State of Coin: Sound money in the face of inflation
Current state of Bitcoin for the week ending 7/16/21
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In our Friday articles, we take a deep dive into the current state of Bitcoin. We previously published a series debunking the FUD surrounding Bitcoin - you can find those links at the bottom of this article. Every Friday we will continue to publish brief State of the Coin newsletters to keep subscribers up to date on BTC with both on-chain analytics and off-chain momentum of the Bitcoin industry. For full disclosure, Brandon and Daniel are strong believers in Bitcoin and both have allocated portions of their portfolios to BTC (HODL baby).
Let’s take a look at the State of the Coin
A look off chain:
Capital Group buys indirect exposure to BTC via MicroStrategy: One of the largest US investment firms - Capital Group - has purchased a 12.2% stake in MicroStrategy. MicroStrategy’s CEO Michael Saylor has made headlines over his bullish attitude towards BTC. MicroStrategy has over 105,000 bitcoins in their reserves and it would not be shocking to see them purchase more. This move is just one more indication that major institutions are buying into Bitcoin, even if it’s currently happening indirectly.
Jack Dorsey announces plans to build a new platform for developers in the decentralized finance space: Twitter and Square founder Jack Dorsey announced that Square would be creating “a new business (joining Seller, Cash App, & Tidal) focused on building an open developer platform with the sole goal of making it easy to create non-custodial, permissionless, and decentralized financial services.” He noted that they would specifically be focused on platforms using Bitcoin.
Inflation in the U.S. continues to rise: On Tuesday, the Federal Reserve released economic data for June 2021. Unsurprisingly, the data showed that inflationary trends are continuing - prices are continuing to rise and your hard earned money is being devalued. These trends call for investment in assets capable of storing value - BTC has sound fundamentals that make it an appealing option for hedging against inflation. We also reviewed inflation with two threads on Twitter, check them out here: data driven & cost driven.
A look on chain:
We’re continuing to get our feet wet with Glassnode on chain data!
Price update: Price remains trending horizontal as the crab market continues. At the time of this writing, BTC is priced at $31,915, well below the YTD average but in line with the 30 day average. Despite low price movement, several on chain metrics are promising. For example, hash time has returned to relatively normal levels following the recent Chinese mining ban - confirming the resiliency of the BTC mining network. As discussed below, price volatility is narrowing, which some suggest is a sign of a strong accumulation phase, signaling the current price range as a new bottom moving forward.
Price volatility: Another thing that has garnered attention this week was narrowing price volatility. In the chart below, we’ve plotted the day high minus the day low over time to show this trend. Some suggest that narrowing volatility represents an accumulation phase and a potentially uncertain market (no major buy ins and no major sell offs).
Inflation rising: On Tuesday, the Federal Reserve of the U.S. released economic data for June 2021. Although this is not “On Chain” data, it’s worth discussing to highlight the pitfalls of our current monetary system - particularly inflation. In June, we hit the highest month-over-month increase in the Consumer Price Index (CPI; a common metric of inflation) since June of 2008!
CPI was 5.3% higher than June of 2020, well over the Fed’s 2% inflation target. Despite these startling numbers, the Fed announced no plans to alter economic policy, which means prices will continue to rise and your hard earned money will continue to lose its buying power.
In times of inflation, people look to invest in assets with sound underlying properties such as gold and other precious metals. Interestingly, gold and silver prices have remained relatively steady over the last year while BTC has increased ~250%. Has Bitcoin replaced gold as a sound store of value and a hedge against inflation? It appears so.
BTC Meme of the Week, courtesy of Green Candle! What would the BTC community do without memes? Every week on State of the Coin, we will be featuring our favorite meme of the week. If you create or see a meme that you like and want us to consider featuring it, tag us on Twitter or instagram (both @Greencandleit)! This week our feature goes to Bitcoin Magazine! Be sure to follow them for more fire memes and to stay up to date on BTC news!
New to Bitcoin and looking to learn more? Check out our introductory series, where we walk through common misconceptions about the world’s leading cryptocurrency!
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Happy Friday everyone - get after it this weekend!
Brandon and Dan
Disclosure: The authors of this writing hold positions in cryptocurrency mentioned in this article. That cryptocurrency is Bitcoin. The article was written by Daniel Kuhman and Brandon Keys, and it expresses the author's own opinions. They are not receiving compensation for it. The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock or cryptocurrency. Brandon and Daniel are not financial advisors. We encourage all readers to do further research and do your own due diligence before making any investments.