Bitcoin Is Getting Stronger And More Compelling
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The data around Bitcoin continues to become more compelling.
Below I dig into the fundamentals, the investment case, and what I see as the single most important data point. There are plenty of risks still associated with the decentralized digital currency, but I personally believe gaining exposure, either as an individual or institution, is the best risk/reward opportunity in technology today.
There are only 21,000,000 bitcoins that will ever exist. As of yesterday, a little more than 17,761,000 have been mined. Of those 17,761,000+ bitcoin, 661,862 were mined in the last 12 months (see chart above).
The current hash rate on the Bitcoin network has again reached all-time high levels, making the network more secure than ever before. The hash rate has seen a 10X+ increase over the last 24 months and it wouldn’t be surprising to see this accelerate as we go deeper into a new bull market.
The adjusted daily transaction volume on the Bitcoin network is now consistently surpassing $3 billion. If this type of transaction volume persists, it would put Bitcoin on an annualized transaction volume run rate of over $1 trillion. To put that in context, Visa does ~$8 trillion in annual transaction volume and Mastercard does ~$4 trillion.
And finally the most important fundamental metric in all of Bitcoin — daily active addresses. On Saturday, the Bitcoin network saw more than 1,000,000 active addresses participate in a transaction in a single 24 hour period. This level of activity hasn’t been seen since November 2017 during the height of the last bull market.
In my opinion, daily active addresses is the most important data point in Bitcoin because it shows how many unique network participants (with known exchange wallets removed) are transacting the decentralized digital currency. As John Biggs of Coindesk pointed out, 1,000,000 daily active addresses is 1/14th the number of rides (transactions) that Uber does in a single day. Slowly, but surely, Bitcoin continues to be used by more people around the world.
Bitcoin broke through the $9,000 price point over the weekend and is currently trading at just under $9,200. This continues the rapid appreciation in price that Bitcoin has experienced this year.
While most detractors use 2018’s bear market as an argument for avoiding the digital currency, the facts tell a very different story. Currently, buying Bitcoin and holding it till today would have been a profitable trade on the following timelines:
In fact, the statistics show that Bitcoin has not only been the best performing asset over the last decade, but if you bought and held it till today, only a 90 day period of time is still unprofitable (Dec ‘17 - Feb ‘18).
This leads us to the question of whether the macro argument for Bitcoin is still valid. I believe Bitcoin is a non-correlated, asymmetric return asset that benefits from supply and demand economics. The data from May appears to agree with that belief.
Bitcoin was up 55% in the month of May, while holding an inverse correlation to the S&P 500 and to gold. The BTC/S&P 500 correlation was -0.9 and the BTC/Gold correlation was -0.8.
According to modern portfolio theory, the addition of a non-correlated, asymmetric return asset should have positive effects on a portfolio. Based on Grayscale’s simulated 60/40 portfolio through March 31, 2019, you can see a significant improvement in overall return performance with a relatively small allocation to Bitcoin.
The data is hard to argue with. The fundamentals are improving and Bitcoin is getting more scarce, more secure, more popular, and more compelling. Eventually everyone will realize this. It is no longer a question of “if,” but “when.”
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Ben Mezrich is the author of Bitcoin Billionaires, a story about Cameron and Tyler Winklevoss' foray into digital money. Ben has also written multiple books, including the books that became The Social Network movie and 21.
In this conversation, Ben and I discuss:
How he found the Bitcoin Billionaires story
What he learned while writing the book
Why he's fascinated by Bitcoin
What he believes the future of money holds
I really enjoyed this conversation with Ben. Hopefully you enjoy it too.
Here are my tweets from yesterday:
Interested in crypto research? Look no further. The premier research firm in the space, Delphi Digital, has two subscription offerings for individuals and institutions alike. Take a look at their Bitcoin and Ethereum reports to get a taste of their analysis. [Click here]
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Nothing in this email is intended to serve as financial advice. Do your own research.