Blockstream Markets Weekly — Aug 27, 2021
Blockstream raises $210M and acquires hardware maker Spondoolies, BTC held by funds/corporates ticks higher as MST buys another $177M worth of BTC and fund flows flip positive, Morgan Stanley funds expand GBTC positions, futures-backed ETF may be just weeks away, and Cuba looks to follow El Salvador’s lead on Bitcoin
By Jesse Knutson
What’s happening in the markets?
Jackson Hole
Bitcoin is on pace to give up a five-week win streak to end just north of 200-day moving average support.
Global stonks and gold looked set to end the week higher with the USD and Bitcoin set to end the week lower.
Traditional markets caught an end-of-week bid and will be focused on Federal Reserve Chair Jerome Powell’s comments at Jackson Hole later today. Indications that fed officials preferred tapering sooner rather than later were offset by expectations that Powell was more inclined to take a wait-and-see approach.
As mentioned last week it’s interesting to see Bitcoin continuing to trade more in line with the USD than stonks.
I think BTC declines into the end of the week were probably, to some degree, tied to monthly options expiry today. Fund flows actually look to be tentatively turning positive. The 200-day moving average continues to be a key line of support.
Blockstream, fund flows, and sovereign adoption
Headlines this week were led by Blockstream’s $210M raise at a $3.2B valuation and the acquisition of mining hardware manufacturer Spondoolies as the first step in the establishment of Blockstream’s new ASIC division.
Outside of that, fund flows, corporate treasuries, and sovereign adoption were the key themes of the week.
It looks like, at the aggregate, Bitcoin holdings with funds/corporate treasuries are just off of an all-time high. The tick higher this week was led by MicroStrategy buying an additional 3,907 BTC, but I think is also supported by a reacceleration of fund flows including several Morgan Stanley funds revealing an increase in GBTC allocation. Bloomberg Intelligence also said this week that they expect approval for a futures-backed BTC ETF by early 4Q21.
On the sovereign adoption front, we saw headlines this week that Cuba is preparing to recognize cryptocurrencies for payment as El Salvador prepares to implement Bitcoin as legal tender from mid next month.
Muddy waters
There was a bit of confusion this week around on-chain data analysis with indications of de-risking and profit-taking from long-term holders as well as metrics showing a sharp increase in BTC being sent to exchanges.
I think a lot of this data was probably muddied by the monthly options expiry today which I think is probably closely entwined with hedge fund inflows and outflows and not necessarily reflective of a long-term directional view.
Spot exchange balances remain very low and, historically, it has not been uncommon to see price pushed lower into the month-end expiry.
The overall setup continues to look constructive. A tentative increase in overall leverage this week was quickly de-risked with~ $400M in liquidations over the past few days. Overall market leverage now continues to look low relative to the current price.
I think the relatively low degree of leverage in the market, the modest long bias, reacceleration of fund flows, and clearing of the expiry overhang probably puts us in a fairly good spot for the coming weeks.
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Bitcoin markets news
Blockstream announces $210M raise led by Baillie Gifford, iFinex
- Valued at $3.2 billion after a $210 million series B raise
- Blockstream also announced the acquisition of mining hardware manufacturer Spondoolies
- Spondoolies IP and key team members will form the core of Blockstream’s new ASIC arm
MicroStrategy buys another 3,907 BTC at an average price of $45,294
- Latest acquisition totals ~ $177M and brings MSTR’s total holdings to around $5.1B
- MSTR’s is up around +75% from a total costs basis of roughly $2.92B
Cuba to recognize cryptocurrencies for payment
- Cuba’s government said Thursday it will recognize — and regulate — cryptocurrencies for payments on the island
- Looks like early days still, though, with not much detail available yet. The Central Bank has yet to set rules or establish a licensing regime
TSMC increases chip prices
- Taiwan Semiconductor prices for 7nm and 5nm chips are expected to increase 7% to 9%
- Prices for its more mature processes will be increased by ~20%
- The price hikes are thought to be in response to TSMC’s plan to boost capital expenditures by US$100B over the next three years, in addition to its overseas expansion plans in the U.S. and Japan
- This is probably positive to holders of the Blockstream Mining Note and miners with hardware already deployed
Morgan Stanley funds add to GBTC allocation
- An SEC filing revealed that over 30 Morgan Stanley funds have built GBTC positions
- Morgan’s Insight Fund is the largest with over 928,051 GBTC shares worth ~ $36M or over 700 Bitcoin
- A June filing with the SEC showed that the Europe Opportunity Fund had acquired ~ 28,000 GBTC shares
- Follows an earlier filing in April that allowed each of five funds to invest up to 25% of assets into Bitcoin-related products
Bloomberg Intelligence: futures backed BTC ETF likely by October
- Analyst Eric Balchunas says that the shelving of ETH ETF applications from ProShares and VanEck are probably positive foreshadowing for their BTC ETF applications
- ProShares is thought as the most likely to win approval
- Balchunas expects a muted reception to the first round of futures backed ETF’s though
“…the excitement will be only half that what it would be for a real bitcoin ETF. The best metaphor I can come up with is this is like serving O’Doul’s when the party wants real beer. Will they drink it anyway? We’ll soon find out.”
China’s crackdown delivers a windfall to global Bitcoin miners
- Bitcoin miners outside of China are reaping rewards from China’s ban, generating ever-higher profits by filling a vacuum left by the sharp correction in global hashrate
- Shane Downey, CFO of Hut 8 Mining said:
“Think of average daily global bitcoin production as the pie. The size of the pie stayed the same, and each existing miner was able to help themselves to a much bigger piece”
- You can get a gauge of mining profitability on the Blockstream Finance page. Each BMN (2,000 TH sold for €200,000) has mined 0.943 BTC over the past 52 days
El Salvador to implement Bitcoin adoption from next month
- The tone of the article isn’t exactly supportive
- Dollarized economies around the world will likely be watching how this plays out very carefully
Substack adds BTC Lightning payments for 500,000 users
- Email subscription platform Substack has integrated Bitcoin Lightning payments in collaboration with OpenNode, a payment processor offering Bitcoin and Lightning optimized API solutions for businesses
- OpenNode will now power both on-chain and off-chain Bitcoin and Lightning payments on the Substack platform, meaning journalists and writers can now effectively make a living in Bitcoin as independent writers.
Charts
Monthly expire driving declines
- I think a good chunk of the selling over the previous 24–48 hours was probably tied to today’s expiry
- Historically, the last Friday of every month has been a pretty solid entry point — especially when led by a bit of downward pressure
Volatility is declining again
- Volatility, as measured by Bollinger Band Width, is on pace to end the week at a 34 day low
- I don’t think it’s quite at an inflection point yet, but if we get another week or so of consolidation and Bollinger Band Width (volatility) comes in a bit more, we could probably expect to see another big price move on the other side of that
BTC holdings in funds and corporate treasuries just off ATHs
- The tick higher in corporate treasury and fund holdings this week was led by a $177M Bitcoin buy from MicroStrategy, but also supported by improving fund flows
Chart credit: Willy Woo
Purpose Bitcoin ETF sees BUM reaccelerate
- Inflows on a ten-day rolling basis reversed five weeks of consecutive outflows this week
- Coinshares’ fund flow report this week also reported the first week of inflows after a string of weekly outflows
Chart credit: Purpose Bitcoin ETF
Bitcoin leverage remains low
- After a tentative spike higher (which was corrected with ~ $400M in liquidations) leverage is again very low
- Estimated Bitcoin leverage is on pace to finish the week on the low side — especially relative to the current price
Chart credit: CryptoQuant
Bitcoin spot exchange balances remain very low
- It looks like the bulk of the BTC spot exchange outflows came from Coinbase which saw a net outflow of > 30,000 BTC this week
Chart credit: CryptoQuant
