Crypto Beans #25 Bitcoin's challenge to Gold in the new digital era

Hey there everyone! 👋 This is Shivam. I bring to you the 25th weekly edition of Crypto Beans. This is an effort through which I try to share my thoughts on the Digital Assets Industry and Business Models in the space. Your 0 to 1 guide for Digital Assets Industry

Read time - 4 mins

In this edition, the article I explore is titled "Bitcoin's challenge to Gold in the new digital era" Hope you enjoy it.

Spill the beans (Explain to me like a 5 year old) 

Why Bitcoin can be a Gold alternative? It's difficult to understand at first,

But soon, the picture gets clearer, there is a secret behind the numbers no one gets right now

1} In order to understand the narrative we need to look at two things:

1. Supply of "Gold"

Currently the amount of Gold that has been mined. With gold, global mining efforts collectively add ~2% per year to above-ground supply. This steady 2% annual supply growth has been true for the last century. As the low-hanging fruits of gold deposits have been plucked, now, technology has unlocked access to previously unreachable deposits

2. “Demand” for Gold

A look at the demand numbers suggest record demand for Gold. The reasons are multifold. There is colossal central bank purchases, aided by vigorous retail investor buying. This clearly demonstrated a shift to buy gold as a safety hedge

This was driven by the macro challenges that the world faces . Currently we have~$12T in total above-ground gold, which means the global market must absorb ~$240B in new supply every year just for the price of gold to remain where it is.

This downward pressure on gold’s price acts like the force of gravity and keeps gold’s valuation constrained by the realities of supply and demand.

2} Now, let me paint another picture

There is another asset that:

1. Acts as a store of value like Gold

2. Has fixed supply

3. Is adopted by less than 5% of the world

4. Safe from nation state level attacks

5. Cannot be manipulated (transparent)

So, Bitcoin is gold on digital rails - A deeper look reveals that. Bitcoin has a fixed supply of 21 million. As a store-of-value asset in general, the rule written in code says is that the market has to absorb half as much new supply from “mining” every four years. This phenomenon is termed as Bitcoin halving and is baked in the schedule

With that logic -annual supply growth

In 2016 – 3.6%.

Today – 1.8%.

In 2024 – 0.9%.

In 2028 – 0.45%, and so on.

3} To top that up a look at some “Supply” numbers reveals that:

A considerable portion of bitcoin’s 21-million supply is estimated to be lost, this includes Satoshi Nakamoto’s coins. As per data, nearly 4 million bitcoin has been lost.

The amount of circulating bitcoin supply on exchanges is just 12% today down from ~18% at peak. Why does this matter? Well because most of the supply around 14M is with long term HODLERs. This could be good for the price of Bitcoin as it creates reduces sell pressure. And most people don't want to sell their BTC back into Fiat or other assets

The bottom-line is this - We all love Gold and feel the way we do. Because we understand GOLD to some extent. Once you understand Bitcoin, and what numbers show, the shift to Digital Gold becomes clearer

State of Crypto affairs - A quick look at the market 

The global cryptocurrency market cap today: $1.09 Trillion

Weekly change: -7.98% | Yearly change: -0.89% 

Bitcoin (BTC) is the largest cryptocurrency with a market cap of $527 Billion.

Weekly change: -5.06% | YTD change: 55.06%

Another important metric is Bitcoin dominance which can be used as a rough indicator of the relative strength of Bitcoin versus other cryptocurrencies. A high Bitcoin dominance means that Bitcoin has a large market share and is potentially more influential in the overall cryptocurrency market and vice-versa.

Bitcoin dominance: Current Year: 47.92% | Last year (June 2022): 43.69%

Greed and fear index 

The market sentiment has been a bit neutral now post Bitcoin dumping in the last week. The beginning of a crab market it seems. However, with an agreement on Debt ceiling can send the Bitcoin soaring to new heights in the short term

Note: The data used is based on metrics like Volatility, Surveys, Bitcoin Dominance, Social and Google Trends. Source: Coinstats

Is ETH ultrasound money? 

Let's have a look at Ethereum supply changes post its merge to a PoS blockchain from PoW.

The significance of the charts - understand how the supply of Ethereum is decreasing post the merge, which means “deflationary economics” for the Blockchain

Supply change since merge POS -282,281 ETH

The graph highlights POS vs POW issuance since the merge. Impressive numbers, look super bullish for ETH long term given the supply of ETH is not growing as before

What's brewing today? Bringing fresh beans to you: 

Robinhood Ends Support for All Tokens Named in SEC Lawsuit as Securities: The trading platform will end support for Cardano (ADA), Polygon (MATIC) and Solana (SOL) on June 27th.

The Memecoin Grift and How It Threatens Ethereum Culture: If Ethereum is to grow it’ll have to mature beyond the antics of those shilling the token-of-the-moment, says CoinDesk columnist Paul Dylan-Ennis.

When AI and Blockchain Merge, Expect the Mundane at First: As the transformative technologies of generative artificial intelligence and blockchain find their way in business, inevitably they will interact. The pairing has the potential to achieve wild, weird and presently unimaginable results, but expect the first experiments to be boring and predictable, says EY's Paul Brody.

Whats meme-ing? Better make sure this is fun

And now the funny part,

What did you think of today's edition?  

Reach out to me on Twitter or LinkedIn for any feedback :)

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research