Bitcoin Market Intelligence - Issue #17- Market Update and monetary supply: Euro vs Bitcoin (Published: November 29,2022 on Revue)
Note: This is an old issue which has originally been published on Revue on November 29, 2022
Hey everyone,
In today’s newsletter will give more of an update on the indicators from the last issue and what has happened since then. But First some remarks on bitcoin’s price performance in relation to other financial assets.
Bitcoin’s performance relative to other assets
Bitcoin has been performing relatively well since the 75bps interest rate hike of the FED on September 22. Even after the latest FOMC meeting on November 03 and another interest rate hike of 75bps, Bitcoin’s price started to outperform other assets. This, however, quickly evaporated with FTX blowing up.
While it started to look like Bitcoin would gain some ground vs other assets, the market now has to stomach the disaster that unfolded and still unfolds.
Overall this shows the severity of the impact of FTX going bankrupt.
Thanks, Sam, for the cheap sats! But also, WTF?
Graph 1: Price performance since 22 Sept. FOMC meeting (Source: Tradingview)
Graph 2: Price performance since 03 Nov. FOMC meeting (Source: Tradingview)
Table 1: Price performance different time horizons (Source: Tradingview)
Net realized losses
In the previous issue, I already talked about the net realized losses. While around the time of writing of the previous issue, net realized losses have already been substantial e.g. on Wednesday 09 with $1.9b, on Friday, they reached a new all-time high some days later.
On November 18, they reached an all-time high denominated in US dollars of $4.3b. The second biggest one was on June 13, worth $4.2b.
Note: As bitcoin’s price is trending up over time, net realized losses tend to also increase over time. But even going by that, this was quite a significant capitulation event.
Graph 3: Bitcoin net relized profit/loss (Source: glassnode)
Medium and long-term holders
With net realized losses reaching a new all-time high, the percent of the total supply last active 6+ months ago has also come down more significantly to 77% from 81% on Oct. 20 (at the time of writing of the last issue, it stood at 79%).
Graph 4: Percent supply last active 6+ months ago (Source: glassnode)
Real trading volume and on-chain activity
We have seen real trading volume pick up after the FTX news came out. However, it dropped back to low levels shortly thereafter. Similarly, the value transacted on-chain increased but is now declining again.
Graph 5: Bitcoin real trading volume (Source: messari.io)
Graph 6: Bitcoin on-chain transaction volume (Source: Bytetree)
Hashrate
In the last issue, I have written that we are seeing the hashrate flatten and the first signs of it declining.
Since then, we have actually started to see it come down a bit. I would not be surprised if we see a further decline of the hashrate in the near term, as miners are increasingly coming under pressure at current prices.
Graph 7: Bitcoin hashrate (Source: CryptoQuant)
ECB and money supply growth
It has been some time since I have been dunking on the ECB on Bitcoin Market Intelligence. So I am going to close the newsletter with that.
While month-over-month money supply growth has already been negative for the US dollar since earlier this year, October was the first month this happened for the euro, irrespective of whether you look at M2 or M3.
Graph 8: Money supply M3 euro (Source: Tradingeconomics)
Graph 8: Money supply M3 US dollar (Source: St. Louis Fed)
Money supply growth for the Euro in October since a year ago:
M2 +5.2% (MoM -0.47%)
M3 +5.3% (MoM -0.45%)
In comparison, US numbers:
M2 +1.3% in October (MoM -0.41%)
M3 +2.6% in September* (MoM -0.60%)
*October numbers for M3 not released yet
Relative to the US dollar, this is not a good look. In particular, looking at the year-over-year growth numbers, which are still more than twice as high for the euro than for the US dollar.
Meanwhile, Lagarde has stated again how “committed” they are to fighting inflation.
Does anyone seriously believe her?
I do not know about you, but I am grateful that Bitcoin exists. Money with a predictable supply schedule with a growth rate that by design goes down over time.
One that does not depend on unelected bureaucrats adjusting the monetary lever.
Graph 9: Bitcoin supply issuance rate (Source: glassnode)
Bitcoin currently has an issuance rate of less than 2%, which is guaranteed to go down over time as more bitcoin are discovered, particularly as block rewards halve every 210,000 blocks (roughly every four years). As it currently stands, the bitcoin mined per block will drop from 6.25 to 3.125 in less than 600 days.
In times of uncertainty, Bitcoin and its supply schedule are among the few certainties out there, and this is why Bitcoin will prevail even if sentiment may be very negative nowadays and Bitcoin may be declared dead, AGAIN!
Bitcoin is dead! Long live Bitcoin!
Jan Wüstenfeld
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This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.