Blockstream Markets Weekly — Aug 20, 2021
Blackrock reveals $400M mining position, Fidelity looks to build on Bitcoin, JPM and Wells Fargo prepare tracker funds, Robinhood revenues double on crypto trading, and Blockstream readies Modular Mining Units to flatten lumpy energy demand
By Jesse Knutson
What’s happening in the markets?
Taper tank
Bitcoin is on pace to finish on the top end of this week’s range for the fifth weekly win in a row.
Oscillation around the 200-day moving average continued with Bitcoin breaking higher into the end of the week despite a nine-month high in the USD and a dump in global stonks on taper concerns.
While BTC has had a positive correlation with the dollar for most of the year, it is interesting to see Bitcoin move higher with safe havens like the dollar and gold while risk assets tank.
The herd is coming
Newsflow this week was a bit lighter than previous weeks, but the broader trend of institutionalization and Wall Street participation continued to see new data points.
Top stories this week included Fidelity looking to build new infrastructure around Bitcoin, $9T Blackrock allocating close to $400M to Bitcoin miners, Wells Fargo and JPM preparing new Bitcoin tracker funds, a surge in Robinhood 2Q21 revenues on the back of increased crypto trading, Coinbase teaming up with Japanese banking giant MUFG, and Blockstream Energy looking to help power producers flatten out lumpy energy demand with Modular Mining Units (MMUs).
Building a base
Following up on last week’s comments, I think that the overall market setup still looks pretty positive at the moment.
Bitcoin continues to move higher despite ostensibly negative news. Price action last week saw number go up despite potentially negative legislation buried in the infrastructure bill and another big DeFi blowup.
This week Bitcoin was able to pop back above the 200-day moving average despite a rip in the dollar.
Funding rates — which have been trending higher for the past five or six weeks — also point to improving investor sentiment but are still well away from overheating.
Fund flows are also showing tentative signs of recovery. Declines in Bitcoin Under Management at the Bitcoin Purpose ETF look to be losing momentum and I wouldn’t be surprised to see fund flows reaccelerate over the coming few weeks.
The more volume we print north of the 200-day moving average the stronger it will become as a line of support. A strong base here will put us in good shape heading into the 4Q which is normally one of Bitcoin’s best.
With leverage low, sentiment improving, global adoption up, and investors like Blackrock, Fidelity, JPM, and Wells Fargo broadening their exposure to Bitcoin, I find it hard to be bearish.
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Bitcoin markets news
Incentivizing renewable energy with Blockstream Energy
- Blockstream’s Modular Mining Units (MMUs) leverage Bitcoin mining to scale energy usage, flattening out lumpy energy demand and making renewable projects more efficient and economical
- Good interview with Blockstream CEO, Dr. Adam Back, on Bloomberg this week as well
Blockstream Talk podcast
- Our new podcast will highlight various projects and products within the Blockstream ecosystem. The genesis episode with Dr. Adam Back will be out next week
$9T Blackrock puts $383M into listed Bitcoin miners
- A filing with the SEC shows that Blackrock now holds a 6.71% stake in Marathon and a 6.61% stake in Riot Blockchain for a total capital commitment of $383M
Fidelity looks to build new infrastructure around Bitcoin
- Plans to increase Digital Asset team headcount by 100 this summer to 150
- Fidelity is trying to educate — and lobby — lawmakers for what it considers the right level of regulation
- Tom Jessop, President of Fidelity Digital Assets says that client interest in Bitcoin has accelerated since the pandemic and as high-profile investors such as Stanley Druckenmiller and Paul Tudor Jones began to talk about bitcoin as a hedge against inflation
“What really got people off the fence was the pandemic, because you’ve got this scarce asset class — there will only ever be 21 million bitcoin created — and an environment where our currency is being debased, and there’s a ton of money printing….You’re seeing the emergence of a real asset class.”
Coinbase to dedicate $500M and 10% of future earnings to crypto
- Looking forward to seeing how they allocate. Presumably, they will not just go 100% USDC
- Expect a lot of criticism if they don’t allocate heavily to Bitcoin. Probably also very risky to do anything else. It’s very easy to get rekt out in the weeds
Wells Fargo, JPM partner with NYDIG on Bitcoin tracker funds
- Wells Fargo wealth and investment management arm has $2T in assets
- Wells Fargo Investment Institute President Darrell Cronk said
“We think that cryptocurrency space has just kind of hit an evolution and maturation of its development that allows it now to be a viable investable asset”
- JPM also filed for a passive BTC trust with the SEC this week
Crypto trading drives 2x gain in Robinhood 2Q21 revenues
- More than 60% of its users are now trading digital currencies
- More than half of its total transaction-based revenue came from crypto trading
- Crypto transaction-based revenue for the 2nd quarter was $233 million, compared to just $5 million for the same quarter in 2020
- Dogecoin accounted for 62% of 2Q21 revenue. That’s probably not sustainable
Galaxy Digital applies for Bitcoin (futures) ETF
- Follows guidance Earlier this month SEC Chairman Gary Gensler signaling he preferred ETFs based on bitcoin futures
- There’s now a pretty long list of applicants with filings in with the SEC
Chainalysis: Crypto adoption +881% YoY
- Up 2300% since Q3 2019
- China fell from global #4 to global #13
- US fell from #6 to #8
- Emerging market adoption is being driven by P2P platforms. Driven by capital controls, access to banking, and volatile domestic currencies.
“Several countries in emerging markets, including Kenya, Nigeria, Vietnam, and Venezuela rank high on our index in large part because they have huge transaction volumes on peer-to-peer (P2P) platforms when adjusted for PPP per capita and internet-using population.”
Coinbase teams up with MUFG Bank to start trading platform
- MUFG is the largest bank in Japan and an investor in Coinbase Global
- The new platform will be focused on Japan
Intel discloses (small) Coinbase stake
- Intel holds 3,014 shares worth just $770,000
- The investment was disclosed because Intel holds more than $100M in publicly traded investments
- Given the tiny size, it’s probably part of a general growth or technology exposure strategy and not Coinbase specific
Peter Thiel’s software development company, Plantir, to accept BTC
- Bloomberg also reported that the company has $2.3B in cash and in May said it was evaluating an investment in Bitcoin
- The company also spent $50.7 million this month on gold
“You have to be prepared for a future with more black swan events.”
Charts
Realized market cap
- Arcane Research highlighted this week that Bitcoin’s ‘realized market cap’ has exceeded the April 2021 all time high
- Realized market cap is calculated using the price at the last time the coins were moved. It’s basically an on-chain version of the volume-weighted average price (VWAP)
Chart credit: Arcane Research
Chainalysis Global Cryptocurrency Adoption Index
- Up 2300% since Q3 2019 and +881% YoY
- While we spend a lot of time discussing how institutional participation is improving it looks like a key driver of adoption is coming from P2P usage in emerging markets like Kenya, Nigeria, Vietnam, and Venezuela
Chart credit: Chainalysis
Leverage is low
- Cryptoquant’s all exchanges estimated leverage ratio shows that current leverage is still well below what it was the first time Bitcoin gained to this level
Chart credit: Cryptoquant
Purpose Bitcoin ETF sees BUM declines narrow
- Declines in the Purpose Bitcoin ETF’s Bitcoin Under Management (BUM), look to have ground to a halt
- Total now is 2,2040 BTC, down just 0.04% over the past 10 days. I think this is probably a decent pure-play proxy on broader Bitcoin fund flows
Chart credit: Purpose Bitcoin ETF
