Mar 29 • 3M

There Is Not Enough Bitcoin Available In The Market

58
1
 
1.0×
0:00
-3:27
Open in playerListen on);
Episode details
1 comment

If you are not a subscriber of The Pomp Letter, join 215,000 other investors who read my personal opinion on finance, technology, and bitcoin each morning.

To investors,

It is usually very difficult to predict why and when bitcoin’s price may move up or down. With the benefit of hindsight, this analysis becomes much easier. A great example is the bitcoin move from $10,000 to $64,000 during September 2020 into March 2021.

We were in the heart of the pandemic and the central bank was engaged in historic levels of monetary stimulus. In May of 2020, we also had experienced the bitcoin halving, which brought the daily incoming supply to 900 bitcoin. This set the stage for what would become one of the most epic run ups in bitcoin price.

The bitcoin halving created a supply shock, but a lesser known fact is that we saw a demand shock in Q3 and Q4 of 2020. First, Michael Saylor and MicroStrategy started to buy billions of dollars of bitcoin. At the same time, hedge funds and family offices were piling billions of dollars into the GBTC arbitrage trade.

This was noteworthy because MicroStrategy was exclusively a buyer in the market - they have no intentions of ever selling their bitcoin. GBTC is similar in that they have no redemption functionality, which means that they can only buy and there is no ability for the ~ 3% of circulating supply held within their fund to be returned to the market.

While these demand shocks were playing out, bitcoin holders were making the bitcoin supply highly illiquid. Nearly 65% of the circulating supply of bitcoin, as of September 2020, hadn’t moved in over a year. Supply shock plus demand shock means that the bitcoin price had to go up to accommodate everyone. This is exactly why bitcoin rose from ~ $10,000 to $64,000 from September 2020 to March 2021.

So what exactly does that have to do with the current bitcoin market?

Well, it appears we are watching the same situation play out again. Bitcoin’s illiquid supply is actually the highest it has ever been.

The amount of bitcoin sitting on crypto exchanges, which could be sold into the market at a moment’s notice, is sitting at a multi-year low.

As these market is becoming more illiquid, there is a significant increase in demand happening at the same time. Most notably, the Terra ecosystem is purchasing billions of dollars of bitcoin to put in the reserves of their UST stablecoin.

When you have an illiquid market meeting a persistent bid of approximately $125 million in daily demand, the price has to move upwards to accommodate everyone. To put this in perspective, Terra is purchasing approximately 300% of the daily incoming supply of bitcoin issuance.

The bitcoin miners are currently being paid about $43 million a day to secure the network via the block reward. Terra is purchasing $125 million a day or so. Quite literally, there just isn’t enough bitcoin available to satisfy demand and therefore the price is rising at a steady pace.

History is not a perfect guide for the future, but the bull run of 2020-2021 is indicative of what can happen when the demand shock overwhelms the available amount of bitcoin. If you’re not paying attention to market dynamics, now would be a good time to start watching closely.

Hope everyone has a great start to your day. Talk to you tomorrow.

-Pomp

If you are not a subscriber of The Pomp Letter, join 215,000 other investors who read my personal opinion on finance, technology, and bitcoin each morning.


SPONSORED: Bitcoin 2022 is the LARGEST Bitcoin event in the world that takes place April 6th - 9th in Miami Beach, Florida. All four days will be jammed-packed with exclusive content, exciting announcements and an incredible lineup of bitcoin speakers, artists and leaders.

Day 1 is INDUSTRY DAY for enterprising bitcoiners who are looking to build a business or career within the ecosystem. Days 2 and 3 are general conference days featuring hundreds of speakers. The conference caps off on the fourth day with the world's first and largest Bitcoin Music Festival - Sound Money Fest. Last year’s conference SOLD OUT and this year’s is on pace to be 3x larger so make sure you grab your tickets before it's too late.

Click here to learn more. Ticket prices increase on APRIL 1st, use promo code POMP for 10% off and I will see you in Miami.


Podcast — Anthony Pompliano

Blake Masters is the former COO of Thiel Capital and the Co-Author of "Zero To One". He is now running for the U.S. Senate in the state of Arizona.

In this conversation we discuss the economy, Bitcoin, individual rights and how Blake intends to provide solutions to the American people if elected to the Senate.

Listen on iTunes: Click here

Listen on Spotify: Click here


Here Is Exactly Why Bitcoin Price is Going Up


Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

  • Bitcoin 2022 is the largest Bitcoin event in the world that takes place 4/6 - 4/9 in Miami Beach. Click HERE to learn more and use promo code POMP for 10% off.

  • Fundrise is largest direct-to-investor real estate investment platform. Go to Fundrise.com/Pomp today and get $10 when you place your first investment. 

  • Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

  • Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. Download the Brave privacy browser at brave.com/Pomp today.

  • Abra lets you trade, borrow, and earn interest on crypto. Earn up to 13% interest on USD stablecoins or crypto, borrow USD stablecoins, and trade in 110+ cryptocurrencies in a simple, secure app. Download Abra and get $15 in free crypto when you fund your account.

  • FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

  • Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

  • Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in digital assets inside your IRA. Visit choiceapp.io/pomp 

  • BlockFi provides financial products for crypto investors. Those products include BlockFi Wallet, no fee Trading, crypto collateralized Loans and the World's First Crypto Rewards Credit Card. To get $75 back on the first swipe of your BlockFi Rewards Credit Card, sign up today at http://www.blockfi.com/Pompcc 

  • LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

  • Okcoin is the first licensed exchange to bring new cryptos to market. To get started, and go to okcoin.com/pomp 

  • Exodus is the world’s leading desktop, mobile, and hardware crypto wallets, with over 150 assets. Founded in 2015 to empower people to control their wealth. Visithttp://exodus.com/pomp today.


You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.