Bitcoin: Bitcoin Dominance Reaches 9-Month High

Apps: Top crypto app downloads rise over 15% following SVB collapse

Stablecoins: Tether Stablecoin Dominance Hits Highest Point in 18 Months

Payments: Why this ‘winter’ won’t stop the growing crypto e-commerce adoption

Ethereum: Forget HTTP: Ethereum has a new URL standard that can’t be blocked

One of crypto’s biggest weekly gains in several years has coincided with two of the three largest bank failures in US history, as well as emerging signs that potential chaos in the financial sector is still ahead. The market cap of all cryptocurrencies surged above the $1.14 trillion mark, and the price of Bitcoin (BTC) in USD terms crossed $27,000 on for the first time in nine months on Friday morning. That run-up in BTC represented a massive 34.5% increase from the same time a week ago.

Bitcoin surged back above its 200-week moving average over the past seven days ($25,312) and remained well-above realized price ($19,810), the average cost basis at which each unit of BTC was purchased. When Bitcoin is above its realized price, the majority of addresses on the Bitcoin network are in profit, and the further above realized price BTC’s market price goes, the greater that majority is.

More users in general have been utilizing BTC this week, as the number of entities on the Bitcoin network with a balance greater than zero surged to an all-time high close to 44.9 million, adding more than 1 million balance-bearing addresses since the start of February. The seven-day moving average of transaction volume on the Bitcoin network also moved to a 3-month high in recent days.

With many likely waking up to the potential utility of a decentralized monetary network, it is worth revisiting some of the core tenets and functions of Bitcoin and why it is so relevant at this moment.

As confidence was lost in banks throughout the past week, it appears investors poured assets into Bitcoin to store their value and keep it remote from the next potential bank collapse. BTC’s value in Dollar terms shifts constantly, but one Bitcoin is always fungible and equal to one Bitcoin. If those investors take custody of their BTC in a private wallet or similar cold storage solution, they eliminate any counterparty risk that a bank may pose since Bitcoin is always stored on an immutable blockchain ledger. Bitcoin is not an IOU like a bank account, it is a cryptographically-secured bearer asset that can be stored in any amount at little to no marginal cost. It can be sent anywhere on the network at any time with full settlement in minutes.

It is no coincidence that Bitcoin was created in the wake of the 2008 financial crisis and launched in January 2009. With $152.85 billion in bank borrowing flowing from the discount window in just one week, surpassing the previous record of $111 billion reached in 2008, Bitcoin is now facing its own kind of stress test and use case in the conditions that gave rise to it in the first place. As the pseudonymous creator of Bitcoin, Satoshi Nakamoto, stated in a 2009 blog post, “The root problem with conventional currencies is all the trust that’s required to make it work”, and that is exemplified by the failure or near-failure of many banks throughout the financial system in 2008-2009.

Additionally, as MRP wrote in January, the mismanagement of humans running such institutions creates inherent risk and governments have shown that there is little punishment for massive mistakes resulting from mismanagement of that risk. Just a few after we wrote that, the US financial system is right in the eye of the storm again and, given a federal guarantee of all assets at Silicon Valley Bank (SVB), insured and uninsured by the FDIC’s mandate, it looks like there will once again be few consequences resulting from financial mismanagement by bank executives or monetary policymakers.

A “bailout” of banks and the resulting monetary and/or fiscal stimulus typically required to fight the fallout caused by financial crises, requires inflation of the money supply and, therefore, a material debasement of purchasing power that disproportionately damages those who have relatively little cash and likely had nothing to do with the catalyst of such crises. In the week to March 15, the Federal Reserve added nearly $300 billion to its balance sheet, undoing four months of the Fed’s balance sheet reduction. That was little more than a blip in the long-term trend of the central bank’s balance sheet, now worth more than $8.6 trillion and more than 3.8x larger than it was at the end of 2009. In contrast, Bitcoin is meant to be digital money with a fixed supply and distribution schedule that cannot be inflated or debased.

Approximately every 10 minutes, a new block of transactions is solved (aka “mined”) for a current block reward of 6.25 BTC (worth approximately $165,600), distributed to the miner. Therefore, throughout a single day, about 900 new BTC are generated. That amount has been, and will continue to be, halved every 210,000 blocks, or approximately four years’ time. This pattern will continue until all 21 million BTC is mined in the year 2140.

On-chain data shows that users who have bought in on the Bitcoin value proposition – long-term adopters who have held a portion of BTC for a period of multiple years – are not selling into this rally. Glassnode data shows that the proportion of BTC’s circulating supply that has remained unspent for at least two years continues to climb to all-time highs above 52.2%. If we narrow that cohort to BTC that has not moved in at least three years, we can observe an all-time of 39.5% of circulating supply.

February 22, 2023: Ethereum May Face Contagion from SEC Crackdown on Crypto Exchanges’ Staking Services →

February 14, 2023: Staking Services and Stablecoins in SEC Crosshairs as Crypto Industry Preps for Court Battles →

January 24, 2023: Bitcoin Mining is Back to Profitability, Hash Ribbon Shows Peak Capitulation May Have Finally Passed →

October 18, 2022: Fallout From Ethereum “Merge” Bolsters Bitcoin’s Hash Rate as Some Criticisms Still Linger →

October 7, 2022: Ethereum’s Post-Merge Era Conquers Key Goals, Yet Centralization and Regulation Concerns Linger →

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