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Pantera: Bitcoin demand triples supply?

Pantera Capital

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In 30 years, every central bank will have bitcoin, not every central bank will have gold.

Original title: "Pantera: Bitcoin demand triples supply? 》

Original source: Encryption Valley Live

Relationship between supply and demand

A Tiger Cub friend/TMT investor: “We don’t invest in Bitcoin because There is no cash flow to discount."

Me: "Well, EUR/USD has no cash flow either, but no one is thinking of trading it."

How to value Bitcoin?

One answer is: Bilateral exchange rates only reflect supply and demand.

I know this is an unsatisfactory answer for some.

In this letter, we look at supply and demand from two perspectives.

The first is an Economics 101-style supply and demand diagram, in which.

Y axis: BTC price

X axis: quantity

The demand curve appears to be very insensitive to price. When people want to join -- like now -- price doesn't seem to matter much. On the graph, this produces a fairly flat line. Conversely, supply appears to be very inelastic. Many Bitcoin holders are motivated more by political/belief in the crypto world than simple price appreciation. A higher price is needed to induce them to sell. This makes the supply curve very steep.

In the last 7 months there have been two huge shifts - one in demand and one in supply, both upwards.

On the demand side, we've had public companies like PayPal come into the market, which shifts the demand curve up significantly.

Meanwhile, the supply of newly issued bitcoins was cut in half in May -- as part of the halving of bitcoin issuance every four years. Fewer bitcoins.

The title of our previous investor letter was "Bitcoin Shortage" and the price performance bears that out.

Demand changes over time

For PayPal, the demand curve does not just shift upward Once, for a decade, Bitcoin's demand has been rising as new entrants discover it.

This is our standard log price chart. In this, we have the x-axis as the number of people using Bitcoin. When only a few hundred people participate, its value is close to zero. Bitcoin is worth more when 10,000 people use it. When a million people own it, the price goes up. Every few years, the number of people using Bitcoin increases by an order of magnitude. The same goes for the price.

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Roughly 100 million people are using Bitcoin today. I can imagine a world where ten times as many people buy and use Bitcoin, and the price goes up a lot.

3.5 billion people own a smartphone. A smartphone is the only requirement to use Bitcoin. Maybe they don't seem relevant at first glance, but in the long run we have to think about why most of them don't use Bitcoin. It's not much more complicated than sharing photos on Facebook.

PAYPAL has purchased more than 100% of the newly issued Bitcoin

PayPal has just launched Their new service enables customers to buy, sell and hold cryptocurrencies directly from their PayPal account. Last month we discussed the massive demand shift caused by PayPal.

Paxos is the encryption infrastructure provider of PayPal. Before PayPal integrated crypto, itBit, an exchange operated by Paxos, saw fairly steady volumes – the white line in the graph below.

When PayPal went online, the transaction volume began to explode. The increase in itBit's transaction volume means that PayPal has purchased more than 100% of the new supply of Bitcoin within two months of going live.

MASSMUTUAL BUY BITCOIN

MassMutual--This 170-Year-Old Life Insurance Provider, Starts Buy bitcoins in bulk. MassMutual bought $100 million in Bitcoin for its general investment account.

MICROSTRATEGY Bet $1 Billion on Bitcoin

MicroStrategy is led by Michael Saylor A publicly traded company under CNBC bought $425 million worth of bitcoin in August and September of this year. The investment paid off quickly, with bitcoin nearly doubling in price within months of their purchase.

Recently, the company raised $650 million in capital through the sale of convertible notes, and intends to invest the proceeds in bitcoin. For reference, this represents a month's worth of new Bitcoin supply.

Issuance Reduction - Traffic Forecast

In the April letter we published a Potential framework for predicting the price impact of Bitcoin halvings based on the analysis of the Bitcoin stock-to-flow ratio for each halving. The size of the impact is already proportional to the size of the supply reduction.

If the ratio of this cycle is similar to that of previous halvings, then by August next year, Bitcoin may rise to $115,000. The constant growth path from April's price to this point is drawn as a dashed line.

Actual prices are behind this historical forecast -- but not by much. According to the forecast, the price will reach $115212 after 9 weeks.

Fund Performance

The Pantera Fund continues to deliver strong returns in a seminal year for digital assets. We believe we are still in the early stages of a potential multi-year bull market, driven by strong macro tailwinds and growing fundamentals in related technologies.

Pantera funds invest in Open to investors

All of our funds can be invested through an IRA. We support over a dozen providers including Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company.

Portfolio company update

Circle partners with Visa to launch USDCoin-backed commercial consumer services .

Circle enables businesses to leverage USD-backed stablecoins (blockchain-based tokens pegged to USD reserves) globally for payments, commerce and more financial applications. Circle offers trading services, merchant accounts, and platform APIs backed by USDC. Circle and Coinbase created USDC - a regulated full-reserve stablecoin with over $3 billion in total circulation and a net new issuance of $100 million per week.

Recently, Circle announced a partnership with Visa to integrate the USDC payment function with some Visa card issuers, so that businesses can receive and spend USDC balances through corporate cards. In this way, Circle has forged a path for USDC’s open financial network to onboard 60 million merchants from Visa’s customer base. As of now, the Circle platform has supported more than 100 million transactions, nearly 10 million retail customers, and more than 1,000 enterprises.

Collaborating with Professors DAN MOREHEAD and DAN BONEH is the Stanford Institute for Economic Policy Research (SIEPR).

I have the honor of speaking at the Stanford Institute for Economic Policy Research. SIEPR is "Stanford's thought leader in understanding the economic challenges, opportunities, and policies that affect people in the United States and around the world."

Past SIEPR speakers include:

Jerome Powell , Federal Reserve Chair

Janet Yellen

John Taylor, Stanford University Hoover Institution Senior Fellow

Professor Dan Boneh (Head of the Applied Cryptography Group) and I discussed monetary policy and blockchain

Q. The big vision for Bitcoin, and cryptocurrencies in general, is that they will replace money, right? But none of that happened. I can't buy things on Amazon with cryptocurrencies. I absolutely cannot use cryptocurrency to buy physical items on the market. Some people say this is a failure of technology, or how would you understand it?

Dan: "I've been hearing this for 8 years. It's a simple question. Bitcoin is going to do so many different things, essentially it's going to end up doing The best thing is to buy a cup of coffee. Like you said, there are 6 billion people living in countries with bad monetary policy, bad banking, people don't have to go to the bank, controlled by capital, and citizens' savings often fail in banks This is great. That's why you see countries like China, India, the Philippines actually using Bitcoin. But, buying a cup of coffee at Starbucks is not for it, for a few reasons:

One is high volatility, which is just a fact. It has 60%, 70% annualized volatility, so as a unit of account, it is not good for pricing. 10 Years later, this will calm down and it will be normal.

Another reason this is bad for business is if you think the asset will always be This astronomical rate of appreciation, you probably don't want to buy anything with it because you'll end up regretting it. The first commercial transaction was a developer buying a pizza for 10,000 bitcoins. That's $200 million today. Guy is not a fool. He bought two pizzas, so only 100 million each, but, it is not good to spend bitcoin, because it is a currency with high appreciation. If you want to buy a TV, you can buy one today 10, you can buy 10 next year. So, you might want to hold off and do it later.

Q. Another point that people always make is that Bitcoin doesn’t value. It has no intrinsic value. It's just bitcoin on a computer, why do we assign so much value to it? How would you respond to this question?

Dan: "Well, two angles. One is, it's a utility, it's useful. There are 100 million people who think it is useful, and it is useful. Like you said, a lot of people in developing countries think it's safer than their bank. You said the fact that it is protected by an encryption key. My thought is that if you live in a developing country and your bank is really not that trustworthy, you can have your entire net worth as a password in your head. This has tremendous value. 100 million people are using it, which is why it has its value today.

"However, if we were to have this conversation ten years from now, some central banks would have it on their balance sheets. It would be 22 years of trading For the record. That's an opinion I'll have. I think 30 years from now, every central bank will have bitcoin, not every central bank will have gold."

Q. What will stop another cryptocurrency from appearing and replacing Bitcoin as a new, better, faster cryptocurrency?

Dan: "That's another very common, negative perception. I did an interview with Andrew Ross Sorkin and he said, he Walking down the streets of New York with his wife, some guy was selling a cryptocurrency. So, they decided to make their own, because it's easy to make a new cryptocurrency. So, Bitcoin can't have any value because there are 2000 bitcoins there. My answer to him was: "I have a better idea: photo sharing. If you can get 2.5 billion people to share photos on your site, it's worth a lot of money. That's basically it, if you can get over 100 million people to use your new cryptocurrency, it's better than Bitcoin, but it's hard to get 100 million people to switch from one thing to another. And Bitcoin has 100 million people storing $400 billion in value. It's really, really hard to compete with that. Like Dan [Boneh] said, there are many other use cases, which are very interesting applications, but the encryption technology of the digital gold version, I think it has been completed. ”