Ecoinometrics - November 09, 2020

Uncharted territory

Everybody knows that Bitcoin topped at $20k in December 2017. But if you weren’t around back then (or if you’ve forgotten already), you might not remember that this was a very quick event.

In less than a month we went from $10k to the top at $20k then it all came crashing down.

So you can argue that at the current price, we are already in uncharted territory.


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Uncharted territory

The thing with uncharted territories is that it is harder to figure out how we’ll go from point A to point B.

We have a vague idea that as long as Bitcoin follows a growth pattern similar to the previous halving cycles then we should end up north of $100k within 4 years.

That’s roughly the end point.

The starting point is now, with Bitcoin at $15k clearly starting to move ahead of its 200 days moving average similarly to what happened after the second halving.

We’ve broken out above the $14,000 level rather easily and we are now left with a purely psychological level at $20,000.

I’m saying this level is entirely psychological simply because very few people bought anything at all at this price.

Over its entire history Bitcoin spent less than a month above $15,000 and less than two weeks above $17,000.

Check this out.

There is no true obstacle on the way to $20,000. 

So how fast are we going to get there? Who knows, but we are in November and historically this is a good month for Bitcoin returns… see for yourself.

The moral of the story is start stacking sats now or risk getting left behind.


United States of America vs Approximately 69,370 Bitcoin

USA vs 69k BTC, who would win? Over a long enough period of time I’m going to bet on Bitcoin winning.

But let’s back off a second. What is this all about?

Apparently the US Department of Justice managed to get their hands on some Bitcoin associated with the Silk Road days.

The story is a bit convoluted with hacks, stolen coins and strange arrangements so I’ll let you read about it here.

Long story short, the DOJ has managed to seize 69,370 BTC in a case whose official name is the hilarious “United States of America vs Approximately 69,370 Bitcoin”.

Now the big question is what are they going to do with it? 

Usually the way it goes is that those coins will be auctioned so that the DOJ can get good old fashioned USD instead.

The timing of the auction will be interesting though. Right now 69,370 BTC goes for about $1 billion. 

But we are at the start of a new exponential growth cycle… so if they auction those coins in a year this might go for more than $10 billion…

I’m sure there are rules for how and when the DOJ is allowed to auction seized properties but if I was them I’d try to delay that as long as possible to get the maximum return out of it.

Or better just keep those as a reserve asset...

Read the article.


Spot driven

When you see sudden large price moves on Bitcoin the playbook is often the same:

  • Some whale puts a large trade.

  • That trade dries up liquidity and starts pushing the price significantly.

  • Leveraged traders see their positions liquidated pushing the price even more.

That's what you see often. But not always!

It looks like the current move is not primarily driven by liquidations. Instead we see:

  • The amount of liquidation on exchanges is low.

  • A big proportion of coins move out of the exchanges to be stored for hodling.

This is the perfect scenario for a post halving exponential growth cycle: less coins are available from the miners and hodlers are taking coins out of exchanges.

And that happens before FOMO has even started.

If you weren’t bullish already the setup keeps looking better and better.

Read the article.


Bitcoin, Amazon and groupthink

There are a lot of similarities between the growth trajectory of Bitcoin and the dominant tech stocks. We talked about that some times ago.

But in this article Andy Edstrom has a nice take on the idea from the point of view of wealth managers.

Back in the early 2000s the vast majority of fund managers missed the opportunity to invest into Amazon. The dominant narrative was that Amazon would fail. And so very few took a chance at the massive potential it had as an internet native business.

Fast forward 10 years and the vast majority of fund managers are missing on the opportunity to invest into Bitcoin.

Until recently the dominant narrative was still that Bitcoin will never scale. And so very few are taking a chance at the massive potential it has as an internet native store of value.

Of course the details between Amazon and Bitcoin are different. But the core idea remains. So let me try to summarize.

Investing in Bitcoin right now is making an asymmetric bet.

By their nature asymmetric bets do not fit the main narrative. 

If everybody agreed that buying Bitcoin is the thing to do its market cap would already be several trillion of US$.

But overtime the narrative can change. What was once a fringe idea becomes the mainstream way of thinking. 

By the time this transition happens those who took their chance early have reap the largest rewards. Those who waited are stuck with average returns.

With Bitcoin we are still very early in this transition. So don’t waste the opportunity, take your chance.

Read the article.


That’s it for today. If you have learned something please subscribe and share to help the newsletter grow.

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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:

  1. Click on the subscribe button right below.

  2. Follow Ecoinometrics on Twitter at https://twitter.com/ecoinometrics

Done? That’s great! Thank you and enjoy.