Blockstream Markets Weekly — June 18, 2021
Blockstream Mining Note launches tranche 2, MicroStrategy reloads for more BTC buys, Spain’s BBVA opens BTC to private wealth, China crackdown continues, SEC kicks ETF decision back, Miami wants miners, Panama may follow El Salvador, 81% of fund managers say Bitcoin’s a bubble as holders turn net buyers, and Fidelity says the bottom is in
By Jesse Knutson
What’s happening in the markets?
Taper tantrum
Bitcoin ended the week modestly lower as consolidation between $30,000 and $40,000 stretched into the fourth consecutive week.
Bitcoin gave up a break above $41,000 earlier in the week as stonks tanked and the USD spiked on speculation that the Fed may hike interest rates sooner than expected. Tech stocks were a bit of an exception with NASDAQ constituents ending just off an all-time high.
Next Friday is Bitcoin futures/options expiry which may provide a bit of excitement after 30 days of sideways trading.
Mixed bag
News flow was more of a mixed bag this week after a string of positive headlines last week.
Top stories this week included: MicroStrategy filing to sell $1B of stock to buy more BTC, Spain’s BBVA launching BTC services for private wealth clients, the SEC pushing back its decision on the VanEck’s latest ETF application, China looking to have accelerated its Bitcoin crackdown with hashrate falling and reports of increased exchange scrutiny, Panama considering a new bill to accept Bitcoin as legal tender, and Miami looking to attract Bitcoin miners with cheap nuclear power.
Miner movements
30-day average hashrate ended the week just shy of a new YTD low.
China’s share of global hashrate at the beginning of this year was thought to be just over 50%. In May, Chun Wang, the co-founder of one of Bitcoin’s largest mining pools, said that China had dropped below 50% of global hashrate for the first time in April. China is almost certainly well below 50% now.
The crackdown looks to be skewed towards provinces and regions like Inner Mongolia where energy production is largely coal-focused (it’s unclear how much of this is due to China’s ongoing trade war with Australia and how much is being driven by environmental concerns). There have been some indications of a more lenient stance from hydro-powered provinces, though reports this week suggest that shut down orders are already being implemented in Sichuan.
But with the end of the rainy season in September and a drop in cheap excess hydro energy, many miners will likely be unable to return to their regional hubs and will be looking for new homes.
Many seem to have relocated to Kazakstan, but there is a lot of interest in North America as well. In January of this year, Miner Daily estimated that North America represented 11% of global hashrate. We’re likely more than double that now.
Bottom pickers
Bitcoin sentiment still has the needle buried deep in the fear territory, but market commentary looks to be increasingly constructive with ‘the bottom is in’ calls this week from John Bollinger and Fidelity’s Director of Global Macro Jurrien Timmer.
I think it’s also interesting to note the big divergence in opinion between Fund Managers and Bitcoin holders.
Bank of America’s latest Fund Manager Survey reports that 81% of respondents still think that Bitcoin is in a bubble (despite the recent -54% pullback).
Meanwhile, though, data from Glassnode shows that addresses holding Bitcoin for longer than six months have just turned net buyers for the first time since October of last year and that total supply held by these long-term holders continues to increase.
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Bitcoin markets news
Blockstream Mining Note tranche two goes live
- Each BMN is backed by 2,000 TH
- All in, 36-month cost of ~ $120/TH
- This tranche will be open for 10 days, mining begins July 7
BBVA opens BTC trading to private welath clients
- BBVA is a 166-year-old Spanish bank
- The bank will initially offer Bitcoin-only trading and custody services
- Reports strong demand from investors looking for portfolio diversification
Miami wants BTC miners to go nuclear
- Mayor Francis Suarez told CNBC that Miami is working to lower the cost of electricity to entice Bitcoin miners to make the move to Florida
- Suarez is looking to attract global miners with Miami’s virtually ‘unlimited’ supply of cheap nuclear energy
Panama set to present BTC bill next month
- Panama is a dollarized economy similar to El Salvador and has been using the USD since 1904
- The domestic currency is used in conjunction with the dollar and is pegged 1:1 to the dollar
- Panamanian congressman Gabriel Silva says that the country’s constitution prohibits the government from mandating only certain currencies as legal tender, which may leave room for Bitcoin acceptance
SEC pushes back CBOE, VanEck ETF application
- The SEC said in a filing this week that it will seek more public comments
- I think this shows continued reluctance to list a BTC ETF. The SEC has been collecting public comments on ETF applications for the past five years already. They should have a stack of them by now
MicroStrategy files to sell $1B of stock to buy more Bitcoin
- MicroStrategy says the firm plans to sell up to $1 billion in stock to buy even more Bitcoin
- The announcement of this stock offering comes just after the company completed a $500 million junk bond sale to finance Bitcoin purchases
Lightning network hits record high capacity
- Over 1,512 BTC are now locked up in Lightning channels
- +60% YoY for a total of ~ $60M
Bitcoin hashrate falls on China mining crackdown
- Hashrate at the moment is just north of a YTD low
- Think this could potentially accelerate into August and September as the rainy season in China ends and miners operating in Sichuan are unable to return to their regional mining hubs
- For miners in North America, it’s a good time to be mining as hashrate growth is constrained by the global semiconductor shortage and hashrate migration out of China
Exchanges tighten leverage functionality on China concerns
- Some Chinese crypto exchanges have reportedly trimmed leverage available to traders to a measly 5x from the normal 125x
- Chinese users reportedly no longer have access to derivative product trading
- Thought to be part of a broader regulatory crackdown in China
World Bank can not assist El Salvador Bitcoin implementation
- Who in El Salvador thought that the World Bank was the call to make on Bitcoin implementation?
“While the government did approach us for assistance on bitcoin, this is not something the World Bank can support given the environmental and transparency shortcomings”
Tim Draper reiterates $250K 2023 price target
- Draper first made his $250k price call in 2018
- Drapers price prediction seemed to be based on an increase in transactional usage and broader user adoption
Kyle Bass says actual inflation is probably ~ 12%
“…when you look at the inflation numbers these are chain-weighted inflation numbers, these are numbers that are designed to be artificially low. If you look at a non-chain-weighted index of inflation, we think it’s running about 12% and with short-term interest rates still at zero, that means that people with money in the bank or savings are losing, call it, 5–12% of the purchasing power annually. We have 34% more money in the US system than we had 14 months ago. Of course, we’re going to have inflation…”
Charts
Bitcoin the most undervalued in a decade
- Stock-To-Flow Deflection shows Bitcoin is the most undervalued in the past 10 years at the current price
- The Stock-to-Flow Deflection is the ratio between the spot price of Bitcoin and its Stock-to-Flow ratio
Chart credit: Michaël van de Poppe
Holders turn net buyers for the first time since October 2020
- Those holding coins for six months or more turned Net Buyers this week for the first time since October of last year
Chart credit: William Clemente III
Long-term holders continue to accumulate
- Total supply held by long-term holders (longer than six months) continues to increase
Chart credit: William Clemente III
Most fund managers think Bitcoin is a bubble
- 81% of fund managers surveyed think that Bitcoin is still a bubble, despite having fallen -40% off its all-time high
- Would think that is probably bullish
Chart credit: Bank of America Global Fund Manager Survey
Goldman Sachs thinks we’re still early
- The fact that GS is making this chart suggests to me that we’re actually further to the right than they’re acknowledging
Chart credit: Bank of America Global Fund Manager Survey
The bottom is in
- Fidelity’s Director of Global Macro thinks that Bitcoin has already bottomed
- The chart looks at the head and shoulder chart patterns that have played out in Goldman Sachs’ Retail Favorites index and Bitcoin, the chart implies that Bitcoin should follow retail favorites higher
Chart credit: Jurrien Timmer
