Blockstream Markets Weekly — March 12, 2021

ECB bond backstop and Biden’s stimmy pump markets, energy giant Aker teams up with Blockstream, GBTC continues to wobble, Chinese corporates pour cash into BTC, Goldman Sachs reports strong client demand, WisdomTree makes ETF application…and Bitcoin breaks back above $1 trillion market cap

What’s happening in the markets?

Biden stimmy and the bond backstop

Mixed bag

March madness

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Bitcoin markets news

Blockstream announces partnership with Aker

  • Aker is an industrial investment company with ownership interests in across a number of sectors including, oil and gas, renewable energy, maritime assets, and industrial software. The company has extensive energy assets around the planet
  • Aker has also dedicated $58M to Seetee, a division that will work exclusively on Bitcoin
  • Aker’s Chairman and largest shareholder, Kjell Inge Røkke, said:

“By merging Aker’s industrial capabilities and experience with Blockstream’s leading position in Bitcoin and blockchain technology, we believe that both parties can greatly accelerate the pace of development.”

MicroStrategy CEO: Sovereign wealth funds are next

  • Singapore might be one of the first given the Bitcoin ecosystem investments made by GIC and Temasek over the years

Slam dunk turns into max pain as GBTC arb trade fizzles

  • I think the potential for this to blow up or severely maim a few major crypto funds is going unnoticed by most Bitcoin market observers
  • As we’ve mentioned previously, I think the discount is being driven by retail investors buying Canadian ETFs (that are cheaper and track NAV better) and a pick up in selling from hedge funds playing the arb trade (running for the exit as the probability of a US ETF increases)
  • Grayscale’s parent company Digital Currency Group also announced this week that it would begin a $250M share buyback of GBTC. This seems like a no-brainer for them as the GBTC will eventually return to parity with NAV
  • Grayscale is also reportedly looking for ETF specialists, potentially signaling a shift in the fund’s future structure

Bitmain’s Taiwan offices raided on reports of talent poaching

  • Bitmain has reportedly been recruiting top engineers from TSMC (2330 TT) and Mediatek (2454 TT) with promises of doubling their salaries
  • Taiwan is extremely sensitive to preserving its global dominance in the chip design and foundry business because this is probably the single best deterrence to an acceleration of cross-strait tensions
  • It seems like a very dangerous strategy to risk angering TSMC when they are the only high yield source globally for 5nm mining chips

JPM files for Cryptocurrency Exposure Basket

  • Looks like it will be an unequally weighted basket of digital asset exposed companies
  • Constituents include Microstrategy, PayPal, Square, Riot, and the CME Group amongst others

Goldman Sachs: client demand for Bitcoin is increasing

  • Client demand is rising and the company is trying to figure out how it can meet that demand within its regulatory framework
  • Goldman is also said to be exploring a bitcoin exchange-traded fund and has issued a request for information to explore digital asset custody
  • Goldman Sachs’ COO was also quoted this week as saying:

“The pandemic has been a significant accelerant…there is no question in or mind there will be more digital commerce…and (use of) digital money”

China’s Meitu, pours cash into Bitcoin and might buy more

  • Meitu is a selfie app with close to 500 million users worldwide
  • Has purchased $18M of Bitcoin and could add more
  • The board has reportedly approved a total of $100M of crypto purchases

WisdomTree files for ETF application with the SEC

  • WisdeomTree is a giant in the ETF and ETP (exchange-traded product) space with a total AUM of almost $42B
  • Recent Canadian ETF approvals have rekindled applications with the SEC. In recent weeks we’ve seen applications from several other potential providers including a third application from VanEck

Norway’s second richest man makes the case for Bitcoin

  • Aker’s Kjell Inge Røkke wrote a very well articulated, 23-page letter to shareholders explaining why the company was establishing a Bitcoin focused entity

“Like gold, bit­coin has the abil­i­ty to pro­tect us against politi­cians who have the pow­er to de­stroy our mon­e­tary base. Is that re­al­ly nec­es­sary, you might ask? Ask So­vi­et pen­sion­ers whose poli­cies are still ho­n­oured by the Russ­ian gov­ern­ment, al­though the val­ue of those pay­ments is bup­kis be­cause of hy­per­in­fla­tion in the 1990s. Strike up a con­ver­sa­tion with a 19 Turk­ish work­er the next time you are on va­ca­tion and ask how it feels to have your cur­ren­cy de­pre­ci­ate by al­most 50 per­cent against the dol­lar in a sin­gle year. It has hap­pened, it hap­pens, and will hap­pen again.”

China bans? Weibo said to shut down exchange accounts

  • Weibo is a Chinese social media platform with close to 500m users
  • OKEx, Binance, and Huobi said to have had their Weibo accounts shut down this week

Charts

Exchange Net Outflows supportive of price gains

  • Exchange flows have been mostly negative since the March price crash, this should be generally supportive of price gains
  • Inflow peaks coupled with price gains are a pretty good indicator of tops

Bitcoin exchange balances continue to dwindle

  • This implies that most Bitcoin holders have a low near-term propensity to sell. That should be price positive

Solid week of Coinbase net outflows

  • Most of the outflow this week looks to have come from Coinbase
  • I think Coinbase is dominating US institutional and corporate flow, so this is probably a pretty solid proxy for institutional buying

ECB balance sheet….funny business!

  • ECB balance sheet hit a new high in the run-up to this week’s meeting
  • Total assets rose by €9.8bn to €7,120bn over the past week
  • ECB balance sheet is now 71.3% of European GDP vs 35% in the US
  • Remember when Lagarde called for a tighter regulation of Bitcoin’s ‘funny business’?

US Corporate Investment Grade Real Yield

  • Market yields of corporate bonds are now below inflation
  • Buying these bonds will result in a loss in real (inflation-adjusted) terms
  • I think this is a big part of the reason why USD stablecoins now have ~ $50B AUM and why BlockFi can raise $350M at a $3B valuation…the world is starving for yield

Inflation on our minds

  • Google searches for ‘Inflation’ highest since 2004
  • Definitely supportive of the Bitcoin investment thesis

Replay from last week…

  • The wedge worked!

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

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