#781 Is The Bitcoin Bear Market Over? w/ Dylan LeClair
1/13/2022 · 30 min · transcript via mlx
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Key topics
— Dylan LeClair discusses Bitcoin mining difficulty and hash rate trends, showing both have increased exponentially over Bitcoin's history in log scale, making it progressively harder to mine Bitcoin per unit of hash rate.
— Mining revenue denominated in Bitcoin terms is trending toward zero due to halving events and difficulty adjustments, even as USD-denominated revenue grows for mining companies.
— Publicly traded Bitcoin miners (Riot, Mara, Hut, BITF, Hive) are significantly underperforming Bitcoin when returns are measured in BTC terms rather than USD, despite USD gains.
— The importance of denominating performance in Bitcoin rather than dollars as a mental model and unit of account, especially for long-term investors and institutions.
— Interest rates and real yields are likely to remain negative or near zero to prevent system collapse, making Bitcoin an attractive store of value as fiat currencies continue to debase.
— Bill Miller's 50% Bitcoin allocation and potential adoption by more nation states in 2022 signal growing institutional and sovereign conviction in Bitcoin.
Market & price signals
— Bitcoin traded from ~$69,000 in November 2021 down to the high $40,000s / low $50,000s as of the conversation date (early January 2022). The Fear and Greed Index dropped to 10, compared to 90 at $40K in January 2021. LeClair identifies $40K as a strong technical support level for bulls. Long-term Bitcoin holders distributed some holdings into the drawdown due to macro concerns, though LeClair notes long-term holders who understand Bitcoin as a monetary asset are accumulating on dips via dollar-cost averaging. Mining hash price (revenue per terahash) has declined significantly in BTC terms with each halving, with May 2020 showing a vertical drop corresponding to the third halving event.
Actionable insights
— Evaluate Bitcoin mining stocks and companies in BTC-denominated terms rather than USD terms; publicly traded miners are programmed to underperform Bitcoin over time because mining revenue in BTC terms declines with every halving, regardless of USD revenue growth.
— Consider adopting a Bitcoin standard mental model for personal savings and long-term portfolio allocation; this framework provides clarity for individual investors who cannot analyze every publicly traded company and may benefit more from conviction in a simpler, harder monetary asset.
— Monitor macro developments around real yields and potential debt crises; if interest rates cannot sustainably rise without breaking the financial system, Bitcoin could be a strong performer during the next deflationary crisis, similar to its March 2020 bottom before the subsequent rally.
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