Digital Credit
Market Analysis: Between Key Levels
Dear Bitcoiners,
We have always talked about two gateways that served as the main source of demand this cycle. Both gateways were absent in previous cycles. Last week’s institutional adoption report focused on the first one: ETFs.
Last week, we discussed how institutions largely held through the most bearish phase and the drop to $60k. The number of reporting institutions even went up! If you haven’t read last week’s institutional adoption report, based on the 13F filings, you can find it here:
Since rejecting off the 200-day moving average, we’ve seen substantial outflows from ETFs, especially IBIT.
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Digital Credit
While the last two weeks ETFs saw poor performance, Strategy bought almost 25k BTC this week alone. Demand for Digital Credit is enormous and, unlike ETFs, especially high during bear markets. Providing an 11.5% yield is truly unprecedented, and Strategy, with its strong balance sheet, can pull this off and stomach the volatility.
I’ve been going down the Bitcoin treasury rabbit hole, which led me to my new sponsor Roxom, who are building incredible products on top of Digital Credit.
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Digital Credit is a bridge that allows low-volatility capital to flow from TradFi into Bitcoin, and we are only at the beginning. It can attract capital from bank deposits, short-term treasuries, money market funds, and even equity.
Saylor found a way to generate a continuous stream of capital that can flow into Bitcoin and put upward pressure on price. During a bear market, this can have a dampening effect on the downside. His purchases alone will likely buy all new supply issuance. Think about that for a minute.
Besides the institutional adoption report covering ETFs, I am working on including Strategy. From the latest filings, we see that several pension funds have allocated to MSTR. This means passive flows into Bitcoin continue to increase.
The outlook for Bitcoin in the medium term looks incredibly bullish. Let’s now look at what the short term looks like.
