Today's post that will comment on Glassnode's usual weekly metrics needs an introduction to the period of currency uncertainty we are experiencing.
The red line is the amount of ships waiting to dock at the port of Shanghai. Comparing with the other colored lines, relative to previous years, it is clear that, as long as China maintains the obsolete lockdown policies now abandoned in the West, Chinese domestic inflation will perhaps improve (perhaps at the cost of increasing social tensions), while the West will have permanent inflation.
We need to put this in perspective, tying it to the Federal Reserve's monetary policies....
If inflation in the West is destined to be permanent, thanks to the "help", conscious or not, of the Chinese, then the Fed should theoretically maintain restrictive monetary policies for at least two years in a row.
This is a likely possibility because of the 9 trillion government bonds on the markets that the Fed would not have time to remove from circulation before they become an unsustainable burden on the government, forced to pay huge interest rates on those bonds. Moreover, even if the Fed were able to reduce the number of government bonds in circulation, how would the government then be able to finance itself, having to reduce the issuance of debt in the form of government bonds due to the very high interest costs? And how would the coffers of governments around the world do without being able to accumulate dollars (in the form of US government bonds) to support their budgets?
When they say that the system of fiat currencies based on debt has come to the end of its life, this is what they are talking about...
No wonder it's all the rage right now to hoard cryptocurrencies.
No one knows if cryptos will actually help in the end to deal with inflation and the debt and fiat currency crisis, but in the meantime everyone is hoarding them, governments, corporations and ordinary citizens. We believe in them!
In the situation described last week by Glassnode's charts, there was no economic basis that could support the rises that occurred in the first half of that week, and in fact these did not follow.
Glassnode shows us in this chart that trading activities are as always stagnant (the yellow wall on the right becomes horizontal and has no peaks) and there is no entry of new investors in the market.
All price dynamics are confined to the derivatives market, which makes its ups and downs by taking advantage of small, transient price fluctuations.
An indirect measure of the market's stagnation is the very low value (historically the lowest) of the fees that miners receive from each transaction on the bitcoin blockchain (the yellow wall on the right is reduced to almost a line).
The rarity of transactions produces little congestion for miners, hence the low fees.
However, due to the increasing scarcity of bitcoin, the difficulty of mining new btc grows, increasing competition among miners and boosting their earnings.
The apparent contradiction with the previous figure (the very low commissions) comes from the fact that the btc earned are certainly lower in number, but cost much more in terms of fiat currency.
This is a factor that reduces the risks of possible strong sell-offs by miners and therefore stabilizes the market a lot.
This chart shows market stability from another perspective: that of realized losses.
As you can see, there are no longer those vertical sell-offs that characterized the final parts of previous cycles.
Now the peaks of loss-making sell-offs are very limited and it is almost impossible to distinguish the final parts of the cycle from the intermediate ones.
In conclusion, these charts confirm the situation already described last week. That of a very stable market, suitable for the use of bitcoin and other cryptos as a supposed store of value.
The general economic and political scenario certainly does not entice people to trade and take the risks, but rather pushes people to accumulate cryptocurrencies while waiting for the worst.
Thanks for reading
https://insights.glassnode.com/the-week-onchain-week-15-2022/
https://blog.vesselsvalue.com/insights-analytics/
