As we enter a new phase of the monetization of bitcoin, I thought it would be a great time to write another blog. Enjoy, dear readers! :)
Bitcoin ETFs approved!
Firstly, a quick recap from my previous post. Bitcoin is once again breaching it’s previous cycle’s all time high, currently sitting at a handsome $67,459. This is about 3.5X from my previous blog post on Dec 2020! In short, the bitcoin network is strong.
Jan 10th, 2024 marked a monumental landmark in the short history of bitcoin - the US regulators for securities approved 10 spot bitcoin ETF applications. This ended the decade long battle to bring bitcoin to Wall Street. With these new financial vehicles, buying bitcoin is as simple as buying Apple stock!
Excitement is building once again and it seems that we are in for another ride, but how long and how far will it go up?
What is price?
Determining the price of an asset is a simple matter of figuring out the supply and the demand. If the supply is higher than the demand, then the price will fall. If demand is higher than the supply, then price will go up. However, it gets complicated with bitcoin because the supply is inelastic - there will only be 21 million bitcoin created and not 1 more. No other asset in existence has this quality. Even gold, with the supply as scarce as it is has an elastic supply - if the demand is high enough, everybody and their dog will pick up a shovel and start digging!
Bitcoin’s supply dynamics creates a unique situation wherein only the demand is variable, the supply is constant. Currently, 19.6M out of the 21M has been created. As demand picks up and with an immovable supply, the only variable that can change is the price. And boy oh boy is it changing. It has gone up an astonishing 200% in the last year alone from $22k to $67k USD.
Pumpamentals
Recent conversations after such a magnificient price increase has folks concerned that they “missed it”. Let me assure you, dear readers, bitcoin is still in its infancy as a monetary technology. Yes, you may have missed a doubling or two, or even a 10X increase, but it’s never too late to become a bitcoiner.
For the benefit of my readers, I’ll list down some key fundamentals that can cause the next pump (pumpamentals).
Scarcity
We must once again go back to the core reason that bitcoin has any value at all - it is scarce. It is the most scarce commodity that has ever existed and will ever exist. If you manage to get your hands on some bitcoin, you will own a percentage of the buy that cannot be wrested from your hands by way of inflation.
TAM
When considering any investment, one strategy that is applied to guage the potential growth is to figure out the TAM (Total Addressable Market). The TAM of a pizza shop is any pizza lover that lives within a deliverable distance. The TAM of a social media platform is the subset of the global population that has internet access and pictures to share. The TAM of a money such as bitcoin is any person, company, institution, government, charity, organization, franchise or union that needs to use money to make purchases or store value for future use. The TAM for bitcoin is unimaginably large. With great TAM comes great potential.
Insatiable demand
We’ve seen that the since the approval of the ETFs in the US, the market is eating up thousands of bitcoin per day. Let me rephrase that because I find it hard to believe myself: the largest financial institutions are facilitating the purchase of thousands of bitcoins, amounting to hundreds of millions of dollars, per day to anybody with a brokerage account. The likes of BlackRock and Fidelity are out selling bitcoin to their customers. I remember the bleak bear markets of 2018 where any d-list celebrity mentioning bitcoin on their FaceBook live made the front page news in bitcoin circles. We have come far dear readers, and we have far to go.
It’s cyclical until it isn’t
In my previous post, I wrote that the bitcoin price is so cyclical it isn’t even funny. I think with all of the happenings recently, the cycles of bitcoin have been broken. If the cycles were still in tact, we would be far below current price. Usually bitcoin would start it’s quadrenniel run up months after the halving. Yet, here we are a full month and a half before the halving is due and we are challenging the previous cycle’s top. We shall see where we go from here, but all signs seem to point up. Very up.
Here are some things that I’m excited about in the forseeable future:
- The halving coming up on April 20th or so
- ETFs continuing to eat up all liquid supply
- Long time bitcoiners tightening their grip on their precious coins now that the insatiable demand is apparant
- More public companies announcing that they’ve been buying large amounts of bitcoin
- Soverign wealth funds finally admitting that they’ve allocated some percentage thanks to the ETFs
I wish everybody a prosperous bull run!
