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Since the end of 2017, the conventional thinking was that well-heeled financial institutions would take the reins from retail investors, becoming the driving force and primary investor class in crypto.

But areportout last week from derivatives exchange ZUBR argues retail investors are not just here to stay, they could end up absorbing more than half of bitcoins daily fresh supply in as little as four years.

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By the time the next reward [halving] era comes around in 2024, retail could potentially account for eating up over 50% of the physical supply, the report predicts.

Using data from analytics firm Chainalysis, ZUBR found the number of wallet accounts holding small whole balances, anywhere between 1 to 10 bitcoins sizes that suggest retail rather than institutional had risen rapidly.

Since bitcoin hit its all-time high at the end of 2017, the number of retail wallet holders more than doubled, reaching 215,000 by the start of June 2020.

In total, these entities hold over 500,000 bitcoin (~$4.6 billion), up over 100,000 since the start of 2019.

On average, 144 bitcoin blocks are mined every day. After the next halving in 2024, about 450 bitcoin will enter circulation each day. Assuming demand continues at its present trajectory over the next four years, ZUBR estimates the amount of new bitcoins demanded daily by retail investors could be at around 250 well over half the daily supply four years from now.

And thats only wallet addresses with whole numbers. Adding in wallets with fractional balances and daily demand could be even higher. ZUBR also excluded crypto held in exchange accounts from its study.

At the start of the year, approximately 1,800 new bitcoins entered into circulation each day. Since the block reward fell from 12.5 to 6.25 in mid-May, the daily bitcoin supply has dropped to just 900.

Assuming the same level of mining activity, daily supply will likely fall down to just 225 bitcoin by the end of the decade.

These supply pressures make a highly bullish case for bitcoin, said Jason Deane, analyst atQuantum Economics.

Bitcoin has a perfect supply curve, total (maximum) supply is always known, and it can only be lower due to lost coins, he told CoinDesk.

Although bitcoins total supply stands at around 21 million, the estimated number of coins believed to have been lost or otherwise irrecoverable ranges between 1.5 million, according toCoinMetrics, or even as high as 4 million, according toUnchained Capital. That puts even greater pressure on supply.

But the real variable is demand. Should this continue to increase, there will come a point when it will outpace supply, causing bitcoins price to rise.

A rising price might help burnish bitcoins credentials as a store of value asset; possibly creating a virtuous circle where price increases help bolster the store of value narrative which, in turn, leads to further price increases.

Indeed, going back to ZUBRs research, this virtuous circle may already be present.

Since the start of 2020, balances for retail-sized entities have grown continuously month on month. Despite unprecedented market volatility bitcoins price fell nearly 40% in March there has not yet been a month so far this year where the total amount of bitcoin held in retail-sized wallets has decreased.

Zooming out, there hasnt been a month of net decline since April 2019. Going out even further, there have only been five months since the mining of the genesis block, more than 11 years ago, where the monthly amount of retail balances of bitcoin have decreased, rather than grown.

This natural hodling mentality might suggest that retail investors, as an investor class, see bitcoin as a natural store of value, rather than a medium of exchange, and are, therefore, hoarding as much as they can, anticipating further price increases.

Indeed, events such as Black Thursday on March 12, which temporarily took the bitcoin price down below $5,000, might have been seen more as a unique buying opportunity, rather than an existential threat to the cryptocurrency.

In fact, some institutions and brokeragestold CoinDeskat the time they were offloading as much of their bitcoin as possible onto retail investors, some buying for the first time, who were buying up to two to three times as much as they were normally.

According to Deane, this should come as no surprise. If you assume that demand is going to continue rising, just as daily supply continues to fall, its reasonable that retail investors may be buying in anticipation of further price hikes.

The market may soon be at the point where instead of dealing in bitcoins, many small-time traders will instead be buying in satoshis, bitcoins smallest divisible unit at approximately 0.00000001 BTC (currently around 0.009 of a cent).

Obtaining a whole bitcoin will be very difficult in the future and most people will only deal in satoshi, which will almost certainly become the norm, especially for individuals, Deane said.

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BTC: Price: $9,106 (BPI) | 24-Hr High: $9,190 | 24-Hr Low: $9,025

Trend:Bitcoins price bounce from lows below $8,850 seen over the weekend has run out of steam, and the cryptocurrency looks vulnerable to deeper declines.

At press time, bitcoin is trading near $9,100, having faced rejection around $9,200 during Sundays U.S. trading hours.

On the hourly chart, a bearish trendline connecting the June 22 and June 24 highs is still intact. Meanwhile, the relative strength index (RSI) has fallen back into bearish territory below 50. The MACD, too, has crossed into the negative territory.

The same indicators are also reporting bearish conditions on the daily and three-day charts.

In addition, the weekly chart shows signs of uptrend exhaustion: Bitcoin has been above a trendline connecting the June 2019 and February 2020 highs (yellow line) for six weeks. Even so, buyers are failing to step in.

As a result, a retest of the weekend low of $8,830 cannot be ruled out. A violation there would expose deeper support levels lined up at $8,630 (May 24 low) and $8,638 (50-week moving average).

On the higher side, immediate resistance is seen at $9,172, the hourly charts bearish trendline. Above that, the focus would shift to $9,344 (a lower high on the hourly chart). The overall bias would turn bullish only after a move above $10,000.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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First Mover: The Return of the Bitcoin Retail Investor (And Why Thats a Good Thing) - CoinDesk - CoinDesk

Nico Cordeiro is the chief investment officer and fund manager at Strix Leviathan. He oversees quantitative research, strategy development, risk management and portfolio allocation. A longer version of this post can be found here.

The stock-to-flow model (SF), popularized by a pseudonymous Dutch institutional investor who operates under the Twitter account PlanB, has been widely praised and is the leading valuation model for bitcoin proponents. SF has achieved viral popularity and inspired rags-to-riches dreams for those gambling it all on the future of bitcoin. However, we believe the models accuracy will likely be about as successful at forecasting bitcoins future price as the astrological models of the past were at predicting financial outcomes.

Stanford Professor Paul Pleifderer coined the term chameleons to describe models that are built upon dubious assumptions and are given more credence than they deserve. An initial evaluation of any model should begin with a critical look at the models theoretical assumptions, he says. As an example, Pleifderer provides the following scenario:

Imagine an asset pricing model based on the assumption that there is no uncertainty about any asset's returns. No serious person would suggest that the predictions of the model should be subjected to rigorous empirical testing before rejecting it. The model can be rejected simply on the basis that a critical assumption is contradicted by what we already know to be true.

Chameleons are particularly difficult to spot and dispute because they appear to be meaningful. Its only under further scrutiny that you realize they are built upon assumptions that do not map to what we know about the real world.

Introducing stock-to-flow

PlanBs paper Modeling Bitcoin Value with Scarcity states that certain precious metals have maintained a monetary role throughout history because of their unforgeable costliness and low rate of supply. For example, gold is valuable both because new supply (mined gold) is insignificant to the current supply and because it is impossible to replicate the vast stores of gold around the globe. PlanB then argues this same logic applies to bitcoin, which becomes more valuable as new supply is reduced every four years, ultimately culminating in a supply of 21 million bitcoin.

Low rate of supply, which PlanB defines as scarcity, can be quantified using a metric called Stock-to-Flow (SF), which is the ratio between current supply and new supply.

This premise is then translated into the hypothesis, that scarcity, as measured by SF, directly drives value. PlanB then plots bitcoins SF against USD market capitalization as well as two arbitrarily chosen SF data points for gold and silver.

PlanB then runs a linear regression using the natural logarithm of bitcoins SF metric as the independent variable and the USD market capitalization as the dependent variable. The paper ends with the conclusion that there is a statistically significant relationship between USD market capitalization and SF values, as evidenced by the linear regression resulting in an R2 (a statistical measure of how close the data fits to a regression line) of ~0.95. The two randomly chosen data points for gold and silver are in line with bitcoins trajectory and presented as further evidence of the hypothesis.

PlanB suggests that investors can forecast the future USD market capitalization of bitcoin using the above formula. This has helped give credence to those $100,000 bitcoin projections.

Problems abound

There are several deficiencies within the paper, both in its theoretical proposition and its empirical foundation.

From a theoretical point of view, the model is based on the rather strong assertion that the USD market capitalization of a monetary good (e.g. gold and silver) is derived directly from their rate of new supply. No evidence or research is provided to support this idea, other than the singular data points selected to chart gold and silvers market capitalization against bitcoins trajectory.

This becomes quite obvious when one extends the model into the near future. By 2045, the model estimates each Bitcoin will be worth $235,000,000,000.

The second is the nave application of a linear regression that results in a high probability of a researcher finding spurious results. Good statistical results, such as a high R-square, do not constitute a meaningful finding. It is common for researchers to underestimate how often such techniques lead to false results. And particularly in this situation, where there is a large degree of freedom for random data to fit a specific outcome.

Gold and the dollar

From a theoretical perspective, what PlanB defines as scarcity is not scarcity by definition. PlanB uses scarcity to describe an assets supply growth rate or new production as measured by the SF metric. This assumes that increasing new supply depresses price through increased selling pressure from producers and vice versa.

This seems reasonable at first glance until one considers that a high SF represents a dynamic where new supply is insignificant to the current supply. PlanB quotes Bitcoin Standard author Saifedean Ammous saying as much: For gold, a price spike that causes a doubling of annual production will be insignificant, increasing stockpiles by 3% rather than 1.5%.

Perhaps unsurprisingly then, SF has no direct relationship with golds value over the last 115 years, as can be seen in the scatter plot below. Golds market capitalization held valuations between ~$60 billion to ~$9 trillion, all at the same SF value of 60. A range of $8 trillion is not very indicative of explanatory power and lends itself to the obvious conclusion that other factors drive golds USD valuation.

Recall that the value of gold/USD is the ratio of purchasing power between gold and the USD. When the purchasing power of the dollar decreases, the value of gold/USD increases and vice versa. With relative stability in the purchasing power of gold, we find that roughly 88% of the variability in golds value over the last 115 years can be explained by the substantial decrease in the purchasing power of the USD, with $1 in 1915 now worth just $0.04. Most market participants understand this dynamic intuitively, buying and selling gold based on USD inflationary expectations.

While a higher SF value may be a necessary feature for a commodity to serve as hard money, the metric itself says nothing about how market participants value said commodity. Many cryptocurrencies which utilize Bitcoins code have the exact same supply schedule as Bitcoin and everyone understands their SF values have nothing to do with their future (or current) valuation.

We are left with a hypothesis that applies to no economic assets except bitcoin and whose only evidence is a linear regression with questionable application and clear selection bias.

$235 billion bitcoin to infinity

An entire overview of linear regression and its mathematical basis is beyond the scope of this analysis. However, there are several implementation errors well-established in the research community that demonstrate why the SF model is likely to be spurious. Obscure math has allowed SF proponents to dismiss all criticism so it may be more intuitive to understand conceptually why the SF model is irrelevant for future price predictions.

The model supplied in the SF paper is the same slope-intercept equation everyone learns in 7th grade: y = mx + b. An ordinary-least-squares (OLS) regression is not a predictive model but rather an estimation of the m and b values that minimize the difference between the actual y values and the estimated y values given by the equation mx+b. In other words, every change in x equates to a corresponding change in y.

Recall that OLS is estimating how much y (Market Cap) changes for a given change in x (SF). On a month-to-month basis in which the model is derived, the change in x is effectively 0. As a result, the OLS model is doing nothing more than estimating Bitcoins historical growth rate. This becomes quite obvious when one extends the model into the near future. By 2045, the model estimates each Bitcoin will be worth $235,000,000,000 before eventually converging to infinity as bitcoins flow approaches 0.

Using the estimated slope-intercept formula is making the most naive prediction possible, because bitcoin grew by X in the past, it will grow by X in the future. One should remember that past results are not representative of future returns.

Marketing piece

Darrell Huff wrote in How to Lie with Statistics: Many a statistic is false on its face. It gets by only because the magic of numbers brings about a suspension of common sense. Upon reflection, few would take seriously the idea that golds USD price is a function of its own supply rate and therefore so is bitcoins. Yet, the supposed mathematical precision presented in the paper has resulted in the SF model continuing to be heavily promoted in both retail and professional investment channels.

Investors should be highly skeptical of this model even if they believe bitcoin is digital gold. The SF paper is not proper empirical analysis, but more akin to a marketing piece in which the author is trying to convince readers that bitcoin is going to be worth a lot more tomorrow. This may or may not turn out true, but it has little to do with bitcoins supply schedule.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Why the Stock-to-Flow Bitcoin Valuation Model Is Wrong - CoinDesk - CoinDesk

Crypto market skeptics and speculators are concerned about 789,000 ETH that started moving four days ago last Wednesday. The transaction was recorded by Whale Alert, and the $187 million worth of ether stems from the Plustoken scammers.

On Wednesday, June 24, 2020, at approximately 9:46 a.m. (ET) the Plustoken scammers who have yet to be arrested, moved 789,534 ETH worth $187,847,550 USD at todays exchange rates.

Cryptocurrency traders are concerned that this stash of ETH will be dumped on numerous digital currency spot markets. Additionally, the Plustoken scammers moved $67 million worth of EOS tokens two days before the 789,000 ETH transaction.

A number of crypto traders and organizations like Chainalysis and Cyphertrace have reported on the Plustoken scammers transactions.

Speculators have assumed that Plustoken coins that were dumped on spot markets caused the price of BTC to slide at the end of 2019. Plustoken scammers have been accused of fueling the March 12, 2020 dump often referred to as Black Thursday.

On March 9, 2020, crypto market observers witnessed 13,000 BTC sent to bitcoin mixers and crypto speculators assume the scammers are selling. Chainalysis said after March 12, that the organization didnt believe the sell-off stemmed from Plustoken coins sold.

In this case, we dont believe Plustoken liquidations are responsible for bitcoins price drop. While Bitcoin did move from Plustoken addresses over the weekend, very little has gone to exchanges, Chainalysis wrote.

The recent 789,000 ETH transaction may have been shuffled or obfuscated through a number of hops. The $187 million was split into 50 different addresses on the Ethereum network.

Findings stemming from Cyphertrace and Chainalysis have noted that the Plustoken scammers still own large amounts of ETH, BTC, EOS, and a few other types of digital assets. To this day, the scammers who are still at large, hold large swathes of these coins and no one is sure how they will be sold, but many suspect over-the-counter (OTC) operations.

The ETH address where the $187 million in ether was stored, still has $139.70 worth of ETH in the wallet today. 192 days ago, the wallet started with 10 ETH deposited, but 789,524.6 ETH was deposited immediately after.

What do you think about the Plustoken ether on the move? Let us know what you think about this subject in the comments section below.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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The infamous and controversial owner of the website bitcoin.org, Cobra, is under fire recently and a number of community members have asked to see the website removed from his possession. The initial argument was sparked by the websites maintainer, Will Binns, who told the public that bitcoin.org was in danger of being compromised. Since then, Cobra has decided to fire Binns and the crypto community has been very focused on watching this quarrel unfold.

During the last few years, news.Bitcoin.com has reported on the curious case of Cobra, the peculiar anon with a lot of power. Just recently, bitcoiners have been arguing about Cobras ownership of bitcoin.org. Cobra has always been controversial and hes asked the community to change the Proof-of-Work (PoW) consensus algorithm.

Cobra also asked the community and fellow bitcoin.org maintainers to change certain statements Satoshi Nakamoto made in the Bitcoin white paper. Five days ago, bitcoin.org maintainer Will Binns told the community via Github, that he believes Cobra is participating in compromising the website where the latest version of Bitcoin Core software stems from.

Bitcoin.org, where many people also download the latest version of Bitcoin Core software, is now in danger of becoming compromised, if it hasnt just happened, Binns said.

Cobra-Bitcoin has removed my access and seized control of the site and accompanying code repositories. I do not believe Cobra is the sole and lawful owner, nor does he have any right to do these things without just cause. Cobra has referenced recent messages I sent in regular conversation regarding my work and the management of bitcoin.org as reasons for my departure. This has been taken out of context in an attempt to manipulate public opinion and infringe upon my rights, along with the rights of others, Binns added. The bitcoin.org software maintainer further stated:

I believe he is looking to illegally transfer ownership of the site without due process, and this may only be the beginning. Im writing this message to request assistance setting up a legal fund and the help of experts, to help stop this. In the interim, the websites treasury will be placed under the control of a trusted third party. The funds are safe, the site is not.

Cobra explained that he had removed Will Binns as the sites maintainer, in another Github post called Regarding Will Binns #3397. During a conversation on Twitter, he had claimed that his work contributing to bitcoin.org conferred on him more authority than what I had agreed with him. I wont engage with him beyond attempting to retrieve the communitys donations from wallets he has control over, Cobra told the community members on Github.

The websites owner continued by stating:

This may seem harsh, but any further communication with him risks putting this project in an unfortunate situation. So I had to be brisk and terminate his relationship with us. Ill be taking over the day-to-day activities on the site more actively from now on; if any contributors or translators are in any group chats with him, please make alternative groups so you can continue work on the site.

Interestingly the former Blockstream employee and Bitcoin Core developer, Gregory Maxwell, seemed to agree with Cobras stance. Your position appears to be a misplaced and inappropriate response to Cobra suggesting that he was considering not handing you unilateral control of Bitcoin.org. I hope you reconsider your approach, Maxwell explained in the post reply toward Binns.

Another software developer wrote: From my experience, even though Ive not always agreed with [Cobra] on certain things, I think hes shown good character, and as others have stated, he has acted as a trustworthy steward over the years.

Bitcoin Core developer, David Harding, stood up for Binns when Cobra called Binns a scammer. Ive been interacting with Will Binns for over six years now, first on Bitcoin.org and later as coworkers, Harding wrote.

We havent always gotten along, but Ive never seen him try to scam anyone. Quite the reverse Ive seen him selflessly contribute to this project and others for no tangible return. I dont know whats happening in that conversation and I understand the need to be clear about who has what rights, but I dont think a single confused conversation warrants the character assassination of a long-time contributor to multiple open-source documentation projects.

Whatever the case may be, Binns has lost his position and there is literally trouble in paradise when it comes to the web portal bitcoin.org. Cobra has always been a controversial figure and no one knows who he or Theymos is.

His sidekick Theymos is also an anon who once in a while participates in the bitcoin.org operations and discussions. Theymos also has complete control over r/bitcoin, the unofficial bitcoin wiki, and bitcointalk.org too. Both Cobra and Theymos, however, have been around since the early days. They both are mysterious and have maintained a lot of power, as far as bitcoin domain real estate is concerned ever since Satoshi left.

What do you think about the quarrel over bitcoin.orgs ownership? Let us know in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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