A store of value....or purchasing power?

Note: This post was originally published on LinkedIn in Sep't 2023


The iPhone 4s cost 162 BTC. iPhone 15 cost 0.031 BTC.

Triggers a double take? Maybe because your reference point, or unit of account, is fiat currency.

What is money?
Money has three main purposes – it acts as a unit of account, a means of payment and a store of value.
(https://lnkd.in/eTsBzn5W)

Every now and then we hear noise about BTC transaction fees.
The Block has some nice tables that demonstrate this over time. Bitcoin Average Transaction Fee (7DMA) is one table I like. Sometimes, those transaction fees spike. But why? Well part of the problem is your unit of account. You're referencing BTC transaction fees in USD, not in BTC (satoshis).
(https://lnkd.in/esWDVjbU)

This paper expands on the point nicely:
Determination of Transaction Fees in the Bitcoin Network.
(https://lnkd.in/ehwCjSzv)
To save reading the 21 pages of this paper a crude summary would be:
i) BTC transaction fees are charged in BTC (satoshis).
ii) If BTC dramatically ramps up in price – the relative USD value of BTC transaction fee also jumps – but if our unit of account was BTC – there would be no such spike. (as evidenced by figure 2).
iii) Be aware of block size (basically, if you don’t have enough transaction to fill a block, even zero fee transaction will get written).

Ordinals (aka BTC NFTs) also make up a piece of the puzzle.
(https://lnkd.in/eBxG8wVU)

The iPhone price variance also highlights why institutions (asset managers) are interested in BTC and why sell side institutions want to support their customers getting price exposure to this asset class. Note well, price exposure does not mean operational risk exposure (like steal my keys!).

I found the Acuiti Q3 2023 Crypto Derivatives Management Insight Report interesting. It confirms the polarisation of crypto-natives and TradFi (along the lines we would expect). It also confirms both the need for prime brokerage services and how TradFi is recognising this.
(https://lnkd.in/e-iK2Zip)
#acuiti

For those that are enjoying the RWC - WooHoo! The Wallabies may be going home after 15 days, but I'll still be enjoying the games. For some the Ryder Cup is also on. Regardless, whatever your leisure, may it be a pleasure.