Ring the Alarms we have a BITCOIN shortage Chico Jarheads! The gobble goos are swallowing up all that can be produced. Is it true…find out, because it’s time for Chico Crypto! Well Supply vs Demand, it’s 2 simple concepts, which create the abstract thing everyone knows as value. The value of things boils down to this…how many there are of it. Supply. and is it wanted? Demand. Salaries of jobs are created based on this, prices of assets, commodities, services and goods are created based on this, wherever value is transferred in this world…supply and demand is a critical function, thus supply and demand defines economic value. Since the dawn of humankind, everything in this world has had a perceived unlimited supply, from animals, to land, to gold, to water, to oil. Literally humans have consumed, from caveman to us today like there is no supply cap. We will even consume it until it vanishes forever off this earth, just look into species made extinct by human activities, and you get it.
But humans are figuring out even how to increase the supply of extinct animals for our personal needs. DNA, Cloning, the next Jurassic park?? Even when the supply runs out, humans want more of it…humans have a need to consume at all costs. So what does that mean for BITCOIN? As we know, Bitcoin was the first truly supply capped asset ever created in this world. 21 million, that’s all that will ever be created & humans can’t even clone it, even if they tried, and put all their knowledge & power they could at creating more. That goes against what we have ever known, since the dawn of time, the laws of consumption. There’s always a way to figure out how to get more, except with BITCOIN. Thus, this has flipped the definition of economic value for BITCOIN, on its head. It’s the reason BITCOIN went from worthless to looking like reclaiming 20 thousand dollars in just over 10 years.
Fastset & highest returning asset in the history of humankind. And in my opinion, it’s only the beginning. So you may be saying (*mexican voice) “Damn… why you so bullish Chico?? Well anyone should be “bullish†on BTC long term, when compared with an ever inflating supply of government controlled fiat currencies. But did you hear what I said? LONG TERM Be aware, of headlines like this, from my future competitor Cointelegraph. “Bitcoin shortage is real, and PayPal is the cause, Pantera Capital claims…which Pantera does, the VC firm put out this medium post “PayPal’s crypto infrastructure provider is Paxos. Prior to PayPal’s integration of crypto, itBit, the Paxos-run exchange, was doing a fairly constant amount of trading volume — the white line in the chart below. When PayPal went live, volume started exploding. The increase in itBit volume implies that within four weeks of going live, PayPal is already buying almost 70% of the new supply of bitcoins. PayPal and Cash App are already buying more than 100% of all newly-issued bitcoins.
And they show the chart, which says that yes this is true, volume on itBIT the orange line was getting close and finally exceeded to the value of the daily amount of newly minted BTC, the dashed line. Although trading volume is the buying…..& selling of an asset, so that is false, that this is all “BUY†volume like both pantera & cointelegraph imply. It’s good to see, increasing volume from PAXOS’s ItBIT, as what it does imply is payal crypto is being used…but that use isn’t a green buy button stuck on press repeat. So what is itBIT? Well going to their website…it’s an exchange with Crypto Asset Trading built for Financial Institutions and Active Traders. Sounds pretty damn legit right, financial institutions…active traders, like it would be a pretty damn big force within the crypto industry.
Well pulling out their volume chart since last year, nope…averaging just about 5 million in 24 hour volume. Well you wanna know what they will say?? They will say, we play with the big dogs, the financial institutions, and they buy OTC, over the counter, under the counter…aka off the exchange books, which ITbit covers below, saying for Trades over 100k, they do specialized OTC trades. So this just has me gosh dang confused…it bit, has weak arse liquidity even with Paypal, like just over 20 million 24 hours, that is not deep whatsoever order books, and you could not get Paypal customers the “best†prices on their crypto, just through ITBIT…their order books are weak AF… And in Paypal’s crypto agreement they say this “PayPal makes money when you buy and sell Crypto Assets.
PayPal will charge a spread (or margin) between the market price we receive from our trading Service Provider and the exchange rate between USD and Crypto Assets displayed to you. Paypal is making money off you….now let’s just go back to itbit on Coingecko, their “Price†for a Bitcoin on the exchange, yesterday it was $18,516…now look at the current price averaged across exchanges, much lower…$18,472. That’s a nearly 50 dollar spread…and if you didn’t know, Paypal is offering solid prices, in line with Coinbase and Cashapp. How are they doing this when they are using an LP, whose order books won’t allow it? Well just think for a gosh damn second, Paypal would not be using the ITbit exchange to make a large bulk of their Bitcoin purchases and sales, they would be using Paxos and their wide net of OTC. They are a big dog, which has one goal, profit and they want to make the most money possible off each and every single crypto transaction…and using solely ITbit and their liquidity, would not allow that.
So what exactly is going on? Well this June Coindesk article on the Paypal expected crypto launch explains it pretty well. An insider told Coindesk this ““My understanding is that they are going to allow buys and sells of crypto directly from PayPal and Venmo, They are going to have some sort of a built-in wallet functionality so you can store it there & PayPal would be working with multiple exchanges to source liquidity. So who is the other source? They obviously have to be working with more than 1 exchange to source their “prices Paxos OTC network? Another deal? And why the “volume†on itBIT if that’s not the source? A narrative being written as we speak? Paypal buying up all the newly minted bitcoins.
Bitcoin shortage. PAMP it. So Paypal gobbling up all the BTC & I hope you remember my video last week, BITCOINs Tether “CRASH†Black Swan Event..WHEN!? I highly recommend you check it out, in the description, or it will pop up as one of those cards at the very end. Click it. Now the video was about the OTC channel crackdown in China, and how Miners couldn’t sell their BTC through their normal channels. They could mine the BTC, they could exchange the BTC for Tether, but they couldn’t use their normal OTC bank account routes to get fiat.
So now, we are getting the narrative that this is also causing a supply shock. The miners have to “HOLD†the created BITCOIN. Well that’s not necessarily true either…they can exchange it for USDT. So let’s finish off this supply and demand episode with what Chico does the best and look at the actual DATA to see this is true. Terminal.bytetree.com tracks miners first spends, it tells us the first time any miner moves their coins. They may not happen to be selling them or exchanging them the very 1st time they move them, but it does give a good ballpark estimate.
Now, if we view the monthly, 5 week and 3 month, 12 week Miners first spend, it signals that the bitcoin miners have been selling into these markets. Negative BTC numbers, and over 100 percent on the metrics signal this. So exchanging miners BTC, has been operating per normal…miners have been “selling†not being forced to hold in these markets. The supply is operating per normal, and a lot of this supply shock hype you see, is just that….HYPE. I’m bullish on BTC, but I try to hold a realistic footing in these crazy crypto markets. Paypal’s crypto hype isn’t that big…yet…and there isn’t a bitcoin supply shock from Chinese miners.
But Paypal’s real hype will be coming…Paxos is just an intermediary step So going back to what the insider also said in June regarding paypal and crypto #1 Paypal would be allowing buys and sells of crypto directly from Paypal and Venmo…both of those are now confirmed as True…but #2 they said they were going to have some sort of built in wallet functionality for storage. That isn’t true….. Right now…….so remember just last month, it was leaked that Paypal was in talks for the acquisition of the leading crypto custodian BitGO. What will this acquisition allow them to do?? Provide wallet services. Storage, and the ability to send and receive…not just buy and sell crypto assets. And That’s when the real hype comes.
Cheers I’ll see you next time!.
