Many here in California are already checked out for the week having one last blast at the Burning Man Festival. Others are enjoying a light week before cutting out early for Labor Day and the last holiday of summer. Then, like clockwork, post September 5th, kids are back in school fulltime and everyone gets down to business, and sadly, the summer sale of bitcoin ends.
All summer long, I’ve been happily accumulating 40% more bitcoin than usual with my current dollar cost averaging strategy. While we may still see a random “flash sale” post September 5th, if the miners continue to be forced to sell in order to pay CapEx costs, sending BTC below $19,000, the good news is there are many fundamentals in place that will drive the price higher, and support its continued rise over the long term.
Leading Indicators
Here are just a few of the technical and business cases that keep me very bullish on bitcoin, and why I think this Fall we’ll see serious upward momentum:
Black Rock joins the party. This is being covered heavily in the news but I’ll just point out that the world's biggest asset manager ($10 trillion oversight) did not get into bitcoin to short the market. Bank Of America, the second-largest bank in the U.S., released a new report asserting that blockchains have “intrinsic value” and rejecting recent claims to the contrary. “Digital assets are a transformative innovation on par with the internet, cars, and electricity,” was the conclusion of a new report from Wells Fargo Investment Institute titled “Digital Assets – A World of Possibility.”
ESG (environmental, social and governance) investors concerned about the environmental impact of bitcoin mining can start to buy BTC with a clear conscience. I think we’ll be seeing more about how your bitcoin can be more sustainably and responsibly mined in the near future, brought to you by the good folks at Black Rock. I certainly want my bitcoin to come from a clean energy source, and to even drive demand for clean energy projects. I think the collective brain trust at Black Rock and their partners understand this and that’s why they are getting into bitcoin. When everyone is back to their desk this Fall, the announcements about ESG projects should bode well for BTC and foresee an upward trend.
The Lightning Network continues to gain traction by facilitating bitcoin micropayments. Lyn Alden does an insightful deep dive into the Lightning Network here. Currently we are seeing 410% year over year growth of payment volume. Though we’re still only talking about $35 million in transactions at the peak, it’s good enough for use cases for small business operators to accept and process BTC transactions on the fly. (Think about when Square launched and its huge impact on small businesses and street vendors.)
Ethereum loses its proof of work status. Regardless of whether the merge is successful or not, the changes to the blockchain landscape can not be overstated. Sophisticated and conservative investors will still spread their risk between proof of work bitcoin and proof of stake Ethereum. Regardless, as the saying goes, a rising tide lifts all boats. As a result, more dollars will flow into bitcoin regardless of the price of Ethereum. More significantly, for long term bulls of bitcoin, is that it’s also making progress (albeit slowly) into smart contracts and even NFT’s that has long been the reason to buy Ethereum in the first place. You may have missed what happened with tornado cash and heavy handed sanctions by the U.S. government early this month that sent ripples through DeFi and the open source developer community. You can read about it here. This will drive more innovative projects to the bitcoin blockchain instead of Ethereum.
I hope everyone enjoys the last days of summer. I plan to continue taking advantage of the bitcoin summer sale until the last sunset, reserving some dry powder in case of another flash sale. I’ll also pursue finding and buying my other favorite summer indulgence: delicious soft serve ice cream.
Cheers,
Jim
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