Crypto Watch 015 👀

Crypto Market Update

  • Historically October has been a good month for crypto and there is a lot of chatter about history repeating itself. A lot of talking heads are talking up bullish chart patterns so lets hope for new all time highs (ATH). September is historically a bad month for Crypto and with China cracking down hard September 2021 was no exception.

  • Jamie Dimon, JP Morgan CEO & the great Bitcoin Yo-Yo, recently described Bitcoin as ‘a little bit of fool’s gold (We don’t like him).

  • A gold coin minted in 2013 that also contains the seed key for a Bitcoin wallet with 1,000 Bitcoin in it was bought for $4,905 and is now worth $49m.

Visa Proposes a Cross-chain Payment System

Visa (big credit company) has released plans for a Universal Payment Channel, which it says, "acts like a hub, interconnecting multiple blockchain networks and allowing for secure transfer of digital currencies."

Translation: Visa wants to position itself firmly in the middle of crypto transactions. Right now the existing cryptocurrencies don’t interact with each other that well, each operating in its own silo. Visa wants to create a hub where you can spend Bitcoin on Ethereum applications, Cardano on Bitcoin applications and Central Bank Digital Currencies on all applications etc. This will be a centralised hub owned by Visa which doesn’t really fit in with crypto’s decentralised ambitions but could never the less be very effective, even if the centralised structure does put the whole system at risk as evidenced recently when Facebook, Instagram and Whatsapp all failed to operate.

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Volcano Mining!

El Salvador is mining Bitcoin using Volcano power! How cool is that!

First test results from the Bitcoin Volcano mine are out: It’s Alive 🌋

The volcano is mining Bitcoin using 100% renewable energy. This will be extremely unhelpful for parties who are trying to paint Bitcoin as an environmental disaster. This is the first Bitcoin mining volcano initiated by a government. Private companies led the way for example Genesis mining has been mining Bitcoin using geothermal power for 7 years already. Bitcoin incentivises miners to find the cheapest forms of energy it can and renewables will provide a lot of that power.

Plan B Drops a Knowledge Bomb

Plan B is an anonymous crypto twitter analyst made famous for his stock to flow model.
This model compares Bitcoin to commodities such as gold, silver or platinum. These are known as 'store of value' commodities because they retain value over the long term due to their relative scarcity.

It is difficult to significantly increase the supply of gold, silver or platinum (the process of searching for gold and then mining it is expensive and takes time). Bitcoin shares similar features because it is also scarce. As the total number of Bitcoin is known (unlike the total amount of gold) it can be argued that it is the scarcest commodity. It is also the first-ever scarce digital object to exist. There are a limited number of coins in existence (21 million) and it will take a lot of energy and computing effort to mine the 3 million outstanding coins. This limits the supply rate and keeps it consistently low.

Bitcoin Stock-to-Flow Cross Asset (S2FX) Model)

How to view the Chart

The white line on the chart shows the number of days until the next Bitcoin halving (sometimes called 'halvening') event (every jump up is a halvening event). This is where the reward for mining new blocks is halved, meaning miners receive 50% fewer bitcoins for verifying transactions. Bitcoin halvings are scheduled to occur every 210,000 blocks – roughly every four years – until the maximum supply of 21 million bitcoins has been generated by the network.

The coloured dots represent the Bitcoin price variation. The chart suggests a correlation between halvening events and price jumps (each halvening bumps the price higher). This has held true previously in Bitcoin's history.

We can see that price has continued to follow the stock-to-flow of Bitcoin over time. The theory, therefore, suggests that we can project where price may go by observing the projected stock-to-flow line, which can be calculated as we know the approximate mining schedule of future Bitcoin mining.

The stock-to-flow line on this chart incorporates a 365-day average into the model to smooth out the changes caused in the market by the halving events.

So what does this model predict?

S2FX model estimates a market value of the next BTC phase/cluster (BTC S2F will be 56 in 2020–2024) of $5.5T.

This translates into a potential top BTC price of $288K in this cycle. 🥰

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Till next time

The Wealth Gap Team