Bitcoin’s Buyers of Last Resort

Lenders of Last Resort

  1. People paid in bitcoins. Their employers or clients may already own bitcoins or have to go buy them, in either case people receiving bitcoins as income are the economic equivalent of buyers. The value of the transfer is likely denominated in USD, so the demand pressure is constant.
  2. Recurring buyers. For example, someone who set up an auto-buy on Coinbase, every two weeks they market buy BTC regardless of what is happening with the price. Some have even forgotten they have it on, like a monthly charge for a gym they don’t go to anymore. Individually it may be a small $50 buy, but in aggregate these accumulators could be a large pool of buyers of last resort.
  3. Windfall buyers. They’ve been wanting to buy more BTC for a while now, and their employer just had a successful IPO or they landed a big new client. They take the cash from the windfall and go buy a nice spot on the UTXO set. The timing is unrelated to the BTC price.
  4. Opportunistic buyers, market timers. They sold the BTC top or knew the market was overheated. They’re back to buy the bottom.
  5. Relative value and flight to safety traders. This can range from someone selling their altcoin mining rig for bitcoins, to someone dumping their portfolio of distressed illiquid ICO tokens for bitcoins. They were trying to make more bitcoins during “alt-season” and now they are guiding their ship of bags into port during the storm.
  6. Transactional buyers. They’re not actually speculating on the price of BTC, they’re buying to use the underlying payment rails. The person they’re sending value to may be quick to sell, so transactional buyers only affect the market with the residual amount and time held. Individually this is small but it can add up, especially as the “Bitcoin economy” scales up and closes the loop between buyers and sellers. We’ll also end up seeing transactional users who are buying BTC to fund Lightning Network channels. There are also lower-velocity transactional users, for example corporate multisig contracts, using properties unique to Bitcoin’s programmable money.



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