Bitcoin's Market Cap Is Better Reference Than Price

  
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To investors,

Bitcoin has continued a breathtaking run and eclipsed $17,000 per bitcoin this morning. This puts the year-to-date appreciation of the digital currency at more than 135% against the dollar, while also being up 88% since the halving in May 2020.

All eyes are now on the all-time high price of $20,000. As a reminder, bitcoin moved from $10,000 to $20,000 in only 10 days in 2017. The digital currency spent less than 72 hours at that level before experiencing a nasty 80%+ drawdown that took almost an entire year to play out. The bears were out in full force during this entire drawdown. They were screaming that bitcoin was going to $0. They were telling everyone bitcoin was nothing more than Chuck E. Cheese tokens.

Well, in a wild twist of fate, oil futures went negative and Chuck E. Cheese went bankrupt, yet bitcoin still didn’t go to $0. In fact, it has come back with a vengeance. We are now sitting at $17,000 in price, which is leading many people to start the countdown to a new all-time high. The milestone they are waiting for is $20,000, but I’m not convinced that is the best way to evaluate an all-time high in price.

Nic Carter, from Castle Island Ventures, has been all over this for weeks:

Additionally, if we take a look at the new www.casebitcoin.com site, we can see a few other great data points:

This is important because I believe the market cap metric is much more important than the price of a single bitcoin. The supply slowly increases, so total market cap better represents where the market is over time. We are currently sitting at just over $315 billion — only 3 days in the history of bitcoin have ever been higher.

Price is not the only metric to watch either. Nic Carter put out a piece that hit on a bunch of other metrics that are at an all-time high, including wallet addresses with at least $10 in them, open CME futures interest, realized capitalization, bitcoin options open interest, bitcoin priced in various currencies other than USD, bitcoin held by Grayscale, and stablecoin free float. I highly recommend reading his write up here.

While the price, and many other metrics, are aggressively accelerating, there is much less discussion about bitcoin in the mainstream media and on social media platforms. Yesterday, Bloomberg wrote an article saying that no one is talking about it — the irony is awesome when one of the largest financial media companies writing an article claiming that no one is talking about something.

Additionally, we saw Bitcoin trending on Twitter in the United States this morning as well.

The momentum we are seeing is really strong. I have no clue where short term price movements will go. Bitcoin is a beast — it can increase and decrease in price rapidly. My thesis for the next 12-14 months continues to remain intact. If the mainstream conversation shifts at some point and people start talking about bitcoin like they did in 2017, we could see price movements even larger than I previously anticipated.

It is crucial during euphoric times like this to remember a few simple rules:

  1. Don’t get cocky. The market is the ultimate referee.

  2. Information and data can change quickly. Make sure you’re paying attention.

  3. Be open to changing your mind if you get new information.

  4. The best investors press their winners harder than anyone else.

  5. It is our responsibility to educate and welcome everyone who shows interest in bitcoin, regardless of whether they were previously bearish or not.

Bitcoin will hit a new all-time high in market cap at some point and then eventually hit an all-time high in price. The bears will be proven wrong. The bulls will be vindicated. I’m just not convinced that this will be the end of the story. It still sounds crazy to many, but I believe we are watching the rise of the next global reserve currency. If that happens, we are all still so early.

Have a great day. I’ll talk to everyone tomorrow.

BONUS: I wrote a piece for Polina’s The Profile this weekend on the importance of focusing on HOW to think, rather than WHAT to think. Click here to read.

-Pomp


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THE RUNDOWN:

Jay Clayton Says He Will Step Down Early as Head of the SEC at the End of 2020: Jay Clayton, who has led the Securities and Exchange Commission for the past 3½ years that included a number of major changes in financial markets, said Monday he will step down at the end of the year. “Working alongside the incredibly talented and driven women and men of the SEC has been the highlight of my career,” Clayton said in a statement. His term would have expired in June 2021. Read more.

Airbnb Files to Go Public, Turned a Profit Last Quarter: Airbnb on Monday released its prospectus to debut on public markets. The company allows users to book short-term rentals and experiences while traveling. The company made $219 million in net income on revenues of $1.34 billion last quarter. That was down nearly 19% from $1.65 billion in revenue a year prior. Despite primarily turning net losses, the company has had other occasional quarters of profitability, including the second and third quarters of 2018 and the third quarter of 2019. Read more.

Scaramucci’s $9.2B SkyBridge ‘May Seek Exposure to Digital Assets:’ Anthony Scaramucci’s mega hedge fund, SkyBridge Capital, just gave itself the ability to bet on cryptocurrencies from afar. In a series of filings with the U.S. Securities and Exchange Commission published Friday and Monday, the $9.2 billion asset manager helmed by the one-time spokesman of U.S. President Trump signaled that two of its funds “may seek exposure to digital assets.” The documents are meant to give SkyBridge the green light to invest in other funds that have money in the crypto markets or in the companies supporting the ecosystem. Read more.

IBM Scores Patent on Proposed Blockchain Consensus for Transactions in Multiplayer Games: Tech giant IBM has been granted a patent on a blockchain-based consensus model envisioned for use in handling transactions within multiplayer games with a large user base. The U.S. patent, titled “Gaming consensus protocol for blockchain,” was awarded last week and proposes the model of electing a subset of any game’s users to verify transactions, and then from within that subset choosing a leader to generate a block and broadcast it to the blockchain network.Read more.

Warren Buffett's Berkshire Hathaway makes Big Bets on Drug Stocks: Warren Buffett's Berkshire Hathaway is making a big bet on the health care sector at a time when the Covid-19 pandemic continues to be a major crisis in the United States. Berkshire Hathaway bought new shares in pharmaceutical companies AbbVie, Bristol-Myers Squibb, Merck and Pfizer during the third quarter. Pfizer has a promising coronavirus vaccine in the works, but the company's stock fell Monday after Moderna announced progress for its own vaccine. Read more.


LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE


Yoni Assia is the founder and CEO of eToro, the largest social trading platform in the world. He has been a Bitcoin proponent for almost a decade and was part of the team that built the original colored coins too.

In this conversation, Yoni and I discuss:

  • Institutional services

  • Rise of millennial investor

  • Staking

  • SPACs

  • Renewable energy, sustainable meat, and gene editing

  • Retail investor behavior during recent crypto boom

I really enjoyed this conversation with Yoni. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE


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