Four Fundamental Reasons Currently Speaking For Bitcoin

21e6 Capital AG
9 min readMay 16, 2022

In the past days, Bitcoin was hit hard after a flurry of liquidations in the market and the aftermath of the Terra/Luna downfall. Prior to this, Bitcoin had reached a high of $47,000 at the end of March (up from $37,000 mid-month) despite the tense geopolitical situation. In the media, Bitcoin’s rise at the time was often associated with, for example, Russia’s capital controls introduced after the start of the sanctions on Russia. We see other reasons as more decisive here. In the following article, we, Prof. Dr. Philipp Sandner and Maximilian Bruckner name four reasons why we believe that the Bitcoin price will recover and continue to rise in the medium term. We hope to create a small overview with this article, because a lot has happened in the last few months.
Authors: Prof. Dr. Philipp Sandner, Maximilian Bruckner

#1: Inflation and energy prices

Since the end of 2021, inflation in many countries had already risen towards 5%, at least according to official figures. Now, inflation is even higher, often clocking in at 7 to 8%. Figure 1 shows the latest estimates from the European Union’s (EU) statistical office, Eurostat. In April 2022, they estimate inflation in Germany at 7.8%. They also give significantly higher estimates for other EU member states.

Figure 1: Inflation in the EU Member States (source: Eurostat)

Experts have predicted rising inflation for years, and the warnings grew more prominent during the course of the pandemic and the accompanying supply shocks. Both the European Central Bank (ECB) and the U.S. Federal Reserve Bank (Fed) were strongly criticized for their handling of the situation, and for a long time denied rising inflation or described it as “transitory”.

Bitcoin and similar crypto-assets offer a possible hedge against inflation, due to their underlying technical architecture. It is specified in the code not only how many new Bitcoins will be mined (“printed”) per year, but also how many there will ever be in total. There will never be more than 21 million Bitcoin, no more will be mined once this number is reached. The code governing this is immutable due to blockchain technology. This is in stark contrast to fiat currencies like the Euro or US Dollar and the monetary policies of central banks. Actually, it’s a miracle the money printing machines in the basements of the ECB and Fed haven’t overheated yet.

#2: Sanctions and confiscability

With Russian EUR and USD holdings frozen in the wake of far-reaching sanctions, it is evident that central bank assets are not absolutely safe. There is a risk of confiscation / seizure of said assets. It will be part of central bank risk management to analyze the vulnerability of their reserve assets to sanctions or seizure in the months and years ahead. One attempt at a solution could be to buy gold or other commodities. However, this does not solve the confiscability issue.

Most of the world’s assets are fundamentally vulnerable to confiscation. Foreign currency reserves, ships, real estate, gold, stocks, etc. are often not safe in this regard. But there is a new type of asset, and the current situation has taught us that these very assets cannot be seized: crypto assets. Bitcoin, Ethereum, and the like are inherently constructed in a manner that does not allow third parties to confiscate or seize them. Due to the private-key-public-key architecture (see Public-key cryptography) that is a staple of blockchain technology, crypto assets are untouchable in this regard. But beware: this is only true if the assets are held on a so-called “cold wallet” (USB stick, pen & paper or even simply in memory) and not on a centralized exchange. The world is slowly beginning to understand that blockchain technology has birthed a new asset class that can technically never be taken against one’s will.

#3: Lawmakers send various positive signals

The European crypto community recently breathed a collective sigh of relief. After prolonged tension and discussion around a potential Proof-of-Work (PoW) ban in the EU via the Markets in Crypto Assets Regulation (MiCA), the EU Parliament voted against this ban. They hence deleted the corresponding paragraph from the MiCA draft. The consequences of such a ban on Proof-of-Work technology would be equivalent to a Bitcoin (and Ethereum in its current form) ban in Europe. PoW is a vital component of the Bitcoin blockchain and ensures the decentralization and immutability of the blockchain.

On the other side of the Atlantic, the White House in the U.S. released a regulatory agenda for digital assets, see Figure 2. The document is intended as a roadmap of what lawmakers wish to undertake regarding digital assets in the next few years. This is a holistic regulatory agenda for various digital assets, including cryptocurrencies such as Bitcoin, as well as security tokens and digital central bank currencies. It is noteworthy that the very first paragraph states that 40 million Americans hold or have held cryptocurrencies (16% of the US adult population).

Figure 2: White House Regulatory Agenda on Digital Assets (Source: The White House)

So the signal is this: The US publishes a roadmap to regulate all digital assets and addresses cryptocurrencies first. One interpretation of this would be that the US considers this type of digital asset to be the most important and sees the most potential there. For us, this is a clear sign that not a ban, but progressive regulation is coming — this can be assumed as near certain.

It is also worth mentioning that there was a discussion about banning Bitcoin in Russia earlier this year. The Russian Central Bank argued for a strict ban on Bitcoin mining and other “crypto operations” (Euronews, 2022), while other Russian authorities opposed such a ban. The result of the deliberations is that a ban is not an option. We assume that Russia has also understood that Bitcoin cannot be confiscated. However, we can also say quite confidently that it was and is not possible for Russian oligarchs and the government to escape sanctions via crypto assets. For this, the total liquidity in the market is not enough. Transactions of this size (in the billions to hundreds of billions) would have been noticed immediately, but none were registered. Moreover, all major crypto exchanges have announced to comply with the sanctions on oligarchs as well.

#4: Decreasing supply pressure from China

It’s been a few months now since the final act and culmination of China’s crypto ban. Quick refresher: the Chinese government banned crypto assets in three phases in 2021. Phase 3, the complete ban of all crypto assets in the Chinese space, was introduced in September 2021. Chinese exchanges (the largest in the world) responded by offering their domestic customers a transition period to sell all crypto assets. Thus, since the end of November 2021, we saw a surplus of supply from China, which exerted a strong downward pressure on the price (for a more in-depth analysis, see here: A Fundamental Analysis Of Crypto Markets In Early 2022). Price is roughly a result of supply and demand, and currently, most of the supply still comes from China, while high demand exists in the West. If the excess supply from China decreases or even dries up, while the EU and US continue to buy (which is expected), then this logic would have a positive effect on the price.

A similar phenomenon could be observed after the crypto mining ban in China in June 2021: Initially, a general wave of Fear-Uncertainty-Doubt (FUD) holds sway, however, other mining operators outside of China see the disappearance of their largest competitors as a golden opportunity. Figure 3 shows the mining hash rate of Bitcoin. From this metric, one can see how much computing power (how many miners) is connected to the network. The higher the hash rate, the more robust and secure the network stands. Miners are rewarded for their work in the form of Bitcoin.

Figure 3: Estimated hash rate of the Bitcoin network. (Source:

In Figure 3, we can see the significant collapse in overall performance in June 2021 when miners in China had to pull the plug. After that, however, you can see a real race back to the top. The winner was whoever could provide the most of the lost computing power the fastest. Now, hash rate is at all-time-highs, so the fear in June was unfounded. We expect a similar development in terms of supply and demand. The supply surplus from China should dry up soon when the collective dumping of Bitcoin from Chinese holders is over.

It‘s only a matter of time

In short, one can see that the signals and sentiment for crypto assets are positive across the board. Consumers begin to notice the effects of rising inflation first hand: everything is getting more expensive. People begin looking for a safe asset that, unlike cash with its 7% loss p.a., generates positive returns. Recent events show that assets traditionally considered safe may very well be seized or otherwise lost. Assets belonging to the Russian Central Bank and oligarchs have been frozen, but many Ukrainians have also lost access to their bank accounts and credit cards as a result of the war. For these people, crypto assets are lifesavers. Lawmakers in the world’s major economies are working on inclusive regulation, and absolute bans are no longer on the table. We find that these factors will make an important contribution to the further appreciation of crypto assets and especially Bitcoin in the medium and long term.


This article is an informational document and does not constitute an investment recommendation, investment advice, legal, tax or accounting advice or an offer to sell or a solicitation to purchase any securities and therefore may not be relied upon in connection with any offer or sale of securities. The views expressed in this letter are the subjective views of 21e6 Capital personnel, based on information which is believed to be reliable. Any expression of opinion (which may be subject to change without notice) is personal to the author and the author makes no guarantee of any sort regarding accuracy or completeness of any information or analysis supplied.

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About 21e6

21e6 Capital is a Swiss investment advisor, connecting professional investors with optimal crypto investment products. 21e6 Capital has analyzed over 1,000 crypto funds across the world and condensed them into a selection that can yield crypto-exposure with minimized downside risk. Backed by a highly experienced team of crypto and finance experts with in-depth knowledge in digital assets and DLT, 21e6 Capital created a unique quantamental strategy that is aimed at achieving crypto-like returns while minimizing risk and volatility to global equity levels. The 21e6 Capital team builds upon strong academic roots with a track record of leading crypto asset and decentralized finance publications and research, ensuring state-of-the-art crypto investment solutions for financial industry professionals.


Prof. Dr. Philipp Sandner has founded the Frankfurt School Blockchain Center (FSBC). From 2018 to 2021, he was ranked among the “top 30” economists by the Frankfurter Allgemeine Zeitung (FAZ), a major newspaper in Germany. He has been a member of the FinTech Council and the Digital Finance Forum of the Federal Ministry of Finance in Germany. He is also on the Board of Directors of FiveT Fintech Fund and Blockchain Founders Group — companies active in the field of blockchain startups. The expertise of Prof. Sandner includes crypto assets such as Bitcoin and Ethereum, decentralized finance (DeFi), the digital euro, tokenization of assets, and digital identity. You can contact him via mail ( via LinkedIn or follow him on Twitter (@philippsandner).

Maximilian Bruckner is Head of Marketing & Sales at 21e6 Capital AG. Prior to this, he was engaged as Executive Director of the International Token Standardization Association (ITSA) where he focused on research and classification of crypto assets according to the International Token Classification (ITC) framework. He was heavily involved in the creation of the world’s largest token database for classification and identification data on tokens (TOKENBASE). Maximilian did academic research in close consultation with Prof. Dr. Philipp Sandner. You can contact Maximilian via e-mail at to request more information on 21e6 Capital AG or ask any questions regarding this article. You can also follow Maximilian on LinkedIn ( to stay up to date.



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