There’s just not enough Bitcoin to meet demand.
That’s not just some hopium-based fantasy by the leader of a fringe crypto cult.
No, it’s simple fact from tallying just a couple places where Bitcoin can be bought.
Retail demand is also currently at “unprecedented levels.”
Israeli trading and investing platform Etoro warned customers in Europe on Friday of possible limitations on crypto purchasing over the weekend. In an email, the exchange said: “The unprecedented demand for crypto, coupled with limited liquidity, presents challenges to our ability to support buy orders over the weekend. In light of this, it may be necessary for us to place limitations on crypto buy orders.”
eToro’s statement acknowledging unprecedented demand is just one of many that point to the fact that there isn’t enough Bitcoin available at today’s prices to meet demand.
In last month’s investor letter we discussed that after 30 months of operation, Square’s Cash App is estimated to be buying around 40% of all newly-issued bitcoin.
PayPal just launched their new service that enables customers to buy, sell, and hold cryptocurrency directly from their PayPal accounts. It’s already having a huge impact.
The bitcoin community is proud to have grown to 100 million users over twelve years. PayPal has 300 million active users. As we’ve argued — and will argue more fully in our December investor letter — this rally is much more sustainable than 2017. One of the main differences is the ease of investing in bitcoin now — via PayPal, Cash App, Robinhood, etc.
Previously the friction to buy bitcoin was pretty onerous: take a selfie with your passport, wait days to a week to get activated, daily limits.
BOOM! The results are already apparent.
PayPal’s crypto infrastructure provider is Paxos. Prior to PayPal’s integration of crypto, itBit, the Paxos-run exchange, was doing a fairly constant amount of trading volume — the white line in the chart below.
When PayPal went live, volume started exploding. The increase in itBit volume implies that within four weeks of going live, PayPal is already buying almost 70% of the new supply of bitcoins.
PayPal and Cash App are already buying more than 100% of all newly-issued bitcoins.
Only 900 New Bitcoins Created Each Day
Bitcoin supply is growing daily. Literally, it’s growing by 6.25 newly created Bitcoins with each new block mined. By design, one Bitcoin block is mined every 10 minutes, resulting in an average of 144 new blocks every day. 144 x 6.25 equals 900 new Bitcoins created each day.
Genuine Bitcoin Investor Demand
As we reported above, just Paypal and Cash App are responsible for buying more than 900 Bitcoin per day.
Let’s look at another rather obscure place to buy Bitcoin: LocalBitcoins.com. This is a site outside of the massive mainstream crypto exchanges. It is sort of a peer-to-peer classified ad site that matches buyers with sellers on an individual level.
Contrast that to the average daily trading of Bitcoin at localbitcoins.com which is a mere $6 million. The difference in size is staggering. The point being, trading volume at localbitcoins.com is a tiny, extremely tiny, amount of Bitcoin being bought each day.
Now, be aware that most of the trading volume on Binance and other big exchanges is just that: trading, not investing. A trader can buy and sell multiple times per day with each of those trades adding into the cumulative total trading volume.
On localbitcoins.com it is definitely not “traders” doing the trading, it is mom and pop type of people buying Bitcoin to hold as an investment.
So let’s look at the numbers. $6 million worth of Bitcoin are being bought right now every day on localbitcoins.com.
How many Bitcoin is that?
$6,000,000/$37,000 each equals 162 Bitcoin.
Remember, there’s only 900 being created. And this tiniest little peer-to-peer exchange is responsible for its users buying up almost 1/5 of all newly created Bitcoin each and every day. This is purely Bitcoin volume, and does not include other cryptos such as XRP and Litecoin.
Paypal and Cash App are already buying more Bitcoin than are being created each day. This tiny little site is facilitating the buying of nearly 20% of all new Bitcoin being create. What about the customers of Binance? What about demand from the customers of Coinbase, Gemini, Kraken, Bittrex, Bitstamp, Huobi, Bitfinex, and hundreds of other exchanges are are many times lager than localbitcoins? Where will all the Bitcoin come from for those buyers to be able to purchase?
Only Existing Holders Can Supply Bitcoin To Match Soaring Demand
One thing is certain, there is no way to increase the supply of new Bitcoin being created each day and available on the market. With demand absolutely overwhelming new supply, that only leaves existing holders willing to sell in order to satiate buyer demand.
Which means only one thing: prices will continue to be bid higher.
There’s good reason for the crypto fear and greed index to be pegged on greed.
How high is high? Here’s our Bitcoin forecast for this year and beyond.