GREY:VYGVQ - Post Discussion
Post by
nozzpack on Feb 10, 2021 7:09pm
Fewer Bitcoins Produced and Rising Demand= Higher prices
Market Moves
Everybody wants bitcoin, but where will it come from?
The number of bitcoins held on cryptocurrency exchanges, ostensibly ready for a quick sale if the price is right, has declined over the past year to levels not seen since mid-2018.(Glassnode)
A collision course is setting up in the bitcoin market: a wave of new buyers appearing just as easily obtained supplies of the cryptocurrency fall to their lowest levels in more than three years.
Electric-vehicle maker Tesla’s announcement this week that it had bought $1.5 billion of bitcoin triggered a new round of wagering that more corporate treasurers might soon follow CEO Elon Musk’s lead.
At least one Wall Street analyst argued that iPhone maker Apple, the world’s largest company, should push into the game. There’s also speculation that software giant Oracle might be next, partly fueled by CEO Larry Ellison’s service on Tesla’s board of directors. Facebook, Amazon, Netflix, Google and Microsoft could all be candidates, suggests Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics.
Even the obstreperous CNBC personality Jim Cramer weighed in on Tuesday: “Every treasurer should be going to boards of directors and saying, ‘Should we put a small portion of our cash in Bitcoin?'” Cramer said on the financial-news network. (A JPMorgan analyst, for what it’s worth, argues that corporate treasurers are likely to be turned off by bitcoin’s notorious price volatility.)
Yet if companies start buying bitcoin en masse, finding fresh supplies of the cryptocurrency is likely to come at a cost, according to professional analysts in digital-asset markets.
The number of bitcoins sitting on cryptocurrency exchanges – ostensibly ready for a quick sale if the price is right – has fallen to about 2.3 million, the lowest since July 2018, based on data from Glassnode, a blockchain analysis firm. It’s down from about 3 million as recently as early 2020.
The decline may reflect the activity of big investors who bought bitcoin over the past year and then swiftly transferred their holdings to custody providers or offline “cold storage” solutions, awaiting long-term gains, according to Arcane Research, a Norwegian cryptocurrency-analysis firm.
“A proper supply crisis is taking place in front of our eyes,” the Arcane analysts wrote.
Bitcoin's year-to-date returns versus the Standard & Poor's 500 Index and gold.
Source: TradingView/CoinDesk Prices for bitcoin are already up 62% year-to-date, versus 4.1% for the Standard & Poor’s 500 Index of large U.S. stocks. That track record alone might be enough to tempt more companies, investment firms, endowments, pension plans, governments, endowments, pension plans and regular people – especially at a time when bitcoin is increasingly viewed as a hedge against currency debasement, during an era of easy-money policies from central banks around the world.
“If you think Bitcoin is lively now, wait till there’s a liquidity crunch,” says Matt Blom, head of sales and trading for the cryptocurrency exchange firm EQUOS.
Some 900 new bitcoins are minted each day by the underlying blockchain network, worth roughly $42 million at current prices.
Compare that with the $2.02 billion that has flowed into bitcoin-focused investment products so far this year, based on a report Tuesday from the digital-asset manager CoinShares. That works out to an average $51.9 million per day.
And the CoinShares report doesn’t even cover demand from investors or corporate treasurers who may be buying bitcoin directly through their own accounts, or from retail traders who are looking for a piece of the action.
The math is pretty simple: There’s not a lot of bitcoin for sale at current price levels.
“Holders are not selling their bitcoin in response to price increases,” says Philip Gradwell, chief economist for the blockchain-forensics firm Chainalysis. “If this behavior continues, then price should continue to rise if demand continues.”
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