Coinmetrics research issued their latest report this week which gives some insight into the fundamentals behind bitcoin. The full report is here and we provide a summary of the highlights below.
Daily value transfer
Currently $2.3 billion per day in value is transmitted across the bitcoin network. For context, in 2018, Visa processed an average of $30 billion per day, AMEX processed about $3 billion, so we might reasonably expect bitcoin to surpass AMEX in value transfer in 2020.
Note, this chart has a log scale, so the growth is in fact enormous.
One of the best proxies for the total users of bitcoin is the number of unique bitcoin addresses holding value (in this case value over $10). This isn’t a perfect measure since users may have more than one address with value attached but it is a good approximation.
Again, very strong growth, with 14 million users. You can see on the chart the general crypto “bubble” bursting in late 2017 from which it has taken 18 months to fully recover. The overall figure is still low compared to the major social networks, Twitter has 321 million active users and Facebook has over 1 billion.
In the payment networks, Paypal reported 277 million accounts as of Q1 2019. American Express had 110 million active cards members in the period. So here, bitcoin is behind by an order of magnitude.
How hard is it to mine bitcoin? Very, very hard. The bitcoin mining industry is now serious and large.
To give context, it was possible to mine bitcoin in 2012 with a graphics card on a home computer. In 2019, the total hashpower dedicated to mining bitcoin is equal to 21 billion laptop computers. That is not a typo and it is absolutely amazing (log scale again on the chart).
Here we come to new supply and inflation. You can see inflation fall steeply with time. We know the halvening is coming up in May 2020. Inflation will fall to 1.8%, the lowest rate of any commodity. Consider this in the context of Square (owners of the cash app who sell bitcoin in the US) and Grayscale (US Bitcoin Fund) absorbing 33% of all new issuance in Q3 this year, that number will see just two companies absorbing two thirds of all newly issued bitcoin post halvening.
Price through the supply eras of bitcoin
Finally, the price through the different supply era’s of bitcoin. In 2012, at $12, people talked about a $100 bitcoin and everyone laughed. In 2016, people talked about a $10,000 bitcoin, everyone laughed. In 2020, people will talk about a $100,000 bitcoin, everyone will laugh. There is a chance though, if you own bitcoin, you might laugh the loudest of all.