Bitcoin is an Unstoppable Force

Daily Fintech  | | July 29, 2019

BTC quarterly price change - Bitcoin is an Unstoppable Force

TLDR. During the recent House Committee on Financial Services’ hearing about Facebook’s, Libra, Rep. Patrick McHenry described Bitcoin as an unstoppable force:

“The world that Satoshi Nakamoto — author of the Bitcoin white paper — envisioned, and others are building, is an unstoppable force. We should not attempt to deter this innovation, and governments cannot stop this innovation, and those who have tried have already failed. So the question then becomes, what are American policymakers going to do to meet the challenges and the opportunities of this new world of innovation?”

Today, the entire market cap of digital assets was around $263 billion. Digital currency market caps, coin prices, and overall trade volumes have dropped since June. Looking at what’s been happening over the last few months, the question on everyone’s mind is how is this time different from the past, when Bitcoin reached highs and then came down crumbling.

Well, many things are different.

One of the things is that most of investing is not happening by retail investors, as it did in 2017. Google searches for “Bitcoin” are only 10% of what they were in 2017. FOMO by retail investors has not really kicked in yet. I can only imagine what will happen with the price of BTC when it does.  Source: google trends

Another thing that’s different is institutional demand for Bitcoin. Its soaring. Institutional interest is high, as booming derivatives trading on CME can attest. On June 17, open interest at CME Group saw 5,311 contracts totaling 26,555 BTC, approximately $246 million, dwarfing the volumes during the 2017 price peak. Fidelity, Bakkt, and TD Ameritrade all have plans to launch institutional trading products for BTC.

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More importantly, network fundamentals better than ever. Hash rate has increased, driving up security. Security is measured by how much it costs to mount a 51% attack on Bitcoin. The more hash rate, the more security. Over the past five years, Bitcoin’s hash power has increase 1000x, growing to 70 million trillion hashes per second.  Source: blockchain.com

The increase  of daily on-chain transactions and block size, indicate that more people are transacting. Both the on-chain transactions per day (line below) and average transaction value in USD (fill below) have risen significantly since last year.  Source: coinmetrics

The average BTC block size (fill below) has increased substantially, when you compare it to last year’s.

Best of all, average transaction fees have been relatively low, compared to those in 2017. Currently its around $1.92, despite increased block size and on-chain use. Scalability have kept fees substantially lower than late in 2017.

historical daily average bitcoin transaction fee - Bitcoin is an Unstoppable Force

Source: bitcoinfees.info

All this is happening almost a year before Bitcoin’s block reward halving, which set for May 2020. Next May, mining rewards will be reduced from 12.5 to 6.25 BTC, which will reduce the number of Bitcoins minted when a block is verified, and the number of Bitcoins potentially sold to the market.

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As Bitcoin’s supply gets tighter and tighter, its inflation rate drops. Unlike governments that can print fiat currencies and risk inflation, Bitcoin’s inflation rate by 2024, the will drop under to 1% and over time it will decrease toward zero.

Today, the number of Bitcoins in circulation is  17.8 million Bitcoins. There will only be 21 million Bitcoins ever issued and we will not reach that number for another 120 years. While we only have another 3.2 million Bitcoins that will ever be created, this limited supply does not restrict Bitcoin’s use as a medium of exchange. Each Bitcoin is equal to 100 million Satoshis. So, if Bitcoin’s price ever reached $1 million, one Satoshi would be worth just a penny.

And it not the only thing that’s happening.

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