Blockstream Markets Weekly — December 25, 2020

Elon Musk asks about big Bitcoin transactions, Jefferies cuts gold allocation in favor of Bitcoin, $9.2B Skybridge Capital doubles down on BTC, Bitmain executes hard fork, on-exchange BTC evaporates, Stock-to-Flow model nails this year’s price prediction…and says we’ll top $106,000 on Christmas Day 2021

What’s happening in the markets?

SEC triggers flight to crypto quality

JP Morgan, Goldman Sachs battle on Bitcoin

Bitcoin on the balance sheet

This time next year Rodney…

“…around the year 2022, Bitcoin’s stock-to-flow ratio will overtake that of gold”

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Bitcoin markets news

Jefferies adjusts allocation from gold to Bitcoin

  • Jefferies is a $51B global financial services firm based in New York
  • Chris Wood, global head of equity strategy at Jefferies, said the firm would trim their multi-year 50% gold allocation by 5% in favor of Bitcoin
  • Wood has been the top Equity Strategist in almost all major broker polls in Asia for the past two decades. His weekly newsletter ‘Greed and Fear’ is one of the most popular institutional notes on the street.

“The 50 percent weight in physical gold bullion in the portfolio will be reduced for the first time in several years by five percentage points with the money invested in Bitcoin. If there is a big drawdown in bitcoin from the current level, after the historic breakout above the $20,000 level, the intention will be to add to this position.”

Elon Musk inquiries about large Bitcoin transactions

  • In a public Twitter exchange, Musk asked MicroStrategy CEO, Michael Saylor, whether it was possible to convert billions of Tesla’s dollars to bitcoin. MicroStrategy has purchased more than US$1.3B worth of Bitcoin in recent months

JPM: Bitcoin looks overbought, but fund flows may keep price going

  • Strategist says Bitcoin looks overbought but notes that GBTC now has a total of US$13.1B under management and fund inflows are running at about $1B / month
  • Article cites growing corporate and institutional interests in Bitcoin as an inflationary hedge with recent investments by Mass Mutual, MicroStrategy, Paul Tudor Jones, and Stan Druckenmiller

Bitcoin custodian, BitGo, announces $16B in assets under custody

“We’re seeing unprecedented interest from institutional investors as a result of the pandemic’s economic impact, as well as Bitcoin’s extraordinary performance”

Skybridge Capital doubles down with new Bitcoin fund

  • Skybridge Capital is a $9.2B fund-of-funds founded by former White House Director of Communications and Goldman Sachs alumni, Anthony Scaramucci
  • Skybridge will invest $25M and will be opening the fund to investors Jan 4 with a minimum buy-in of $50,000
  • Skybridge’s fund will charge 0.75% in fees vs the Grayscale Bitcoin Investment Trust’s (GBTC) 2% and is expected to trade much closer to NAV than the 20–30% premiums typically seen with GBTC

“…we think there’s a very large move for Bitcoin over the next five to ten years. We think it’s a product that people will have in their portfolios, and we wanted to get out there with something that could be available to RIAs, the mass affluent, and people who have an interest in owning some digital assets.”

Goldman: Bitcoin is no threat to gold

  • A very different view to JPM’s “Bitcoin will make gold suffer” headline from earlier in the month

“Gold’s recent underperformance versus real rates and the dollar has left some investors concerned that Bitcoin is replacing gold as the inflation hedge of choice…While there is some substitution occurring, we do not see Bitcoin’s rising popularity as an existential threat to gold’s status as the currency of last resort.”

“We do not recommend bitcoin on a strategic or tactical basis for clients’ investment portfolios”

SEC comes after Ripple for unregistered security offering

  • SEC on Tuesday charged Ripple with conducting a $1.3B unregistered securities offering
  • The SEC has also charged two executives for personal gains they received from the offering. Ripple’s former chief executive, Christian Larsen, and its current CEO, Bradley Garlinghouse, are said to have personally profited by approximately $600 million from their unregistered sales of XRP.
  • This news weighed heavily on the non Bitcoin crypto space this week which ended the week -10% vs BTC finishing modestly higher

Mining giant Bitmain hard forks with $600M settlement

  • After months of very public battles for control of the company and demonstrations of some of the worst corporate governance in the space, Bitmain co-founders Jihan Wu and Micree Zhan have reportedly reached a settlement
  • Micree Zhan will reportedly buy out Jihan Wu for $600M and cede control of the mining pool as well as Bitmain’s overseas mining centers. Micree Zhan will retain control of the Antpool mining pool, Bitmain’s China-based mining farms, AI business, and probably most importantly, the hardware manufacturing business
  • Bitmain’s internal struggles have seen them bungle what was once thought to be an $18B IPO, lose significant market share to mining hardware manufacturers rivals like MicroBT, and reportedly post a $60M loss in 2019

China power rationing impacting hash rate?

  • Many provinces in China are reportedly suffering their worst power shortages in decades
  • The power outages come on the back of a coal shortage (trade tensions with Australia), higher than expected winter power demand and post virus resurgence in domestic manufacturing
  • Hash rate has shown relatively little growth over the previous 2 months, despite a sharp increase in price. Tight capacity at semiconductor fabs and a bottleneck for 7NM and 8NM chips is probably the main factor constraining hash rate growth at the moment, but might also be exacerbated by China’s ongoing power shortages


Wallets ≥ 1 BTC on Christmas Eve hits record high

  • Points to continued growth in users as well as an improving overall dispersion of wealth. Most importantly, though, the fact that this number is only just above 800,000 suggests we are still very, very early in terms of broad Bitcoin adoption.

Christmas Cheer: The Stock-to-Flow model was right

  • The Stock-to-Flow model looks to have really nailed the 2020 year-end price forecast. As of the time of writing, Bitcoin is trading ~$24,100 vs the predicted $24,732
  • The accuracy is pretty impressive given we started 2020 in the $7,000 range and hit a $3,800 low in March
  • The model predicts a Christmas Day 2021 price of $106,393. While that sounds like a big number, it’s only 4.4x from current. Only slightly better than the 3.3x gain we saw this year from Christmas Day 2019’s close of ~ $7,200.

Is a Bitcoin supply crunch coming?

  • Since January of this year, the total Bitcoin supply on exchanges has fallen by 20% as users remove assets to long-term storage and custodian wallets. I wonder if this trend could actually mean that the Stock-to-Flow model is actually conservative and that the long term supply dynamic could actually become much tighter than originally forecast.

Bloomberg: Bitcoin is here to stay

  • Article details author’s realization that Bitcoin is the Honey Badger of Money

“Demand has proven impervious to wild price swings….like Monty Python’s Black Knight, Bitcion believers treat near-fatal volatility as mere flesh wounds. Drops of 80% are welcomed as fortuitous buying opportunities. But far from being a weakness, this is evidence of the asset class’ longevity.”

Alt Coin rotation helps support BTC and Tether

  • Reports of SEC charges against Ripple and two of the company’s executives drove a steep drop in non-Bitcoin cryptocurrency this week
  • Looks like a modest rotation into Bitcoin and Tether

Bitcoin on pace to outperform everything…again

  • Year-to-date Bitcoin is +229% outperforming everything…except Tesla (!)

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

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