ShortSimon on Nostr: I feel like the BTC price is about to take a bath! I know that I am not going to be ...
I feel like the BTC price is about to take a bath!
I know that I am not going to be popular for saying this on Nostr, but please hear me out.
My reasoning is that there is too much expectation built into the price right now.
1. Every man and his dog, thinks that we are going to have an upwards price spurt in the 6 months post halving. Everyone that would be buying over the next few months to make that happen has already bought.
2. New people into the market don't self custody. Back in 2013, the people that discovered Bitcoin were the type of people that would study and learn how to self custody. We are beyond the inner circle now and most new adopters are going to see the ETF as the best way to hold Bitcoin.
3. The supply change as a result of the halving is not that big anymore. Relative to the total amount of bitcoin already mined, the impact on supply of a halving is reduced.
4. There is an unknown amount of new supply of Bitcoin IOUs. Anyone that buys bitcoin and keeps it with a custodian is getting a bitcoin IOU. Funds held on exchanges, within ETFs or in custodial wallets are all basically just IOUs. There is no limit to the number of these that can be created. Re-hypothication is real, it has been going on in the gold market for decades.
5. In past cycles interest rate cuts have been positive move for Bitcoin. The fed has clearly signaled that interest rate cuts are coming and the bitcoin price just isn't responding to it.
6. The fact that so many people expect the price to go up means that there it likely to be a lot of leverage in the system. When the expected price spurt does not arrive, some of that leverage will get unwound. For some people this will be by choice, for others it will be a liquidity event.
7. The mining network is now less profitable than it was at the bottom of 2022. The hash rate has gone up by more than the bitcoin price since then and we have had a halving. The ordinals boom has been and gone and they are no longer paying the miners for assets that have no intrinsic value. The miners are going to have to consolidate if the price does not go up some time soon. They are sitting on a lot of bitcoin that they have mined and chosen not to sell. They are, by their very nature, leveraged players in this industry and when they chose to keep their working capital in bitcoin, they are increasing their leverage. Their costs are in fiat and revenues are in bitcoin. A squeeze is not going to pretty for them and it will feed upon itself as they are forced to sell.
I hate to say it, but I think that it is different this time. The 4 year cycle is over.
The good news is, that this could be a new era of relative price stability for bitcoin. If that is the case, then it could smooth the path to adoption as a currency, as price volatility is a major barrier for many people.
Bitcoin acting as a currency is the real route to price increases in the long run. Let's keep building.
I know that I am not going to be popular for saying this on Nostr, but please hear me out.
My reasoning is that there is too much expectation built into the price right now.
1. Every man and his dog, thinks that we are going to have an upwards price spurt in the 6 months post halving. Everyone that would be buying over the next few months to make that happen has already bought.
2. New people into the market don't self custody. Back in 2013, the people that discovered Bitcoin were the type of people that would study and learn how to self custody. We are beyond the inner circle now and most new adopters are going to see the ETF as the best way to hold Bitcoin.
3. The supply change as a result of the halving is not that big anymore. Relative to the total amount of bitcoin already mined, the impact on supply of a halving is reduced.
4. There is an unknown amount of new supply of Bitcoin IOUs. Anyone that buys bitcoin and keeps it with a custodian is getting a bitcoin IOU. Funds held on exchanges, within ETFs or in custodial wallets are all basically just IOUs. There is no limit to the number of these that can be created. Re-hypothication is real, it has been going on in the gold market for decades.
5. In past cycles interest rate cuts have been positive move for Bitcoin. The fed has clearly signaled that interest rate cuts are coming and the bitcoin price just isn't responding to it.
6. The fact that so many people expect the price to go up means that there it likely to be a lot of leverage in the system. When the expected price spurt does not arrive, some of that leverage will get unwound. For some people this will be by choice, for others it will be a liquidity event.
7. The mining network is now less profitable than it was at the bottom of 2022. The hash rate has gone up by more than the bitcoin price since then and we have had a halving. The ordinals boom has been and gone and they are no longer paying the miners for assets that have no intrinsic value. The miners are going to have to consolidate if the price does not go up some time soon. They are sitting on a lot of bitcoin that they have mined and chosen not to sell. They are, by their very nature, leveraged players in this industry and when they chose to keep their working capital in bitcoin, they are increasing their leverage. Their costs are in fiat and revenues are in bitcoin. A squeeze is not going to pretty for them and it will feed upon itself as they are forced to sell.
I hate to say it, but I think that it is different this time. The 4 year cycle is over.
The good news is, that this could be a new era of relative price stability for bitcoin. If that is the case, then it could smooth the path to adoption as a currency, as price volatility is a major barrier for many people.
Bitcoin acting as a currency is the real route to price increases in the long run. Let's keep building.