Digital Beans👋- The main drivers of Bitcoin adoption and what they tell you

Bitcoin’s adoption cycles are primarily driven by 3 things

1. Global liquidity

2. Network growth

3. The Halving supply shock narrative

All three elements appear to be lining up nicely, along with Blackrock ETF 🤯 Let’s look into why

1} It appears that global liquidity bottomed at the end of ‘22, which also marked the bottoms for BTC and the S&P 500

We’ve seen a slight bounce in global liquidity to start the year. Bitcoin has responded with an 85% rally. But the rates are still high, which means as inflation reverts back toward 2%, the global economy should slow along with it (the data is pointing to this outcome)

The liquidity may not increase for some amount of time but it looks like that the bottom already happened in Nov22. Bitcoin’s market price lives & dies with liquidity. From a global standpoint, the liquidity is difficult to predict, but it looks like liquidity conditions have bottomed. The same for China, Japan, India and Europe

2} Growth in network fundamentals looks good

Bitcoin KPIs indicate that the network is growing, more BTC is taken off exchanges into self custody, the hash rate is at an all time high and more people holding BTC than ever

3} The Halving Narrative

The halving occurs every 210,000 blocks, which translates to approximately every 4 years. It marks the date that Bitcoin’s pre-programmed monetary policy changes such that the block reward (network inflation) paid to miners is reduced by 50%.

In April of next year, the block reward drops from 6.25 BTC/block to 3.125. Since new issuance is halved, it’s reasonable to conclude that the reduction in new supply is the catalyst for each bull market.

The theory goes like this: Post halving, miners sell less BTC into the market. This exhausts a large % of sell pressure. Price is set at the margin, so new buyers push the price up. The financial media starts talking about Bitcoin. People start googling it. Influencers and evangelists go viral.

New buyers enter the market, on-chain activity picks up. VCs pour money into new businesses supporting the ecosystem. More businesses = more marketing = more users. Which fuels more buyers. More on-chain activity. And more media coverage.

4} In the current scenario, the cherry on top would be an approved spot EFT with Blackrock’s name on it in the coming months

Why? Blackrock is a $10T AMC and has an impeccable reputation. A 575-1 track record with ETF approvals. And they control about 30% of ETFs today. TBH, Blackrock's name on this ETF will be super bullish for the BTC network

Its the way out.

The global cryptocurrency market cap today: $1.26 Trillion

Weekly change: 2.85% | Yearly change: 24.82%

Bitcoin (BTC) is the largest cryptocurrency with a market cap of $588 Billion.

Weekly change: 0.06% | YTD change: 82.12%

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: 48.36% | Last year (July 2022): 41.74%

The market sentiment has been back to high greed levels now post Bitcoin pumping in the last week as the likes of Blackrock filed for Bitcoin Spot ETF (bullish news)

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

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 -292,342 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

Ripple’s XRP Token Surges 96% After Partial Victory in SEC Lawsuit XRP climbed as high as 93 cents at one point, its highest level since March 2022.

SEC Formally Accepts BlackRock Spot Bitcoin ETF Application for Review The procedural move suggests that the federal agency will give the closely-watched application a serious look.

Hollywood’s Angry Creators Show Why Web3 Is Needed Web2 economics don’t work for artists and writers, says CoinDesk's Michael Casey.

And now the funny part,

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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