August Bitcoin Market Review

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Dylan LeClair discusses the bitcoin market, inflation, and the Triffin dilemma.

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In this episode of the Bitcoin Magazines Fed Watch podcast, we invited Dylan LeClair, editor at Bitcoin Magazine, to pick up on the podcast. LeClair is deep in the weeds of bitcoin market fundamentals. After touching on the September 7 price drop (the day the podcast was recorded), our conversation turned to LeClairs Monthly Deep Dive, a great report he writes for the exclusive members of Bitcoin Magazines.

As we perused the LeClairs report, we stopped at several of our favorite charts. The first is the supply by liquidity cohort, seen below. He explained to us the meaning and what to take away. As you can see from the graph, the vast majority of the bitcoin supply in circulation (all bitcoin mined so far) is illiquid, in that it has not budged within a prescribed time frame.

Bitcoin Charts in the Deep Dive

Next, we touched on a graph you may have seen floating around the interwebz, HODLer’s net position change, measuring the amount of coins that have entered HODLer’s hands. We have of course discussed several aspects of the chart below, noting of course the recent increase as well as the net sales that have occurred on the upside. This is a lagging indicator, clearly showing that buildup precedes rallies, at which point you get a short squeeze and distribution as prices rise.

At this point in our conversation, we also talked about the Grayscale Bitcoin Trust (GBTC) and its possible effect on holding behavior and price. It wasn’t covered in Deep Dive, but we had a good discussion raising several important points. I wrote more on GBTC dynamics here.

The chart we probably spent the most time on was the hash ribbon chart. This is one of my favorite bitcoin charts because it simplifies the entire industry into one chart, complete with price and hash rate. You can find my version on Bitcoin Pulse posted through BitcoinandMarkets.com. This indicator may be an oversimplification, but the more you master bitcoin, the more detail you can find in this chart.

LeClair, Christian Keroles and I explained in detail how unexpected drops in the hash rate can signal a collapse in prices, as was the case in March 2020 and again in May 2021. The period around the reduction in half in May 2020 and again from October 2020 to November 2020, with the end of the rainy season in China, were expected.

Macro graphics in deep dive

In Bitcoin Magazine’s August Deep Dive, LeClair included a large section on the macro parameter, from the US perspective. And that’s where we started to disagree slightly. It has charts for the consumer price index (CPI), treasury bill interest rates, government deficit and more. Listeners should already know about Keroles and my take on inflation, but LeClair has put together some compelling charts and arguments as to why the end of the US dollar system is near.

LeClair also made a fantastic comment while covering his section on Triffin’s Dilemma. Paraphrasing, he said, Robert Triffins’ solution to the dilemma in the 1960s was to adopt a Keynesian Bancor as the international reserve currency. Today we have bitcoin, which can fulfill this role.

Interestingly, bitcoin is a perfect combination of a gold standard and a Bancor-type currency.

We can’t cover everything from the podcast here, you really have to go listen and watch on YouTube. We’ll try to get LeClair back on the show regularly to discuss his in-depth knowledge of the bitcoin industry.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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