Apr 21, 2022·edited Apr 21, 2022Liked by Joachim Klement

Joachim, another brilliant post and unique perspective.

I’ve been following all of Erik’s work for many years- I even have Google Alerts set up to get notified when his recent posts get published. He is always ahead of the curve.

Thank you for sharing!

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Apr 21, 2022Liked by Joachim Klement

The metric is interesting, but I find it problematic: profit per transaction is basically just a function of how many transactions there are: if there are many transactions then they become more expensive, i.e. transaction fees go up and miners make a greater profit. At parabolic peaks when Bitcoin price spikes by a factor of 5-10 a lot of that traffic comes from holders sending their coins to and from exchanges to either sell or after having FOMO-bought.

Sure, it's possible to say the added marginal hash-power increases the supply of Bitcoin temporarily, but I'd guess that it's a very minor factor: let's assume the block reward is 6.25 BTC/block every 10 minutes, which is about 900 BTC/day or 9,000 BTC over a 10-day period. If the hashrate increases by 5%, this will speed up block generation and add about 450 BTC to the supply over 10 days. That's a drop in the bucket, about 25-50 million USD or so.

I doubt that it's enough to crash the market sustainably as in a major top. The simpler explanation would be: transaction fees are correlated with the hype factor. And peak hype = peak price.

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Apr 26, 2022Liked by Joachim Klement

"Which makes me think if it really could be this easy to make money with cryptocurrencies?"

Its always easier after the fact -- the trick would have been to develop that thesis in 2013 or 17...

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