Some rationale thoughts — BTC

What is going on?

I’m not going to exert any opinions, but I am going to give you the thoughts that are running through my head about some macroeconomic factors that affect my fair valuation of BTC versus other investment opportunities.

I don’t know what’s going on, and neither does anybody. There’s an adage that information is power, but it’s also true that too much information can be poison.

I’m looking at this shit sandstorm as an opportunity to reflect on my perception of the future. There are really only two decisions in my mind. You’re long for the continued bull cycle, or your not trading BTC. Speculators won big up to now, and I’m not getting on the short bus with an open downside.

But here’s the deal. Technical indicators have been wildly misleading up to now.

The Puell Multiple, a measure of dollar value inflation paid to miners in a 365 day moving average, sat at 2.9x on May 9th as compared to 2x in 2017 and 2019, prior to major bull runs.

Puell Multiple = Daily Coin Issuance / MA365 (Daily Coin Issuance)

Miners are the only natural supplier of BTC and hold tokens when FV is favorable or when they need to liquidate to cover operating expenses. Makes sense. So if miners are shoving off tokens, it’s a bad sign.

Someone’s gobbling these tokens up in consolidation. There have been massive transfers on Coinbase and others indicating that.

Here’s more evidence.

But what’s an accumulation address? It’s the number of addresses that have at least two incoming transactions, have never spent BTC, and have been active over the past seven years.

Tells me that accumulation is happening. But somethings fishy here. It feels like the miners know something that we don’t, because there was every indication that this dip was coming last week. Crypto twitter has been sounding off in preparation for consolidation. Miners have some insights that we don’t. Worth considering.

MVRV = Market Value/Realized Value

Realized capital inflows were plus 208% from Nov to now where BTC grew 2.29x.

Market Value = circulating supply * price

Realized Value = UTXOs * last trade

UTXOs are unspent transaction outputs. Basically, your wallet is made up of chunks of UTXOs that hold whatever currencies you hold. They’re kin to different paper bills in a wallet — 5 dollar bill, 10 dollar bill, 1 dollar bill etc.

They function similarly as well. When a trade executes, a UTXO containing the currency from the sender moves to the receiving wallet. In order to cover the transaction plus fees associated, the UTXO must be greater than the sum of the two, and the remainder is returned to the sender as a smaller UTXO as “change”.

The purpose of measuring UTXOs is to get a better idea as to what the value of the circulating coins is in comparison to a perhaps inflated market cap. Fair value, if you will.

Roughly $250 billion in capital BTC inflows is for Nov through now shows what could be a buy signal. I’m not so sure, though. While I have no objections with the data and what it implies, it stands alone in it’s indication to this point.

Long Term HODLers Net Position Change

This indicates when HODLers cash out and when net new positions are accumulated by HODLers. The indicator fluctuates around zero, and turned positive for the first time in 3 months in May. Another bullish indicator.

There’s an element of FUD here, though. The narrative since the China blackout event at the beginning of March has been alt coins until consolidation occurs. Doge has probably contributed to the extended consolidation period, and speculators trading on margin picked up momentum as price continued to fail retests around 60,000.

Elon Musk has been a wild card. Following the Vitalik Buterin donation of memecoins, effectively punting Shib off a bridge, doge was rescued by a timely Elon Musk tweet that declared BTC payment ineligible for Tesla purchases moving forward until the energy costs associated with mining were more efficient.

The entire market has been depressed since. Psychologically, you have to understand doge constituents from the inside out. Put yourself in their shoes for a minute and cast aside your feelings about meme coins.

Doge hodlers are fiercely loyal to the ideology and they are incredibly deep in volume. They don’t likely own a sophisticated portfolio or have access to sophisticated financial products. They understand little about the intricacies of the ecosystem as a whole, and their objective is to send Doge to the moon by sheer will.

It’s going to take a lot to make these guys jump ship. Had Elon not intervened, taking Doge out of the spotlight and shifting the FUD to BTC, I believe that doge would be all but extinct right now. But Elon did what Elon does, and subsequently started an all out war with BTC maxis that has made Bitcoin look incredibly weak. More on that later.

Back to LT HODLers. It’s hard to say what this data reflects. On the one hand, I’m inclined to treat this as a bullish indicator. On the other, I revert back to the case of miners pumping the token supply. Net result is neutral to chilly. I can’t emphasize how important miners are in validating the SoV (Store of Value) theory from which BTC derives a lot of it’s value.

Miner Net Position Change

This is a horrendous trend ST. April data is strong for miner’s providing the SoV that BTC desperately needs. As evidenced by the Puell, however, we’ve flippened the trend big time. Miners are dumping.

Digital Gold Theory

This is the concept on which btc maxis have predicated every thought that they’ve ever had about anything related to crypto. And DGT argument is weaker than ever.

Miners are bailing.

Elon Musk seems to control the market price with his thumbs, sending it up or down at his leisure. He’s like a mean kid with a magnifying glass and we’re the ants.

The confrontation between maxis and Musk has elevated in its hostility. Each encounter on twitter fuels further retribution at the extent of the HODLers who can’t keep their mouths shut. I will never understand how a community within a cult-reputation community can have such a cult reputation.

Elon Musk is an idealist. We know that he cares little for his Income Statement. Tesla regularly reports negative Net Income and still trades at a premium in the secondary markets. With no apparently clear motive, it’s safe to assume that Musk is less worried about the BTC on his balance sheet and more concerned with extinguishing a mindset that he considers harmful to innovation in an incredibly promising and disruptive technology.

We already know that he announced the split with BTC while hodling on Tesla’s balance sheet. He could’ve exited his position or at least mitigated downside price fallout that he knew would come. But he didn’t.

We also know that Elon has an itch for emerging innovation. Smart cars, rocketships, crypto. Like him or not, Elon Musk is going to make sure that he is a part of this chapter in tech history. He’s not going anywhere. I think that there’s reason to suspect that Musk could dump BTC in the future, delivering a timely KO punch to BTC altogether.

Without SoV use case, BTC is replaceable. Ethereum is clearly the more dynamic, forward-thinking ecosystem. New market entrants are attracted by DeFi yeilds and derivatives markets, not a Satoshi philosophy/history lesson. Digital Gold simply doesn’t hold up anymore. Like I said, if Elon Musk can move prices with his thumbs, then it clearly isn’t what we have valued it to be.

Cue BTC maxi freakout.

Ethereum Settlement Argument

It’s completely logical to assume that Ethereum is the network of the future. Maxi philosophy fights any sort of cooperation between BTC and other chains by nature, so eventually something’s gotta give. Inclusion and cooperation nets innovation.

Ethereum will operate as the anchor of the interconnected blockchains of tomorrow in my mind. There will be huge improvements in Smart Contract application with verified truth extending to the most blurred, complex applications. Smart Contracts are going to change the world in unimaginable ways. Cooperation in development cross-chain will afford the most dynamic coding languages, and the future is bright.

DeFi continues to explode in the short term. Access to derivatives markets for the retail investor is driving new user growth. BTC isn’t seeing any of those synergies.

There will be growing pains, of course. Government involvement is around the corner as they figure out how to classify this new asset class.

Nonetheless, the importance of the blockchain technology pioneered by Bitcoin coupled with Ethereum’s dynamic application on top of it has been recognized in its propensity to change the world.

Bitcoin gave us a great foundation, and there is room for bitcoin in the future of cross-chain cooperation. But the purists need to adapt, allowing the devs need to change the direction to fit into the crypto of tomorrow. Otherwise, they may get left behind.



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Landrum Tyson

Landrum Tyson


Lead me, follow me, or get the heck out of my way. I write to understand what I think.