Blockstream Markets Weekly — Jan 7, 2022

BMN to launch capital raise on Bitfinex Securities in 9 days, El Salvador readies regulatory framework for upcoming BTC bond, Goldman Sachs says BTC is taking SoV market share from gold, Kazakhstan miners hit by internet outage, and listed miners announce massive CAPEX plans.

By Jesse Knutson

Risk-off

Bitcoin is on pace for its second consecutive red candle and the worst weekly decline since November.

Bitcoin was dragged lower by derisking across global markets as the Fed indicated a faster than expected taper and the potential for sooner than expected rate hikes.

December’s jobs report was also pretty dismal with just 199,000 jobs added vs 422,000 expected.

Trading this week leaves Bitcoin at a pretty important support level — a level that Bitcoin has bumped into several times both on the way up, during the 3Q21 consolidation, and then again with the big wick lower in December of last year.

Bitcoin, tokenized sovereign debt, and mining tokens

I think 2022 will be a big year for the Liquid Network, STOs, and Bitfinex securities.

This week Bitfinex Securities announced regulatory approval for the listing of the Blockstream Mining Note. We also saw El Salvador send 20 bills to congress in preparation for their big push into tokenized sovereign debt and ahead of their billion-dollar Bitcoin bond. Tuur Demeester joined me on this week’s Blockstream Talk where we cover a number of these topics.

Other headlines this week included a note from Goldman Sachs predicting that Bitcoin will continue to absorb store of value market share from gold. They think if Bitcoin continues to eat market share, it could be well on its way to $100,000 (admittedly…doesn’t feel like that today).

Mining headlines were led by internet outages in Kazakhstan the world’s second-largest Bitcoin mining hub, a modest dip in global hashrate, and another round of massive CAPEX plans from listed miners.

Correlation 1

Arthur Hayes, the co-founder of derivatives giant BitMex, had a really good note out this week.

Hayes reminds us what happened in March of 2020 when Bitcoin got caught up in a correlation 1 moment — when asset classes got hammered across the board and margin calls pushed investors to dump everything with liquidity.

It’s easy to see why Bitcoin, as the only really free market on the planet (no backstops, circuit breakers, or weekends off) can often get hit hard and fast in these types of situations.

Inflation will be a hot-button issue going into the 2022 elections and the Fed will be pressured to taper harder and raise rates between March and June. Hayes makes the case that this could drive a March 2020 type washout.

Gut check

Trading this week saw two weeks of consolidation end with a sharp move to the downside filling the sub $42,000 wick from the first week of December.

The decline in risk appetite triggered liquidations across the space with more than $1B in liquidations over the past 36 hours and with more than 137,000 traders liquidated in the previous 24 hours alone.

Fear and greed hit a six-month low this week, but funding rates are still mostly flattish and shorts have only just started to pick up.

Long-term I think Bitcoin’s unique value proposition continues to drive price appreciation, but short to mid-term we’re likely at the whims of central bankers and global risk appetite.

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Bitcoin markets news

Regulators give green light to BMN listing on Bitfinex Securities

  • The Blockstream Mining Note (BMN) has been accepted for listing on the Bitfinex Securities exchange
  • The BMN has also been granted an International Securities Identification Number: LU2423687628
  • The capital raise will take place on January 17th, 2022

Blockstream Talk #7: Tuur Demeester

  • Pretty wide-ranging conversation around Bitcoin-based investment products — including El Salvador’s Bitcoin Bond, the Blockstream Mining Note, and Bitcoin mortgages

El Salvador sends 20 bills to congress in preparation for BTC bonds

  • El Salvador’s Finance Minister Alejandro Zelaya said that the administration is preparing to

“provide a legal structure and legal certainty to everyone who buys the bitcoin bond”

  • El Salvador aims to raise $1 billion through the bond issuance where half the funds will go to buying Bitcoin and the other half allocated to building infrastructure
  • The El Salvador Bitcoin Bond (EBB1) will be issued on the Liquid Network and distributed by Bitfinex Securities

Goldman Sachs: BTC will take market share from gold, hit $100k

  • Zach Pandl, co-head of global FX and EM strategy, wrote in a note earlier in the week that Bitcoin is currently 20% of the store of value market (gold representing the rest)
  • If that number increases to 50% over the next 5 years, Bitcoin will easily top $100,000
  • Interestingly, the report expressly says that Bitcoin is unlikely to be used for commerce or payments. I think Wall Street is missing what’s going on in El Salvador with the Lightning Network and underrepresenting the potential network effects

Bitcoin Suisse taps Barclay’s wealth management boss for CEO role

  • Bitcoin Suisse is a Swiss-based, VQF-regulated Bitcoin financial services company

Miners in Kazakhstan suffer internet outage as unrest intensifies

  • The internet was reportedly shutdown to disrupt communications around anti-government protests
  • Kazakhstan is estimated to be the second-largest global mining region with ~ 20% of global hashrate
  • Imagine the frustrations of Chinese miners that escaped the ban in China, invested in new facilities in Kazakhstan only to experience further disruptions

Listed miners forecast massive capacity expansion

  • Marathon Digital says its total hashrate will increase by ~7x by early 2023 while Hut8 is forecasting hashrate to increase ~75% by the end of March
  • Marathon currently holds a total of 5,133 BTC while Hut ended the year with 5,518

New York’s new mayor: Buy the dip

“Sometimes the best time to buy is when things go down, so when they go back up, you made a good profit…we need to use the technology of blockchain, Bitcoin, of all other forms of technology. I want New York City to be the center of that technology.”

South Korean presidential candidate accepts Bitcoin donations

  • The Democratic Party of Korea is the country’s dominant political party
  • Will accept up to three digital assets. The final list of coins to be accepted will be announced in mid-January
  • The party also plans to issue NFTs to supporters

Charts

Fear and Greed

  • Sentiment is starting to dip into extreme fear

Chart credit: Look into Bitcoin

Funding rates remain resilient

  • While fear and greed points to extreme fear, funding rates continue to suggest much less dire sentiment
  • I think this suggests that actual market sentiment is much more robust than fear and greed implies (not sure if that’s a good thing)

Chart credit: Coinglass

Uncorrelated asset?

  • Since the March 2020 COVID crash, Bitcoin has seen a generally higher degree of correlation with stonks
  • Increased institutional investment in Bitcoin means that global market moves have a larger-than-previous on Bitcoin’s price action

Chart credit: Ecoinometrics

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

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