Blockstream Markets Weekly — Sep 3, 2021

Miners record $1.4B in monthly revenue, BMN breaks 1 BTC, Twitter working on BTC support, El Salvador approves $150M BTC fund, Skybridge capital expects $100K by year-end, Paul Tudor Jones rumored to be preparing new BTC fund, and volatility drops as BTC tests $50K

By Jesse Knutson

What’s happening in the markets?

Meme mania

Bitcoin recovered off of last week’s monthly options expiry lows to end the week just shy of $50,000 and up for the seventh time in the past ten weeks.

The dollar dropped to a one-month low, supporting gains in gold and Bitcoin. Global equities continued to grind higher with US tech stonks refreshing all-time highs as jobless claims dropped to a pandemic era low.

Retail remained active in both traditional and crypto markets with meme stonks continuing to churn and Non-BTC digital assets gaining to within 5% of the May high.

Hash crash

Newsflow was a bit slower this week but remained positive.

Bitcoin mining was again in focus with miners continuing to post strong results in the wake of June’s China-driven hashrate crash. As a whole, the BTC mining industry saw $1.4B in August revenue. August was the second-best month on record for miners with strong results from the Blockstream Mining Note, as well as listed miners Hut 8 and Marathon. HUT gained +30% this week while MARA was up +15%.

The Lightning Network was another big focus this week following reports that Twitter is planning to roll out Bitcoin tips and El Salvador’s approval of a $150M Bitcoin fund part of which will be used to distribute $30 in Bitcoin to wallet users.

Monkey jpegs

Non-BTC digital assets enjoyed another big leg up this week, expanding outperformance vs Bitcoin to a four-month high. I think this is probably reflective of a big change in market participants.

Over the past 12 months, there’s been an incredible amount of institutional and even sovereign interest in the space. The bulk of that interest has been focused on Bitcoin.

Given the massive change in market participants this year, I think it makes sense to see some price divergence between Bitcoin and more speculative digital assets from time to time.

The macro backdrop is still extremely supportive of the Bitcoin investment thesis, though, and I think you can see some pent-up demand in how Bitcoin-themed stonks like Hut 8, Marathon, and MicroStrategy have outperformed Bitcoin year-to-date. I think this probably implies a strong appetite for Bitcoin exposure by mainstream institutional investors restricted by mandate and regulatory limitations.

Mean reversion

After recovering from the end of week selling around August’s month-end options expiry, price continues to look constructive.

$50,000 is a major line of resistance given the volume that accumulated there in the first half of the year. Once convincingly above $50,000, though, I think new all-time highs are probably just a matter of time.

Looking at the outperformance in non-BTC digital assets, I think we’re getting close to a point where we should start to see some mean reversion kick in. Non-BTC digital assets are outperforming Bitcoin by about three standard deviations vs the 50-day moving average. This might mean a rotation back into Bitcoin.

At the same time, fund flows continue to move tentatively in the right direction, and price action in listed Bitcoin proxies like Hut 8 and Marathon points to growing institutional interest.

Volatility has also really thinned out over the previous two weeks. Volatility (as measured by Bollinger Band Width) has fallen to the extreme bottom end of the year-to-date range. Typically a sharp decrease in volatility foreshadows an incoming price move. I wouldn’t be surprised to see a bit more oscillation around $50,000, but think odds are probably in favor of break higher later in the coming week.

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Bitcoin markets news

Blockstream Mining Note took just 56 days to mine 1 full BTC

  • It took only 56 days of mining for each Blockstream Mining Note to produce 1 BTC
  • Each BMN was originally sold for €200,000 (~ US$240,000) and is backed by 2,000 TH of mining power
  • As a whole, the BTC mining industry saw $1.4B in revenue in August. The second-best month on record

Twitter is working on the ability to receive tips in Bitcoin

  • It’s about time!
  • Will be an expansion of Twitter’s Tip Jar, which allows creators on Twitter to easily receive money from their followers
  • Tip Jar currently supports a number of payment services including Bandcamp, Patreon, PayPal, Venmo, and Cash App
  • The new lightning service will reportedly be Strike enabled and also support Square’s upcoming hardware wallet

Paul Tudor Jones said to be working on a digital disruption fund

  • No detail on this at all, just a tweet
  • Jones has done a lot to drive institutional interest in Bitcoin over the past 12 months after an investor letter in May 2020 that highlighted Bitcoin as a fast-moving inflation hedge
  • Jones personally has been an active investor in crypto infrastructure, participating in FTX’s $900 million round that valued the exchange at $18 billion

El Salvador approves $150M Bitcoin fund

  • El Salvador’s Legislative Assembly has passed legislation creating a $150-million Bitcoin Trust and supporting the development of crypto infrastructure and services across the country
  • The bill passed on Tuesday with strong support, 64 voted in favor and 14 opposed
  • ~ $23.3M has been allocated toward rolling out crypto ATMs and $30 million to incentivize the use of the state-backed “Chivo” wallet

Hut 8, Marathon Digital report strong mining results

Scaramucci: Bitcoin will hit $100,000 by year-end

  • Anthony Scaramucci, CEO and founder of SkyBridge Capital, thinks Bitcoin (BTC) can reach $100,000 before the end of the year

“The bottom line is you have the limited and fixed supply of Bitcoin and you have every month exponentially more demand…As long as I see that, I see those prices rising. So, we’re going to stick with the $100,000 price target”

  • Scaramucci said that SkyBridge now has between $650 to $700M in Bitcoin across the firm’s product portfolio

Binance plans to spin out US business in IPO

  • Binance CEO, Changpeng Zhao, said that its US arm could have an initial public offering in the next three years
  • Binance.US is also set to close on a large private fundraising round in the next two months that should reduce his control of the board
  • Binance generated $800 million to $1 billion in profit last year, according to Zhao, the report added (Coinbase made ~ $300M last year)

Tim Draper: We’re on track for $250,000

  • Draper famously acquired 29,656 coins at $632 from a US Marshalls auction in 2014
  • Draper first made his $250,000 price target in 2018

Fidelity thinks Bitcoin could go to $100M (kind of)

  • While hardly an official target price, Fidelity did show a stock-to-flow chart in a recent Bitcoin webinar that plotted Bitcoin on a trajectory that could take it as high as $100M

Charts

Fidelity hints at $100,000,000 Bitcoin price

  • The chart below is reportedly from a Fidelity Bitcoin webinar
  • Jurrien Timmer, Director of Global Macro Fidelity, hosted the event
  • It’s just a standard stock-to-flow chart, but interesting to see Fidelity marketing presenting a chart that would have got you laughed out of the room a few years ago

Chart credit: Investing.com

Volatility is signaling an incoming price move

  • Volatility, as measured by Bollinger Band Width, is now down to the extreme bottom end of the year-to-date range
  • This should imply a large price move is building

Mean reversion

  • Non-BTC digital asset outperformance relative to BTC is about 3 standard deviations above the pair’s 50-day moving average
  • I think we’re probably getting close to some mean reversion here and think that will likely see some degree of rotation back into BTC

Institutional interest — BTC linked stonks are outperforming BTC

  • I think this points to massive pent up institutional demand for Bitcoin that is being fettered by mandate and regulatory restrictions
  • Mining stocks, particularly, MARA and HUT have been on a rip since the June hashrate crash

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

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