Blockstream Markets Weekly — April 2, 2021
Blockstream launches mining STO, Morgan Stanley funds eye BTC exposure, Goldman Sachs opens Bitcoin to private wealth, JPM says Bitcoin could go to $130k, accountants say Tether is fully backed, Blackrock begins to dabble in BTC futures and Bitcoin miners post record revenues in March
By Jesse Knutson
What’s happening in the markets?
Modern Monetary Theory
Bitcoin on pace to end its two-week losing streak with an +8% gain this week.
Gains in March came in at a better than seasonal +30% and marked Bitcoin’s sixth consecutive month of gains for the longest winning streak since 2013.
The Biden administration’s new $2T infrastructure bill had risk assets pumping again this week. Tech stocks, which have recently taken a back seat to value and cyclical thematics, were back in focus with FANG constituents contributing almost half of a 1,000 point gain on the S&P.
The USD remained pretty stable but showed signs of possible mean reversion with the EUR, JPY, and CNY all bouncing off of sub 30 RSIs.
The inflation theme gave gold a boost as Biden’s plan highlighted the administration’s readiness to spend money and as logistical issues and shortages continued to plague supply chains across industries.
Continued gains in equities, especially Tech stocks, a weaker dollar, and inflation are all probably positive for Bitcoin’s near-term price outlook.
Bitcoin miners made ~ $1.6B in March
Bitcoin miners posted another month of record-high revenue in March.
Bitcoin miners earned a total of $1.6B in March. The current seven-day average is now up to $64M per day, implying an annualized aggregate top line of $23B.
Mining looks like a very good place to be at the moment. The broader macro environment looks tailor-made for Bitcoin price outperformance and hashrate remains constrained by tightness at chipmakers like TSMC and Samsung.
To help address global semiconductor tightness, TSMC announced this week that it would increase its already record annual CAPEX of $28B by a further $100B over the next three years. This is unlikely to have much impact on Bitcoin’s hashrate in the near term, though. Mining is not an industry favored by TSMC given the industry’s high historic order volatility and miner allocations are likely to remain skinny.
As we enter China’s wet season it will be interesting to see what happens to hashrate. Hashrate typically increases during April-October when seasonal rain in China drives power prices lower allowing less efficient hardware to be profitable again. If hashrate doesn’t react much, I think this will be a good indication that the current Asic supply chain is still very, very tight.
The herd is coming
Headlines this week remained positive as major investment banks continued to build out Bitcoin services and products for their clients.
Top stories this week included Morgan Stanley filing for Bitcoin exposure in 12 funds as well as reportedly being close to allowing clients ‘direct ownership’ of Bitcoin, Goldman Sachs starting to provide Bitcoin access to private wealth clients, Blackrock begining to dabble in Bitcoin futures and JP Morgan saying lower volatility could push Bitcoin to $130,000.
Other stories included Coinbase gaining approval for a direct Nasdaq listing on April 14, reports indicating that Tether is fully backed, and Blockstream launching a Bitcoin mining STO (Security Token Offering).
Lucky Seven
After last week’s record $6B options expiry and another round of deleveraging, Bitcoin is once again off to a strong start this month.
The near-term technicals look constructive. MACD just flipped positive and volatility is starting to thin out again. Bollinger bandwidth is down to a year-to-date low and is starting to look like a potential Bollinger band squeeze . Very low volatility often foreshadows big price moves.
Six months of consecutive gains makes you think Bitcoin probably needs to take a breather. This is already the best win streak since 2013. That said, the near-term technicals, news flow, and overall macro environment are all supportive of further price gains.
Seasonality is also skewed in Bitcoin’s favor. April is one of Bitcoin’s most reliable up months and price has been higher every April for the past five years. The average monthly gain over the past five years is +26%.
Maybe we can make it seven up months in a row.
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Bitcoin markets news
Blockstream launches Bitcoin mining STO
- The Blockstream Mining Note is backed by 2,000 TH and available to eligible non-US investors
- Issued by a Luxembourg securitization fund
- Sign up with STOKR for more information
- Blockstream CEO, Dr. Adam Back:
“If you hold Bitcoin or your business relies on it, you have an incentive to directly participate in mining to improve the security of the Bitcoin network. Fortunately, Bitcoin mining has historically been a great complement to a Bitcoin position, thanks to its lower volatility of returns”
Auditor: Tether is fully backed
- The attestation from Cayman Islands-based accounting firm Moore Cayman reveals that the company had at least $35.15B of assets against liabilities of $35.15
- Tether plans to issue another attestation for March, followed by quarterly attestations going forward
- These attestations are separate from the disclosures Tether intends to produce for the New York Attorney General’s office (NYAG)
Morgan Stanley files for Bitcoin exposure in 12 funds
- Each fund will be able to invest up to 25% of its assets in Bitcoin
- This translates to 10s of billions of potential inflow.
Morgan Stanley close to allowing ‘direct ownership’ of Bitcoin
- A few weeks ago Morgan Stanley announced Bitcoin Funds for private wealth clients
- Looks like this story is based off of a single tweet
- Rumor is that Morgan Stanley is two weeks away from announcing the ability to hold Bitcoin on their wealth management platform
- Or you could get a Blockstream Jade hardware wallet and do it yourself
Goldman to provide Bitcoin access to private wealth clients
- The bank aims to begin offering investments in Bitcoin from 2Q21
- Goldman is looking at ultimately offering a “full-spectrum” of investments in bitcoin and digital assets, “whether that’s through the physical bitcoin, derivatives or traditional investment vehicles,” she said.
- Goldman's new global head of digital assets for Goldman’s private wealth management division, Mary Rich said:
“…. [Some clients] feel like we’re sitting at the dawn of a new Internet in some ways and are looking for ways to participate in this space…”
JP Morgan trader says lower volatility could push Bitcoin to $130,000
- The report noted that if bitcoin continues to see its volatility converge with gold’s volatility, it would imply a long-term price target of $130,000
Coinbase NASDAQ listing given green light for April 14
- Coinbase’s plans were undergoing a review by the SEC, which has been swamped with IPO filings, including the frenzy of special purpose acquisition companies
- The Commodity Futures Trading Commission said last week that it had reached a $6.5 million settlement with Coinbase, resolving claims the company had reported inaccurate data about transactions and that a former employee had engaged in improper trades
- Coinbase will trade under the ticker COIN
Bitcoin miners post another month of record revenues
- Miners recorded a record ~ $1.6B in March
- The current seven-day average is ~ $64M/day which equates to an annualized aggregate top line of $23B
- I don’t think this changes anytime soon given capacity tightness at the foundry level and macro forces pushing Bitcoin price higher
Blackrock begins to dabble in Bitcoin futures
- BlackRock is the world’s largest asset manager — it managed some $8.7 trillion at the end of the fourth quarter.
- According to public filings, Blackrock has started to dabble in Bitcoin futuresand is said to have acquired $6.5 million in CME bitcoin futures contracts earlier this year
- Bitcoin exposure is tiny relative to its current AUM, roughly 0.03% of BlackRock’s massive Global Allocation Fund
TSMC jacks CAPEX with a massive $100B over the next three years
- TSMC is by far the global leader in semiconductors used in everything from automotive applications, mobile phones, and Bitcoin mining
- Allocation to miners has been extremely skinny this year given demand from larger, less volatile industries
- This will hopefully help alleviate some of the congestion in the mining hardware supply chain
Charts
Supply shock — Bitcoin balance on exchanges at two year low
- Low on-exchange balance points to a low near-term propensity to sell
- This is price positive
Chart credit Glassnode Alerts
Bitcoin miners record another record month of revenues
- Aggregate miner revenue set a new high of ~ $1.6B in March
- I don’t think this changes anytime soon given capacity tightness at the foundry level and macro forces pushing Bitcoin price higher
Chart credit Arcane Research via Coindesk
It’s called the Grayscale discount now
- GBTC averaged a -6% discount vs NAV over the last month
- Dipped as low as -14%
- This probably continues for some time as retail investors migrate to cheaper, better tracking alternatives and arb traders head for the door
Chart credit Rafael Schultze-Kraft
Combined G-10 Central Bank balance sheet growth
- Total is up by about $10T over the past 12 months
Chart credit The Daily Shot
JPM highlights how Bitcoin has eaten gold’s lunch
- Some of the attention on Bitcoin over the past two quarters has come at the expense of gold, JPMorgan’s strategists said, citing $7 billion of inflows into Bitcoin funds and $20 billion of outflows from gold ETFs
Chart credit Bloomberg
Does a drop in volatility foreshadow an incoming price move?
- Volatility (as measured by Bollinger Band Width) has started to contract and is now down to a four month low
- Multi month lows in volatility often foreshadow sharp price moves
