Episode XI. Block height: 798000. Focusing on long term signal instead of short term noise: Bitcoin metrics you should know.
Original Substack post including links to the live-charts: https://carlbmenger.substack.com/p/valuing-bitcoin
Bitcoin, as a public open source blockchain, enables it to be analyzed like no other asset. We don’t need to rely on information from third parties, because we can just take a look at the Bitcoin Code or On-Chain data. When analyzing Bitcoin and its value compositions, I look at three different layers: Network Health, Growth, Speculation.
In this episode, we look at the health and growth layers of Bitcoin, both long-term indicators of how properly the network is functioning and how fast adoption is growing, cutting out the unnecessary short-term bullshit on which mainstream media is mainly focusing. Therefore, this is not a ‚Bitcoin goes to the moon tomorrow’ article but about the underlying fundamentals of Bitcoin’s value compositions, so let’s dive in.
Monetary policyMonetary policy
Circulating SupplyCirculating Supply
Total circulating supply is a function of historical monetary metrics and the daily issuance associated with current monetary policy. From Bitcoin’s inception, monetary policy has been pre-determined and encoded in its protocol, making it predictable and verifiably. Only 21 million Bitcoin FOREVER, Laura.
Currently, 19,426,437 Bitcoin are in circulation, which represents 92.4% of the total supply. The remaining 7.6% will be issued over the next 118 years. Yes, you read that right: The last Bitcoin will be mined in the year 2140! Bitcoin’s strict adherence to a rules-based monetary policy highlights its integrity.
Inflation RateInflation Rate
Furthermore, Bitcoin‘s inflation rate, the issuance of new coins to the circulating Bitcoin supply is also encoded. Unlike fiat currencies, which can be printed at will, the new Bitcoin supply is pre-determined and halves every 210,000 blocks (roughly 4 years). Currently, Bitcoin has an inflation rate of 1.74%, comparable to that of Gold. The next halving occurs in April 2024, making Bitcoin much scarcer than most other assets.
Bitcoin NodesBitcoin Nodes
Each full node has the entire Bitcoin blockchain stored, thus another node means another copy of the Bitcoin ledger and a further distribution of the Bitcoin code. The more individual copies exist and the wider those copies are spread around the globe, the harder it is to turn Bitcoin off: 43,668 Bitcoin nodes (reachable and unreachable) are running around the globe right now.
Running your own node is at least as important as holding your own Bitcoin keys. It is also much easier than many think. Check out my step-by-step guide here ‚Don‘t trust, verify‘, and run your own Bitcoin full node now: https://carlbmenger.substack.com/p/dont-trust-verify
Hash RateHash Rate
Bitcoin’s security is guaranteed by miners, who ensure transactions are verified and irreversible. Mining hash rate is therefore a key security metric for Bitcoin. The greater the levels of hashing power, the harder it is for someone to overpower and attack the network. Thus, all else equal, rising hash rate increases security.
Since 2010, the hash rate has increased at four orders of magnitude higher than that of price. As a result of advancement in hardware and miner’s willingness to invest in the expectation of Bitcoin’s price appreciation over time. Very bullish.
S - Curve AdoptionS - Curve Adoption
The S - Curve breaks global adoption into stages along the growth cycle. It is a term used to define a sociological framework that demonstrates how different people ranging in demographics and psychological characteristics adopt and react to new technologies and innovative products. In this concept, most of the growth occurs during the early and late majority stages. In other words: You are still early.
Market Cap RatioMarket Cap Ratio
Bitcoin’s market cap sits currently at roughly 600 billion USD, a tiny, insignificant little spot in all the world’s money and markets, which exceeds 1.3 quadrillion USD (A number with fifteen zeros!). Thus, Bitcoin is currently valued at 0.00046153846 per cent, despite being one of a few assets without any counterparty risk. This will be an essential feature once our debt based fiat system collapses, which is inevitable looking at current debt levels.
Visual Capitalist: https://www.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization-2022/
HODL WavesHODL Waves
HODL Waves divides the total circulating supply of the Bitcoin network into holding period bands. The 1-to-2-year HODL wave, for example, measures the percentage of Bitcoin that transacted between one and two years. Short term age bands rise dramatically during periods of market exuberance and the 3y-5y band rises during major market downturns, signaling very healthy hodling behavior at the moment.
Personal Bitcoin StackPersonal Bitcoin Stack
And last but not least, the most important metric of them all. Your own Bitcoin stack, that is hopefully growing over time: DCA matters.
The EndThe End
That's it for this episode. I hope you gathered some valuable knowledge from this one. Keep stacking and focus on the fundamentals.
Thanks for reading and remember: ₿ critical, ₿ informed, ₿ prepared. Yours,
Stay tuned:Stay tuned:
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B informed:B informed:
[X] Solving the Adoption Dilemma: #201172 [IX] NOSTR: Social Media 2.0: #189821 [VIII] The Bitcoin Retirement Plan: #183327 [VII] Bitcoin in Guatemala: #171339 [VI] Bitcoin in El Salvador: #161607
Bitcoin is definitely the future of payment and business, soon or later regular Fiat currency will be going through some inflation and I may be wrong but it is likely because other countries and mine have already had their currency become almost worthless
How many bitcoiners are there? Is a bitcoiner someone who leaves there holdings on an exchange? Or just someone who holds their own keys?
For me it’s owning keys and I don’t think we are even at 0.1% global adoption.
We're nowhere near that far along the adoption curve.
Of course it’s about argumentation but in my opinion did we pass the early adopter phase by now.
The scale on that graph is implicitly 0-100%, so I'd say we're barely into "Early Adopters". Even amongst those of us who are interested in Bitcoin, very few use it for their daily activities. I'd say that makes it debatable whether we're even really adopters, yet. I think a solid argument could be made that we're still in the "Innovators" stage.
Good point. Seems like you'd have to know the ultimate destiny of btc to know where we are. If it's a globally used currency + SoV for humanity, I think you're right, we are stupidly early. If it's in the "digital gold" niche, @CarlBMenger seems right -- we're still pretty early, but a little later.
The context is very important. I don't know how many people are using Bitcoin in Ecuador, but it seems likely that they are in one of the majority categories.
Where I live there are literally zero businesses in the area that accept Bitcoin, so even if I want to be more of an adopter, my options are very limited. Whoever starts accepting Bitcoin first around here will definitely count as an innovator.
Interesting post. I personally don't believe in funny curves about number of nudes, hodl waves or circulating supply, inflation rate. They are super priced in.
My alternative approach using number of humans on earth and using Bitcoin only (no Dollars or other dirty fiat like you used): #51272
Very informative. Thank you.
Thx for your feedback.