What fuels a bull run? Much talk has been made this month on the futures market of bitcoin, with a groundbreaking paper ETF now multiple weeks in existence and a filing of a spot ETF from Grayscale with a presumed imminent approval by mid-December.
As more and more of these bears get slaughtered by the mass awakening and understanding of the truly free market that is Bitcoin, their sacrifice will be shown in the liquidation tweets and fast, upward green candles across the many exchanges and markets connected by the open monetary network that is Bitcoin — its price made increasingly accurate by arbitrage bots and the aforementioned free market effects.
As Bitcoin education and understanding begins to saturate the globe, we get a more and more accurate reflection of bitcoin’s role in the free market of human energy; the more people bet on doubting bitcoin with their capital, the more potential fuel bitcoin has to make upward headway into the vast skies of dollar-denominated purchasing power.
The graph is lovingly referred to as the duck curve; itself is a single-day snapshot of a Californian spring day, which exacerbates the spread of energy supply from demand due to it being neither hot enough for air-conditioning nor cold enough to necessitate heat.
The beauty of Bitcoin’s proof-of-work governance, token issuance and security model, is its utilization of a truly universal and forgetful function; no matter how much time or energy has been spent attempting to solve the next block, there is still an equal mathematical opportunity for any active participant on the network to succeed.
To put this in perspective, aluminum processing, historically one of the industries countries with an abundance of energy participate in, costs significantly more in basis costs to turn production off then on again on a whim, due to the human labor, the operation costs of a safe and executing processing plant, and the many basis points of transporting and finding buyers of a physical metal.
Bitcoin simply doesn’t care if the energy spent producing hashes comes from “renewables,” a misnomer that ignores the concepts of the first law of thermodynamics, cheap and bountiful sources like solar, or even the high capacity means of geothermal energy from a volcano.
But the concept of cheap energy is anything but a “narrative” and the economic costs of producing hashes will not lead to an overtaking of the energy grid as we see it constructed now, but rather geographic-independent energy sources that monetize formerly-stranded energy into productive outlets for human consumption.
Wind turbines have also decreased around 71% during the same time period, and natural gas nearly 32%, although one could argue that is from the increased usage of fracking and not from industrial efficiency and direct production-based deflationary effects.
This is not an attack on coal or the fossil-fueled industry, and in fact we will absolutely need these types of energy to even get to a time and place when we have a chance of modernizing and efficiently monetizing our grid.
By being a buyer independent of grid demand of last resort for the high capacity, high-cost output of nuclear, and by being a seller of last resort for the low capacity, low-cost output of solar, Bitcoin feasts on both the belly and the neck of the duck curve.
This lock-in effect means we have existing fossil plants that have already been invested into and thus the cost of producing one unit of energy is “cheaper” for said owner-operators rather than investing in new infrastructure that could distribute the deflationary effects of cheap energy around the energy grid and back towards the consumers and purchasers.
Much like how we can easily understand the subsidized dollar hot dog of Costco is just as unreliable a metric of inflation as our government-issued Consumer Price Index, we can see how our energy grid is in need of a truly free market to unlock deflationary effects for consumers.