beehiiv-import

⚡Bitcoin's Volatility Risk Premium Tanks🎋

Croxroad

11 May 2024 — 4 min read

In partnership with

Green Energy Meets Bitcoin, Hidden Gem Company

This tiny company has all but cemented itself in the future list of bitcoin mining giants.

An industry shakeup of environmental regulations could spell catastrophe for others, while this company begins to soar.

The underlying factors?

Cheap production and carbon neutral mining.

But that’s just the start of it.

Here’s the real kicker…

☕️ GM Dear Plebs!

Here is Crox Road, your daily dose of orange pill that will turn you into a Bitcoin Maxi.

The menu for today:

🚰 Calm Waters Ahead

The collapse of Bitcoin's volatility risk premium (VRP) since the halving event suggests a shift towards relatively stable market conditions, according to analysts. VRP, which reflects the premium options sellers demand for the additional risks associated with future uncertainty and price volatility, has plummeted from 15% to 2.5% since the mining reward halving on April 20. This significant narrowing indicates a realignment of market expectations towards a more predictable environment post-halving, with the consensus being that future volatility may be lower than previously anticipated.

The halving event, which reduced the per block supply emission of Bitcoin, has reinforced market sentiment towards more stable conditions. Despite concerns over global debt and massive fiscal spending, Bitcoin has maintained a largely unchanged price around $62,400 since the halving, albeit with recent recoveries from lows near $56,500. The expectation is that these factors, combined with the halving-induced supply reduction, will support Bitcoin's solid gains in the months ahead.

On the other hand, Ethereum's VRP, while declining from 18% to 8.5%, remains elevated compared to Bitcoin, indicating relatively uncertain future conditions for Ether. This uncertainty is attributed to the pending decision by the U.S. Securities and Exchange Commission (SEC) on several applications for spot Ether exchange-traded funds (ETFs), scheduled for May 23, 2024. The VRP's ability to capture the premium related to future uncertainty is evident in this context, reflecting traders' cautious outlook amidst regulatory considerations.

3️⃣ Trump, Fed, and Bitcoin

As the Bitcoin price continues to hover around $62,000 per bitcoin, up nearly 50% since the start of the year, anticipation mounts for a potential shock sovereign wealth fund revelation. Adding fuel to the fire, Elon Musk's recent warning about the U.S. dollar's impending collapse has sparked speculation about the cryptocurrency's future trajectory. According to Geoff Kendrick, Standard Chartered's head of FX and crypto research, the confluence of factors involving former U.S. president Donald Trump, the Federal Reserve, and U.S. fiscal dynamics could propel the Bitcoin price to $200,000 per bitcoin by 2025, equating to a market capitalization of approximately $4 trillion.

Kendrick's analysis underscores the growing likelihood of U.S. fiscal dominance, characterised by the monetization of government debt by the Federal Reserve. In such a scenario, Bitcoin emerges as a potential hedge against de-dollarization and declining confidence in the U.S. Treasury market. A potential Trump victory in the upcoming election is seen as a catalyst for accelerating the withdrawal of foreign official U.S. Treasury buyers, further bolstering Bitcoin's appeal as an alternative asset.

Despite Trump's previous scepticism toward Bitcoin and cryptocurrencies during his tenure, recent indications suggest a shift in his stance. Notably, Trump has softened his rhetoric, acknowledging the significant utility of cryptocurrencies and expressing reluctance to curb their usage. With Bitcoin and cryptocurrencies poised to play a more prominent role in the upcoming election, voter sentiment in crucial swing states indicates a growing recognition of crypto policies as influential factors in shaping political support.

Moreover, the burgeoning fundraising efforts by crypto industry super PACs for the 2024 congressional elections underscore the escalating influence of the cryptocurrency sector in political circles. With approximately $100 million raised for campaign purposes, these developments signal a heightened focus on crypto-related policies and regulations, highlighting the sector's increasing significance in the political landscape.

📒 Ledger

A ledger is essentially a comprehensive record of transactions, encompassing both traditional financial institutions and decentralised finance (DeFi) applications. It serves as a repository for essential data related to each transaction, including timestamps, dates, as well as information about the senders and recipients involved. Ledgers play a critical role in tracking and maintaining the flow of assets within financial systems, ensuring transparency, accuracy, and accountability in all financial activities. Whether centralised or decentralised, ledgers serve as the backbone of financial infrastructure, facilitating seamless transactions and enabling effective oversight and management of financial resources.