Blockstream Markets Weekly — Nov, 5, 2021
BMN tranche 7 out next Friday, Laos expects ~$200M from mining, Australian ETF breaks records, $400B Neuberger bullish on BTC, Bitcoin dominates Square’s quarterly revenue, Saylor sees trillions in ETF inflows and volatility drops as BTC coils for a big move.
By Jesse Knutson
Calm before the storm
Bitcoin is on pace to squeeze out its second consecutive week of gains.
Stonks continued to plow new highs with tech stonks in the US posting a nine-day winning streak this week — the longest in almost two years.
Bitcoin trading this week was mostly sideways with volatility falling to the lowest level since October of 2021.
Wall Street, sovereigns and mining
News flow this week remained positive.
Top stories included Blockstream announcing tranche seven of the Blockstream Mining Note, Laos expected to earn $190M from Bitcoin mining in 2022, Forbes reporting massive 2022 CAPEX plans from miners, Michael Saylor predicting trillions of eventual ETF inflows, US congressmen lobbying the SEC for a spot ETF approval, Australia’s new crypto ETF smashing first day records, Bitcoin contributing almost half of Square’s quarterly revenue, and $400B Neuberger posting bullish Bitcoin analysis.
Kraken’s October on-chain report highlighted how coins are remaining dormant for longer, meaning that Bitcoin holders may be fueling a supply shock.
Data from Glassnode and CryptoQuant shows that the total of Bitcoin held on exchanges is now at the lowest level in about three years. As mentioned previously, I think this is probably reflective of a low near-term propensity to sell.
Exchange outflows this week were heavily skewed towards Coinbase. Over the previous seven days, Coinbase saw a net outflow of 19,876 BTC, 96% of the total exchange net outflow tracked by Viewbase.
Coinbase looks to dominant the US institutional OTC market. Large Coinbase outflows this week are reminiscent of the persistent outflows seen in 1H21 when institutional interest in Bitcoin began to really accelerate.
Pent up demand
After the blowout launch of the US futures-backed Bitcoin ETF last month, we saw another data point this week indicating how much Bitcoin demand is still being frustrated by mandate and regulatory restrictions.
Australia’s Crypto Innovators ETF (ASX:CRYP) posted the most successful launch in ASX history, eclipsing the record for the most debut inflows in less than an hour of trade.
It beat the previous full-day record in less than an hour and went on to more than 5x the previous record by the end of the day.
While the ETF story has been playing out for years, I think we’re only now really getting a clear gauge of how massive the pent-up demand is.
With declining volatility this week, I think Bitcoin is getting close to another inflection point.
One measure of volatility, Bollinger Band Width, fell to the lowest level since October of last year. I think this probably indicates that we’re are coming to the end of this consolidation phase and sets us up for a volatility squeeze and a big move in price. This kind of setup can break in either direction, but given the broader macro environment, the technical setup, and signs of increasing fund flows, my bet is we break to the upside.
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Bitcoin markets news
- Tranche seven will total €2,600,000 (~ $3,000,000)
- For this round, in excess of 1.95 BTC (~ €108,000, $125,000) will be purchased and added per BMN exactly matching the amount mined on the day of power-up
- Tranche six was the largest tranche issued to date at €13.9 million ($16.1 million) and drew interest from a wide range of individual and institutional investors
- Michael Saylor thinks that Bitcoin is eating gold as fast as it can and over the next two to three years will replace all gold ETFs
“To do that, you need the spot ETF…and once these spot ETF’s roll, I think you’ll see billions, then tens of billions, then hundreds of billions, then trillions of dollars flow into them”
- This resulted in $42M of gross profit, up 115% and 29% YoY
- Square’s overall 3Q revenue totaled $3.84B, making Bitcoin’s contribution come to close to half of total firm revenue
- Square also said on its earnings call that the company doesn’t plan on offering users other cryptocurrencies outside of bitcoin
- It is focused on building out its hardware wallet and plans to allow individuals and businesses to mine bitcoin. In June, Blockstream and Square announced a plan to join forces and build a solar-powered mining facility
- A series of Bitcoin articles are featured prominently on the fund’s website
“For us, Bitcoin’s amalgamation of attractive attributes in combination with its straightforward implementation of blockchain technology makes it uniquely situated as a ‘cornerstone’ digital asset.”
- Total October crypto investment product inflows totaled just shy of $2.1B, with Bitcoin contributing 97% of that
- Think Blockworks might have buried the lead on this one. The article starts off a bit ‘blockchain > Bitcoin’, but think the real highlight is the recognition that Bitcoin is a store of value to many globally
- Bank of America notes that of the roughly 180 currencies in the world, there are plenty that many people would not want their money in and that moving money across borders can be expensive
- Bank of America COO, Tom Montag, said that some of the benefits of cryptocurrencies might not be as relevant to Americans, who have a more stable currency
“The global store of value concept and the global movement [makes] sense to me.”
- JPM says that Bitcoin will likely beat both traditional assets and alternative assets like real estate and hedge funds
- But….they think the fair price of BTC is currently $35,000 and assign a year-end 2022 target of $73,000…if volatility falls
- Bit hard to marry those ideas together
- In a letter sent to SEC Chairman Gary Gensler, two Congressmen articulate why a spot bitcoin ETF should be approved in the U.S.
“We question why, if you are comfortable allowing trading in an ETF based on derivatives contracts, you are not equally or more comfortable allowing trading to commence in ETFs based on spot Bitcoin…Bitcoin spot ETFs are based directly on the asset, which inherently provides more protection for investors.”
- Congressmen. Emmer and Soto argue that spot-based ETFs are more preferred by investors because they can get direct exposure to the asset, unlike the futures ETFs which are based on derivatives
- Would account for close to 7% of the country’s projected 2022 domestic revenue
- Mining is expected to increase projected revenue for next year by 20%
- I think this should probably be bigger news, and likely foreshadows a coming trend of sovereign mining for developing countries with abundant natural resources
- The article says that major listed miners look to increase hashrate by 277% next year
- Notes how the China mining ban has been a boon for North American miners who mined 79% more BTC in 3Q vs 2Q and 155% more than Q1
- I think one thing the article misses, though, is the premium awarded to prop miners vs miners with a greater allocation of capacity to hosting
- Mayors of New York, Miami, and Jackson have all announced their intent to take their salaries (or parts of the salaries) in Bitcoin
- This seems to be some new form of technology or innovation-centered virtue signaling. It’s interesting, though, how an increasing number of cities, states, and countries are turning to Bitcoin as a growth driver
- Saw quite a bit of press on this, but it was only about a 5-second exchange between four comedians that were probably all pretty high
- Rogan is actually where I first learned about Bitcoin with Andreas Antonopoulos’ first appearance in 2014
Miners look to expand bigly
- The companies below are forecasted to increase their collective hashrate by 277% from 17.83 EH/s to 67.34 EH/s.
- This growth will reportedly come from new generation equipment that the miners have pre-ordered and which are scheduled for delivery between now and the latter end of 2022
- Given the global semi shortage, I think miner CAPEX guidance is likely to disappoint massively in 2022
Chart credit: Forbes
Bitcoin on exchanges drops to three year low
- This is an interesting structural trend that just keeps grinding on
- I think this is probably an indication of more, longer-term investors buying Bitcoin and moving it off-exchange for storage
Chart credit: CryptoQuant
US instos buying ?
- Coinbase saw a net outflow of 19,876 BTC, 96% of the total exchange net outflow tracked by Viewbase
- The Coinbase premium (to Binance) also looks to be trending up
- I think this is probably an indication of buying from US institutionals
- Volatility, as measured by Bollinger Band Width, is down to the lowest level since October of last year
- I think that’s an indication that the current consolidation phase is coming to an end and probably foreshadows a big price move incoming