#787 What In The World Is Going On With Bitcoins Price w/ Dylan LeClair
1/19/2022 · 36 min · transcript via mlx
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Key topics
— Bitcoin realized market capitalization shows ~$90 billion in capital inflows since August, indicating continued accumulation but at a slower relative pace than needed for parabolic price action.
— Derivative market speculation (perpetual futures and three-month futures basis) has been the primary driver of recent Bitcoin price moves, not organic spot market demand.
— U.S. bond yields are rising sharply as the Fed signals multiple rate hikes in response to 7% CPI inflation, creating downward pressure on both equities and Bitcoin as risk assets.
— Bitcoin-S&P 500 correlation currently sits at ~56%, but this masks the distinction between Bitcoin as a financialized risk-on asset (for institutions) versus a reserve asset or value store (for individuals and El Salvador).
— Cash App's Lightning Network integration and Intel's announced Bitcoin mining ASIC entry represent significant infrastructure advances, though price impacts from such news are muted at Bitcoin's $800 billion scale.
— Political adoption of pro-Bitcoin candidates in the 2022 midterms is likely underpriced; a future U.S. president sympathetic to Bitcoin is plausible within 10–20 years.
Market & price signals
— Bitcoin is trading around $40K (referenced as a more attractive valuation than early 2021) with the market value-to-realized-value ratio at 1.75—historically attractive, though not yet a generational buying opportunity (which occurs below 1.0). Bond yields are rising (10-year Treasury around 1.5–1.6%) while CPI remains at 7%, creating real negative yields and supporting equities. The futures market is pricing in four Fed rate hikes by end-2022, with yields beginning to bend upward as government bonds sell off. Bitcoin's 30-day realized price change remains tepid despite $90 billion in inflows, signaling slowed capital velocity relative to market size growth since 2017.
Actionable insights
— Bitcoin remains more attractive on a relative valuation basis at current levels than in early 2021; accumulation by long-term holders is more rational than speculation, especially given the financialization-driven volatility from macro hedges and hedge funds treating Bitcoin as a high-beta risk asset.
— Monitor Fed rate hike trajectory and bond yield movements as leading indicators for Bitcoin price action; institutional sell-offs during liquidity contractions may present opportunistic entry points for conviction holders who view Bitcoin as a deflationary store of value rather than a leveraged macro trade.
— Hash rate increases and ASIC manufacturing competition (Intel, Blockstream, Square) strengthen network security and adoption utility but will eventually commoditize mining margins; long-term Bitcoin holders benefit from these trends even as mining profitability normalizes.
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