- Evolutionizing Finance - Week of Oct. 30, 2023
Evolutionizing Finance - Week of Oct. 30, 2023
More bullishness with increased macro factors
Welcome to The Weekly Axis
Bitcoin jumped over $35k this week, and we’re seeing movement in other tokens like SOL and LINK. Macro and Micro factors are affecting the prices.
Catch up on this week’s big crypto stories.
Crypto's Price Surge: Macro Factors, Micro Factors, and Adoption
Bitcoin Macro First
First, let's talk about the recent upward movement in crypto prices. Bitcoin and ETH have been on the rise, along with other tokens like Solana and Chainlink. This surge can be attributed to both macro and micro factors. On the macro side, we're seeing growth in real interest rates, inflation in the macro world, and even geopolitical tensions affecting commodities like oil. In times like these, people tend to seek assets with fixed supply, such as Bitcoin, as a safe haven.
Speaking of Bitcoin, it's worth noting that influential figures like Stanley Druckenmiller and Paul Tudor Jones have been expressing their interest in it. Druckenmiller, who invests in gold, acknowledged that younger generations are favoring Bitcoin over the traditional precious metal. Meanwhile, Tudor Jones has been a well-known Bitcoin investor for some time now. These endorsements from respected investors highlight the growing acceptance of crypto in the mainstream financial world.
Stanley Druckenmiller & PTJ.
Listen until the end.
— Dylan LeClair 🟠 (@DylanLeClair_)
Oct 30, 2023
We still have ETF discussions, although not the same excitement we saw from the previous weeks with the speculation about the ticker symbol. This is one on the huge factors that may affect demand for bitcoin.
Something we will call more attention to in future newsletters is the halving in April. This is, according to the Bitcoin Core Code and the issuance and monetary policy, when the block reward will be cut in half. Without going into too much technical detail, the amount of new bitcoin in the world will start to decrease by 50% starting in April 2024. '
8 years ago:
• 3,600 new #BTC per day
• Less than $1 billion #BTC daily on-chain volume
• #BTC price: $325
4 years ago:
• 1,800 new #BTC per day
• $11 billion #BTC daily on-chain volume
• #BTC price: $9,261
• 900 new #BTC per day
• $32 billion #BTC daily on-chain… twitter.com/i/web/status/1…
— Juan Leon (@singularity7x)
Nov 1, 2023
Adoption - SOL and LINK
Now, let's shift our focus to Solana. This blockchain platform has been gaining traction due to its faster smart contract capabilities compared to Ethereum. While it has faced some uptime issues in the past, recent developments have improved its efficiency and stability. As a result, we're witnessing increased adoption and the SOL token's impressive 80% surge in value over the past few weeks. This demonstrates the importance of adoption as an investment thesis for tokens like Solana.
What Does this Mean for Financial Professionals?
As financial advisors, it's crucial for us to understand these investment theses and how they differ from one another. We need to grasp the macro and micro factors driving the demand for crypto assets. This knowledge will enable us to have meaningful conversations with our clients and make informed decisions when it comes to allocating their portfolios. It's not just about speculation; it's about identifying real use cases and integrating crypto into the existing financial system.
In conclusion, the movement in crypto assets is signaling a potential shift in the market. We might be emerging from what we called "crypto winter," and now is the time to deepen our understanding, identify investment opportunities, and assess the risks involved. By staying informed and adapting to this evolving landscape, we can position ourselves as trusted advisors who can guide our clients through the exciting world of crypto and blockchain.
Advisor Question - Why Only 21 Million Bitcoin
Today, let’s address a question I received from a participant at a conference
You may have heard about this 21 million limit, which plays a crucial role in Bitcoin's store of value and inflation hedge investment thesis. But have you ever wondered if this number can be changed? Well, the answer is not a simple yes or no.
Technically speaking, the supply cap of 21 million Bitcoin can be changed. However, before you start panicking or dismissing Bitcoin as a store of value, let's understand the intricacies involved. The issuance policy of Bitcoin determines the number of new Bitcoins awarded every 10 minutes to miners who process transactions. This reward system starts with 50 new Bitcoins and halves roughly every four years. Currently, it stands at 6.25, and it will continue to decrease until we approach the 21 million mark around the year 2140.
Now, let's talk about how this affects you as a financial professional. The possibility of changing the supply cap relies on a Bitcoin improvement proposal (BIP) that would need to be discussed and voted on by the core Bitcoin developers and miners. However, here's the catch – changing the supply cap would likely have a detrimental effect on the value of Bitcoin.
Think about it – Bitcoin's value is intricately tied to the belief that the supply is limited. If we were to change it once, it would open the floodgates for further alterations, eroding the trust and value of Bitcoin. As financial professionals, you understand the importance of stability and predictability in investments. Any significant change to the supply cap would likely result in a sharp decline in Bitcoin's value, potentially even to zero.
The good news is that the incentive structure within the Bitcoin community is aligned to maintain the supply cap. Miners, developers, and even large financial institutions involved in Bitcoin mining have no incentive to increase the supply. It would directly harm the value of their investments and ETFs tied to Bitcoin. So, while technically possible, the likelihood of the supply cap being changed is incredibly low.
As a financial advisor, it's crucial to have a deep understanding of the dynamics surrounding Bitcoin's supply cap. While it's true that the number can be changed, the incentives and consequences make it highly unlikely. So, when discussing Bitcoin with your clients, remember to emphasize the stability and predictability that the 21 million supply cap brings to this digital asset.
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