5 Reasons Why Bitcoin ETFs Just Make SenseTBL Weekly #192: Bitcoin ETFs and the four drivers of bitcoin price
Dear Readers, The bitcoin ecosystem has been through a LOT this year. In the AI era, hackers’ abilities to engage in online crimes have expanded exponentially. Crypto companies become an obvious target, but everybody is now subject to the fact that one tiny crack in a security system can lead to catastrophe. Coinkite (Coldcard) and Ledger, two popular bitcoin hardware wallet companies, got hacked in ways that led to both financial loss and confidence loss. And now, with over $6 billion stolen from crypto mega-exchange Binance, many are doubting whether customer funds are, indeed, safe. How Binance will plug the gap is currently unknown, but I imagine they will be able to. What is troubling is that the crypto stolen from Binance wallet is likely gone forever. Early reports from news outlets such as WSJ and Bloomberg point accusing fingers at North Korea, but seeing how much information, or lack thereof, has been released on identifying the criminals behind the Coldcard hack, we are not sure how much supporting evidence we will get for these new claims. We would like to stress that multisig solutions, such as those provided by TBL sponsor Casa, are the best protection for your bitcoin. They distribute keys across multiple parties to reduce the concentration of control, which can deter hacking or make it ineffective. If you are choosing self-custody as many of us do, please make sure you are storing bitcoin in a multisig fashion, which can be a mix of cold and hot signatures, multiple cold signatures, or multiple hot signatures. For people who are hesitant to take self-custody of bitcoin because it can be daunting to trust yourself or those simply losing trust in custodians because of what’s happened with Coldcard and Binance, Bitcoin ETFs serve as a legitimate, safe, regulated, insured, and mostly headache-free bitcoin investment vehicle for most people. Here are five reasons why we think Bitcoin ETFs are a good choice for many.
None of this is financial advice, and everybody has their own investment needs. For some people, self-custody is the best avenue, and for others it’s ETFs. We are not sponsored by any Bitcoin ETF, so there is no financial motivation for me to suggest to the many of you that are considering it: Bitcoin ETFs make sense as a way to own bitcoin. Consider it. TBL’s Four Drivers: A Flash UpdateOver the past year, TBL has been working to provide readers with thorough research, and in a bid to condense all the moving pieces behind Bitcoin’s price into broader categories, we landed on the Four Drivers of bitcoin’s price, and each week will provide an update on some (or all!) of the Four Drivers. This week, we cover Drivers 3 and 4.
Driver Three: Liquidity CyclesThe TBL Liquidity Index (chart below) is a theoretical framework we use to gauge Liquidity in the financial system wherein the US dollar, US Treasuries, bond volatility, and global banking assets make up Liquidity, and the Index below compiles this all into one number: The idea is simple: better Liquidity conditions help risk assets, such as bitcoin and equities, rally. For example, when rates go down, conditions get easier for all borrowers, which makes TBL Liquidity go up. Driver Three focuses on the longer cycles in our Index. The chart below overlays bitcoin against the longer-term Liquidity backdrop we observe (note, these zones are not to be confused with our popular Green and Red dots). Notice how positive Liquidity conditions have generally (though not always) coincided with explosive price action in bitcoin, while negative Liquidity conditions have been tougher on the orange coin:
If we zoom into each Green or Red time period performance (charts below), you get a better picture of how Green Zones generally prove good for both bitcoin (and vice-versa for Red Zones):
We’ve spent most of this year in the Red Zone, and bitcoin is down 13% and has been unable to catch a bid that puts it in profit this year: Driver Four: VolatilityThis brings us to Driver Four, which is where our Green and Red dots live. A map is great and all, but you still need to drive every mile to your destination. Whether we are in a liquidity-positive or negative environment, bitcoin will dance around to the current tune, and our Dots come in handy here: Even though bitcoin has fallen this year, our Green and Red dots have given us a near 40% return for 2026, although this outperformance has fallen of late: These numbers available to you here. Given the Red conditions in Driver Three (the Liquidity cycle), Driver Four’s maneuvering (Volatility) hasn’t been too bad on 2026’s bumpy road. This Week On TBLNik introduced our Four Drivers in his letter this week. Johan incorporated Drivers One and Two into his analysis of bitcoin’s seemingly never-ending consolidation, and Nik recorded a subscriber-only video sharing his opinion on how and why we are approaching the end of a credit cycle. Nik had Peruvian Bull on the show this week to discuss Japan, an important player in our Four Drivers. As the US’s biggest lender, the goings-on in Japan directly affect US interest rates. Nik also expressed his thoughts on the latest FOMC decision to hold rates steady at 3.75-4%. Lastly, the biggest elephant in the room: Binance. The topic was so big this week that we had to address it twice. Nik published a video about it on Friday, and Johan hopped on the Less Noise More Signal podcast to further discuss the intricacies of what happened and how it affects bitcoin. TBL AnnouncementsReminder that we are hosting a live Q&A for TBL Pros on Thursday, November 12th at 3:00 PM ET (12:00 PM PT). Can’t wait to see you all there!
For Podcast ListenersOur videos are on major podcast platforms—take us with you on the go! Keep up with The Bitcoin Layer by following our social media! Disclaimer The TBL Model Portfolio, TBL Liquidity Indicator, and all TBL research outputs reflect Nik Bhatia and team’s analytical positioning for the macro and bitcoin environment. They are published for educational purposes only and are not investment advice, not a solicitation to buy or sell securities, and not a recommendation tailored to any individual’s portfolio. The Bitcoin Layer is not a registered investment advisor and does not manage client money. Please consult a professional financial advisor and conduct independent due diligence before making investment decisions. Thanks for reading The Bitcoin Layer — for access to all content, upgrade to paid!
|
No comments:
Post a Comment