Blockstream Markets Weekly — Dec 17, 2021

German banks gear up to support BTC interest, Ray Dalio calls Bitcoin the younger generation’s gold, Myanmar’s shadow gov adopts USDT, NYDIG raises $1B and BTC passes a major milestone with 90% of BTC mined

By Jesse Knutson

Glass ceiling

Bitcoin is on pace to give up most of its post FOMC bounce to end the week modestly lower as consolidation just north of the 200-day moving average stretches into the 13th consecutive day.

Fiscal and monetary policy news helped drive market volatility with congress smashing through the debt ceiling as the fed doubled its taper pace, set the stage for a string of rate hikes in 2022 and the Bank of England bumped rates higher in an effort to dampen inflation.

Looking forward, we can probably expect more volatility in markets as central bankers try to play catch up on inflation and navigate the minefield of tapering without crushing growth.

Consolidation

News flow was slow this week as Bitcoin consolidation continued.

Top stories this week included reports that More German banks are gearing up to support client interest in Bitcoin, Ray Dalio commenting that Bitcoin is the younger generation’s alternative to gold, NYDIG announcing a $1B funding round, Myanmar’s shadow government adopting USDT, and Bitcoin passing a major milestone with 90% of Bitcoin’s supply now already mined.

Delayed, done, or broken?

Last week I wondered if, as Bitcoin matures, and as institutional participation increases we see cycles lengthen considerably and a lot of the sting comes out of the downside.

This week I saw a good series of charts from Incrementum (charts below) that addressed the same topic.

Incrementum suggests that the China mining ban may have been responsible for derailing the bull run and delaying the peak. They cite a series of indicators signaling a bullish environment for Bitcoin, though consider the most relevant and most accurate to be the S2F model by PlanB.

They conclude that the current cycle is not over and that we are likely to see a delayed peak form in the coming months with price likely to push north of $100,000.

Fear of Missing Christmas (FOMC)

Despite a very modest gain last week and a post-FOMC bounce this week, Bitcoin continues to trade pretty heavy.

The 200-day moving average has backstopped price for most of the past three weeks, but we probably need to see Bitcoin regain its footing back above the $50,000 level before we can expect to see much of a reversal in sentiment.

Last year’s Christmas rally was a big one. The last three weeks of 2020 saw Bitcoin jump +84%, running from $19,000 to end the year just shy of $35,000.

The coming weeks and months will be interesting.

We can probably expect more volatility in markets as policymakers and central bankers attempt to navigate inflation, tapering and growth. As Novogratz mentioned this week, traditional markets could end the year a bit messy as market jitters trigger year-end profit-taking.

But as Incrementum AG pointed out, looking a bit farther out, there are still a number of mid to long-term indicators that point to further Bitcoin upside and a decent chance of reacceleration in the coming months.

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Bitcoin markets news

90% of Bitcoin’s supply has already been mined

Myanmar accepts CNY as shadow government turns to Tether

  • In February of this year, the elected government was overthrown by the military
  • Myanmar has accepted the Chinese yuan as an official settlement currency for border trade with China in a move that aims to address its shortage of US dollars and other foreign currencies
  • Meanwhile, Myanmar’s shadow government said it would adopt Tether as an official currency, making it easier for it to raise funds and make payments

More German banks to support client BTC buys

  • Following Sparkasse (German Savings Banks Association)’s crypto wallet announcement, Commerzbank & Volks Bank are planning similar services
  • Commerzbank and Volks- und Raiffeisenbank — a German universal bank and brand of cooperative banks respectively — have started developing concepts to enable customers to buy and sell BTC

Ray Dalio: Bitcoin is the younger generations alternative to gold

  • Quite a title to this article: “Ray Dalio warns Fed’s hands are tied and higher US inflation is sticking around. Democracy maybe not”
  • Kind of a backhanded compliment:

“It’s almost a younger generations alternative to gold and it has no intrinsic value, but it has imputed value and it has, therefore, some merit”

$15B Elektra becomes the first retailer to accept BTC in Mexico

  • Users who pay for their purchases with BTC before December 31st will enjoy a 20% discount

Peter McCormack buys a football club

  • McCormack’s goal is to get the team promoted from the lowly tenth division all the way to the Premier League

“If we can separate money and state, we can get a football club into the Premier League”

  • Compass Mining will be the club’s first sponsor

Powell: Crypto is not a threat to financial stability

  • Powell also suggested that proper and efficient regulation of the crypto space is necessary
  • Powell had some specific comments on stablecoins, but I think is overlooking what makes stablecoins popular in the first place; they are both low volatility and low friction. If the regulation recreates the friction of traditional payment rails, investor interest will nosedive

“Stablecoins can certainly be a useful, efficient consumer-serving part of the financial system if they’re properly regulated. Right now, they aren’t. They have the potential to scale, particularly if they were to be associated with one of the very large tech networks that exist.”

Reports of Lemonade’s $1M BTC buy turn sour

  • Lemonade’s $1 million worth of BTC purchase was a rumor
  • It looks like the company probably hasn’t added bitcoin to its balance sheet

Bitcoin backed mortgages coming to Canada

  • Crypto savings and loan platform Ledn is preparing the world’s first Bitcoin-backed mortgage offering after raising $70 million
  • Series B funding round led by Dan Tapiero’s 10T Holdings brings Ledn’s market valuation to $540 million
  • Conceptually this is probably a high demand product waiting for a lender to deploy balance sheet at a reasonable rate

NYDIG Announces $1 Billion Funding Round

  • NYDIG offers clients a suite of institutional Bitcoin products that run from trading and custody to borrowing and lending
  • The funding raises NYDIG’s valuation to $7B
  • Some of the more recognizable names in this round include MassMutual, Morgan Stanley, and New York Life

Novo: Bitcoin has ba-toom-ed out

  • Sees traditional markets as trading a bit messy into the end of the year and possibly the start of the first quarter as nervous markets trigger investors to take some cash off the table
  • Novogratz said that he’s still positive on Bitcoin in the medium term and that it should be able to hold the line in the low 40s
  • Says that Bitcoin prices will be supported by the amount of money that’s preparing to come into the market (cites interest in Bitcoin mining from large pools of capital in the Middle East and large fundraising rounds from NYDIG and others)
  • My title above is a reference to the song ‘Bitcoin pls go to moon’. Interestingly, in that song, $40,000 was Novo’s bull case and has now flipped to be his base case.

Jack Dorsey’s Block allows users to give the gift of BTC for Xmas

  • Block, the company is formerly known as Square, will allow users to give the fight of Bitcoin to their loved ones in units as small as $1
  • In September, the Cash App reported 70 million annual transacting users and gross profit worth $1.8B from its markets in the UK and the US

Charts

Is the having cycle over?

  • The current cycle is starting to get a bit long in the tooth
  • Perhaps we’re now in a stage of Bitcoin’s maturity where cycles lengthen considerably and a lot of the sting comes out of the downside

Chart credit: Incrementum Chartbook

Delayed, done, or broken?

  • Incrementum expects a delayed peak for this cycle
  • They suggest that the China mining ban may have been responsible for derailing the bull run and delaying the peak

Chart credit: Incrementum Chartbook

Bitcoin vs Gold

  • Bitcoin’s market cap is still small vs gold
  • Think this is a good chart to illustrate early it still is for Bitcoin
  • Incrementum sees Bitcoin and gold as complementary parts of a portfolio and as different parts of a single, non-inflatable asset class

Chart credit: Incrementum Chartbook

100k still in play?

  • Incrementum sees numerous indicators signaling a bullish environment for Bitcoin
  • But consider the most relevant and historically most accurate to be the S2F model by PlanB
  • They conclude that the current cycle is not over and that we are likely to see a delayed peak form in the coming months with price likely to push north of $100,000

Chart credit: Incrementum Chartbook

The most concise roundup of Bitcoin market action in the industry.

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