BTC Increasingly Hedges Against Fiat
What this chart demonstrates is that “whales” – that is, high net worth entities holding between 1,000 and 10,000 BTC – have been adding to their BTC holdings in lock-step with the latest round of Fed money printing.
This supports two observations:
1) BTC increasingly correlates with mainstream investor sentiment, which is a sign both of institutional on-boarding activity and, therefore, of a maturing asset class;
2) The current BTC valuation drop from a recent high of about $12,400 to its current hover around $10,000 has not spooked large investors and long-term holders who don’t move in and out of the coin (called “hodlers”). In fact, hodlers (new and old) are buying the dip.
A deep dive into the data by Glassnode and Willy Woo show that the rate of hodling is going up. Hypothesis: more people are entering the BTC space to hedge against dollar devaluation.
That requires holding BTC the same way people hold AU as a hedge against fiat devaluation. The difference is that BTC still has premium (unit value) upside potential as a still-maturing asset class with capped total supply and steadily reducing available supply. Gold is well-aged; therefore has far less premium increase potential.
Note that BTC acquisition does not appear to be for the purpose of hedging against either the stock market or gold/pm. In fact, as with gold/pm, market downturns can cause a degree of BTC liquidation as investors seek dollars against declining stock portfolio balances.
The lesson in the chart is that BTC is looking more and more like a long-term hedge against fiat inflation and manipulation.
Hypothesis: more people are entering the BTC space to hedge against dollar devaluation.
I love bitcoin. Its design is perfection. Theoretically, it is the perfect currency for our times.
I don’t believe that narrative, however. I don’t believe more “whales” is a good thing.
Throughout history, every market has had only one objective: to sell you something. In financial markets, you are not buying a financial asset, you are buying an idea. All narratives surrounding a market are derivatives of this one idea.
The ‘one idea’ in everyone’s mind can be different, but they have one common denominator: My life will be better in the future if I buy this…
Maybe the marketing (narrative) plays on your fears; my cash will lose its value if I don’t buy bitcoin. Maybe the marketing plays on your greed; bitcoin will be worth $100k in two years! But whatever it is, don’t forget, that you are being played.
The truth is that the bitcoin market exists for the whales to take your money. They will do it by manipulating the price. The good news about bitcoin is that the little guy has access to market information that is reserved only for the market makers in other markets. Look at this snapshot from my Coinbase account:
See that trading activity meter at the bottom? 72% of traders have added to their bitcoin in the last 24 hours. Who do you think is the 28% selling it to them?
If this was a low for bitcoin it would be more like 28% buyers and 72% sellers.
Sell your dreams and buy your fears…it’s the only way to play the game.
Speaking of Fiat…
Care to make an educated guess as to why 2/3rds of Tether’s $14.5 Billion market cap got created out of thin air in just the last 6 months?
I’ve been on the fence with bitcoin since $25. I obviously picked the wrong side of the fence. With that said, I keep telling myself that I’m going to purchase some, but typically keep adding PM miners right now. Anybody own the grayscale Bitcoin Trust? Figured that might be a decent vehicle to gamble in. I look at a position in Bitcoin as pure speculation and outright gambling. As the Qouth the Raven podcast guy says, “It’s either going to a million or zero”.
Recent data analysis from Glassnode:
1. Bitcoin miners’ outflow of BTC on 9/3 spiked just a couple hours before the price drop to circa $10,000. Question is: did they sell from their stock to drive the price down? Or because they anticipated a price drop? IMO, as the price was already trending down and building momentum down, good chance miners decided to sell relatively close to the recent highs.
2. To the question of who’s selling, here are two screenshots based on Glassnode data. First, note that over 85% of BTC holdings have been dormant for at least 1 year. Therefore, 15% of BTC supply is in play.
If that’s true, and whales are adding to their holdings, who is selling? Apparently, so-called “Dolphins” make up a bit of the action, but it’s currently primarily exchanges – including non-hodlers who keep their BTC in exchange wallets and more actively trade. (A separate chart that I did not copy indicates that recent sellers have sold at a slight loss, indicating weak investors are getting shaken out. Technically, that’s short- to medium-term bullish.)
This does not mean whales will not seek to “sell high,” having “bought low.” That seems self-evident. However, it does not appear whales are doing very much of that at this point. Rather, they seem to be adding to their already-large holdings, which indicates they anticipate increased strong upside.
@MontanaNative: If I may,
let me suggest that owning some coin is better than owning shares in a fund – for BTC as for AU. That doesn’t negate owning paper rights, but imo that ought always be secondary and built on a floor of outright ownership of the underlying commodity itself.
And it’s definitely not too late. We are still in early days and this is still ground floor, as this graph plot point makes clear:
If you want to follow the thread for a full explanation of the author’s assumptions, methods, and conclusions, you can see it on Twitter (you don’t have to be signed up with Twitter to read the thread), here: https://twitter.com/Croesus_BTC/status/1271165665236246529
In terms of standard adoption cycles, this shows how early it still is:
The point: $100 or $1000 invested today still has significant upside potential over the next 4-10 years in BTC. Indeed, the best gains are still farther ahead than that.
To help conceptualize the safety of BTC, this chart from “PlanB” shows that BTC’s price has never been below its 200 week moving average (the dot colors move from red to blue over the 4 years between halving events):
The lesson: despite the wild swings BTC can provide, it has a solid history of higher highs and higher lows. Over any 4-year period to date, BTC has appreciated quite nicely.
Even better, it is now possible to earn 4% interest on BTC holdings saved on certain lending sites, in highly collateralized loans. (This is like the savings account I had as a boy in the late 1960s, where I parked my newspaper route earnings and made 5%. Heh. Remember those old, sound-money savings accounts?) There are several sites for such opportunities, and they all operate about the same. Here’s one I like – use it to read about how one’s coins are secured and interest is earned and paid: nexo.io
(Personally, I keep my BTC offline in a private wallet. But I put some of my other cryptocurrency holdings out for interest earnings. I take that interest in BTC, and add it to my offline wallet.)
Nice posts VTGothic. It’s nice to have someone to discuss this subject with.
I have a hardware wallet but to be honest I don’t use it very much. I keep my crypto with Blockfi, to earn interest on it. I feel pretty certain that it is safe with them but you never know. What do you think?
Also, I really like this guy’s quant approach. Here is his latest video where he discusses dynamic dollar cost averaging:
I’d be interested in your comments.
I’m new to bitcoin. I tried years ago to buy some but I couldn’t figure out how to do it. It’s much easier these days. I bought my first bitcoin during the crash in the Spring.
I think there is a pretty high probability of another crash in the general markets coming soon, just based on the incredible speculation in the option markets. I’m currently hedging that possibility with VIX calls in my brokerage account.
I’m not sure that one will be able to hedge this decline, as even my VIX calls are showing correlation to the markets. So weird.
i own some bitcoin, but i still have questions:
1/ is byzantine reliable broadcast a better algorithym and a threat to bitcoin or is the current pow still more secure.
2/will the energy consumption of bitcoin make btc less attractive to millenials who may seek a greener algorithym (eg/ byzantine reliable broadcast)
3/if a cheaper method of pow were found (eg/ photonic computing) would the price of bitcoin match the subsequent drop in energy costs?,
ps it would be good if pp could put more upfront the extraordinary amount of fossil fuels we all use in its various measurement metrics it has used over the years. eg/ each of us uses the energy of 200 slaves etc. in australia we get this constant “immigration push” and i think if we started measuring our lives more in terms of fossil fuel use, we would see that we are way over populated.
Greetings — Yes good to see The wonderful world of Crypto get a thread on this Great website (Mark Reese — on this site 6-7 years ago waded me and others “Down the Rabbit hole, I followed his lead and the help of other crypto enthusiasts to good success). I’ve been taking a multi-tiered approach:
1. Core Hodling — ETH, BTC ,Chainlink ,few others(keep most of these on a Ledger in Safe Deposit Box)
2. No Point NOT making/taking Interest (De-Fi movement has soared this year with 7 billion influx … mainly riding on top of ETH network) Mark had recommended Celsius Network (do your own due diligence/research — but the Founder is an internet legend –Alex M. — co-inventor of VOIP (internet phone calls). Ive been getting Significant Interest paid weekly on their app — for well over a year (from 5% on ETH, 6% BTC to (no brainer in my book) — 11.55% on Coinbase’s Stable Coin -USDC..)
3. Staking… I am Staking a variety of coins/tokens in a variety of ways — making interest …i can discuss further
4. Deep Research, Buying/Speculating (with a few core groups of friends) — on new Tokens, (eg De-Fi, New Polka Dot Network & associated ecosystem tokens (using a variety of Exchanges , Uniswap, etc — one of the keys here is getting in as early as possible (before they go to major exchanges) — honestly there are more “losers then winners” …but that said you only need a few 25x, 50x to 100x to make money (we bought Chainklink… now number 6 token/coin .. bought early on for 39 cents .. hit $20 .. now $13 and I’m collecting 4.5% on my holdings in Celsius.
If you use — we both get $20 in BTC for any $200 deposit held 30 days
Join Celsius Network using my referral code 19358611ac when signing up and earn $20 in BTC with your first transfer of $200 or more! #UnbankYourself
I deeply trust PP members/people — I’d be happy to start a subgroup where we share data/intel/perceptives/etc — No doubt Crypto IS and WILL play a significant role in the Convergence of Crisis/Opportunity ahead