, which occurs every four years, causes miner revenues to drop by half, exclusive of block fees. 

Since miners earn less after a halving, the hash rate tends to drop after each halving. Although the hash rate initially declined, it quickly recovered, achieving new highs.

Atop the record-high hash rate, Bitcoin’s post-halving cycle remains a potentially positive factor for its medium-term price. 

After the previous halving, it took Bitcoin 15 months to peak at $20,000, setting a record high that is yet to be breached. Since the latest halving occurred in May, that would make a rally by mid-2021 probable.

The confluence of Bitcoin being in a post-halving cycle with a strong hash rate and rising network activity strengthens its medium-term outlook.

Active addresses on the Bitcoin blockchain. Source: Coinmetrics

According to Soona Ahmaz, a general partner at Volt, active addresses on the Bitcoin blockchain hit an all-time high alongside the hashrate. She said:

“Bitcoin active addresses at an all time high (200 day moving average) with a fraction of 2017 press coverage. This is what healthy, substantive growth looks like.”

Two key metrics that measure a blockchain network’s user activity and security are both at record highs, which could aid the recovery of Bitcoin throughout Q4 and heading into 2021.

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