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The institutionalization of Bitcoin

Welcome to the Friday edition of the Ecoinometrics newsletter.

Every week we bring you the three most important charts on the topics of macroeconomics, Bitcoin and digital assets.

Today we'll cover:

  1. The institutionalization of Bitcoin.
  2. How Bitcoin is beating gold: a shift in global store of value.
  3. Is Ethereum underpriced relative to Bitcoin?

Each topic comes with a small explanation and one big chart. So let’s dive in.

For Bitcoin to become a multi-trillion dollar assets you need the institutional money. There is no way around it. 

This is not the cypherpunk dream. But it does the job. 

The low estimate, based on public information, is that 11% of the maximum supply of Bitcoins is already held by institutions. 

The ETFs alone represent 4.5% and are the fastest growing category of the lot.

How Bitcoin is beating gold: a shift in global store of value

For Bitcoin to become the dominant store of value it is inevitable that it must take the crown from gold.

The first step was for the younger generations to invest in Bitcoin without even thinking about gold. The second is for the owners of paper gold to start buying Bitcoin instead. 

This is where we are as of today.

Gold is hitting an all-time high and investors are deciding it is a great time to sell out of it. That's pretty clear from looking at the GLD ETF outflows.

Meanwhile Bitcoin is hitting an all-time high and investors are deciding it is a great time to buy...

Is Ethereum underpriced relative to Bitcoin?

Bitcoin is touching its all-time high. But Ethereum isn't. Bummer. The last two time Bitcoin was reaching around $69k, ETH was respectively around $4.9k (its peak) and $4.3k. This time around it is like $1k lower than that.

So we are not getting a coincidental peak.

Clearly the reason for the difference between BTC and ETH is that Bitcoin have the ETFs while Ethereum doesn't. And while the NFT market is definitely waking up we are far from the activity of peak Zero Interest Rate Policy. 

But crypto comes in waves so this is not the death of Ethereum for sure. 

Actually if you put the ETH/BTC pair in its long term historical context Ethereum is priced pretty much where it should be relative to Bitcoin. There is no anomaly in this cycle so far.

That’s it for today. I hope you enjoyed this. We’ll be back next week with more charts.

Cheers,

Nick

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