As my previous post pointed out (www.russell-clark.com/p/bitcoin-update) - short interest in bitcoin has mainly been squeezed out, and further appreciation would need to be driven by value creation.
I watched something the other day that I found interesting - a valuation model that Raoul Pal developed that appears to work not only for BTC but also for other crypto assets. It's a metcalfe's law analysis that suggests that value grows along with adoption so long as people are actually transacting. He explains it & shows the charts in this vid at 13:40-16:00: https://www.youtube.com/watch?v=OAA33NL3mBk&list=PL33zxjMywve1AS0EDTNHHUt0pi9PZHF5C&index=37
Being a lawyer, it's not within my skillset to analyse this properly, but from what I understand, as long as adoption continues, the price should continue to rise over time (makes sense). However, not sure what happens when network adoption starts to plateau and/or transacted value on the BTC network stops growing (for example if transactions move to lower cost solutions like the layer 2 lightning network). Some have suggested that at the adoption saturation point the price just plateaus.
I would be interested in your thoughts on Raoul's model (appreciating though that your time is valuable and your focus is probably more on other things...).
Keep an eye on the decentralized stablecoin UST linked to the Terra protocol. It’s experienced rapid growth in TVL and could be a more scalable future solution.
Don't understand the graph of BTC price vs USDT and USDC volumes. Previous correlation has broken down... but what is the conclusion we are supposed to draw from this? BTC price will play catch up on the downside? Or correlations is just broken for good now? Thanks.
Sadly no conclusion at the moment... but previously bitcoin and stablecoin volume and market cap all traded together... but now they dont. If volume is more important than market cap then bitcoin will fall further...
Could be that capital is now flowing from the stablecoins to alt/shit coins as opposed to BTC. BTC could fall relative to USD or fall relative to other crypto assets like ETH / SOL / LUNA while holding steady or rising vs USD.
All possible. Plan to do some more work on crypto in the new year. The original post just highlighted how short interest had collapsed in bitcoin which I supplemented with comments on stablecoin volume...
hey Russell. definitely echo the comments of look beyond USDT, USDC has grown alot, UST is now growing very fast (leading the algorithmic stablecoin space), as are the EUR stablecoins - since the industry knows SEC et al has USDT in their sights for obliteration. Interesting SI has dropped, since the massive consensus view was for a December rally to the moon across digital assets.
Good point - but I wonder why tether market cap has not fallen? It would seen very easy to switch to a stablecoin with less legal issues... It also makes the lackluster performance of bitcoin harder to understand, if liquidity across all stablecoins has risen significantly
USDT is still the preferred cross on many exchanges and dealer desks, you get a sense of this looking at its velocity versus other stablecoins. As money flows into crypto, USDT prevalence secures demand (its not clear that significant money is leaving the asset class yet). Liquidations over Nov especially, also Dec explain some of the BTC performance. Probably also good to look at total crypto market cap as BTC is considered the low beta digital asset now.
Interesting post Russell. FWIW here is my take. BTC has been highly correlated with US 10 year interest rates (though with a variable lead/lag) and that makes sense if you believe that Bitcoin is correlated with global liquidity. Regarding Tether I would note that USDC and other stable coins are going in popularity as well.
Have updated the post to include USDC volume with Tether - makes no difference to conclusion
Hi Russell,
I watched something the other day that I found interesting - a valuation model that Raoul Pal developed that appears to work not only for BTC but also for other crypto assets. It's a metcalfe's law analysis that suggests that value grows along with adoption so long as people are actually transacting. He explains it & shows the charts in this vid at 13:40-16:00: https://www.youtube.com/watch?v=OAA33NL3mBk&list=PL33zxjMywve1AS0EDTNHHUt0pi9PZHF5C&index=37
Being a lawyer, it's not within my skillset to analyse this properly, but from what I understand, as long as adoption continues, the price should continue to rise over time (makes sense). However, not sure what happens when network adoption starts to plateau and/or transacted value on the BTC network stops growing (for example if transactions move to lower cost solutions like the layer 2 lightning network). Some have suggested that at the adoption saturation point the price just plateaus.
I would be interested in your thoughts on Raoul's model (appreciating though that your time is valuable and your focus is probably more on other things...).
With thanks
MK
Keep an eye on the decentralized stablecoin UST linked to the Terra protocol. It’s experienced rapid growth in TVL and could be a more scalable future solution.
Don't understand the graph of BTC price vs USDT and USDC volumes. Previous correlation has broken down... but what is the conclusion we are supposed to draw from this? BTC price will play catch up on the downside? Or correlations is just broken for good now? Thanks.
Sadly no conclusion at the moment... but previously bitcoin and stablecoin volume and market cap all traded together... but now they dont. If volume is more important than market cap then bitcoin will fall further...
Could be that capital is now flowing from the stablecoins to alt/shit coins as opposed to BTC. BTC could fall relative to USD or fall relative to other crypto assets like ETH / SOL / LUNA while holding steady or rising vs USD.
All possible. Plan to do some more work on crypto in the new year. The original post just highlighted how short interest had collapsed in bitcoin which I supplemented with comments on stablecoin volume...
hey Russell. definitely echo the comments of look beyond USDT, USDC has grown alot, UST is now growing very fast (leading the algorithmic stablecoin space), as are the EUR stablecoins - since the industry knows SEC et al has USDT in their sights for obliteration. Interesting SI has dropped, since the massive consensus view was for a December rally to the moon across digital assets.
Good point - but I wonder why tether market cap has not fallen? It would seen very easy to switch to a stablecoin with less legal issues... It also makes the lackluster performance of bitcoin harder to understand, if liquidity across all stablecoins has risen significantly
USDT is still the preferred cross on many exchanges and dealer desks, you get a sense of this looking at its velocity versus other stablecoins. As money flows into crypto, USDT prevalence secures demand (its not clear that significant money is leaving the asset class yet). Liquidations over Nov especially, also Dec explain some of the BTC performance. Probably also good to look at total crypto market cap as BTC is considered the low beta digital asset now.
Interesting post Russell. FWIW here is my take. BTC has been highly correlated with US 10 year interest rates (though with a variable lead/lag) and that makes sense if you believe that Bitcoin is correlated with global liquidity. Regarding Tether I would note that USDC and other stable coins are going in popularity as well.
Yes good point - will look at USDC as well.