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Peter Marcano

Peter Marcano

Fidelity predicts $100M per bitcoin by 2035

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The other day Fidelity hosted a webinar covering investment opportunities in Bitcoin and showed off a graph that speculates a $100M price point for a single bitcoin by 2035.

Lots of finance and tech bigwigs have made bold price predictions — high and low — which rarely pan out.

What’s specifically interesting about Fidelity’s recent price prediction is the model they used to make it.

The pricing model is called Stock-to-Flow (S/F) and the idea behind the model is rather simple.

From Fidelity’s Bitcoin Investment Thesis:

The stock-to-flow ratio (stock divided by flow) is a metric commonly used to quantify the scarcity, or hardness, of commodities. Stock is the existing supply of a commodity less the portion of supply that has been consumed or destroyed. Flow is the annual incremental production of new units. Together, the stock-to-flow ratio measures how many years of production are required to achieve the existing level of stock.

Commodities with a stock that is difficult to double due to a low rate of production relative to existing supply have historically served as superior stores of value. Such commodities are largely used for investment purposes, and occasionally industrial uses. On the other hand, consumable commodities that are susceptible to large increases in supply, are less effective in storing value.

S/F was popularized by an investor — under the psudonym “PlanB” — in a 2019 essay titled “Modeling Bitcoin Value with Scarcity“. (If you’re more of a podcast listener I recommend PlanB’s conversation with Natalie Brunell in the Coin Stories podcast.)

PlanB mapped this model to gold, silver, and other precious metals to accurately calculate their current market values.

What gives Bitcoin investors an advantage over other scarce investors is that the stocks and flows at any given time are transparent on the blockchain.

We know exactly how much bitcoin is in circulation today and how much will be added until mining no longer mints new Bitcoin in the year 2140.

Glassnode, a company that visualizes real-time bitcoin blockchain data, has a graph dedicated to measuring this relationship.

Obviously as a holder of bitcoin I’d love to see a 2000x return on Bitcoin in the next 15 years, but the fact that this projection suggests that there will be more money in bitcoin than the entire stock market might test this model’s limits.

Time will tell.

Really bad crypto regulations snuck into the must-pass bill

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In the United States, the Biden administration has been pushing forward a $1 Trillion Infrastructure Bill to fund much needed improvements across the country.

It would fund clean energy, transportation, and many other things I care about.

To top it all off with warm fuzzies, there seems to be lots of bi-partisan support on Hill to make sure it passes. Not every day you see America’s two parties play nice together!

But big spending bills need money to fund them. Some legislators believe that they can get $28 Billion from the blockchain/cryptocurrency industry by changing the definition of a “broker”.

From the EFF:

While the language is still evolving, the proposal would seek to expand the definition of “broker” under section 6045(c)(1) of the Internal Revenue Code of 1986 to include anyone who is “responsible for and regularly providing any service effectuating transfers of digital assets” on behalf of another person. These newly defined brokers would be required to comply with IRS reporting requirements for brokers, including filing form 1099s with the IRS. That means they would have to collect user data, including users’ names and addresses.

The broad, confusing language leaves open a door for almost any entity within the cryptocurrency ecosystem to be considered a “broker”—including software developers and cryptocurrency startups that aren’t custodying or controlling assets on behalf of their users. It could even potentially implicate miners, those who confirm and verify blockchain transactions. The mandate to collect names, addresses, and transactions of customers means almost every company even tangentially related to cryptocurrency may suddenly be forced to surveil their users.

This bill was clearly written by someone who doesn’t understand the technology or the industry. These blockchain technologies are by nature, secure, anonymized, and global.

The correct way to tax this industry is to monitor the on/off ramps when users take their crypto gains and convert them back into USD. Many inside the industry have been asking the IRS to do just that for years now.

The only thing this provision would accomplish would be driving the entire industry out of the United States.

Thankfully, there are a few senators that get it. A bipartisan amendment was proposed by Senators Ron Wyden, Cynthia Lummis, and Pat Toomey that would fix this language, keep the tax money flowing, and protect the industry.

For some political reasons I can only speculate on, this amendment isn’t getting the support it needs.

Do me a favor, call your senators, and tell them to support the amendment. I just did and it took less than a minute.

This link does 99% of the work for you.

Be nice, pleasant and professional. It’s important that this hastily written draft doesn’t become law.

NY Giants’ Saquon Barkley is taking $10 million a year in Bitcoin

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This is a fun one.

New York Giants’ running back Saquon Barkley announced on “The Pomp Podcast” that he will be receiving his $10 million/year endorsement payments in Bitcoin.

What is really noteworthy about this is that the people paying him don’t need to even know a thing about Bitcoin.

Saquon will be using a new feature on the payment app Strike that allows him to set up direct deposits and convert a percentage of each deposit to Bitcoin. He’ll be converting 100%.

Can’t wait to see his lambo collection.

China cracks down on crypto mining

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Bitcoin (and other digital currency) prices dropped over the weekend due to a Chinese government crackdown on cryptocurrency mining.

China Communist Party (CCP) doesn’t really like Bitcoin. They can’t control it and can’t easily surveil their citizens on it.

On the flip-side, many Chinese people seem to like it. Easy access to computer hardware and cheap energy made cryptocurrency mining very profitable for many Chinese entrepreneurs.

Earlier this month Chinese miners were responsible for about 65% of the mining computing power worldwide.

But China has a long history of censoring tech platforms they can’t moderate or control. Since the late 90s, China has been using its “Great Firewall” to block sites at the network level, only to replace them with Chinese versions the CCP can easily surveil.

But blocking a decentralized protocol like Bitcoin isn’t as simple. The network is run by thousands of individuals and companies. Each running the full Bitcoin application, myself included. They’d have to get creative to block us all.

Instead, China worked overtime to shut down any business that facilitated crypto trading and now has gone after the miners.

In the short term, a decrease in miners makes Bitcoin easier to mine for the facilities still running. With existing miners getting a surplus of Bitcoin, supply goes up and the price goes down.

New mining companies will emerge. The price will go up again, but for now, you can think of it as a sale.

Buy the dip!