Episode 31. The "Krueger" multiplier effect BTC-USDT as one giant AMM Hyperbolic supply shock

The model: docs.google.com/spreadsheets…

If we get into this hyperbolic supply shock, things go insane very quickly. Like omega candle quickly @Excellion

Bitcoin Price is likely to be much more Hyperbolic than Exponential in a Supply shock. The reason for this is that the exchanges tend to operate like constant product AMMs. As the supply of Bitcoin gets drained from exchanges, the price tends to infinity as x tends to zero

This idea of looking at the 80Billion of BTC and equivalent amount of USDT on exchanges came to me as vision yesterday. It allowed me to estimate a price of 186K BTC if 1MM BTC was drained over this cycle by IBIT and other ETFs. But it's also a reality: Bullish, for example has a massive AMM, powered by Block One's 150,000 Bitcoin. Uniswap V3 has a much smaller liquidity on WBTC, but still 20MM

Rockefeller demonstrating Standard Oil in 1870. 150 Years later, ETFs are "Standard Financial Products" This includes Bitcoin.

Very clear diagram of how ETFs are eating the entire financial world. We're not moving to a "Bitcoin Standard", we're moving to an "ETF Standard". Bitcoin is just there for the ride.

This graph does not go down. It's a freight train.

One company clearly is leading this race. It's BlackRock by a 3-1 margin.

The key word here is STANDARDIZATION. ETFs bring all financial assets into a single ultra-tax efficient, ultra low-fee standard. No other form of ownership can complete. Not mutual funds. Not closed end funds. Not CoinBase (in the case of Bitcoin). Not Hardware Wallets (agin for BTC). Not Perps w/Leverage. Everything gets standardized. BlackRock is the new Standard Oil. Larry Fink is the new Rockerfeller.

With Blackrock, Bitcoin is going past 100K this year. Don't sell. For any reason.

Max is right. I would specifically say this Season will belong to Larry Fink and BlackRock. It's clear to me after reading "The Bogle Effect" and following Eric from Bloomberg, the future of Wall Street is a 2 way battle between BlackRock and Vanguard. BlackRock, and specifically Larry got orange pilled sometime in the last 12 months. He is now going to deploy the entire arsenal of Wall Street ETFs to win Season 4. I would guess somehow IBIT gets to 1 Million BTC. It has to get to substantially more than GBTC, which is about to drop below 500K. We're going to get all kinds of leveraged ETFs, covered call ETFs etc.. this year. Everything you ever could do on FTX, Binance or Bitmex, there will be an ETF for that. You will be able to borrow against IBIT, margin trade IBIT, link IBIT balances to your credit card (like a Merrill Visa does today). It's very clear that this is the future.

Thought Experiment: What if the entire BTC-USDT trade operated as an AMM. What would the multiplier be? Answer: About 21 for small amounts (10K BTC) Proof: Let's imagine that the roughly 80 Billion BTC and equivalent amount of USDT on exchanges was in a single UniSwap type constant product AMM. I am not saying that it is -- but a lot of crypto trades in these types of AMMs. How would buying BTC and taking it off the exchange impact the price of bitcoin, and the multiplier of BTC value in to BTC market cap difference? Well, lets start with 80 Billion USDT and 1,904,702 BTC, which is the equivalent at 42K. Now lets try and drain 10,000 BTC off the exchange. We now have to insert 422,216,637 USDT into the AMM to get the constant product (see google sheets). The 10,000 BTC is worth 420M USD at the old price, and moves the price to 42,444. This increases the market cap of BTC by 8.889 Billion. The ratio of these is 21. As you increase the drain, the multiplier increases substantially. Take 1MM BTC off the exchange and the multiplier goes to 68. Conclusion: Although I believe I am the first person to actual derive this number, I am not completely convinced that the model is applicable. @jvs_btc has estimated the multiplier at 100, and @BritishHodl has also argued for a higher number. But it's interesting that we can use basic math to get some predictive estimates.

I do feel that Wall Street will Gobble up 1 MM BTC over time. Thats 42 Billion at today's prices. If they did that with the exact AMM, the impact would be to increase the price to 186K and the market cap of BTC to 2.8 Trillion. We could still move much higher, but that's my stretch goal for this cycle.

One thing to remember is that there is 96 Billion dollars of USDT out there, and 80 Billion dollars of BTC on exchanges (1.89M BTC). These two massive stashes can reprice and move Bitcoin 5% in a single day, as one one asset increases or decreases in perceived value versus the other asset. That's what happened today (James is in Asia). This has nothing to do with ETF Flows. It's also why there is a lot of leverage in the system that can spike huge movements if the "idea" of the ETF being successful takes hold. We don't "actually" need the ETF flows to fully happen. There can be a forward looking speculative pop, which can then drive the reality of wall street FOMO in a recursive, reflexive move. This is why I'm betting the move comes BEFORE the news is final.

Check out the volume for IBIT. Almost HALF A BILLION DOLLARS. Mein Gott...

Two week scorecard: 5.6 Billion USD in NAV. 133,767 BTC. No signs of slowing down.🐂🐂🐂