Bitcoin's Moment in the Sun is Coming

Just two days ago, Bitcoin’s whitepaper turned 15 years old. Much has happened since those very first days, however, Bitcoin’s original promise of decentralization and independence still stands strong.

Getting here has been no easy path.

Since inception, Bitcoin has faced numerous battles, and seeing it reach this far is in itself a remarkable achievement.

In that timespan, the world has also changed a lot.

The cracks in the global financial and monetary system are becoming ever more evident, and the need for Bitcoin stands higher than ever.

In fact, one could argue that there’s a perfect storm brewing for Bitcoin, and in this post, I’ll try to highlight just a few of those instrumental drivers I think will lead to what I call the “Bitcoin moment”.

U.S National Debt Continues to Skyrocket

As highlighted in numerous letters already, the rising levels of the U.S. national debt is a major concern, which continues to receive much less attention than it should.

• Debt/GDP ratio Exceeds 120%: Since the debt ceiling was lifted in May, debt levels have been increasing at an average of $1 trillion per month, skyrocketing to $33 trillion by the end of September.

  
  

• Deficit-to-GDP ratio Reaches 6%: Between October 2022 to August 2023, the U.S budget deficit increased to $1.5 trillion, marking a 61% increase compared to the previous fiscal year.

  
  

• Net international investment position at -65%: The latest statistics from the U.S. Bureau of Economic Analysis (BEA) revealed that the NIIP plummeted by $1.26 trillion in Q2 2023.

  
  

Coincidentally, all of these alarming developments are occurring at a time when the U.S. is involved in two major international conflicts.

Flight to Harder Assets

If the U.S. national debt continues to spiral out of control, it becomes harder and harder for the Fed to do anything to tie down inflation. The best weapon the Fed can use against inflation is to raise rates. If rates move too high, the debt burden will eventually become too great for the state to handle without issuing more currency. If the Fed issues more currency then a debasement of the Dollar is bound to happen.

Caught between the devil and the deep blue sea.

The Fed of course knows this, and this is why it was no surprise when they announced yesterday in their press conference to do absolutely nothing. Even the speech given was very similar to the one given last time, likely to avoid room for rhetoric interpretation.

However, should things at some point get nasty, the only hail mary the Fed can throw is to print more money. This has happened on several previous occasions, most notably during the COVID crisis recovery.

The Bitcoin Moment Bound to Come

Should that happen, there will be a flight to harder assets such as commodities, land, and equities which would all stand to increase in value. To quote Paul Tudor Jones, there’s a big probability that “Bitcoin will be the fastest horse in the race” once the starting gun sounds.

Here’s a quick recap of BTC’s performance as of late:

• Bitcoin’s price has rallied over the past two weeks by over 21%, decoupling from the S&P 500 index, which recently sank to a 5-month low following underwhelming Q3 earnings reports by the 'mighty' S&P 7 tech stocks.

  
  

• Bitcoin's correlation with Gold is at a high of 0.98, signaling that investors are favoring harder assets amid the prevailing macroeconomic confusion. No one knows which direction the economy or the Fed will take next.

  
  

• Additionally, there is a growing interest in BTC from institutions following Grayscale's victory against the SEC. Blackrock's CEO, Larry Fink, also recently referred to Bitcoin's rally as a “flight to quality”.

  
  

Another interesting trend to observe is quickly capital is returning to the digital asset markets. Last week, the digital asset investment products market saw an inflow of $326 million, the highest since July 2022.

Industry Shakers

• Crypto Delistings Reach an All-Time High on Exchanges

  While Bitcoin experiences a remarkable resurgence, there is a significant increase in the delisting of digital tokens from exchanges like Coinbase Global Inc. and Binance. Data gathered by Kaiko reveals that at least 3,445 tokens or trading pairs have been delisted or rendered inactive for a prolonged period, making it highly likely they will be removed due to the recent upheaval in the cryptocurrency market. This figure already represents a 15% increase compared to the entirety of 2022.

  
  

• Weekly active wallet addresses on L2s at All-Time High

  The number of weekly active L2 wallet addresses has exceeded 4 million, marking a new all-time high. L2s have gained popularity in recent months, with notable DApps like Friend.tech, a SocialFi DApp built on Base, exemplifying this growth. In Q3 2023, transactions on Layer 2 networks increased by 18%; conversely, Layer 1 transactions decreased by 2%. A clear trend that more and more DeFi natives are opting for cheaper alternatives to L1s.

  
  

• PayPal UK Unit Registers as a Crypto Service Provider

  PayPal has successfully registered with the U.K. Financial Conduct Authority as a cryptocurrency service provider. PayPal UK Limited was added to the registry recently, enabling the company to engage in specific crypto-related activities. This registration also grants PayPal the authority to approve its own cryptocurrency communications in line with new marketing regulations.

Enjoyed these insights? There's more where that came from. Follow me on Twitter/X for daily tidbits and updates.