Bitcoin (BTC) and hyperinflationary beginnings

We are heading towards a serious economic crisis. Few seem to be preparing for this if bitcoin’s slowness is to be believed. Still, the great reset (hyperinflation) has shifted gears since the invasion of Ukraine.

Weekly report summary In chain the GlassNode

First of all, remember that we cannot predict the future from past old price curves. Only fundamental analysis can tell whether to go “long” or “short” on anything.

Analyses In chain it is not even a crystal ball, although some information is good to take. In this edition, GlassNode looked at these metrics:

  • Activities In chain
  • the Hashrate
  • The amount of BTC showing a latent gain or loss

The activity In chain is an expression that combines several metrics such as block space usage (1MB), number of transactions per person or transaction fees that increase as blocks are filled and vice versa.

Overall, GN believes it is “It is difficult to find many observations that suggest that the number of bitcoin users is growing strongly.”

The curve of the number of people transacting remains in a typical bear market area (red channel) for BTC / USD. That said, GN observes it “The current active entity count of 296,000 per day is at the upper end of this channel and that sustained upward expansion would be constructive.”

Bitcoin: Number of active entities
Orange curve: Two-week average of the number of people who have transacted on chain

GN notes, however, that the bottom of the number of active entities and transactions continues to rise, proving that the bitcoin network is still growing.

The other flagship metric of on-chain activity is low BTC block filling which results in very low transaction fees. No wonder since the number of payments doubled over the span of a year on the Lightning Network.

Everything is then proceeding according to plan and the decline in transaction fees should no longer be seen as a harbinger of a decline in BTC.

In another log, GN points out that miners remain very excited about the hashrate who breaks records. “Each block currently requires generating 122 zettahash “, We can read in the report. “That would equate to all 7.938 billion people on earth who each guess a hash SHA256, 15,500 billion times, every 10 minutes “.

” The hashrate estimated is between 190 and 215 Exahash per second. This is about 20% higher than the previous record set just before the ban BTC mining in China, “GlassNode also notes.

Minors are clearly bullishwhich is no surprise given that their income (in dollars) is “150% more than immediately after the last one halving (May 2020) “. “Miners earn about $ 207 per Exahah they protect the bitcoin network “.

[Il faut trois heures pour qu’un seul S19 pro génère un exahash, pour mettre les choses en perspective]

Bitcoin: Mining Difficulty
Hashrate du Bitcoin

Last interesting metric of the report: latent gains and losses. The chart below shows the number of BTC that was bought at a price above the current price.

Pink curve: percentage of addresses in profit
Green curve: percentage of entities in profit (one entity can control multiple addresses)
Blue curve: percentage of BTC in profit

We can see that we have seen worse. 70-75% of BTC is currently showing latent gain. We are at levels that could suggest favorable conditions for a smooth start to a bull market.

Provision of bitcoins, entities and addresses for profit
Percentage of BTC in profit (between 70% and 75% of BTC is currently in green)

But as GlassNode points out, the rebounds are for the moment mostly an opportunity to take profits, hence the recent failed escape and concomitant air pocket. The compelling influx of new users to fuel demand has not yet arrived.

Do we really have to wait for the next one? halvingor will double-digit inflation convince those who still hesitate?

Inflation, NASDAQ, Bitcoin

Prices continue to rise in the United States, up 8.5% yoy. We have been at the most for 40 years. At this rate, prices will rise by 50% within four years.

Obviously, this 8.5% is very far from the mark. How can it be, when gasoline is at an all-time high, up 48% in a year? Without rents and properties that seem to be increasing by more than 20%.

It’s very simple. Just play on the average basket of goods taken into account in the calculation. For example, transport costs account for only 3.9% in the basket. Which is suspicious when you know according to the Consumer Spending Surveytransportation is actually the second largest expense for the average American.

Countless accounting tricks allow us to take lantern blisters. The most emblematic is the “quality” effect. For example, the more efficient computer processors are, the lower the price of computers in the fictional world of inflation calculations.

Inflation is actually 12% if we use the 90s methodology or even 17% with the 80s methodology:

US real inflation
Real inflation data in the United States (as a percentage per year)

The only asset that can protect against inflation is a liquid asset that is available in absolutely limited quantities. The only one that ticks both of these boxes is bitcoin. And not gold which is slow and will increase in quantity as the price rises as miners will be incentivized to dig deeper.

The same goes for the shares of big tech monopolies like Microsoft, Apple, Google, etc. It is true that the NASDAQ appreciates a lot, but again the number of Apple or Google shares is not limited. For example, there were 640 million Tesla shares in 2010 compared to 1.1 billion shares today …

Speaking of NASDAQ, its correlation with bitcoin is very close, which makes sense given that the stocks of large multinationals are indeed liquid and desirable assets. HOWEVER, don’t believe that bitcoin should follow NASDAQ if it dives.

But this is what could happen soon. The world is heading straight for a 2008 rerun, when the price per barrel was $ 150 and the Fed rates were hitting 5%.

At the time, the stock market had fallen by more than 50% in 18 months. Conversely, gold will appreciate nearly 200% between June 2007 and June 2011. In 2022 alone, the S&P gained 200% …

The economy ended up bouncing back thanks to the US Shale oil revolution. Except that this unexpected oil fortune has probably already passed its peak, not to mention that Russia is slowly turning off the tap.

OPEC told the European Union on Monday that current and future sanctions against Russia could create one of the worst oil shocks ever recorded and that it would be impossible to replace Russian volumes.

Vladimir Putin, on a visit to the Belarusian cosmodrome, says the sanctions will cause inflation “incredible” :

“If our partners worsen the situation in the financial, insurance, transport, including shipping sectors, the situation will worsen for them too. Food shortages or incredibly high prices in world markets will lead to famines in regions around the world. It is inevitable and the next step will be a new wave of migration, including to Western countries. “

All this to say that we are walking in our sleep towards a crisis worse than that of 2008, and that this time there will be no “shale oil revolution” to restart the machine. As BlackRock’s CIO recently stated: “A new world order is coming for the stock markets” …

A stock market crash is upon us and only tech or essential stocks will be able to do well. We are entering an era of decline. The economy is above all a question of physical flows, which the decline undergone by fossil fuels will necessarily have to constrain, whether we like it or not.

Growth is not a matter of envy or “we just have to”. It depends on the availability of physical resources, first of all oil, on which 95% of global transport depends.

Inflation looks terrible and it would be a big mistake to speculate on bitcoin believing it has an unbreakable bond with NASDAQ. The BTC of 2022 is the gold of 2008 and the monetary system of the 21st century.

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Nicolas Teterel

Journalist writing about the Bitcoin revolution. My articles deal with bitcoin through geopolitical, economic and libertarian prisms.

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