Blockstream Markets Weekly — Dec 3, 2021

Fidelity launches new BTC ETF in Canada, GS considers BTC lending, VanEck files for mining ETF, Jack pivots to BTC, India drafts new crypto regs, Korean Exchange head calls for crypto integration and Paraguay looks to legalize BTC mining

By Jesse Knutson

Consolidation

Bitcoin is on pace to finish the week fractionally lower and likely to post its third consecutive week of declines.

Global stonks bounced as Omicron variant fears faded. Some big moves in markets throughout the week. USD remained pretty strong and Bitcoin continued to consolidate around the $57,000 level.

Data from Glassnode shows a big cluster of transactions around the current level as Bitcoin consolidation continues. On-chain transactions show support at the $48k to $50k level and resistance at the $60k to $63k level.

Dip for ants

With Bitcoin down ~ 20% off of the all-time-high three weeks ago and last week’s drop to $53,000, it’s not surprising to see the fear-and-greed sentiment indicator still buried at the bottom end of the YTD range.

Glassnode noted this week, though, that the current 20% correction is actually one of the smaller corrections of the year. The May-July sell-off went as deep as -54%, September dropped to -37%, and January, February, and April all saw corrections of more than -24%.

Interestingly, though, fund flows last week remained positive.

Digital asset investment products saw inflows totaling US$306M last week. Bitcoin saw the largest inflows in five weeks with a total of US$247M or 81% of total digital asset investment fund inflows. In total, Bitcoin investment products have now seen inflows for 11 weeks running for a grand total of $2.7B.

Sovereigns, corporates, and funds

Newsflow accelerated quite a bit this week after a string of mostly lackluster news weeks.

Following up on news last week that El Salvador would execute a $1B bitcoin bond on the Liquid Network, we had more sovereign adoption news this week. In Korea, the head of the country’s national exchange said that it’s time for South Korea to embrace crypto. In India, a new draft bill to regulate Bitcoin eased concerns around earlier reports of more aggressive regulation, and in Paraguay — home of the world’s largest hydroelectric dam — new legislation has been proposed to legalize Bitcoin mining.

On the ETF front, Fidelity — one of the world’s largest asset managers — launched a new Bitcoin ETF in Canada while VanEck filed for an ETF backed by Bitcoin mining stocks.

Finally, on the corporate side, Jack Dorsey stepped down as Twitter CEO and renamed Square as part of a BTC pivot while Goldman Sachs and other US-based investment banks are said to be exploring BTC-backed loans.

The fourth week’s the charm

After three weeks of consecutive declines, I think that Bitcoin is probably due a bounce.

Over the past 100 weeks, we’ve only had one occurrence of four consecutive weekly losses. Odds are we flip positive next week.

Zooming out, I think the weekly chart still looks constructive as we move deeper into the ascending triangle highlighted last week. I think that could imply a price breakout in the coming weeks and also lines up nicely with normal December seasonality.

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Bitcoin markets news

Korea Exchange head: time for South Korea to embrace crypto

  • Korea Exchange (KRX) is the sole securities exchange operator in South Korea
  • The article reports that daily crypto trading in Korea is currently around $12B vs trading on the KOSPI at $16B

Fidelity Canada officially launches BTC ETF and mutual fund

  • Easily the largest asset manager to date with a BTC ETF
  • On Thursday, Fidelity Canada officially launched the Fidelity Advantage Bitcoin exchange-traded fund (ETF) and the Fidelity Advantage Bitcoin ETF Fund (mutual fund)
  • The ETFs will have an annual management fee of 0.4%. Operating expenses and trading costs are not yet available as the assets are still new. Over 98% of Bitcoin purchased by the funds is stored in cold wallets
  • Bloomberg senior ETF analyst Eric Balchunas summed it up

“This should b embarrassing for the SEC that one of America’s biggest, most storied names in investing is forced to go up North to serve its clients”

Jack Dorsey steps down from Twitter, renames Square in BTC pivot

  • Square said Wednesday it will change its company name to Block which is seen as a reference to a more direct focus on Bitcoin
  • Dorsey has been an active supporter of Bitcoin over the years. He has heavily promoted and supported the development of the Bitcoin Lightning Network and supported Bitcoin developers directly through a unit called Square Crypto (which will now be renamed, rather awesomely, Spiral). He added Bitcoin functionality to Square’s Cash App. At Twitter, he recently rolled out Lightning-based tipping, and before stepping down promised NFT (non-fungible token) avatar integration.

Goldman Sachs said to be exploring BTC-backed loans

  • Goldman Sachs is among a handful of tier-one U.S. banks figuring out how to use bitcoin as collateral for cash loans to institutions
  • CoinDesk reports that:

“Some of them are in the next three to six months category and some are further out. What’s interesting is some of these banks will use their own balance sheet to make the loan. Others will syndicate this out.”

India introduces draft bill to regulate Bitcoin

  • It looks like India wants Bitcoin to be an investable asset, but not a competitor to the INR
  • Probably a positive development given the previous efforts at flat out bans

Paraguay may be close to legalizing Bitcoin mining

  • Paraguay is one of the world’s largest energy net exporters
  • The Itaipu Dam is one of the largest hydroelectric dams in the world
  • If passed, the bill would miners to move into data centers near power generation facilities

VanEck files for Bitcoin mining ETF

  • Will track an index of companies that generate at least half of their revenue from digital asset mining activities or mining-related technology
  • Given the reluctance to approve a spot ETF, I would expect to see more of this, and for and more capital to get squeezed into listed mining companies
  • Could just buy the Blockstream Mining Note instead

SEC’s Gensler: Bitcoin competes with the US banking system

  • Gary Gensler said on Wednesday that Bitcoin was created “as a reaction” to the U.S. monetary system and its worldwide consensus.
  • Bitcoin is an “off-the-grid” alternative to the traditional financial system

Grayscale squares off with SEC after latest round of ETF rejections

  • Grayscale’s GBTC is the largest institutional holder of Bitcoin with ~$37B of BTC under management. Grayscale has previously expressed an interest in converting the fund to an ETF structure
  • Grayscale argues that the SEC has

“no basis for the position that investing in the derivatives market for an asset is acceptable for investors while investing in the asset itself is not.”

Charts

Fund flows

  • Digital asset investment products saw inflows totaling US$306M last week
  • Bitcoin saw the largest inflows in five weeks with a total of US$247M or 81% of total digital asset investment fund inflows
  • Amazing to see fund flows trending up despite three weeks of price declines

Chart credit: Coinshares

Dip for ants

  • The current 20% correction is actually one of the smaller corrections of the year.
  • The May-July sell-off went as deep as -54%, September dropped to -37%, and January, February, and April all saw corrections of more than -24%

Chart credit: Glassnode

Support and resistance

  • Data from Glassnode shows a big cluster of transactions around the current level as Bitcoin consolidation continues
  • On-chain transactions show support at the $48k to $50k level and resistance at the $60k to $63k level.

Chart credit: Glassnode

Ascending triangle

  • The weekly log chart is progressing deeper into an ascending triangle
  • May imply a price breakout in the coming weeks and also lines up nicely with normal December seasonality

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

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