Bitcoin has gotten off to quite a bang in 2023 increasing its USD price by 62% YTD from $16,617 --> $26,800 USD. In addition to the increase in the price, bitcoin has already achieved several significant milestones in 2023 and has impressive fundamentals and momentum.
The hash rate continues to grow setting new highs in 2023 highlighting the increased utility, adoption, growth of mining and the amount of energy dedicated to the network. The fundamentals of the network are growing and Bitcoin is gaining momentum as both a new technology and as an emerging asset class.
Sovereigns including Bhutan, El Salvador, United Arab Emirates and Oman have all made significant investments into bitcoin mining infrastructure. Sovereign countries entering the bitcoin mining arena is an important milestone for bitcoin.
Multiple Bitcoin ETF applications are in the queue and the US courts recently overturned the SEC decision to stop the Grayscale ETF conversion. On the institutional front, Blackrock is shifting away from ESG and towards Bitcoin. KPMG also released a memo "Bitcoin's Role in ESG" highlighting bitcoin's environmentally friendly utility.
FASB (Financial Accounting Standards Board l) has decided to change the way bitcoin is treated and allow corporations to use a fair value approach. This may be the most important milestone for Bitcoin in 2023. Michael Saylor has highlighted this as an important step towards corporate treasury adoption and recently released an excellent interview on the topic.
Approaching a Tipping Point
The combination of these accounting rule changes, looming ETFs, a relentless hash rate, hodlers at all time high, and sovereigns entering bitcoin mining suggest we are approaching a tipping point. Bitcoin is now 52% powered by renewable energy challenging the “bitcoin is a waste of energy” narrative.
The number of politicians supporting bitcoin is also growing and include Robert Kennedy Jr, Rand Paul, Cynthia Lummis, Warren Davidson, Tom Emmer, and Pierre Poilievre. Politicians are choosing to embrace bitcoin in order to attract orange votes.
The president of El Salvador, Nayib Bukele, has achieved success in GDP growth since adopting bitcoin as an official currency and adding bitcoin education into schools. El Salvador’s bonds have rallied more than 60% this year as its financial situation has improved with the bitcoin rally. This is a big change from the El Salvador is doomed narrative when it began investing in Bitcoin. President Bukele has partnered with Max Keizer to create The Volcano Energy company. They have secured $1 Billion worth of investment to build a 241 Megawatt facility and transform a volcano into a revenue generating geothermal bitcoin mine.
Considering that bitcoin does not have any employees or any annual marketing budget it has spread widely across the globe into so many different areas of current events. Bitcoin has also secured victories in both the legal system and with accounting regulators.
Confusing Volatility, Safety and Risk
The volatility of the world continues to increase as governments balance the dangerous combination of record fiat debts, high inflation, rising interest rates and bond yields as well as geopolitical/monetary/energy conflicts. Energy, food and rent prices are still high and rising hinting that we may not have defeated inflation just yet. Fires, natural disasters and extreme weather are becoming more common. The chaos/entropy of the world generally results in Governments increasing the global money supply as the solution to the majority of these challenges is print more money.
Bitcoin is positively correlated with global M2 money supply, benefiting from the chaos.
This is a visualization of money printing protection. If Bitcoin is positively correlated to money printing and money printing happens in every disaster you are positively correlated to disasters.
At first glance Bitcoin looks very risky due to its high volatility and the fact that it is an emerging unregulated technology. Bitcoin is actually a lot safer than it first appears.
For example if you own 0.01 Bitcoin the USD exchange rate value does fluctuate but the actual amount of bitcoin you own remains the same and your % ownership of the bitcoin network itself remains the same 0.01/21M. One way to think about this is if you own 5 ounces of gold and the USD exchange rate for gold increases or decreases you still own 5 ounces of gold.
This is actually a lower risk than fiat currencies which face an expanding money supply and a declining ownership % of the monetary network. Bitcoin is actually a risk-off asset that offers safety and protection from governments who are raising taxes, printing money, controlling capital and debasing currency to finance growing deficits and pay back mounting debts.
Bitcoin removes the risk of counterparties, direct taxation and interest rates while providing geographic decentralization through a neutral global network and upgrades participants capital to a super-sovereign status that cannot be seized or controlled by local governments. As governments continue to increase their economic intervention, currency debasement and direct taxation the demand for a neutral monetary network will increase.
I expect we will see some fireworks soon with the combination of a growing hash rate, new accounting rules, Bitcoin ETF approvals and the Halving approaching in 2024.
Stay Humble, Stack Sats and Hodl.
Taylor
2023 Bitcoin Milestones / Links
Record Hash Rate / Increasing Hash Rate
ETF Applications: Blackrock, Fidelity, Invesco, Wisdomtree, Vakyrie, Grayscale, Global X are all waiting to be considered. Possibility of ETF approval October 2023 / January 2024 / March 2024 based on application deadlines.
US Court Overturns SEC Decisions to Block Grayscale ETF - Increasing the likelihood that the ETF's will eventually be approved.
Texas Pays Bitcoin miner Riot $31.7 million to shut down during heat wave in August and Stabilize the Texas Energy Grid CNBC - MacKenzie Sigalos
Blackrock is Shifting Away from ESG and moving towards Bitcoin "BlackRock CEO Larry Fink says he will no longer use environment, social, and governance (ESG) terminology, following the phrase’s politicization. "
Argentina Presidential Candidate, Javier Milei is a front-runner in the presidential election and is a pro-bitcoin libertarian who is against central bank money printing. Tucker Carlson does an interesting interview.
Softwar Thesis Published - by Major Jason Lowery outlining Bitcoins' Power Projection technology, Hash Wars and the Strategic National Significance of Bitcoin to the United States.
FASB - Accounting Rule Change in Bitcoin's Favour Bitcoin Revolutionizes Corporate Finance | Michael Saylor - YouTube video
Bitcoin Mining is now >50% Renewable Bitcoin Energy Narrative Flipping - Jamie Coutts BIoomberg Intelligence Senior Market Structure Analyst