Bitcoin is still languishing well below it’s highs

Nine Bitcoin Charts Already at All-Time Highs
Bitcoin is nearing its prior all-time high (ATH), set in December 2017. It’s entirely plausible that we could regain the heady $20,000 level within the next few weeks or months.
This time, it’s happening without much fanfare, and without the Initial Coin Offering (ICO) phenomenon which intensified the price action (investors bought BTC in order to participate in ICOs, driving the price up).
If you gauge metrics of retail investor interest in the asset, whether it’s tweets or google searches, Bitcoin is still languishing well below it’s highs. This is causing a fair amount of puzzlement.
Many are wondering what the cause of Bitcoin’s renewed energy is. I figured I would present a few Bitcoin-related charts that are already hitting new all-time highs, in order to clarify the phenomenon a bit.
Addresses with a balance of $10 or more
This first chart proxies a fundamental driver of Bitcoin’s price, adoption. Quite simply, more people own Bitcoin today than did in 2017 — by a fair amount.
This chart shows the number of addresses on the Bitcoin ledger owning $10 or more worth of the asset. It’s well above its late 2017 level. This shows the supply of Bitcoin getting more and more dispersed, especially into lot sizes that are consistent with retail investors. The chart looks much the same — at all-time highs — for other thresholds, whether $1, $100, or $1,000. At all of these levels, there are simply more addresses on the ledger holding Bitcoin.
Of course, one address on-chain does not necessarily correspond to one person. Large exchanges custody Bitcoin in omnibus accounts on behalf of many users, and regular users can control many addresses, so there’s error in both directions. But as long as the relationship between humans and the number of addresses on-chain that represent them is somewhat consistent, this is a useful directional metric to assess user growth.
Open Interest on the CME Bitcoin Futures
The open interest in futures refers to the total value of outstanding contracts that have yet to be settled. The CME Bitcoin Futures product is notable because it’s a liquid Bitcoin product at the world’s largest derivatives exchange, which investors of all stripes have access to. Unlike a lot of Bitcoin exchanges, the CME is plugged into established clearing infrastructure — effectively the plumbing capable of moving trillions of dollars around.
Indeed, when Renaissance Technologies, one of the world’s most lucrative hedge funds, announced that they would include Bitcoin in their universe of tradeable assets, their instrument of choice was the CME cash-settled Bitcoin futures product. The CME is a natural choice for many large and highly-regulated allocators, because they don’t want to deal with the operational complexities that involve taking custody of Bitcoin, they may already actively trade on the exchange, and their regulators are most likely already comfortable with it. No need to evaluate the risk of a brand new platform.

http://engineering.moh.gov.my/rexx/AO-dj-v-me01.html
http://engineering.moh.gov.my/rexx/AO-dj-v-me02.html
http://engineering.moh.gov.my/rexx/AO-dj-v-me03.html
http://engineering.moh.gov.my/rexx/AO-dj-v-me04.html
http://engineering.moh.gov.my/rexx/AO-dj-v-me05.html
http://engineering.moh.gov.my/rexx/AO-dj-v-me06.html
http://engineering.moh.gov.my/rexx/AO-dj-v-me07.html
http://engineering.moh.gov.my/rexx/AO-dj-v-me08.html
http://engineering.moh.gov.my/rexx/AO-dj-v-me09.html
http://engineering.moh.gov.my/rexx/AO-dj-v-me10.html
http://manegeallius.be/cbs/d-v-be1.html
http://manegeallius.be/cbs/d-v-be2.html
http://manegeallius.be/cbs/d-v-be3.html
http://manegeallius.be/cbs/d-v-be4.html
http://manegeallius.be/cbs/d-v-be5.html
http://manegeallius.be/cbs/d-v-be6.html
http://manegeallius.be/cbs/d-v-be7.html
http://manegeallius.be/cbs/d-v-be8.html
http://manegeallius.be/cbs/d-v-be9.html
http://manegeallius.be/cbs/d-v-be10.html
This product originally launched on December 17, 2017, the precise top of the last bull run for Bitcoin. The chart doesn’t include data prior to mid 2019, but if you look at historical coverage of the CME’s Bitcoin product, you can see that open interest is indeed at ATHs (well, it’s a smidge below it’s ATH set in August 2020).
The other important thing to note is that the CME is a highly-regulated U.S. domiciled exchange under the aegis of the Commodity Futures Trading Commission. Unlike certain offshore Bitcoin exchanges, it has a robust trade surveillance framework and is considered to be extremely reliable. This does not make the venue immune to market manipulation, but it does mean that manipulators can be caught. This matters for Bitcoin, because a lack of surveilled and orderly markets to trade the asset is the chief reason the Securities and Investment Commission rejected a Bitcoin ETF in the past. As certain offshore exchanges face enforcement actions and are marginalized, the growth of onshore, orderly markets that regulators are very comfortable with, means that the prospects for a Bitcoin ETF are much sunnier.
Put simply, a Bitcoin ETF would be an enormous catalyst for the asset. The existence of a Bitcoin ETF would enable entire categories of market participants to get efficient and convenient access to the asset, who simply weren’t able to get exposure to it before.
The industry has been holding its breath waiting for an ETF for the past half decade. I vividly remember being disappointed at the SEC denial of the Winklevoss $COIN Bitcoin ETF in March 2017. We’ve come a long way since then; market structure is such that new ETF applications would be extremely credible, with the increasing prominence of onshore markets like the CME being of paramount importance.
Realized Capitalization
Realized Capitalization is an alternative to Market Capitalization, designed to take into account the reality of when Bitcoins changed hands. Instead of pricing every outstanding unit of Bitcoin at the last market price, it prices every unit of Bitcoin according to when they last moved on-chain. This is possible to ascertain because Bitcoin’s ledger is transparent, and we can account for every single coin.
This takes into account the liquid supply of Bitcoin in a practical sense. Realized cap ignores the market value of Bitcoins that haven’t moved since 2009 (when Bitcoin did not have a market value). You can think of it as roughly measuring the aggregate cost basis of all the current Bitcoin holders.
Realized cap sits at $129B today, well above its $90B peak in early 2018. What this tells us is that Bitcoin is substantially more liquid at these levels, with investors less eager to sell. In late 2017/early 2018, the unit price was higher (the Coin Metrics reference rate lists the highest 00:00 UTC daily close at $19,640 on Dec. 16, 2017), but less of the supply had changed hands at those rarefied levels. This also explains why the price collapsed so quickly from there. It simply couldn’t be sustained, as investors in the aggregate had a cost basis far below that threshold, and were eager to take profit. The 2017 bull run was more of a melt-up, driven by ICOs, press coverage, and retail investor excitement. This bull run is more of a sustainable slow burn.
Today, the picture looks very different. The supply has significantly churned and a lot of early investors have cashed out, giving way to new blood. These investors, who bought their coins in the last couple years, are presumably not as eager to lock in a profit at $20k as someone who had been holding Bitcoin since it was $1. Thus, a higher realized cap is an indication of greater maturity and capacity for patience in the current investor set.
Bitcoin Options Open Interest
Open interest in an options contract adds up the value of the outstanding, un-exercised options. (Options traders will grumble at this methodology, because it can be skewed by options trading at silly strike prices like $32k.) While in absolute terms, the numbers are still fairly low, the incipient but maturing options market tells us a thing or two about Bitcoin today.
Just like derivatives first came into existence for farmers to hedge their exposure to crops and lock in a specific price for their harvest (and get liquidity on their future crops so they could buy seeds and fertilizer today), so too are options useful for the producers of Bitcoin — the miners. Miners can tell, roughly speaking, how many Bitcoins they will mine based on their equipment, under reasonable assumptions about hashrate. If they want to get an ‘advance’ on the coins they expect to mine, they can sell calls. This means they promise to deliver coins at a certain price on a certain date — but they get paid for that promise today. And with that cash advance, they can go ahead and finance their operation more efficiently.
What this chart tells me is that the producers of Bitcoin now have access to more sophisticated financial products which they can use to hedge their exposure. In theory, this should mean that the mining industry is more stable and less exposed to boom and bust periods. It lets miners focus on running their operations efficiently, and frees them from the burden of worrying about their unhedged exposure to their equipment.
Additionally, the growth of options means that traders, who take the other side of those bets, have more creative ways to express their view on Bitcoin. For instance, using these instruments, it’s now viable to bet not on Bitcoin going up or down, but on an expectation of future volatility (or a lack thereof). These instruments simply didn’t exist in 2017. Fundamentally, by giving sophisticated investors more tools, Bitcoin can accommodate more capital inflows.
Bitcoin priced in Turkish Lira
Investors often track Bitcoin’s performance in dollar terms, but the truth is that much of the world’s population denominates the performance of financial assets in their local currency. After all, they may not have access to the dollar-based banking system. The further away you are from NY, and the more hops correspondent banks have to take to get to your local banks, the more expensive your access to the dollar is. U.S. banks aren’t fond of doing business with individuals overseas. They are risky to service, and risk makes things expensive. Thus, these U.S. banks have a tendency to “derisk” their exposure to non-U.S. clients.
Billions of savers worldwide must therefore reckon with inflationary currencies, or monetary repression — a state of affairs where they don’t have the freedom to move their assets around. This latter phenomenon is often imposed by central banks that fear currency flight and accompanying depreciation. It comes at the cost of self-determination on the part of savers.
While most people reading this will have the luxury of saving in dollars or euros, it’s important to remember that inflationary currencies are the reality for a significant share of the world’s population. We measure the Bitcoin in dollar terms, but the dollar is among the least inflationary of all global currencies. Because Bitcoin is such a great non-sovereign wealth store, being highly portable, concealable, and seizure-resistant, when sovereign currencies start to fail, it looks attractive. Bitcoin exchanges in Turkey have received a huge boost this year as the Lira has endured a long slide. In absolute terms, Turkey is the 12th-most popular country for exchange web visits.