Month: November 2024

As Bitcoin once again finds itself in price discovery mode, market watchers and enthusiasts are curious: has retail FOMO set in yet, or is the retail surge we’ve seen in past bull cycles still on the horizon? Using data from active addresses, historical cycles, and various market indicators, we’ll examine where the Bitcoin market currently stands and what it might signal about the near future.

Rising Interest

One of the most direct signs of retail interest is the number of new Bitcoin addresses created. Historically, sharp increases in new addresses have often marked the beginning of a bull run as new retail investors flood into the market. In recent months, however, the growth in new addresses hasn’t been as sharp as one might expect. Last year, we saw around 791,000 new addresses created in a single day—a sign of considerable retail interest. In comparison, we now hover significantly lower, although we have recently seen a modest uptick in new addresses.

Figure 1: The number of new addresses on the Bitcoin network has begun to rise.

View Live Chart 🔍

Google Trends also reflects this tempered interest. Although searches for “Bitcoin” have been increasing in the past month, they remain far below previous peaks in 2021 and 2017. It seems that retail investors are showing a renewed curiosity but not yet the fervent excitement typical of FOMO-driven markets.

Figure 2: Google searches for ‘Bitcoin’ are also rising but are still relatively low.

Supply Shift

We are witnessing a slight transition of Bitcoin from long-term holders to newer, shorter-term holders. This shift in supply can hint at the potential start of a new market phase, where experienced holders begin taking profits and selling to newer market participants. However, the overall number of coins transferred remains relatively low, indicating that long-term holders aren’t yet parting with their Bitcoin in significant volumes.

Figure 3: Only a slight increase in bitcoin shifting hands to new holders.

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Historically, during the last bull run in 2020-2021, we saw large outflows from long-term holders to newer investors, which fueled a subsequent price rally. Currently, the shift is only minor, and long-term holders seem largely unfazed by current price levels, opting to hold onto their Bitcoin despite market gains. This reluctance to sell suggests that holders are confident in further upside potential.

A Spot-Driven Rally

A key aspect of Bitcoin’s latest rally is its spot-driven nature, in contrast to previous bull runs heavily fueled by leveraged positions. Open interest in Bitcoin derivatives has seen only minor increases, which stands in sharp contrast to prior peaks. For instance, open interest was significant before the FTX crash in 2022. A spot-driven market, without excessive leverage, tends to be more stable and resilient, as fewer investors are at risk of forced liquidation.

Figure 4: Open interest has been declining on a macro scale, with only a slight recent increase.

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Big Holders Accumulating

Interestingly, while retail addresses haven’t increased substantially, “whale” addresses holding at least 100 BTC have been rising. Over the past few weeks, wallets with large BTC holdings have added tens of thousands of coins, amounting to billions of dollars in value. This increase signals confidence among Bitcoin’s largest investors that the current price levels have more room to grow, even as Bitcoin reaches all-time highs.

Figure 5: Addresses holding at least 100+ BTC is at the highest value since 2019.

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In past bull cycles, we saw whales exit or decrease their positions near market peaks, a behavior we’re not seeing this time. This trend of accumulation by experienced holders is a strong bullish indicator, as it suggests faith in the market’s long-term potential.

Conclusion

While Bitcoin’s rally to all-time highs has brought renewed attention, we’re not yet seeing the telltale signs of widespread retail FOMO. The subdued retail interest suggests we may be only in the beginning phase of this rally. Long-term holders remain confident, whales are accumulating, and leverage remains modest, all indicators of a healthy, sustainable rally.

As we continue into this bull cycle, the market’s structure suggests that the potential for a larger retail-driven surge remains ahead. If this retail interest materializes, it could propel Bitcoin to new heights.

For a more in-depth look into this topic, check out a recent YouTube video here: Has Retail Bitcoin FOMO Begun?

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Well, well, well—if it isn’t Jack Mallers dropping truth bombs like they’re going out of fashion! His latest video on Bitcoin scarcity has me more thrilled than a Brit who’s just found out the pub’s open early.

You see, we Brits have a knack for understatement, but when it comes to Bitcoin, subtlety takes a backseat. We often babble on about Bitcoin being an inflation hedge—as if it’s some sort of financial umbrella protecting us from the monetary drizzle. But let’s cut the crumpets; the real magic lies in its finite supply.

In his recent episode of The Money Matters Podcast, streamed live on 11 November 2024, Mallers didn’t just hit the nail on the head; he used a sledgehammer. “Bitcoin is a solution, it is not a hedge,” he proclaimed, with the kind of conviction you’d expect from someone who’s just discovered tea and biscuits.

He pointed out the glaringly obvious—yet often overlooked—fact that Bitcoin is the only asset where increased demand doesn’t lead to increased supply. If everyone suddenly wants an iPhone, Apple will churn them out faster than you can say “planned obsolescence.” But if everyone wants Bitcoin? Well, tough biscuits. There’s a fixed supply, and that’s that.

Mallers eloquently stated, “Bitcoin is the most performant asset in the world because it’s the scarcest asset in the world. It’s the only asset that demands a higher price for more supply.” It’s like trying to get tickets to a sold-out Oasis concert; the more you want them, the more you have to cough up.

He also took a delightful jab at those who think Bitcoin is just another cog in the financial machine, correlated to stocks or precious metals. It’s as if he’s telling us that while the world fiddles with monetary policies like a cat with a ball of yarn, Bitcoin stands unflinchingly firm.

Now, I don’t know about you, but the idea that Bitcoin is immune to the whims of central banks and governments makes me sleep better at night. Well, that and a good cup of Earl Grey. The finite nature of Bitcoin means it can’t be diluted, devalued, or tampered with—unlike my neighbor’s opinion on my lawn gnomes.

Mallers sums it up brilliantly: “Bitcoin can change the world because the world cannot change Bitcoin.” It’s the financial equivalent of an unstoppable force meeting an immovable object—except, in this case, the object is a decentralized ledger, and the force is our collective realization that scarcity is valuable.

So, what’s the takeaway here? If you’re still treating Bitcoin like an optional side dish rather than the main course, it’s time to rethink your financial menu. The scarcity of Bitcoin isn’t a bug; it’s a feature—a rather splendid one at that.

In the grand tapestry of assets, Bitcoin is that elusive thread of gold that doesn’t tarnish, doesn’t fray, and certainly doesn’t multiply just because we fancy a bit more bling. It’s high time we recognized Bitcoin not just as a hedge against inflation but as a standalone solution to the age-old problem of value preservation.

As for me, I’ve decided to value two things above all: my time and my Bitcoins. Everything else is just window dressing—or, as we say across the pond, mere fluff.

So here’s to Jack Mallers for reminding us that sometimes, less truly is more. And if you haven’t watched his latest video, do yourself a favor and give it a gander. Just be prepared—you might find yourself nodding along more vigorously than a bobblehead on a bumpy road.

Cheers!

Watch the video:

#Bitcoin can change the world because the world can’t change #Bitcoin pic.twitter.com/3WnamG8nL7

— Jack Mallers (@jackmallers) November 14, 2024

This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

A lot of consensus-change proposals for bitcoin are on the table at the moment. All of them have good motivations, whether it’s scaling UTXO ownership or making self-custody more tractable. I won’t rehash them here, you’re probably already familiar. Some have been actively developed for years.

The past two such changes that have been made to bitcoin successfully, Segwit and Taproot, were massive engine-lift-style deployments fraught with drama. There have been smaller changes in bitcoin’s past, like the introduction of locktimes, but for some reason the last two have been kitchen sink affairs.

The reality not often talked about by many bitcoin engineers is that up until Taproot, bitcoin’s consensus development was more or less operating under a benevolent dictatorship model. Project leadership went from Satoshi to Gavin to… well, I’ll stop naming names.

Core developers will likely quibble with this characterization, but we all know deep down that to a first order approximation that it’s basically true. The “final say” and big ideas were implicitly signed off on by one guy, or maybe a small oligarchy of wizened autists.

In many ways there’s really nothing wrong with this – most (all?) major open source projects operate similarly with pretty clear leadership structures. Oftentimes they have benevolent dictators who just “make the call” in times of high-dimensional ambiguity. Everyone knows Guido and Linus and the based Christian sqlite guy.

Bitcoin is aesthetically loath to this but the reality, whether we like it or not, is that this is how it worked up until about 2021.

Given that, there are three factors that create the CONSENSUS CONUNDRUM facing bitcoin right now:

(1) The old benevolent dictators (or high-caste oligarchy) have abdicated their power, leaving a vacuum that shifts the project from “conventional mode of operation” to “novel, never-before-tried” mode: an attempt at some kind of supposedly meritocratic leaderlessness.

This change is coupled with the fact that

(2) the possible design space for improvements and things to care about in bitcoin is wide open at this point. Do you want vaults? Or more L2s? What about rollups? Or how about a generic computational tool like CAT? Or should we bundle the generic things with applications (CTV + VAULT) to make sure they really work?

The problem is that all of these are valid opinions. They all have merit, both in terms of what to focus on and how to get to the end goal. There really isn’t a clear “correct” design pattern.

(3) A final factor that makes this situation poisonous is that faithfully pursuing, fleshing out, building, “doing the work” of presenting a proposal IS REALLY REALLY TIME CONSUMPTIVE AND MIND MELTING.

Getting the demos, specs, implementation, and “marketing” material together is a long grind that takes years of experience with Core to even approach.

I was well paid to do this fulltime for years, and the process left me disgusted with the dysfunction and having very little desire to continue contributing. I think this is a common feeling.

A related myth is that businesses will do something analogous to aid the process. The idea that businesses will build on prospective forks is pretty laughable. Most bitcoin companies have a ton on their backlog, are fighting for survival, and have basically no one dedicated to R&D. The have a hard enough time integrating features that actually make it in.

Many of the ones who do have the budget for R&D are shitcoin factories that don’t care about bitcoin-specific upgrades.

I’ve worked for some of the rare companies that care about bitcoin and do have the money for this kind of R&D, and even then the resources are not sufficient to build a serious product demo on top of 1 of N speculative softforks that may never happen.

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This kind of situation is why human systems evolve leadership hierarchies. In general, to progress in a situation like this someone needs to be in a position to say “alright, after due consideration we’re doing X.”

Of course what makes this seem intractable is that the Bitcoin mythology dictates (rightly) that clear leadership hierarchies are how you wind up, in the limit, with the Fed.

Sure, bitcoin can just never change again in any meaningful way (“ossify”). But at this point that almost certainly resigns it to yet another financial product that can only be accessed with the benefit of a large institution.

If you grant that bitcoin should probably keep tightening its rules for more and better functionality, but that we should go “slow and steady,” I think there are issues with that too.

Because another factor that isn’t talked about is that as bitcoin rises in price, and as nation-states start buying in size, the rules will be harder to change. So inaction — not deciding — is actually a very consequential decision.

I do not know how this resolves.

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There’s another uncomfortable subject I want to touch on: where the power actually lies.

The current mechanism for changing bitcoin hinges on what Core developers will merge. This of course isn’t official policy, but it’s the unintended reality.

Other less technically savvy actors (like miners and exchanges) have to pick some indicator to pay attention to that tells them what changes are safe and when they are coming. They have little ability or interest to size these things up for themselves, or do the development necessary to figure them out.

My Core colleagues will bristle at this characterization. They’ll say “we’re just janitors! we just merge what has consensus!” And they’re not being disingenuous in saying that. But they’re also not acknowledging that historically, that is how consensus changes have operated.

This is something that everyone knows semi-consciously but doesn’t really want to own.

Core devs saying “yes” and clicking merge has been a necessary precursor every time. And right now none of the Core devs are paying attention to the soft fork conversations – sort of understandable, there’s a bunch to do in bitcoin.

But let’s be honest here, a lot of the work happening in Core has been sort of secondary to bitcoin’s realization.

Mempool work is interesting, but the whole model is more or less upside down anyway because it’s based on altruism. For-profit darkpools and accelerators seem inevitable to me, although that could be argued. Much of the mempool work is rooted in support for Lightning, which is pretty obviously not going to solve the scaling problem.

Sure, encrypted P2P connections are great, but what’s even the point if we can’t get on-chain ownership to a level beyond essentially requiring the use of an exchange, ecash mint, sidechain, or some other trusted third party?

My main complaint is that Core has developed an ivory tower mindset that more or less sneers at people piatching long-run consensus stuff instead of trying to actually engage with the hard problems.

And that could have bitcoin fall short of its potential.

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I don’t know what the solution to any of this is. I do know that self-custody is totally nervewracking and basically out of the question for casual users, and I do know that bitcoin in its current form will not scale to twice-monthly volume for even 10% of the US, let alone most of the world.

The people who don’t acknowledge this, and who want to spend critical time and energy wallowing in the mire of proposing the perfect remix of CTV, are making a fateful choice.

Most of the longstanding, fully specified fork proposals active today are totally fine, and conceptually they’d be great additions to bitcoin.

Hell, probably a higher block size is safe given features like compactblocks and assumeutxo and eventually utreexo. But that’s another post for another day.

—

I’ve gone back and forth about writing a post like this, because I don’t have any concrete prescriptions or recommendations. I guess I can only hope that bringing up these uncomfortable observations is some distant precursor to making progress on scaling self-custody.

All of these opinions have probably been expressed by @JeremyRubin years ago in his blog. I’m just tired of biting my tongue.

Thanks to @rot13maxi and @MsHodl for feedback on drafts of this.

This is a guest post by James O’Beirne. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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In his Take from Wednesday, Shinobi argued that the surge of institutional bitcoin adoption will lead to premature ossification of the Bitcoin protocol. While I share this concern to an extent, I am less convinced this is necessarily true.

Bitcoin is inherently a permissionsless system. For protocol changes specifically, it “just” requires users to upgrade their software. And when it comes to deploying soft forks, it really only needs a majority of miners to upgrade. (This is admittedly a simplification for the sake of brevity, but I’d say it’s still “true enough” to state it this way.)

Miners will for the most part follow economic incentives. If a protocol upgrade makes Bitcoin (say) more scalable or more private, there is actually good reason to think this would make Bitcoin more valuable, which in turn means there is good reason to think miners will activate the upgrade.

Even in an extreme scenario where a soft fork occurs through a user activated soft fork (UASF) that splits the blockchain, and even if in this scenario the institutions prefer the legacy version of the chain (this is the scenario Shinobi is ultimately envisioning), it’s not obvious to me that the non-upgraded chain would “win”.

Just owning lots of bitcoin does not give you a “say” on which side of a chain split is more valuable. Initially, everyone receives coins on both sides. Only if you’re willing to buy or sell these coins (eg.: “dump” coins on one side of the split to get more coins on the other side) does your economic weight matter. But this means you have to take a risk: skin in the game.

Would big institutions really be willing to bet everything they own on the version of the protocol without the upgrade? That’s a big assumption to make.

This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Ever since its 2009 development by the mysterious Satoshi Nakamoto, Bitcoin has become foundational to the cryptocurrency and fintech landscape. As the first decentralized cryptocurrency, Bitcoin has driven significant growth in blockchain technology, becoming the most visible and widely adopted coin on the market. With the ability to conduct seamless transactions on the blockchain, Bitcoin has been adopted as legal tender in some countries and embraced worldwide for a variety of uses.

Today, Bitcoin is used by people globally for various services. Notably, Bitcoin has gained adoption not only as legal currency in El Salvador but also for every day transactions—whether trading a pizza from Papa John’s or depositing funds at online casinos and sports betting websites.

Bitcoin’s value lies in its enhanced privacy, cryptographic security, and the development of encrypted wallets that ensure safe transactions on a global scale. Let’s dive into how Bitcoin works, how to use it, and the best ways to keep it secure:

What is Bitcoin (BTC) & How Does it Work?

Despite being around for more than a decade, newcomers may still wonder, “what is bitcoin?” Simply put, Bitcoin is a decentralized digital currency that operates independently of any central bank. Instead of relying on a traditional financial institution, Bitcoin transactions are verified by networked computers through a process known as mining, which involves solving complex mathematical problems. Once mined, Bitcoin can be transferred directly to others or used for purchases with bitcoin-accepting vendors, with each transaction recorded on a public ledger—the blockchain.

This decentralized, peer-to-peer system ensures that all Bitcoin transactions are transparent yet pseudonymous. Even though each transaction is publicly available on the blockchain, the identities of the transacting parties can remain private.

How to Use Bitcoin Online

Before first buying and using bitcoin, you will need to set up a wallet in which to store it. Here’s a simple guide to start using Bitcoin:

Set Up a Wallet: Choose a secure Bitcoin wallet for your needs. You’ll need both a public key (like an account number) for receiving funds and a private key (like a password) for authorizing transactions. Many hot wallets and cold wallets are available, each with its pros and cons for different users.

Find Vendors that Accept Bitcoin: Many online services and products now accept Bitcoin, although some may only accept other cryptocurrencies. Once you’ve found a vendor, you can use your wallet to send Bitcoin directly for goods or services.

Send Bitcoin to Other Users: Bitcoin transfers are similar to traditional bank transfers, though they remain independent of banks. Ask the recipient for their wallet address, then transfer funds directly to their wallet.

How to Store Bitcoin Safely

When using Bitcoin, securing your funds is critical. Here are key wallet types and best practices for safe Bitcoin storage:

Hot Wallets: These are digital wallets connected to the internet, such as mobile or web apps. Hot wallets are convenient for frequent transactions but are more vulnerable to cyber threats. When using hot wallets, consider diversifying to reduce risk.

Cold Wallets: Cold wallets, like hardware wallets, are offline storage solutions, ideal for long-term holdings. These wallets are disconnected from the internet, making them less accessible to potential hackers. While they’re more secure, they can be less convenient for immediate transactions.

Seed Phrases and Private Keys: When you set up a wallet, you’ll often receive a seed phrase—a recovery phrase that enables you to restore your funds if you lose access to your wallet. It’s essential to keep both your seed phrase and private key secure and offline. The public key can be shared with anyone for receiving Bitcoin, but the private key must remain private to ensure the safety of your funds.

Why You Should Use Bitcoin

There are many reasons why people choose to use Bitcoin, and here are some of the most popular benefits:

Privacy and Decentralization: Bitcoin’s independence from central banks and financial institutions allows users to make private, pseudonymous transactions. This feature makes it an appealing choice for those looking to protect their financial privacy.

Global Payment Solution: Bitcoin allows users to conduct transactions across borders without worrying about exchange fees. You’ll only need to pay a small transaction fee on crypto exchanges, with no need to exchange fiat currencies like dollars to euros.

Wider Acceptance: With increased adoption, Bitcoin is now accepted by a growing number of companies and online platforms. Whether it’s for gaming on sites like Stake.com or making everyday purchases, Bitcoin’s utility continues to expand.

Bitcoin: The Future of Finance

Bitcoin offers a decentralized, secure method of conducting transactions that emphasizes user control, privacy, and a simplified financial process. As Bitcoin continues to grow in use and adoption, learning how to use and store it safely has never been more critical. Following these best practices can help you protect your assets and enjoy the benefits of this revolutionary digital currency.

Picture this, dear reader: It’s 2016, and for the princely sum of $288,400, you could stroll into the American dream—your very own house. Now, fast forward to 2024, and that same slice of suburban heaven will set you back a staggering $434,700. Wages haven’t quite managed the same level of gymnastics, leaving many young folks clutching their wallets like they’re bracing for the next unexpected subscription charge.

But what if I told you there was a way to make homeownership not only possible but laughably attainable? Enter stage left: Bitcoin. Yes, the orange wonder coin that goes up, down, and all-around faster than a politician’s promises during election season.

INSERT TWEET – https://x.com/BitcoinMagPro/status/1857064473472704563

Let’s Talk Numbers, Shall We?

In 2016, if you had 664 BTC burning a hole in your pocket, you could swap it for a median U.S. home. By 2020, that figure had plummeted to a much tidier 45 BTC. And now, in the grand year of 2024, a mere 4.8 BTC could snag you a place to call your own. At this rate, we’re only a few years away from buying a house with the change down the back of Satoshi’s metaphorical sofa.

Let’s marvel at this for a moment: as house prices in fiat terms continue their relentless climb—like an escalator with no off switch—Bitcoin’s purchasing power has been heading in the opposite direction. It’s not just holding its own against inflation; it’s laughing in inflation’s face, stealing its lunch money, and then inviting it to watch while it buys a house.

A Glimmer of Hope in a Housing Crisis

For millennials, Gen Z, and the generations to come, the dream of homeownership has often felt like trying to catch smoke with bare hands. Wages are stagnant, the cost of living is skyrocketing, and central banks seem to be in a perpetual money-printing competition. But Bitcoin offers a way out. It’s not just a currency; it’s a lifeline—a savings instrument that actually rewards you for your discipline and foresight.

The Bitcoin Homeowner’s Playbook

Imagine saving up for a down payment in Bitcoin rather than fiat currency. While the dollar in your savings account loses purchasing power faster than an ice cream cone in the sun, your Bitcoin nest egg could be growing—not just in value, but in what it can buy. At the current pace, we’re hurtling towards a future where a single Bitcoin might well buy you a house, a car, and possibly even the white picket fence thrown in for good measure.

And here’s the kicker: the rapid decrease in the number of Bitcoins needed to purchase a house isn’t just a fluke. It’s a reflection of Bitcoin’s deflationary nature and its growing adoption as a global store of value. When priced in Bitcoin, houses are getting cheaper. When priced in dollars, they’re getting more expensive. It doesn’t take a financial wizard to figure out which one makes more sense to save in.

A Word of Caution (and Optimism)

Of course, Bitcoin is not without its volatility. There will be days when the price moves faster than a caffeinated squirrel. But for those with a long-term view, the trend is clear: Bitcoin is the best savings instrument humanity has ever seen.

So, to all the young families and would-be homeowners out there, take heart. The dream of owning your own home isn’t dead—it’s just been reimagined. The answer isn’t in working harder or saving more in a currency that loses value by the day. The answer is Bitcoin.

And one day soon, when you’re sitting on the porch of your very own house, bought with a single Bitcoin, you’ll raise a glass and say, “Cheers, Satoshi. You made this possible.”

Now, where’s that Bitcoin wallet?

This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.