Demand Go Up

Issue #7 – June 6, 2022

The year-long resurgence in inflation is getting another tailwind, this time from supply shocks.

Europe’s peak inflation print (8.1%) on the back of rising food and energy costs being the most recent example inflation’s grip on the global economy (see our May 16th Bulletin, Code is Law for more on BTC integrity vs. Fiat profligacy).

An energy supply shock was a core driver of the recent inflation increase, with knock on effects for the economy, including reduced consumption, travel, etc. First-year economics students are taught about the impact that supply and demand have a direct impact on price changes for a good or service, all other factors held constant. For Europe, the 8.1% inflation release is a real-life example of what happens to price when supply increases in the face of steady demand.


Decreasing Supply Constructive for BTC and ETH Owners

Where the supply shock discussed above was both unexpected and costly to consumers, the disinflationary nature of BTC’s and ETH’s supply is a constructive dynamic for coin owners (see April 25th Digital Asset Bulletin, The Monetary Ratchet).    



Supply & Scarcity

While both BTC and ETH are disinflationary digital assets, their inflation mechanisms and rates differ.

Bitcoin’s encoded approach ties coin issuance to block production. Specifically, the issuance of BTC is cut in half after the production of 210,000 blocks, roughly every 4 years. 

Ethereum’s more centralized structure employs a different approach, ensuring disinflation via upgrades and soft-forks over time, often resulting in a reduction in the rate of coin production.

Though different approaches, both the Bitcoin and Ethereum protocols are programmed to disinflate over time. Where Bitcoin’s supply is codified, adding ~ 3 million coins over the next 120 years for a total of 21,000,000 BTC, Ethereum imposes no maximum supply of ETH, only upgrades to manage supply.


Growing Demand

As disinflationary digital assets, the market prices of both BTC and ETH are quite sensitive to new changes in demand.

As noted above, macro-economic theory posits that increasing demand with stagnant or disinflating supply sends prices higher.  Applying this core economic axiom to BTC and ETH, we are not surprised to see the degree of price appreciation noted in the table at the bottom of our report.

With supply constrained by code or ‘upgrades’, demand remains the more variable and impactful factor in determining BTC’s and ETH’s price. Just ask that first-year economics student.

Using historical Google search results as a proxy for demand, we are not surprised to see the upward trend for BTC and ETH over the last 10 years relative to all search results on Google. The resulting numbers are scaled on a range of 0 to 100 based on a topic’s proportion to all searches on all topics, around the globe.

For example, the readings of 100 for Bitcoin in late 2017 and Ethereum in Q2 2021, occurred near market tops for the coins, meaning they were the most searched for item on Google at that time.



To gauge institutional interest over the last ten years, we used keyword searches based on U.S. regulatory filings. The below graph illustrates the number of US reporting issuers that have mentioned at least one of the digital asset-related keywords noted below.  The search across 10Q filings can be used as a sentiment indicator of interest in the digital asset space by these filing institutions.



A key feature of open-source blockchains like Bitcoin and Ethereum is the ability to peak under-the-hood and visualize the number of funded wallets on each network. The graph below reflects the dollar amount held in individual wallets while the table shows dollar amounts held by institutional and sovereign entities for both BTC and/or ETH.

Note that custodial agents, such as cryptocurrency exchanges, often pool client funds. Such client funds may not be held in segregated wallets, meaning that there are likely a much greater number of holders than outlined below.  



Our work shows that both corporates and sovereigns have allocated more BTC to their balance sheets over time. Below we share the allocation as of May 31st 2022.


Source: 3iQ Research. Data sourced from as of May 31, 2022.


Digital Asset Universe



Source: 3iQ Research. Data sourced from Coin.Dance, as of May 31, 2022.



Source: 3iQ Research. Data sourced from Messari as of May 31, 2022. Figures expressed in USD unless otherwise stated. Past performance is not indicative of future results.


Source: 3iQ Research. Data sourced from Bloomberg as of May 31, 2022. Past performance is not indicative of future results. 


Source: 3iQ Research. Data sourced from Bloomberg as of May 31, 2022. You cannot invest directly in an index.  Past performance is not indicative of future results.

Research Team

Mark Connors

Mark Connors

Head of Research

Herbert Zhang, CFA

Herbert Zhang, CFA

Director and Portfolio Manager

Connor Loewen

Connor Loewen

Cryptocurrency Analyst

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Important Disclosures:

All views and opinions expressed herein constitute the author’s judgement as of the date of this article and are subject to change at any time. The views expressed are for informational and educational purposes only and do not guarantee future performance of the markets.

Statements made are not facts, including statements regarding trends, market conditions and the experience or expertise of author are based on current expectations, estimates, opinions and/or beliefs. Such statements are not facts and involve known and unknown risks, uncertainties, and other factors. Past events and trends do not predict or guarantee or indicate future events or results.

This document is for informational purposes only and is not an offer or solicitation to purchase or sell securities. Investing involves risks, including the potential for principal loss. There is no guarantee that the strategies and services will be successful or outperform other strategies and services. Certain assumptions may have been made in connection with the analysis presented herein, and changes to the assumptions may have a material impact on the analysis or results.

Past performance is no guarantee of future results. The investments discussed herein may be unsuitable for investors depending on their specific investment objectives and financial position. Investors should independently evaluate each investment discussed in the context of their own objectives, risk profile and circumstances. You should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice. Investing in the stock market involves gains and losses and may not be suitable for all investors.

Indices are unmanaged and not available for direct investment. Index comparisons have limitations as volatility and other characteristics may differ from a particular investment.

3iQ US is the US subsidiary of 3iQ Corp. (“3iQ”), a Canadian investment fund manager focused on providing investors with exposure to digital assets, disruptive technologies and the blockchain space. 3iQ was the first Canadian investment fund manager to agree to terms and conditions with the Canadian securities regulatory authorities to manage a public bitcoin investment fund and multi-cryptoasset fund for Canadian accredited investors

About 3iQ Corp.

Founded in 2012, 3iQ is Canada’s largest digital asset investment fund manager with more than C$2.5 billion in assets under management. 3iQ offers investors convenient and familiar investment products to gain exposure to digital assets. For more information about 3iQ and its digital asset investment funds, visit or follow us on Twitter @3iQ_corp.

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Fred Pye

Frederick T. Pye


Frederick T. Pye is the Chairman, Chief Executive Officer and Director of 3iQ Corp. He is also the Chairman and Director of 3iQ Digital Holdings Inc. Mr. Pye is recognized for creating and promoting creative and unique investment products for the investment industry.

Mr. Pye has managed private client portfolios with Landry Investment Management and various other investment dealers. Prior to this Mr. Pye was Founder, President & Chief Executive Officer of Argentum Management and Research Corporation, a company dedicated to managing and distributing quantitative investment portfolios including the first long-short mutual fund in Canada.

He was also Senior Vice-President and National Sales Manager of Fidelity Investments Canada and an integral part of the team that saw assets rise from $80 million to over $7.5 billion in assets under management during his tenure. He also held various positions with Guardian Trust Company, which listed the first Gold, Silver and Platinum Certificates on the Montreal Exchange.

Mr. Pye obtained a Masters in Business Administration from Concordia University.