Big fan, great work, highly appreciated. But global supply (and global demand), at any given time, don't consist only of the daily new issued Bitcoins, do they? Moreover, there are much more BTC already in existence, vs daily issued BTC, that might be / are offered for trade = much larger lever for supply than the daily new BTC? Global trading volume far exceeds 900M per month, anyway. So what am I not getting here?
Great questions here, Frank. You're right, there's a ton more noise on top of this. But this is what it all nets out to, on average. Trade volume is misleading. You can buy $100B of Bitcoin and sell $100B of Bitcoin in a month... that's $200B in volume, but $0 in net demand.
So what ultimately matters is net incoming demand. People turning $s into Bitcoin and holding. That's ~$900M per month right now (underneath lots of noise), since price is going sideways.
On a similar wave length, if the Bitcoin network sees more adoption and the mempool stays deep in the coming cycle, like it is now with this recent sh*tcoin...*cough* Ordinals craze. Then the total block subsidy (fees + block reward) may come out higher despite the block reward halving due to the significantly higher fees. Miners would have more BTC to sell to fund or expand operations.
@Jesse, would love to get your thoughts on what effect that might net out to be.
That's a really interesting point, HM. Because you're right, Ordinals craze causes higher block rewards for miners, who would then turn around and sell that Bitcoin... which would add to the supply side...
However, the ordinals side adds equally to the demand side. (For the most part, these guys are buying Bitcoin in order to mint an Ordinal NFT with those sats.) So in that sense, for as long as the craze continues, today's extra sell-pressure from miners is offset by yesterday's extra buy pressure from Ordinal creators.
Granted, some portion of Ordinal minters are using their Bitcoin savings to do it... in which case the Ordinals craze is re-distributing those sats to miners to sell to the market to stronger-handed sat stacking plebs.
Net is NFTers get poorer, miners get richer, and sat stackers put those sats in cold storage.
Higher fees simply means there were higher adoption/demand for block space, and of course sats to transact with in the first place. Miners get higher rewards sure, and when they sell it's a redistribution of existing supply (over simplified) at the time into the market. If fees stay elevated and even go up in the next bull cycle, that just means demand is outpacing.
The only thing that changes the overall supply trend is the issuance, which will be halved in about a year.
In simple jack terms, supply down, demand up = number go up. That ma ma makes me happy.
thanks Daniel! and yes, me too - most people will only react to the changed scarcity of Bitcoin. but those of us who can see it coming can proactively act accordingly :)
Thanks Clark! Yes, I'm glad that resonated - I wanted to try to make it as plainly tangible as it can be. It's just code, and that code makes it inevitable
I agree, the paper bitcoin during 2021, which was exposed via all the fraud that came to light in 2022 via Celsius, Voyager, 3AC, BlockFi, and FTX absorbed customer demand, but didn’t withdrew supply from the market.
I believe the 2021 top would have been considerably higher without this.
Partly I think that last cycle "should" have been more like 15x, rather than 8x. (Didn't happen because of China mining ban + Fed pivot to QT)
The other consideration is that reducing amplitude of post-halving bull markets won't continue at the same rate, as it bumps up against 1) how early it is in the adoption curve, and 2) the scale of monetary printing this decade. IMO, at some point bull markets start getting bigger again... though that's probably a cycle or two away still
Big fan, great work, highly appreciated. But global supply (and global demand), at any given time, don't consist only of the daily new issued Bitcoins, do they? Moreover, there are much more BTC already in existence, vs daily issued BTC, that might be / are offered for trade = much larger lever for supply than the daily new BTC? Global trading volume far exceeds 900M per month, anyway. So what am I not getting here?
Great questions here, Frank. You're right, there's a ton more noise on top of this. But this is what it all nets out to, on average. Trade volume is misleading. You can buy $100B of Bitcoin and sell $100B of Bitcoin in a month... that's $200B in volume, but $0 in net demand.
So what ultimately matters is net incoming demand. People turning $s into Bitcoin and holding. That's ~$900M per month right now (underneath lots of noise), since price is going sideways.
Great points, and thanks for answering Jesse.
On a similar wave length, if the Bitcoin network sees more adoption and the mempool stays deep in the coming cycle, like it is now with this recent sh*tcoin...*cough* Ordinals craze. Then the total block subsidy (fees + block reward) may come out higher despite the block reward halving due to the significantly higher fees. Miners would have more BTC to sell to fund or expand operations.
@Jesse, would love to get your thoughts on what effect that might net out to be.
That's a really interesting point, HM. Because you're right, Ordinals craze causes higher block rewards for miners, who would then turn around and sell that Bitcoin... which would add to the supply side...
However, the ordinals side adds equally to the demand side. (For the most part, these guys are buying Bitcoin in order to mint an Ordinal NFT with those sats.) So in that sense, for as long as the craze continues, today's extra sell-pressure from miners is offset by yesterday's extra buy pressure from Ordinal creators.
Granted, some portion of Ordinal minters are using their Bitcoin savings to do it... in which case the Ordinals craze is re-distributing those sats to miners to sell to the market to stronger-handed sat stacking plebs.
Net is NFTers get poorer, miners get richer, and sat stackers put those sats in cold storage.
Thanks Jesse!
I see your point.
Higher fees simply means there were higher adoption/demand for block space, and of course sats to transact with in the first place. Miners get higher rewards sure, and when they sell it's a redistribution of existing supply (over simplified) at the time into the market. If fees stay elevated and even go up in the next bull cycle, that just means demand is outpacing.
The only thing that changes the overall supply trend is the issuance, which will be halved in about a year.
In simple jack terms, supply down, demand up = number go up. That ma ma makes me happy.
The next bull market is going to be lit.
Nailed it! And yep, I think it will be. Especially if the Fed pivots back to QE at the same time as the halving arrives. Could be wild
Great article. Very clear and straight forward. Thanks 👍
thanks Wendy! glad you liked it and appreciate your support!
Wonderful read, i'm excited.
thanks Daniel! and yes, me too - most people will only react to the changed scarcity of Bitcoin. but those of us who can see it coming can proactively act accordingly :)
I especially like the inclusion of relevant code and explanation of what it does (non-programmer here).
Thanks Clark! Yes, I'm glad that resonated - I wanted to try to make it as plainly tangible as it can be. It's just code, and that code makes it inevitable
They'll say we were lucky
Croesus tha man
Great work 👏
Thanks Chris! Indeed they will - but we'll know
Good article and graphics. Thank you!
The 3 forces that held price back - won’t these forces occur in some other form during every future cycle?
Great article!
Also mentioning other potential factors that prevented blow off top:
- launch of futures BITO ETF and paper shorting suppressing price
- FTX and others fraudulently selling paper BTC and not spot BTC like they should have been, thus absorbing demand
If I’m missing others or misstated the above pls lmk! :)
I agree, the paper bitcoin during 2021, which was exposed via all the fraud that came to light in 2022 via Celsius, Voyager, 3AC, BlockFi, and FTX absorbed customer demand, but didn’t withdrew supply from the market.
I believe the 2021 top would have been considerably higher without this.
It is also why self-custody is so critical.
We. Are. So. Early.
Do GIFs work here? I'm new. I'll try.
https://tenor.com/bVKiZ.gif
Meh, it's just the link to the gif. It's a "tick tock, next block" gif.
Awesome and informative article. thank you!
Here is our interview with the creator of Bitcoin, Satoshi Nakamoto:
https://joshketry.substack.com/p/satoshi-lives-an-exclusive-interview
Thanks Johannes! Appreciate your support
Partly I think that last cycle "should" have been more like 15x, rather than 8x. (Didn't happen because of China mining ban + Fed pivot to QT)
The other consideration is that reducing amplitude of post-halving bull markets won't continue at the same rate, as it bumps up against 1) how early it is in the adoption curve, and 2) the scale of monetary printing this decade. IMO, at some point bull markets start getting bigger again... though that's probably a cycle or two away still