Bitcoin is the rudder that steers the ship.
When it comes to cryptocurrency, almost all eyes are on Bitcoin. This was the case since the beginning and still holds true to this day.
That does not mean that, over time, it could not change. We are going to see a massive spreading of this industry, especially when AI agents become commonplace. Simply looking at the forecast numbers regarding tokenization, even if Bitcoin has a $20 trillion market cap, it will be a drop in the bucket.
For the moment, Bitcoin is where attention goes. Markets are driven by psychology, meaning that sentiment is something to watch. In spite of this, there is a case that could be made for Bitcoin based upon some other factors.
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The Supply-Demand Equation
Bitcion is fixed money. There is a cap on how many units will be available. The total number will never be known since the 21 million does not include lost coins. Some estimate that 5-6 million could be missing.
Whatever the amount, we do know the emission rate of Bitcoin. Every four years, this drops by 50% in the halving. This reduces the number of BTC produced with each block. This alters what the miners have available to sell into the market.
This is a formula which was known since the Bitcoin white paper was released. It is a powerful mechanism to potentially drive value. Ironically, it is also what makes it a lousy medium of exchange. That said, we are in the era of "digital gold", something that many seem to be embracing.
It is this outlook that is altering the demand side of the question.
We can start the discussion with this headline:
We are no longer dealing with a retail sector. Investors are showing up in the form of corporations. It is rather limited at this point but the trend is starting to emerge.
Public companies holding Bitcoin increased 65% in 2024, signaling early stages of mass corporate adoption.
New corporate players like Rumble and Workport drive Bitcoin adoption with innovative integration plans.
A lot is made about the interest by governments. Certainly this could provide another massive wave of buy demand. However, my view is that it would pale in comparison to what the private sector could accumulate.
Rumble and Workport are not exactly household names. They each have the potential to have million of dollars worth of BTC in their Treasuries. If we look at the number of companies of this type, it is easy to see how the numbers game starts to take over.
To add to the mix, we can start with the major corporation like Apple, Meta, or Google. These could provide orders that will rival many countries.
Miners Cannot Keep Up
Many dicuss the inflation rate of a currency. This is usually a flawed approach since it is only looking at one side of the equation.
If the supply is x, what does that mean? People like to apply conclusions while operating in a vacuum. The supply-demand equation has two sides. We cannot operation with any rationale only looking at one.
With Bitcoin, we have the emission rate (inflation). This appears to be swallowed up by the demand. This is not surprising when we consider what is happening.
The significant demand for Bitcoin (BTC) by institutional investors via spot BTC exchange traded fund (ETF) is reported to have escalated recently, raising concerns about the ability of miners to adequately reset the market into a state of equilibrium. According to market data, spot BTC ETFs recorded an inflow of $423.6 million (4,349.7 BTC) in the past week, almost doubling the 2,250 BTC mined within the same period.
Why is ETF demand surging?
This could be, in part, due to what we just discussed. The fact that corporations are jumping onto the Bitcoin bandwagon means they might be doing so through the ETF. This is a vehicle that removes the worry about custody, allowing companies to aquire simiilar to any other financial asset.
We have another market that opens up.
The emergence of the Bitcoin ETF allowed a host of financial accounts to enter. This could be pension funds, retirement monies, and other investment portfolios that were banned from holding digital assets directly.
Retirement accounts means trillions of dollars can potentially be accessed across the world. Naturally, not all of this will end up in BTC. One factor that could help is the fact that many in the United States find their savings to be lacking as they head near retirement age.
Having some exposure to Bitcoin could help to close the gap.
For those younger, it could be a strong long term move, especially if the history over the last 10 yearrs of outperforming all asset classes repeats itself.
Like any financial or monetary assets, it all comes down to supply and demand.