Killing players


Some voices say that the problem of inflation is beginning to be controlled, that in a few months it will begin to fall, that the economy is already cooling down, as shown by the import charts for German products, and that the reduction in global demand will impact in inflation.

For example, the cost of containers is starting to drop, which is usually a sign that inflation may start to moderate soon:

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Another widely used indicator that tends to advance the moderation of inflation is the Manheim index of used cars in the US. It has fallen by 7%. In 2020 it rose 29% ahead of the price increase.

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I honestly don’t know how long it will take to moderate inflation.

I don’t know where we will see each other in the following months, but what is indisputable is what the actual data shows us so far. For example, if we look at the inflation change for the US from May to June, it’s the biggest month-to-month increase in 80 years:

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Some experts point out that 70% of current inflation is due to the rise in energy prices and therefore, the elasticity of demand will end up lowering and rebalancing the price baskets (leaving behind a great generalized recession). Poorer people -> Less consumption -> Lower gas/oil consumption->Less infaltion.

I am not the one to question this cycle that seems to have been replicated historically and is quite reliable, but there are two things that do not add up to me:

  • The elasticity of energy demand is not that great. When the cold comes, the northern countries are going to consume gas, even if it costs more.
  • And if the origin of the inflation is not the war in Ukraine, as they explain to you in many media, but the monetary policy of the central banks?

So the scenario is much more disastrous. But what annoys me about this reasoning is that it seems that to see inflation go down the only thing we can do is make more poor people go hungry. Killing players from the economy game.

And in this context, the crypto market has obviously been affected. A market where BTC/ETH dominance is more than 60% and have a strong correlation with the Nasdaq, has to suffer. But the question is:

How many players been removed from the crypto market?

Let’s take a look at this graph of active addresses (which could be read as the number of different people actively using BTC or ETH):

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Let’s take a look at BTC:

– We are close to 16M active addresses.

– In July last year, we were a little above 14M just before the last Bull run which pushed active addresses up to 18M at the peak and the price went up 120% (from 30k to 68K).

– From there a drop of 70% of the price with a loss of 2M addresses.

– If we take a bit of perspective, in July 2019, where the price was half what it is now(10k), we touched 16M active addresses for first time.

The good sign for me is that despite the situation we are still far from the 14M active addresses that we could mark as resistance. The price is much more sensitive to an increase of new addresses than a drop of them. Which could be the price of BTC if the number of active addresses reach again de 22M?

Conclusion: social adoption continues to progress satisfactorily and the bear market has not killed so many players as one could think. Last 70% drop in price only took 12% of players out of the game.

Another graph that confirms this hypothesis is that of active Stablecoin addresses:

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The crypto market has increasingly robust tools to keep all of its activity within the crypto market itself, regardless of what economic cycle it is in.

Yours in crypto