Two stories in the last week about the future of bitcoin. One is bullish and one is bearish. I will let you decide which story is more convincing.
Bitwise is an asset manager in the US trying to get a Bitcoin ETF approved by the Securities Exchange Commission (SEC). They produced a 200+ page report on cryptocurrency transactions by exchanges. A story on the report b by CNBC is here. The actual report is here.
The stories are very bearish. And their conclusions are very wrong.
If you actually read the report (again the link is here) it’s not talking about the daily transaction volume of bitcoin, it’s focussing on the trading volume of cryptocurrency exchanges listed in Coinmarketcap.
There is a VERY IMPORTANT difference between the two.
Because not all bitcoin trading happens on cryptocurrency exchanges.
First, there are wallet-to-wallet bitcoin transactions that occur on the blockchain. The daily transaction volume has been steady at about $500 million USD a day for months now.
Keeping those numbers in mind, that means two things:
- The Bitwise report is probably correct in their estimates, as the $6 billion of bitcoin traded in one day means that the trading velocity of bitcoin in current circulation would be more than 100%. That can’t be right, so a lot of these exchanges must be wash-trading.
- Their low-ball estimate of “true” trading volume at the exchanges, about $250 million, seems very reasonable given the volume of wallet transactions on the blockchain and especially the volume of off-shore trading of bitcoin futures contract.
To me, it looks like a report that is accurate and well-research, but the popular media outlets jumped on the news that there’s a lot of wash-trading out there and concluded Bitcoin is doomed.
Bitwise report, page 62
The current estimate of the true trading volume seems quite reasonable given the amount of bitcoin in active circulation.
The second story is from Arthur Hays, CEO and co-founder of Bitmex, and one of the sharpest guys in the world of cryptocurrency.
Mr. Hays is bullish and gives us another of his famously cynical opinions on the world of crypto:
When Arthur speaks, crypto-traders listen, and not just because Mr. Hayes has made a few predictions that were dead-on, such as Ethereum dropping below $100 in the last quarter of 2018.