Another Cyclical Shift Underway

Most of 2021 Ethereum dominance had been rising because of the exploding interest in DeFis. Many crypto fund managers began prematurely abandoning Bitcoin as a sourcing cryptocurrency in favor of Ether.

However, to put it simply, Ether is a crypto of “prosperity and comfort” while Bitcoin is a crypto of “turbulent times and changes in economic/political landscape”.

Despite the U.S. Federal Reserve and seemingly Bank of England are keen to implement monetary austerity to curb the unleashing 70s-style inflation, their efforts may fall short of expectations, because of the escalated geopolitical issues. They point to a prolonged period of high energy and grain prices since Russia and Ukraine play crucial roles in exports and distributions of both. There is no way to substitute the deficiencies – at least in the short run, therefore, it’s beyond the world’s most powerful monetary authorities and next to helpless to deal with this situation. Hence inflation-proof havens where Bitcoin plays a special role are now top considerations.

Second, increasing Bitcoin adoption owes a lot to a tectonic shift in the world’s geopolitical security concept. There are emerging discriminations – those kinds that seemed impossible just a decade ago – entailing episodical intolerance to various ethnic origins (think Chinese back in late Trump’s presidency), religion (exodus of the U.S. troops from Afghanistan), and, finally, certain nationalities (Russia-Ukraine war). Other, unaffected so far, nations can no longer peacefully contemplate how sovereign fiat currencies – preemptively, the U.S. dollar – get more and more politically integrated into various restrictions and sanctions, which more and more question their ability to serve as guaranteed payment and exchange media. This notion boosts the worldwide usage of Bitcoin and, arguably, stablecoins.

2022 Bitcoin Performance To Date

Although it’s been a rocky start to the year for Bitcoin, its outlook has been steadily improving over the course of recent weeks when geopolitical turmoil began sprawling — which, as it was above outlined, doesn’t look as pure coincidence. Bitcoin’s price has been hovering around $40,000 in recent weeks but has seen several surges like one following the Federal Reserve’s announcement last week raising interest rates for the first time in three years, and before that, after U.S. President Joe Biden’s new executive order on cryptocurrency. As we already mentioned in one of our previous pieces, the order directed U.S. government agencies to coordinate on a strategy to regulate cryptocurrencies, and, without the wrongly expected accompanying restrictive moves, experts say, it could bring more stability to the crypto market in the long term. A recent study by Deutsche Bank found that about a quarter of Bitcoin investors believe Bitcoin prices will be over $110,000 in five years.

One of the main factors driving the price increase of Bitcoin is the rate at which new consumers are buying and exploring cryptocurrency. Apparently, crypto technology is being adopted at a faster rate than humans first adopted internet technology. Assuming it continues, the compounding acceleration of new adoption could keep pushing the value of Bitcoin higher and higher.

Bitcoin adoption has been increasing at an annual rate of 113%, according to data from the digital asset management firm CoinShares.This is in contrast to the fact, that people adopted the internet at a slower rate of 63%. If people warm up to Bitcoin at a comparable rate to that of the internet’s early days (or faster), the report makes the case that there will be 1 billion users by 2024 and 4 billion users by 2030.

CoinDesk reported last month the number of new wallets worldwide increased over 100% from January 2020 to January 2022, to an estimated 130 million. The exchange Gemini some time ago released its “State of U.S. Crypto Report,” which found 21.2 million Americans own cryptocurrency of some kind.

Binance’s Bitcoin Dominance Sharply Rises, Now Holds 22.6% Of Total Exchange Supply. According to the latest weekly report from Glassnode, the crypto exchange now holds 22% of the total exchange reserve, a pretty significant amount. The “all exchanges reserve” is an indicator that measures the total amount of Bitcoin present in the wallets of all centralized crypto exchanges.

Bitcoin Statistical Analysis: Wins Over Classic Assets by Wide Margin!

REPORT DATE: 03-09-2022 (the latest available)

The crypto exchange’s BTC balance now stands at 22.6% of the total exchange supply, meaning it holds around 577k BTC today. The BTC “dominance” of an exchange here refers to the percentage share of all exchanges’ reserves that the firm in question holds. At present, the largest crypto exchange by market volume is Binance; here is how its Bitcoin dominance has changed over the last few years.

Value at Risk for BTC/USDT at the 99% confidence level is -10.96% (as we all know, negative VaR means, based on the past data, statistically there is no risk to lose). This can be interpreted to mean that this asset has a 1% chance of losing at least this % amount (or greater) over the next one-day period. Or said another way: Roughly 1% of the time, this asset will lose at least (minus) -10.96% on any given day. Value at Risk (VaR) is based on the return distributions shown below over the last rolling 2 year period.

99% VaR: -10.96 %

95% VaR: -6.12 %

99% ES: -16.07 %

95% ES: -9.06 %

Taking into account losses in the tail, the expected shortfall at the 99% confidence level is -16.07 % – which implies that when the asset loses more than the 99% VaR amount, true losses are often closer to (minus) -16.07 %.