Today, Tesla announced they have purchased $1.5 billion in Bitcoin. This is something Bitcoiners have been calling for awhile, especially after Microstrategy began to purchase Bitcoin with their treasury. In addition, last week Michael Saylor held a special event for public companies looking to put Bitcoin on their balance sheet. He gave them his full playbook. Bullish!
Before we begin todays newsletter I want to congratulate those that did the work and are now reaping the rewards.
So why did a massive company like Tesla decide to put Bitcoin on their balance sheet?
Essentially, it comes down to Bitcoin issuance vs USD money supply. Let’s start with USD money supply.
As you can see in the chart, the money supply has risen substantially since the beginning of last year. However, this isn’t just a one year trend. It is the overall trend of the dollar.
Over the last 25 years there has been a constant rise in money supply. After the 2008 financial crisis the money supply started going parabolic and hasn’t stopped. There are no signs of slowing down as the democrats plan on issuing $1.9 trillion in new stimulus.
With real yields not expected to rise for another couple years, a growing money supply causes higher than normal inflation and decreases the value of the United States Dollar. Therefore, cash savings is constantly decreasing in value in this kind of monetary environment.
Unlike the USD, Bitcoin is hard coded and has a max supply of 21 million Bitcoin. This max supply is expected to be fully issued by 2140. Everyday a small amount of Bitcoin are minted and given to miners for securing the network.
Also, unlike the USD where politicians and the FED are in control of the money supply, Bitcoin’s Issuance is already pre-programmed and transparent to anyone.
The orange line represents new Bitcoin being issued into the market. The dotted vertical line is a Bitcoin halving which happens every 4 years. That is the disinflationary component of Bitcoin; when block rewards get cut in half. This means the amount of Bitcoin issued gets halved.
It is clear the monetary policy is pre-programmed by the consistency of the issuance. Bitcoin has been a very predictable investment which is clear in the chart above. After every halving price goes up due to less supply and increased demand.
While the USD supply keeps increasing at a larger rate of change, Bitcoin’s new issuance rate of change is being cut in half every 4 years.
What store of value makes more sense to you? (the answer is very simple)
Let’s connect on Twitter. Looking forward to hearing your thoughts and feedback.
In the news…
Resources I Use
I use Glassnode for all the metrics I track on the Bitcoin network. Their platform is extremely user friendly and fun to use.
Binance is the main exchange to trade the crypto markets.
Trading Alpha has built their own indicators that provide buy and sell signals for crypto and equities trading.
I use Tradingview daily to analyze trading charts and find areas of support and resistance.
I learned how to trade through the Bulls on Wall Street program. I’m in this chat everyday giving out my trade ideas.
Nothing in this article is investment advice. I’m not a financial advisor. Do not make investment decisions based on what is in this article or any other article written by BTC News or Blockedia.