Bitcoin: The Quarantine Years

purchase Lyrica cheap Bitcoin has grown up quite a bit during the quarantine. There have been lots of stories, both important and not so important during this time when everyone is online even more than usual. So we are going to take a look at what’s happened to Bitcoin and the crypto market since March.

Price Volatile yet Steady?

neurontin 900 mg day Mid-march is when we in the West thought the world was falling apart. The first thing we are going to look at during this time is Bitcoin’s price. When markets around the world were getting crushed by a sea of unknowns and a virus we didn’t understand, Bitcoin declined too.

Komsomolsk Bitcoin’s price declined from $10,335 on Valentine's Day all the way down to 3800 (down 63%) before quickly recovering and moving up to $12,000 (up 215%) and retracing to its current price of $10,800. Here’s a chart of that action and you can see how volatile it is.

Courtesy of Messari

Paypal Announcement

http://towing-whittier.com/service-area Paypal announced in June that sometime in Q3 or Q4 of this year, they will let customers use their Paypal accounts to purchase Bitcoin. So far, the only app that allows for Bitcoin purchases in a seamless way for small amounts is the Cash App. And Cash App is kicking ass doing so. The Cash App charges 1.75% for Bitcoin purchases and they (Square) reported $875 million Revenue in Q2 2020 quarter just on Bitcoin sales. Now the number is a little deceiving in that it takes into account Bitcoin’s price in the Revenue figure. But still, 1.75% of $875 million is a little over $15 million dollars. And the most important part, it’s one of the easiest ways in the entire world to buy some Bitcoin. It’s an absolute boon to small investors.

In July, Coindesk reported that Paypal will be using Paxos, the company behind the Paxos stablecoin, Paxos Gold gold-backed stablecoin, and the itBit exchange as their cryptocurrency provider to provide the Bitcoin for Paypal’s buyers. This is huge news for smaller, retail investors and Bitcoin buyers.

Bitcoin Halving and Square/Grayscale Buying

On May 11th, the block reward for Bitcoin was cut in half, down to 6.25 BTC released every 10 minutes or 900 per day instead of 1800 per day over the last 4 years. We just crossed the threshold this week where there are only 2.5 million BTC left to mine out of 21 million.

Since this happened during Q2, we can basically say that in the quarter (Apr-June) half the days generated 1800 and half generated 900 BTC per day or ~120,000 newly minted BTC into the market during that 3 month period. Q3’s number will be much smaller at 81,000 BTC.

At an average price of around $9000 each, Square’s (owner of the Cash App) Bitcoin revenue of $875 million means they bought ~97,000 BTC in the last quarter or 80% of the newly minted supply just by themselves.

Screenshot from the Bitcoin screen on the Cash App

And the amounts that Square and the Cash App don’t buy, the Grayscale Bitcoin Trust does buy…..and then some. Bitcoin.com reported in late May that Grayscale alone is buying 1.5x the amount of new Bitcoin mined post halving (900 per day). The first 2 weeks after the halving on May 11th, Grayscale bought 18,900 Bitcoin when only 12,300 were newly mined during this same period.

What does this mean?

Bitcoin’s price, like most things that have moving prices, come from supply and demand. So what happened starting in May?

  • Bitcoin’s supply got cut in half (1800 to 900 per day)
  • Square buys ¾ of newly minted supply
  • Grayscale buys 150% of newly minted supply
  • So if more than 200% of the newly minted supply of BTC is bought only by these 2 companies, then where is the excess 100% coming from?

From existing supply of coins of course. And if demand is consistent to buy from the existing supply of coins while the supply of coins is less, then the most likely scenario is that the price will rise just by this fact alone regardless of what the rest of the market does.

OCC Announcement on Stablecoins

The OCC is one of the most important regulators for the crypto industry. The Office of the Comptroller of the Currency is the regulator for the banking industry. Coindesk reports that national banks can ‘provide services to stablecoin issuers’ in the US. Additionally, and maybe even more importantly, banks can hold stablecoin reserves as part of their reserve requirements. The letter specifies that this is for stablecoins that have a 1 to 1 backing by fiat currency.

This is a REALLY big deal.

The US is already working towards a fully digitized US Dollar or CBDC (Central Bank Digital Currency) and both this goal as well as digital currency adoption (including Bitcoin) are more likely and easier following this news.

Banks can now more easily bank stablecoins as customers and hold their reserves. I expect this clarity will lead to more quality fiat-based stablecoin projects in the US.

The SEC’s main response to this is that fiat-backed stablecoins look like they are not securities, meaning they don’t require further investigation and regulation but that algorithmic backed stablecoins could be. The USDC stablecoin and PAX stablecoins from Circle and Coinbase and Paxos respectively are all in the fiat category.

Conclusion

Bitcoin grew up a LOT during the quarantine. As more businesses, institutions and individuals are seeking it, fewer are being mined with the halving. With Cash App and the new Paypal announcement, there is/will be more access than ever to small amounts of Bitcoin for retail investors. Easier access equals greater adoption. And with stablecoins becoming an important part of the market, the OCC announcement will make it easier for them to do business.

About the author

Stu Stu Lustman, the author of this post, is a Credit Analyst by trade trying to bring Commercial Credit Analysis techniques to the world of Peer to Peer Lending. Check me out on Twitter, LinkedIn and Google+

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