New Bitcoin ETFs, old coins
Also retail sales are bad for inflation and there is no such thing as diminishing returns
Welcome to the Friday edition of the Ecoinometrics newsletter.
Every week we bring you the three most important charts on the topics of macroeconomics, Bitcoin and digital assets.
Today we'll cover:
How many coins are already captured by the Bitcoin ETFs?
Retail sales are up in December: that’s good for the US economy, but bad for inflation.
There is no such thing as diminishing returns if you are a mega-cap asset.
Each topic comes with a small explanation and one big chart. So let’s dive in.
In case you missed it, here are the other topics we covered this week:
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How many coins are already captured by the Bitcoin ETFs?
As I'm writing those lines the total amount of Bitcoins held in the ten spot Bitcoin ETFs that launched in the US is ~656k BTC.
At its peak the Grayscale Bitcoin Trust alone had ~635k BTC...
That means so far the effect of those new Bitcoin ETFs is small. In aggregate 3.1% of the max 21 million supply is attached to those products.
But while GBTC had a huge amount of outflows they alone still hold 2.4% of the supply.
So this is still early days.
The most valuable part of having those ETFs is that most investors can now easily allocate a percentage of their savings/retirement to Bitcoin the same way they would dollar cost average the SP500. When they do that, those coins will be taken out of the market for a long time.
That's the proper way of tightening the liquid supply. But this big trend will need time to build momentum. It is not realistic to expect any effect in a just a few weeks.
Retail sales are up in December: good for the economy, bad for inflation
So here is some data point I was looking forward to: was there a dip in the spending of US consumers during the holiday season?
The answer is no. The trend in the total US retail sales is unchanged. If anything the December reading looks like an uptick.
Whatever way you look at it, the trend in those retail sales is in line with a period of economic expansion.
That's good for the US economy. It probably means we aren't at the edge of a recession. In the past retail sales tend to at least slow down (e.g. Dotcom crash), or even completely drop during recessions (e.g. 2008). There is nothing like that right now.
But that's bad for inflation. Because as long as US consumers are in the mood to spend (and they are because wages are rising faster than inflation) they will bid prices up. With that kind of dynamic, getting to the 2% inflation target is much more challenging.
Look at Apple and Microsoft, there is no such thing as diminishing returns if you are at the top
Apple is hitting a bump in its hardware sales. MicroSoft is getting a AI boost to its entire business stack. And that puts the two companies toe to toe in terms of market cap.
This is the state of things. But the most amazing part is that both of them are close to $3 trillion in market cap. Both of them have totally recovered from the bear market and are making new all-time high.
That means there is money flowing around.
So while the macro risk of a recession (which is tied to the inflation problem) exists, right now the macro conditions are favourable to risk assets.
There is no reason Bitcoin cannot benefit from the same dynamic. Now that the ETFs are in place all we need is another catalyst.
The obvious thing is the halving narrative taking over. Only a few months to find out.
That’s it for today. I hope you enjoyed this. We’ll be back next week with more charts.
Cheers,
Nick
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Finally somebody who is not afraid to STAY BULLISH! Diminishing returns are prevalent when you refuse to think of Bitcoin as a black hole for economic value. $33M BTC is too easy.