BTC Sessions - Stock To Flow: $288K Bitcoin, Lebanese Currency Crisis, myNode Update EP050

Episode Date: April 28, 2020

SUPPORT THE SHOW: Visit LEDN to check out getting a bitcoin-backed loan https://platform.ledn.io/join/0a00cca3dd61dea5909c95cd41f41685 Buy Bitcoin on Coinberry and get $20 after your first $50 purchase https://app.coinberry.com/invite/c5d52730857 Get Wasabi wallet and enjoy your privacy https://wasabiwallet.io/ Wasabi Tutorial https://www.youtube.com/watch?v=ECQHAzSckK0 Get NORDVPN to protect your online privacy. 75% off a 3 year https://nordvpn.org/btcsessions Check out my website for private bookings: http://btcsessions.ca/ Join my Telegram channel! https://t.me/btc_sessions If you value my work and would like to send me a tip, they are always appreciated! LIGHTNING tips: https://tippin.me/@BTCsessions SHOW RESOURCES: Stock to flow model update predicts $288,000 Bitcoin https://medium.com/@100trillionUSD/bitcoin-stock-to-flow-cross-asset-model-50d260feed12 Nearly half of BTC hasn’t moved in two years https://bitcoinist.com/nearly-half-of-all-circulating-bitcoin-supply-hasnt-moved-in-two-years/ Increased halving interest on google trends https://twitter.com/WhiteRabbitBTC/status/1255139705873522691 Whale trader on Bitfinex banks on Bitcoin price crash https://cointelegraph.com/news/bitcoin-whale-suggests-btc-price-will-crash-halving-is-priced-in Banks suffering massive losses amid crisis https://decrypt.co/26879/big-banks-suffer-massive-losses-as-coronavirus-crisis-continues Bank of Japan’s unlimited quantitative easing https://decrypt.co/26772/bank-of-japan-prepares-for-unlimited-quantitative-easing Lebanese currency crisis and riots https://www.france24.com/en/20200428-banks-smashed-during-protests-in-lebanon-over-ailing-economy New myNode release https://twitter.com/cpc464_a500/status/1254441275773853702 Blue Wallet tutorial https://www.youtube.com/watch?v=imMX7i4qpmg

Wasabi wallet and fairly private. What's up everyone? I'm Ben with the BTC Sessions and this is your daily session. Hodel their Bitcoin. Before we dive in, of course, shout out to sponsors of the show, ledden.io. This is where you can use your Bitcoin for a few different services. They have Bitcoin savings accounts where you can earn interest on your Bitcoin. They've got Bitcoin bag loans. This was the first service I ever used of theirs and it is where you can use your Bitcoin as collateral to obtain a Canadian or US dollar loan.

So in my case, I was, I needed to get my hands on dollars, really, and I didn't want to sell my Bitcoin. I thought it was bad time. So what I did is I parked it in a dedicated address that I could audit 24-7, and I received a loan within 24 hours. When I paid it back, I got back all of my Bitcoin. And then finally, they've got their B2X offering, which uses the same loan mechanism to actually buy more Bitcoin and, effectively double your Bitcoin on the spot. If you want to check that out, there's a link in the show notes down below. And using that link to get a loan, we'll get you $50 of free Bitcoin along with it.

And secondly, we have Coinberry. This has been my go-to spot to pick up Bitcoin and purchase within Canada as of late. They've got a killer web interface and a very beautiful paired app that you can use for buying on the go. A few things that I really like about Coinberry. Number one, speed of funding my account, which is very good. great. Using e-transfer is super convenient and usually takes, in my experience, it's only been about 20 minutes wait, but that can vary depending on your bank. And secondly, I really love their dollar cost averaging. They have autopilot, which allows you to set the interval and the amount which you would like to buy and it takes all the emotion out of stacking your sats. So if you want to check them out, there's a link in the show notes down below. And using that link will actually get you $20 free Bitcoin after your first $50 purchase. So pretty killer. So with that, let's dive into the news. So Plan B has released an update to his Stock to Flow model.

Now, those of you out of the loop, the stock to flow model is used to potentially look at future pricing for Bitcoin given the stock versus the flow of the asset, meaning the stock, the existing Bitcoin already in circulation versus the flow, the inflation of newly created coins. Now, Bitcoin gets a reduction in the newly created coins every four years or so, which is coming up in two weeks now. It's called the halving. So right now, 12.5 coins are created every 10 minutes. Well, in a couple weeks in early May, we're going to be at 6.25 Bitcoin created every 10 minutes. And that halving will reoccur every four years until you can divide no further until you get down to the lowest denomination of a Bitcoin, which is one Satoshi. and there are 100 million Satoshi's in a Bitcoin. Now, the stock to flow model models stock to flow

and looks at previous price points over the past 11 years of Bitcoin's existence to try and model a general bound in which the Bitcoin price tends to rebound back to, whether it overshoots or undershoots, it tends to fluctuate within a certain range of that model. Now, the model has gradually been tinkered with over the past couple of years here, or sorry, rather, over the past year or so since its inception. But the model went from projecting around 50K as a baseline price after the having to closer to 100K when some other variables were taken into account. Well, there's been an update to the model, and if you haven't read the first couple of blogs, around stock to flow. I recommend you do that first, which I will link down below. But this new model removes time and just thinks of Bitcoin as various different asset classes as it moves through

different stages. And so what Plan B has done here, it has, he's kind of taken a look at, for instance, the US dollar went through phase transitions. At one point, it was literally just a gold dollar. Then it changed into a pay. paper money that was backed by gold dollars and then it changed into a paper money that was backed by nothing other than the government. And he says that Bitcoin also goes through these phase changes. And so he has a chart here put together by Nick Carter and Hasu, which are they've both been big in the Bitcoin space in analyzing it. And it says that there's been a lot of phases for Bitcoin as it matures. And so some of those include an e-cash proof of concept, cheap payments network, anonymous dark net currency,

reserve currency of the cryptocurrency space, censorship-resistant e-gold, and programmable shared database, and an uncorrelated financial asset. And we kind of can see the proliferation of each of those over time. And at any one time, obviously, Bitcoin can be more than one thing to one person. And so what he does is he tries to nail down for specific, I guess, narratives that have been large in the Bitcoin space. And he kind of subdivides it into these ones. He says, number one was proof of concept, which was after the Bitcoin white paper. Number two was payments, which was after it reached a U.S. dollar parity when one Bitcoin was $1.

There was e-gold, which was after the first halving when we almost hit gold parity. One Bitcoin was close to one ounce of gold. And then there was when it became a financial asset, which was after the second having, where we had more than one billion transactions per day. We had legal clarity in Japan and Australia. We have futures markets with the CME and backed. And so he goes on to take a look at these kind of clusters of price points and reasons that these clusters tend to coincide with these different iterations of Bitcoin and the Bitcoin narrative.

So looking at these clusters, that was the proof of concept phase was when the market value was around $1 million, total market cap. The payments phase would have been around the market value of $58 million. Egold would have been when we reached around the $5.6 billion market cap, and the financial asset phase would have been when we went north of around $114 billion. And what he's looking at is actually what the stock to flow was doing in and around halvings or in and around the creation of Bitcoin. Now, what he's tried to do here is rather than look at time and extrapolate out, as to what the price could be, he's brought in other assets that also exhibit strong correlations

and co-integrations with the stock to flow model, namely silver and gold. And he plots them on the same chart as to their stock to flow ratio, which is a number, basically again, taking the existing stock and the flow of new coins and utilizing those numbers to get a specific digit value. So silver has a stock to flow of 33.3 and gold has a stock to flow of 58.3. And he looks at the market caps of those and plots it online with the various points at which Bitcoin had those clusters of price points. And he reasons out that with the coming having, that Bitcoin will be getting very close to or will be in and around the same stock to flow of gold, which would put it at a market cap of around $5.5 trillion. And he said, given 19 million existing Bitcoin

between the halvings of 2020 and 2024, this translates potentially to a price of Bitcoin of $288,000. Now, I know that's a very large number. The previous stock to flow model, even to some, seems very large at 100k in and around that area. And because stock to flow in previous halvings has overshot that level, then this number can be quite surprising. Even to me, it looks like that number could be like a blowoff top like we saw in 2017, where we went to damn near 20K and then we weren't there for very long. I could maybe see that happening.

I'm not convinced that it would be feasible to be in that range for an extended period of time as a baseline. Yeah, so I would just pair my expectations here. It does seem quite a bit, and it does seem that each new iteration of stock to flow seems to be more and more optimistic, and maybe this one gets ahead of itself a little bit. It's hard to tell. There's a lot going on with the world right now and there's a lot of money being printed and in an event where the value and the purchasing power of the dollar were to drop over time, then maybe that is possible. Who knows? Now, there are a few things going for Bitcoin at this point that could point to higher price valuations. Number one, this is from the people at GlassNode that have been looking at, looking at Bitcoin and where it's held and how long people are keeping it in specific spots. And they said that currently 42.83% of all circulating Bitcoin has not been moved for at least two years.

And this is an increase of 10.4% in the last year. So more and more people are actually holding their Bitcoin as opposed to moving it around and selling it. And number two is the interest in the having. And this can kind of give us a precursor to the potential interest in Bitcoin moving forward and how many people are involved at the current time before any sort of mania manifests and after an extended bear market. So this is tweeted by White Rabbit here. He just basically looked at Google Trends. And he said, a new wave of pre-corner is at the precipice of another halving.

End of March marked a huge spike in interest three times as significant as the last cycle during the same period. And what he's looking up is search terms for Bitcoin having. And you can see a spike in and around the last having in 2016. And you see a more significant spike percentage-wise from where we were just prior to. And the interest is quite a bit higher. And we're still two weeks out from the Bitcoin having. So if this continues to rise, then we could see quite a bit more interest as far as people, looking into and trying to understand the Bitcoin having.

I even saw somebody tweet out that in before this gets televised on the next having in 2024, where it's an actual televised event that everybody pays attention to. At that point, it may be priced in. If it was like a televised event that people watch, yeah, then it might be priced in. But right now, so few people understand it, I very much doubt. Now, somebody who doesn't think so that thinks that it, is priced in is one of the largest traders in Bitcoin Wales on, where is he on Bitfinex, I believe? Yeah, BitFinex. So Joe 007, yeah, obviously a moniker name. But anyways, he's one of the largest

traders and he's obviously done quite well for himself trying to predict price of Bitcoin. he was sarcastically remarking in an interview, no, of course it's not priced in. On the very day of the great happening, everybody will finally realize how underpriced Bitcoin is and they will rush to buy it in droves with their unemployment checks. And so he is, as I said, one of the top and the Bitfinex leaderboard. And it indicates right now that he's down about $11.3 million. in the past month. Now, this would indicate that he has a substantial short on the price of Bitcoin

and that he believes that the price will decline in the short term, given that he's sticking with that bet. Now, again, the Bitcoin halving does happen every four years. It cuts the revenue of miners in half because that's the reward for securing the network. They are rewarded with newly created Bitcoin. So when that number gets kind of half, the miners have to adapt and change to different price models and and revenue streams and figure out what their overhead is versus what they're actually bringing in. And so a lot of miners get shaken out if they're not super efficient. So reading from this coin telegraph article just quickly here, it says the having is not an unexpected event.

In fact, the mining industry prepares for the having at least. least 12 months out by establishing strong cash bubbers and negotiating with electricity service providers to try decreasing the cost of mining. Again, I think that this trader is misunderstanding some of the dynamics here. He's trying to allude to the having as having an immediate effect on the day of, which it's minimal, right? Like on the day of at the moment of having all of, existing Bitcoin are still there. The stock is still the same. It's the flow that gets reduced. And right now, at current time, every single year for the past four years, 6757,000 Bitcoin were created every single year. And so people were used to gobbling those up at a price of an average around

you know, seven, seven thousand in and around that price point. And so all the sudden, that number of newly created Bitcoin that the market is used to gobbling up is going to be dropped by half. So there will be 328,500 less Bitcoin mined each year, which means that the miners, especially the inefficient ones, are unable to sell them if they wanted to. Not to mention the backup stash that they have in the event to try and survive the having is cash. So part of those liquidations as they're trying to survive this drop in revenue, hoping that the Bitcoin price will go up, they're having to liquidate cash reserves, not necessarily Bitcoin reserves because they don't want to necessarily be exposed to that volatility risk.

So very soon, very quickly, we will have much less Bitcoin coming onto the market in aggregate over time. And as we've seen in the past couple times, and I'm not saying that history will for sure repeat itself, but it could rhyme. A year to a year and a half after the halving happens, and you have this sustained drain on the number of new coins that are coming into the market that, that the market is not used to not being able to buy up. Well, one of two things have to happen. Either the price, either the demand drops by half and the price remains the same, if you want the price to remain the same, or the demand stays the same and the price continues to elevate.

And obviously the dynamics that come with that, if the demand drops and the price remains the same, okay, well, wonderful. The demand would have to drop. drop quite a bit to see a sustained drop in price after the having, whereas even just sustained demand would command a price increase and that could draw some heads and have kind of a reciprocating feedback loop or a, you know, a self-fulfilling prophecy of people seeing the price go up, becoming interested, buying in, driving up the price more. And that's kind of what we've seen these past couple times in 2013 and 2017 was this feedback loop of the mania of people coming in

and droves and then people seeing the price increase and diving in as well until eventually a blow-off top happens. It's kind of built into the design of Bitcoin that you'll have these crazy manias every four years until it becomes common knowledge how Bitcoin is issued and until the block reward is less of a revenue stream for miners, and it's mostly around fees in the existing Bitcoin, which will probably happen in the next few happen. Anyways, let's get off stock to flow now and move into a couple of the quick things I wanted to touch on. Banks are starting to, you're starting to see the cracks in some banks now.

They're seeing some major losses. you have HSBC and they're reporting 50% fallen profits linked to obviously the current crisis. And Spain's Santander Bank also recently suffered an 82% decline in quarterly net profits. So not looking great there. Now, outside of that, you have, I know it's not commercial bank, but you have the Bank of Japan. Their central bank is preparing for unlimited quantity. of easing, much like the Federal Reserve in the United States. So the Bank of Japan has removed limits on buying government bonds.

This allows for potentially unlimited quantitative easing. This matches similar comments by the Federal Reserve that it has unlimited money. And it removed the upper limits of bond buying canceling the previously recommended annual threshold of 80 trillion yen. And this is according to routers. the Bank of Japan will purchase necessary amounts of government bonds without setting an upper limit to keep long-term interest rates around its 0% target. So again, the spigots are turned on, more and more money printing and liquidity flowing into the market.

And then on the opposite end of the spectrum, you have clashes in Lebanon over the rampant inflation over there. So half of the pound slide, or sorry, the pound, the Lebanese pound has dropped by 15%. And the people there are being locked out of their savings accounts, unable to convert to external, to really anything, because the banks are closed until a lot of this boils over, which it's not going to. you see people throwing malt off cocktails at banks and demanding access to their money. And further to this, the banks and the central bank are trying to get a hold on the sliding value of the local currency. And so to halt the pound slide on a parallel market that is the primary source of hard currency amid a severe shortage, the central bank capped the selling price of dollars at 3,200 pounds for exchange dealers. Some dealers were selling small quantities of dollars at 4,200 pounds on Tuesday, according to one reporter.

A second importer said he was unable to buy any dollars. One currency dealer cited a buying price of 4,000 pounds. Several dealers were arrested on Monday for violating the cap and a syndicate representing them said exchange bureaus would shut until they were released and the situation was resolved. The official rate, now get this, the official. rate for pounds to dollars in Lebanon is still pegged at 1,500, just over 1,500 pounds to the dollar at banks, but the price remains available only for vital imports, wheat, fuel, and medicine. So the central bank is trying to say, no, this is the official rate to buy dollars, and you only have to pay 1,500 Lebanese pounds to get a dollar, or a dollar will buy

only 1,500 Lebanese pounds. When the free market is looking at this and saying, listen, the pound is not worth that much anymore, we want dollars, we're willing to pay more for it, and the currency is continuing to be devalued. We saw much of the same in Venezuela as they experienced hyperinflation. There was the government-mandated rate of what Bolivars were worth, but then there was the free market rate of what they were really worth

and what people were actually willing. willing to pay for them in the street, which was far, far less and reflected the reality of everything. Now, I'm going to move on from this. Just a couple last things to touch on here. Open node, or sorry, my node, rather, my node, the Raspberry Pi or Rock 64 based Bitcoin node that you can run yourself on a dedicated machine. They've got a new release. And so this is version 0.2.04 and this has improved reboot and shutdown consistency, separate settings and status pages. They detect and alert any SD card problems, which may be good for anybody that's having problems there, and some other bug fixes.

I've got to say over at my note, these guys are always so quick for updates and they're constantly working and I love my note. If you haven't checked it out, check on my channel. I have a video for how to build one and then how to use some of the software to connect your wallets to your own node and check out some of the software on there. So really, really cool. Kudos to my node. And beyond that, I did a video, a tutorial video the other day for Blue Wallet. Now, I did do a Blue Wallet video, I think last year on their lightning. Okay, so they have a lightning wallet and a regular Bitcoin wallet. And there was issues with the Lightning wallet because it's custodial. Now, I will say it's still custodial, but I will say also that they've fixed the bugs

that I found. I would still advise if you're using specifically for Lightning, I'd still probably lean towards Phoenix wallet because it's completely non-custodial. But as a Bitcoin wallet, I actually quite enjoy Blue Wallet because they keep on implementing great new features. It's super easy for onboarding newcomers because it's so quick to set up. Anyways, if you want to check it out, I will link to that video in the Shonan's down below as well. It's probably a pretty decent video for newcomers that just need to set up a quick Bitcoin wallet. You can shoot this over to them and it may help them out. Anyways, guys, I'm going to wrap up there.

Thank you so much for watching. As always, if you're on here on YouTube, then you can hit like, subscribe, and share. but I've also started streaming to a ton of other platforms, whether it be my Facebook page, whether it be live on Twitter for any news stuff, whether it be on Twitch or D-Live. And I'm also on library. So there's a ton. So make sure if you're here on YouTube, please do subscribe to one other service because I can't necessarily rely on YouTube. I'm also audio only on the podcast platform of your choice. So you can find me there.

And links for that will be down below as well. Other than that, if you want to help the show in another way, you can hit up the sponsor. as I mentioned, you've got Ledden and Coinberry, both have some deals for you, and you've got Wasabi wallet, which is a desktop wallet to help you with your Bitcoin privacy via Coin Join. If you really like what you saw, you can always drop me a Bitcoin Lightning Network tip at my tippin.combe page. That's tippin.combe slash at BTC Sessions. With that, I'm out. Have yourselves a wonderful rest of the day, and I'll see you next time for your daily session.