Christmas came and look what Santa brought… a good Bitcoin pump.
That means the biggest CME gap on record, probably a lot of pressure on GBTC when it starts trading on Monday and of course FOMO.
The Ecoinometrics newsletter decrypts Bitcoin’s place in the global financial system. If you want to get an edge in understanding the future of finance you only have to do two things:
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Now let’s dig in.
Bitcoin is taking the fast lane
Bitcoin is pushing towards $30k which means it has flipped Visa in terms of market cap and is now moving to overtake the mega cap stocks:
BTC at $41k is where it flips Facebook.
BTC at $63k is where it flips Google.
BTC at $120k is where it flips Apple.
When we get there Bitcoin will be about 20% of the market size of gold which is the natural next target for expansion.
I’ve updated the value in context graph and it is pretty clear that Bitcoin is taking the fast lane.
What’s driving the move? Many things.
The obvious part is that the 3rd halving happened a while ago already (8 months). The supply shock created by the lower output of new Bitcoins is now in full swing. So naturally even if the demand stayed constant this would lead to a rise in price.
But of course the demand is not staying constant. PayPal is buying. Grayscale is buying. Michael Saylor is buying. Various other institutional investors are buying. And all of these buyers have the same use case for Bitcoin: hodl for the long term.
Naturally that’s drying up the supply of coins available for everybody else. So when FOMO shows its head right at the time of the holiday season the price is bound to climb pretty fast.
Will FOMO completely take over the market? Yes.
Will people start thinking at some point that Bitcoin is “too expensive”? Yes.
Will there be big corrections at some point during this cycle? Yes.
But if you are reading those lines you know better than being caught up in all that.
Bitcoin is an absolutely scarce asset. So if you have a low time preference you should not measure up your Bitcoin holdings in terms of their value in US$. Instead you should measure them in terms of the percentage of the total supply that you own.
If you understand this you are already ahead of the game.
Ripple vs the SEC
I’ll admit that I haven’t read the whole SEC complaint against Ripple. But from the excerpt I’ve seen it doesn’t look very good for them. Of course anyone who observed Ripple closely knew that there were risks.
My understanding is that the big issue is the following:
Ripple is selling the XRP token as a cryptocurrency to be used by financial institutions to facilitate transactions using blockchain technology.
But the software solutions it sells to financial institutions do not use XRP.
In fact Ripple is selling XRP to investors in order to finance their software business that has nothing to do with XRP.
So… Ripple is selling XRP tokens to finance its software development business… hmm that sounds suspiciously like selling “Ripple shares” to finance their operations… with on top of that XRP being falsely marketed as tied to said software business success… and all that without being registered at the SEC… you can probably see why the SEC has a problem with that.
You can also see why this is no threat to Bitcoin. None of the complaints of the SEC regarding Ripple overlap with the Bitcoin network.
There is even a part of the filing where the SEC explains how Ripple controls the issuance of XRP like a central bank would… We are far away from the decentralized algorithmic monetary policy of Bitcoin.
For a more in depth look at the SEC complaint check out this overview by the Financial Times or the original complaint document.
Bitcoin cannot lose
Bitcoin has already won but few understand it.
If you want to know why you have to read this great analysis by Jeff Booth.
Key takeaways from the article:
Bitcoin as a store of value is only the first step. This is the use case that will allow Bitcoin to grow and solidify its place in the global financial system. But ultimately it is set to become a reserve currency.
Technological progress is inherently deflationary while the fiat monetary system is inherently inflationary. Those two things cannot diverge forever. At some point the monetary system has to be realigned with reality. That means moving away from fiat.
Bitcoin’s scarcity and algorithmic monetary policy are aligned with the deflationary trend of technological progress.
Everything the fiat system is doing to perpetuate itself only serves to strengthen Bitcoin over the long run.
Jeff goes in much more details on all those topics so go check it out.
And while you are at it I highly recommend you read Jeff’s book The Price of Tomorrow. It’s a comprehensive overview of why we can’t escape the global deflationary pressure created by technology and why it isn’t a bad thing.
That’s it for today. If you have learned something please subscribe and share to help the newsletter grow.
Cheers,
Nick
The Ecoinometrics newsletter decrypts Bitcoin’s place in the global financial system. If you want to get an edge in understanding the future of finance you only have to do two things:
Click on the subscribe button right below.
Done? That’s great!