In the world of crypto it is absolutely essential to do your own research. My advice, read a lot but approach everything with a critical mind.
Here are some stuff you should check out this week.
Nick
PlanB strikes again
Have you been living under a rock for more than a year? No? Good, then you must have heard about PlanB stock-to-flow model for the valuation of Bitcoin. The basic idea of PlanB’s model is to see how Bitcoin scarcity is driving the long term growth of its market cap.
This quantitative model is probably the most influential narrative introduced in BTC since the end of the last bull run.
Well PlanB is back with a new way of looking at the stock-to-flow model.
If you haven read the original article start there as it builds on concepts introduced in the past.
The new core idea of this paper is that as Bitcoin becomes more scarce with each halving its properties as an asset are changing. And this change in properties is accompanied by a change in valuation. This can be modelled and PlanB did exactly that.
You have to read this one!
Whales are hodling
Let’s not kid ourselves, the Bitcoin market is still small. That’s a good thing when you think about the potential growth. But at the same time that means the lack of liquidity makes the market vulnerable to whales actions. A lot of the time you can trace back big price movements to whales selling or buying large amounts of BTC at once. The rest of the time market moves are the result of the results of liquidations of leveraged trading positions.
The good news highlighted by data from Coinmetrics and discussed in this Cointelegraph piece is that most whales have a long term vision for BTC and are not ready to dump any sats for cash at the current price. This is a sign of confidence in the long term value of Bitcoin from those high net worth investors.
A new tool for government surveillance
I used to think that governments creating their own crypto currency or digital currency, whatever you want to call it, would be good for Bitcoin.
The idea is:
People get used to the digital wallets and crypto gets normalized.
People realize government controlled digital currencies suffer from the same monetary policy issues as the old system.
And from there it is easier to transition people to Bitcoin.
There is one big downside to that plan though. Government issued digital currencies greatly increase the surveillance power of the state. And that’s likely to prove a bigger issue than any benefit we could get from increasing awareness.
China is deploying its digital currency in a test phase. Andrea O'Sullivan has a good take on that issue. Definitely worth a read.
Thinking about user experience
Bitcoin has graduated from “play-money” to fully fledged financial assets. And as a result it feels like the conversation is focusing almost exclusively on the financial aspects of Bitcoin. That might be at the detriment of more thinking about the user experience.
Bitcoin is an amazing asset that allows everyone to be their own bank. But to get there requires a serious amount of research. I am of those who think it is important to really try to understand how Bitcoin works before thinking about it as an investment.
It feels like a lot of people are getting stuck early in their discovery process by the complexity of the subject. So I think it makes sense that the community continues to think about Bitcoin education and user experience if we want to continue with mass adoption.
This article talks about the interesting Bitcoin denomination problem and the psychological bias that makes it look complicated. Interesting stuff.
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