Blockstream Markets Weekly — January 1, 2021

VanEck retries ETF application, $9.3B Skybridge already has $182M in BTC, NFL’s Okung will convert half his salary to BTC, Listed BTC miner inks largest hardware purchase ever, Greenpro launches $100M BTC fund, BTC ends December +48% MoM…+300% in 2020

By Jesse Knutson

What’s happening in the markets?

Santa delivered

Bitcoin ended the week higher, punctuating December with the third up week in a row.

Gains this week saw Bitcoin hit a new all-time high of $29,543 and brought the total December gain to just over $9,000, the largest ever monthly gain in dollar terms. In percentage terms, Bitcoin ended December +48% the largest single-month gain since May of last year and the third-best month since 2017.

Asian strength may foreshadow the return of retail

As highlighted previously, over the last couple of weeks the bid on this rally looks to have largely come from western institutional investors with price action typically strongest during US trading hours.

This week we saw a bit of a shift in that pattern with strong Bitcoin price moves during Asia trading into the second half of the week.

Looking at Google searches, retail participation is starting to accelerate but is still well off the previous highs set in 2017. Asian retail investors, particularly in China and Korea, were a big part of the 2017 rally. Better performance during Asia trading hours may be the first sign so far of a pick up in retail participation and new money entering the market.

The price is the news

With many western investors still on holidays, news flow took a bit of a back seat to price action this week.

Top stories this week included $50B investment management firm, VanEck, making another Bitcoin ETF application, the former CFTC head pushing back against Treasury’s plans to crack down on private wallets, listed Bitcoin miner Marathon Patent (Nasdaq: MARA) reportedly placing one of the largest mining rig order ever, and the NFL’s Russel Okung taking half of his $13M salary in Bitcoin (kind of).

Keeping up with the institutional adoption theme of the previous few weeks, we also had reports of Canadian listed small-cap NexTech dedicating $2M of treasury reserves to Bitcoin, Nasdaq listed Greenpro Capital Group (GRNQ) announcing a $100M Bitcoin fund, and $9.3B Skybridge Capital reporting that it had already invested $182M in Bitcoin.

January is typically cool

Historically, January tends to be one of Bitcoin’s most consistent down months. Since 2015, Bitcoin has averaged a -9% drop in January and has finished lower four of the previous six Januarys (table below).

Price action is probably also running a bit hot. The weekly RSI is at 91, and price is 3.6 standard deviations above the 50-week moving average. We are probably due to let some steam out.

That said, 2021 looks tailor-made for Bitcoin outperformance. Macro tailwinds will continue to support broader institutional adoption driving more money to squeeze into a relatively small asset. On top of that, new retail inflows look to only just be beginning.

Either way, 2021 should be a very big year for Bitcoin.

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Bitcoin markets news

VanEck files for a Bitcoin ETF (again)

  • I think this is now VanEck’s 4th go at an ETF application
  • A big opportunity at stake here given that the closest thing American investors have to an ETF is Grayscale’s Bitcoin Investment Trust (GBTC) which now has > US$17B AUM, but typically trades at a ~ 20% premium to NAV.
  • GBTC would be the biggest loser if an ETF is approved as retail money moves to a more reasonably priced alternative and as institutional interest (much of which is focused on harvesting the retail premium) evaporates
  • The biggest change since the previous application is the number of big, mainstream investors now backing Bitcoin. It’s hard to argue the asset is too risky to offer retail while allowing Coinbase to IPO, MicroStrategy to invest its treasury, and with very mainstream advocates like Paul Tudor Jones, Fidelity, Mass Mutual, and Jefferies.

$9.3B Skybridge Capital has already put $182M to work in Bitcoin

  • Anthony Scaramucci’s SkyBridge Capital investment firm has invested $182 million in bitcoin, according to an investor brochure
  • Scaramucci was formerly a White House Communications Director under the Trump administration
  • The new fund will be open as of Jan. 4 to outside investors putting up at least $50,000

“Bitcoin is digital gold…It is better at being gold than gold.”

JPM: BTC will 10x by 2022

  • It’s a good headline, but the article doesn’t provide a reference and I can’t find the report. Bitcoin is definitely getting increasing air time in Nikolaos Panigirtzoglou’s Flows & Liquidity weekly note. However, I don’t think he has a specific target price.
  • JPM has also highlighted Bitcoin as one part of their top 10 macro trends for 2021.

Green Pro Announces $100M Bitcoin Fund

  • Green Pro (Nasdaq: GDQR) is a multinational financial services company headquartered in Hong Kong. The website reads like its primary focus is on servicing high net worth individuals in Greater China.

“GRNQ announced today that it believes in the ongoing mass adoption of $BTC by banks, hedge funds, insurance companies, and institutions and endorses its belief that bitcoin, as the world’s most widely-adopted cryptocurrency, is a reliable future store of value. We believe the strategic management of our balance sheet, combined with the implementation of our $BTC Fund and crypto strategy will produce significant future value for the Company”

Marathon Patent agrees to buy $170M worth of Bitcoin miners

  • Marathon (Nasdaq: MARA) is one of the largest listed miners
  • The first tranche of 7,000 S-19 miners is expected in July 2021 with the last in December 2021. I wonder to what degree this will be constrained by TSMC’s 7nm capacity which analysts say is jammed until deep 2H21.
  • Marathon Chairman and CEO Merrick Okamoto said that

“This purchase is the largest order in dollar terms as well as the single largest order for S-19 ASIC miners that Bitmain has ever received”

NFL’s Russel Okung to get 50% of $13M salary in Bitcoin

  • Okung, a Pro Bowl tackle for the Carolina Panthers, has been looking to get paid in BTC since May of 2019
  • Digging into the details, the headline is slightly misleading. Okung will still get his salary paid in USD, but 50% will be converted to BTC using Zap’s Strike product
  • This could mark the beginning of an interesting cultural inflection point, though, when BTC becomes cool. Now we need rappers.

Former CFTC head argues against stricter private wallet rules

  • Former chairman of the U.S. Commodity Futures Trading Commission, Christopher Giancarlo, has long argued for a relatively hands-off approach to digital asset regulation and is a proponent of US efforts to develop a digital dollar

“Last summer I told the Senate Banking Committee that the United States has an ace to play in the movement towards digital money: privacy rights. With traditional American ideals of economic freedom, sound legal and jurisprudential development of constitutional rights of privacy and thoughtful design choices around anonymity, U.S. digital money could well enjoy superior privacy rights over many competing instruments, commercial or state-run.”

  • Treasury’s proposal should pop his bubble. This is a power grab. It’s the final battle in the war on cash. The motivation is to lock users/citizens into the system, preventing bank runs, allowing interest rates to be taken deeply negative, and to better facilitate surveillance and censorship of transactions.

Cheap power makes Nordic miners great again

  • The wettest weather in more than 20 years has boosted hydro production in Norway and Sweden, now home to some of the cheapest power costs on the planet
  • It’s worth highlighting that cheap power tends to be green and Bitcoin mining plays an important role in subsidizing the development of green power projects

“There is a very important strategic shift away from mining in China to mining in western countries like Sweden as Bitcoin investors become more public and want more stability and critical safety”

NexTech to buy $2M in Bitcoin with treasury

  • NexTech is a listed Canadian small-cap (market cap ~$300M) maker of augmented and virtual reality tech
  • Clearly taking a page out of MicroStrategy’s playbook (MSTR)
  • Expect to see more listed companies following suit going forward

Charts

ECB Balance Sheet Hits ATH

  • ECB balance sheet now tops €7,000B

“Total assets rose by another €6bn on QE. Total assets now equal to 69% of Eurozone GDP vs Fed’s 35%, BoJ’s 132% or BoE’s 36%.”

  • This is not a uniquely USD phenomenon. Every major Central Bank is doing exactly the same thing.

Chart credit Holger Zschaepitz

Price is tracking the Stock-to-Flow model like clockwork

  • I really don’t think that PlanB is getting enough credit for the accuracy of the model.
  • The model targets an end-of-year 2021 target price of just over $100,000. Given economic and allocation tailwinds that may even prove conservative.

Chart credit PlanB

Inflation gauge increases to 2 year high

  • The gap between 10-Year Treasury and TIPS yields has widened to ~ 2% on the back of vaccine roll-out, stimulus and Fed’s new inflation approach
  • This will probably drive USD demand lower and BTC prices higher

Chart credit Bloomberg

Seasonality. January is usually down.

  • Bitcoin gained just over 48% in December
  • January is typically a down month, though, the median decline is -11% with Bitcoin down 4 of the previous 6 years

BTC / M2…we’re just getting started

  • An interesting way to view an inflation hedge, asset price divided by broad money supply. From this perspective, BTC is only just beginning to set new highs

Chart credit Travis Kling

BTC ends the year on top (again)

  • Bitcoin ended the year +306% significantly outperforming other major asset classes

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

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