$30K Monthly Close
Bitcoin has a monthly close above $30,000 for the first time in more than a year.
$30K Monthly Close
$30,000 reemerges…
Bitcoin closed the month above $30,000 for the first time in more than a year. It’s been a slow, albeit rocky, climb back to current levels, complete with twists and turns thanks to the likes of Terra, FTX, and the dreaded “inflation” word. External events aside, let’s focus on bitcoin and its historical price action.
The Last Year
Bitcoin’s +60% since this time last year.
Since Jan. 2021
Bitcoin didn’t fall below $30,000 from January 2021 to June 2022. That drop below $30k in May of last year was precipitated by the $40 billion collapse of Terra, a crypto project that is now known to have been at best, hopium, and, at worst, an outright scam. As investor money around the Terra ecosystem disappeared in May 2022, crypto markets broadly suffered.
We soon learned that Terra was just the first domino to fall. One by one, crypto-focused funds and centralized exchanges and platforms revealed themselves to be insolvent, having irresponsibly invested in Terra and other high risk gambles, with many using customer funds to do so.
Last year at this time was a sobering reminder to newcomers and veteran investors alike that bitcoin is different than everything else in “crypto.” And while bitcoin might’ve had more room to run in a bull market that lasted a year and a half, it largely did what it’s always done... Bitcoin dominance, its share of the total cryptocurrency market, shot up toward 50%.
When markets get rocky, investors who chase gains in highly speculative projects return to bitcoin as a safe haven and bitcoin dominance rises.
Right now, bitcoin dominance is back above 50%. When markets pump, investors add to their bitcoin allocations not wanting to miss out. Markets go down… Bitcoin dominance goes up. Markets go up… Bitcoin dominance goes up. That’s the trend.
Bitcoin Halvings
Bitcoin operates around a four-year even called the halving. Roughly every four years, the amount of bitcoin released into circulation gets cut in half.
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2nd to 3rd Halving
There have been three bitcoin halvings to date. This is the price of bitcoin between the second and third halvings: Jul. 2016 and May 2020.
1st to 2nd Halving
Trading markets weren’t fully developed until 2013-2014. This is the price of bitcoin between the first and second halvings: Nov. 2012 and Jul. 2016. We’re less than 10 months away from the fourth bitcoin halving. That means a few things that are worth paying attention to. Three things to focus on first are:
bitcoin is getting more scarce
the great hash race is here
institutions will play catch-up
Bitcoin is digital scarcity personified. It was invented to solve something called the double-spend problem. This meant it was impossible to ensure that money couldn’t be copied or duplicated by bad actors online. Bitcoin fixed this. It took a set amount of digital money (21 million) and made it so that every single piece of bitcoin is uniquely identifiable. No duplicate or counterfeit bitcoin can ever be used or exist on the bitcoin network.
Bitcoin was a groundbreaking invention in computing that the world is barely starting to appreciate. So, bitcoin is scarce.
The halvings though, make bitcoin even more scarce. If history is any indicator, the closer we get to the next halving in early to mid 2024, the more investors tend to acknowledge this scarcity through their behaviors.
The great hash race is upon us. Bitcoin works by using a computer hashing protocol that generates numbers and keys in a way that are all used as those unique identifiers mentioned above and then strung together on a public ledger called the blockchain. This process physically takes place by people running software and specialized computers. Those people are called bitcoin miners.
Bitcoin miners get rewarded for running software that validates and adds transactions to the blockchain. Each time a halving occurs, their reward is cut in half. As we speak, the largest miners in the world are ramping up operations as quickly as possible. The more time passes, the fewer chances they have to earn more bitcoin with fewer machines and computing power. This is what the great hash race looks like…
This is a chart of the bitcoin hash rate over time. It represents the competition that is bitcoin. It goes up because more people are mining bitcoin. Miners are investing more in their operations, competing for cheap and efficient energy sources, and striking while the iron’s hot. Each bitcoin halving that occurs makes this competition more and more difficult.
Institutions still don’t get it. Most of the world doesn’t own or know what bitcoin is so it’s no surprise that institutions are still playing catch-up. Last week, we got word that the largest asset manager in the world, BlackRock, was applying for spot bitcoin ETF in the US. That’s a huge signal even if the application doesn’t get approved.
The SEC is yet to approve a spot bitcoin ETF so I’m not holding my breath but the application itself is a sign that the biggest institutions in the world are aware of and potentially positioning themselves around bitcoin. Still though, we lack the institutional wave that long term bitcoiners like myself keep thinking is going to happen every single bull run. Some notable “institutions” invested in bitcoin:
MicroStrategy
Tesla
Block
El Salvador
Fidelity
See more institutions at:
Fidelity, the financial giant, has been mining bitcoin since 2014. MicroStrategy, the software company started by now famed bitcoiner Michael Saylor, is amassing unprecedented bitcoin reserves. El Salvador, the country, made bitcoin legal tender and continues to push adoption.
We’ve had these notable instances of institutions jumping on the bitcoin bandwagon but we’re still yet to see the flood gates really open. Each time a bitcoin halving nears, everyone starts to wonder if this is the time it happens…
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