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@mverklin
source: tradeengine.org
Bitcoin Whales Coming Online
Approximately, every 10 minutes 6.25 new bitcoin are mined into existence. That’s 900 new bitcoin issued every day and 6,300 new bitcoin issued every week. This past week, Grayscale Investments added 20,336 BTC to their existing bitcoin position totaling ~527k BTC which is ~$10B AUM.
The point is the “buy the dip” opportunities are numbered now that institutional investors and publicly traded companies have had the bitcoin “light bulb” moment. According to investment firm and crypto focused hedge fund, Pantera Capital, the increase in bitcoin’s price is due to PayPal’s 300+ million active users buying bitcoin. Together with Square’s Cash App, the two companies are buying more than 100% of all newly issue bitcoin.
In Dan Moorehead’s letter to Pantera Capital investors, he stated that this bitcoin rally and cycle is different than 2017 as it’s driven by institutional demand and easier on-ramps to buy the underlying asset.
“Previously the friction to buy bitcoin was pretty onerous: take a selfie with your passport, wait days to a week to get activated, daily limits,” said the letter.
About 21 firms including Microstrategy and Galaxy Digital Holdings, hold a combined $15.3B of BTC in their reserve. That’s 832,151 BTC or ~4% of bitcoin’s circulating supply. The bitcoin shortage is real and only going to increase as more institutional investors move through the internal due diligence and board approvals to put bitcoin on their balance sheet.
source: tradingview.com
When you take a look at the bitcoin daily chart, bitcoin is bouncing off the 10 day moving average breaking through daily resistance levels creating new support or price floors. The RSI has stayed above 70 since October 20th, which can be interpreted as over bought scenarios with a potential upcoming pullback. However, these extended periods of exuberance can also be seen during strong bull markets and similar to the price action during the 2017 bull market.
source: tradingview.com
Note, this article is not implying bitcoin’s price will be a straight line up and to the right without any dips. I believe whatever goes up must come down and sellers, be them bitcoin whales or HODLers will realize their gains and take some profits. For example, during the 2015-2017 bitcoin bull market, there were 9 significant corrections with an average of 37% from high to low 14 weeks from one ATH to the next ATH.
Net-Net
I believe it’s important to understand where we are in the cycle and then for everyone to understand how they’re individually positioned at the current bitcoin price. If you have 0% exposure to bitcoin, then waiting for the dip opportunity is a terrible strategy. You could very well be waiting for that 30% pullback once we get to $30k and buying at $21k, or worse, even higher. If you have a healthy bitcoin position, and you’re happy with bitcoin continuing to march higher and higher, then relax and enjoy the ride. If you’re like me and have a healthy bitcoin position, but constantly feel short, then exercise a layering-in approach by dollar cost averaging on regular basis and be ready for a dip.
Remember, bitcoin is trying to become a reserve asset or the unit of account. If this is the case and that’s where we’re going, then we’re still very early as only ~1% of the world’s population still owns any bitcoin and the market cap is still only $340B. However, please keep in mind, these institutional investors are hedging themselves for this reality as bond’s no longer do the trick in a traditional 60/40 portfolio and these investors have very strong hands. They aren’t planning on selling anytime soon. As more demand comes online, especially with the macro economic backdrop - coronavirus spiking, national lockdowns, central bank and government fiscal stimulus and a sovereign debt ticking time-bomb - supply and demand would suggest a gradual, but very sudden dramatic increase in price action.
source: @danheld
No one wanted to be first and now, no one wants to be last. Stay focused.
Cheers,
Verks
**This is not financial advice. Investing in bitcoin and cryptocurrency is extremely risky. Please do your own research. The ideas and news presented in this newsletter are my personal opinions and meant for informational and entertainment purposes only.