Zaim

We were rugged. New spaces link for $GUMMY! twitter.com/i/spaces/1gqxv…

I need to vent about this supposed #BTC “sell-side liquidity crisis” I’m seeing some people get excited about in my feed. 😡 Apparently, the big Wall St. institutions (ETFs) are “gobbling up” all the available BTC. This is wrong on many fronts. 1) First, markets don’t work like that. There will always be BTC for sale at a price – if collective eagerness to buy outweighs collective desire to sell, the price will rise until it finds a seller. I even read an article in crypto media worrying that exchanges would “run out” of BTC to sell. Exchanges don’t work like that, they don’t hold BTC in inventory. They are platforms on which buyers find sellers and vice versa (simplifying a bit) – the price moves to find a mutually acceptable level. In sum, exchanges will never run out of BTC to sell, and there will never be 0 sellers in the market. Pretty much everyone has a price at which they will part with their BTC – for some it is multiples higher than today, for others around these levels will be just fine, thank you. 2) Second, the “Wall Street” ETFs are not “gobbling up” all the available BTC. This is nuts. They are buying BTC on behalf of investors. Some are institutions, many are individuals who might otherwise be buying BTC on exchanges but would rather avoid the hassle and relative insecurity. (I’m not saying the ETFs are “better”, I am saying they are more convenient for many investors who are willing to accept the centralized risk tradeoffs.) Also, today’s spot ETF buyer may become a seller tomorrow, next month, next year, when they retire, whenever. The BTC the ETFs are “gobbling up” will find its way back to the market at some stage, maybe to be bought by other ETF buyers or maybe to be bought by a bank in Papua New Guinea or a doctor in Thailand. The BTC bought by the ETFs does not “leave” the market. It may rest for a while, but it could re-enter circulation at any time. 3) Third, I read a report review that said if ETF demand continues at the current rate, there might be only 12 months of BTC supply left to buy. What? The error might be with the review rather than the original report which is behind a paywall (although it does have the phrase “depleting available inventory” in the title). There is no “inventory” to deplete! BTC is held by individual savers, institutional investors, miners, traders, market makers, etc., each with different profit goals and time preferences. Given the diversity of the BTC investor base, there will always be sellers. Which means there will always be BTC available to buy. It just might be at a higher price, because there are fewer sellers willing to part with their BTC at this level than there are buyers eager to buy. The price will climb until it reaches a level a seller finds acceptable. The buyer then turns into a potential seller (at some point in time, at some price!), and the seller turns into a potential buyer, and market prices keep on moving to find a temporary balance between them. This makes me wonder if the spread of the “sell-side liquidity” fear could be social engineering to bid the price up further. I hope not, because it’s a totally wrong premise and false expectations won’t do the market’s image any good. There are enough valid reasons to expect the BTC price to climb over time, we really don’t need made-up ones. Of course, it could be that someone, somewhere, made a smart comment about how a pickup in net demand meeting a fixed supply would result in an upward price trend, and then an excited market distorted the message and ran with it. I sort of hope so, since not understanding markets is forgivable, they are complicated (and we all make mistakes). We saw this in the last bull run – collective hysteria encouraged otherwise smart people to repeat stupid claims in the hopes of getting engagement in a price-obsessed ecosystem. In this bull run, it’s way too early for that. In sum, there is no “sell-side liquidity crisis” in BTC! Its price is likely to go up as new demand has to pay more to find willing sellers. But it’s far from a “crisis”, it’s just how markets work.