Bitcoin Adoption Hits An All-Time High

Bitcoin is up 70% in USD price to start the year. This appreciation can be attributed to a number of different drivers.

Here are a few that I have identified:

1. Bitcoin is used as a hedge against potential US default related to debt limit crisis
2. Bitcoin is used as a hedge against a worsening of the banking crisis
3. Bitcoin is used as a way to front-run a potential pivot by the Federal Reserve
4. Bitcoin is used as a hedge against future US sanctions for various countries

This is not an exhaustive list, but it should illustrate how diverse the investment demand drivers have been over the first ~100 days of the year. The common theme is that bitcoin serves as an alternative currency that exists as far outside the legacy financial system as possible.

This value proposition has been found useful by people across the world. According to Chainalysis, global adoption continues to happen in major parts of North America, South America, Europe, and Asia.

This shows that the alternative is not simply viewed as the US alternative, but rather an alternative for anyone in the world. As I have said for years, one of the tailwinds for bitcoin is to simply allow for the passage of time. We can see that on-chain wallet addresses with at least $280 of bitcoin or more continues to hit new all-time highs every week.

The same trend is observed when you look at bitcoin on-chain wallet addresses with at least 1 full bitcoin in them as well.

Another way to evaluate bitcoin currently is through the revenues of the system. Most companies have revenue accrue to a centralized organization with a single P&L and balance sheet. Bitcoin is decentralized, so people tend not to think of the revenue of the system since it is going to various miners that have different P&Ls or balance sheets.

If we were to consolidate that revenue into a single organization, miners were paid a total of 852.49 bitcoin yesterday at a blended price of $28,262. This means the miners earned $24,093,072 in the 24 hour period. If we annualize that number, it comes out to revenue of $8,793,971,418.

Nearly $9 billion of annual revenue for miners during a bear market where bitcoin is trading more than 50% lower than the previous all-time high. Pretty remarkable.

This puts bitcoin’s annual revenue in the ballpark of JetBlue, Motorola, and Campbell Soup. The digital system would not qualify for the top 1,000 public companies by revenue list. Some people will look at that as “bitcoin is still very small,” while others will view it as “bitcoin has a lot of room to grow.”

Both are true in my opinion.

This brings me to something that I have been thinking about a lot — resilience. I have been impressed with how resilient many non-tech public companies have been throughout the last three years of market volatility. Companies who sell staple household goods, such as paper towels, toilet paper, and cleaning supplies, continue to perform well in up and down markets.

Bitcoin’s network appears to be doing the same thing. Although the price of the asset went up at a breathtaking pace, followed by an equally breathtaking fall in price last year, the actual system continues to strengthen. We are seeing bitcoin’s hash rate hit new all-time highs, decentralization of mining and bitcoin ownership is increasing, and adoption around the world is the highest it has ever been.

If you were to view bitcoin through a value investor’s lens, you could easily argue that the price is misleading when overlaid on the underlying fundamentals of the network. I won’t go as far as to argue that bitcoin is a value investment, but I will argue that an analysis of the non-price components of a bitcoin investment thesis remain compelling.

William P. Eason