Blockware Intelligence Newsletter: Week 115
Bitcoin on-chain analysis, mining analysis, macro analysis; overview of 12/16/23 - 12/22/23
1. Blockware Intelligence Podcast. Mitch Askew interviews Morgen Rochard, a Bitcoin-focused Certified Financial Advisor. Morgen makes the case for why Bitcoin should play a vital role in everyone’s long-term savings plan. Mitch & Morgan discuss the different strategies Bitcoiners can take to minimize future taxation, the trade-offs of buying Bitcoin through retirement accounts, and more!
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General Market Update
As we head towards the holidays, let’s take a quick glance across the equity and bond markets to see where we stand.
2. Nasdaq 100 Index (Weekly). The Nasdaq 100, which tracks the largest 100 companies in the broader Nasdaq Composite, has printed a new all-time high this week above $16,764.86. It’s almost hard to believe after a jaw-dropping 8 straight weeks of gains, but the index has moved nearly 18% from November 1st to today. With over $6T of capital parked in money market funds, the sense of FOMO is very real and likely only to continue into 2024. Note that stocks are fairly extended here, and a pullback is not out of the picture.
3. Russell 2000 Small-Cap Index (Weekly). As examined last week, the Russell 2000 appears to have confirmed a Stage 2 breakout as it heads higher after about a year of consolidation. This is one of the key signals that seasoned traders look for to indicate the start of a cyclical bull market. The small-caps provide the foundation that the rest of the market needs to sustain a long-term move higher.
4. QQQ Put/Call Ratio. Simply put, the put/call ratio measures the sentiment of options traders in a specific security. At the moment, the P/C ratio for the Nasdaq ETF QQQ is showing that investors are certainly very bullish, but there may still be room to run before things get too overheated. In 2023, ~1.6 seemed to be the value that indicates it’s time for the bulls to rest. Be on the lookout for signs of a pullback or consolidation. If you missed this move, have patience.
5. 2-Year US Treasury Yield (Weekly). With seemingly inevitable rate cuts in the cards for Q2-Q3 2024, the Treasury market has seen a resurgence of buyers as future rates fall. This is one of, if not the, reason we’re seeing such powerful price action in the equity market. With yields on the decline, the opportunity cost of not holding Treasuries also declines, providing justification for capital deployment into riskier assets.
Bitcoin Exposed Equities
7. Iris Energy (IREN). Iris Energy ($IREN) has been an exciting name to watch this week after providing their most recent production update on Tuesday afternoon. With the team wrapping up a fundraising round to expand their fleet by 10 EH/s, and construction of their flagship West TX facility ahead of schedule, we’ve seen IREN’s price soar over 30% this week. While the street clearly has eyes for RIOT, MARA and CLSK, IREN is a darkhorse name who clearly didn’t get enough love before.
8. BEE Comparison Table. As you can see below, it’s generally been an amazing week of price action for Bitcoin Exposed Equities. Over half of the 25 names tracked here were up over 20% from Monday-Thursday, and only 2 (BITF and BTCS) were down on the week. What’s more encouraging is when you compare these charts to that of spot BTC. Institutions clearly believe BTC is cracking above $45k sometime soon.
Bitcoin Technical Analysis
9. Bitcoin / USD. Now that we’re about 2 weeks into a consolidation, price structure has provided a lot of insight into the current state of BTC. Despite their best efforts, bears have been unable to sustain any downward pressure on price. This current pennant pattern is one that could very easily launch BTC to $50k in coming weeks. Keep a close eye on the $44.5-45k range as we head into the holiday season.
Bitcoin On-Chain / Derivatives
Elizabeth Warren’s Anti-Bitcoin Crusade: The Massachusetts Senator, notorious for spouting anti-Bitcoin rhetoric in an attempt to please the banking lobbyists in her back pocket, has recently issued a bill hostile to Bitcoin and crypto. Her claims that Bitcoin is nothing more than a method by which terrorists fund their operations is so blatantly false that it’s almost satirical. Twitter (X) community notes debunked her claims this week, citing that traditional banking rails are the preferred method of financing for those engaged in criminal activities; not the public, transparent ledger, who would have thought!?
Don’t let the antics of a rogue senator make you forget the many strides that have been made this year to make the United States a Bitcoin-friendly jurisdiction. Bitcoin adoption within the US, and the world more broadly, is a grassroots effort, starting with individuals and working up the chain of institutions. The decentralized nature of legislation within the US, with 50 sovereign states that are capable of self-governing, provides defense against any potential hostility from the Federal government.
Here’s a (very) brief list of the positive developments that have occurred in 2023 that signal the United States is positioning itself to embrace the Bitcoin industry:
3 Presidential Candidates are openly Pro-Bitcoin (Kennedy, Ramaswamy, DeSantis)
Pro-Bitcoin stance from the largest asset manager in the world (Blackrock)
Clarified regulatory stance from the SEC (Bitcoin is a commodity)
42% of the Bitcoin supply hasn't moved in at least 3 years.
57% of the Bitcoin supply hasn't moved in at least 2 years.
70% of the Bitcoin supply hasn't moved in at least 1 year.
80% of the Bitcoin supply hasn't moved in at least 6 months.
An unprecedented level of illiquid supply is about to come face-to-face with an unprecedented level of demand. Short-term Bitcoin price action remains noise at this point. Until HODL’d coins find their way back into the market, the Bitcoin price will continue to rise in the medium-term. The entities possessing a majority of the Bitcoin supply are the same people stacking throughout the entire bear market when the outlook seemed bleak. These entities are highly inelastic in response to an increase in Bitcoin price, as evidenced by the fact that they’ve continued to hold and accumulate despite BTC being up ~160% in 2023. The market will have to engage in serious, exponential price discovery before we see some of these coins become available for sale.
HODL Waves Realized Price: The headwinds Bitcoin has experienced at ~$44,000 are most likely due to bull market buyers selling BTC at their cost-basis in order to "breakeven." Looking at the realized price of each HODL wave shows the aggregate cost-basis based on how long each UTXO has been held. Coins last moved 2-3 years ago are the only cohort that is still underwater.
I expect that Bitcoin will continue its upward trek once these sellers are exhausted.
Next stop: $69,000
Accumulation by Users with .01 - 1 BTC: Addresses with less than 1 BTC have accumulated ~925 BTC per day over the past 14 days. This is on par with the new supply issued to miners. In 4 months the daily issuance will drop to 450 BTC per day.
Notably, accumulation from these users has actually increased over the past month despite the increase in the Bitcoin price. Not only did these users stack at an increased rate during the price dips of 2022, but they are approaching the price pumps with similar enthusiasm.
ETH/BTC: ETH has made another leg down in terms of its Bitcoin-denominated price, breaking its 2022 low. ~.05 is an important historical support/resistance level. A loss of this level could spell trouble for ETH holders.
The institutional interest in Bitcoin, not ETH or “crypto”, as well as the ordinal trend shifting demand for NFTs to Bitcoin, are the primary reasons for ETH being down 26% against BTC in 2023.
% Miner Revenue from Transaction Fees: High fees continue to be the gift that keeps on giving to Bitcoin miners. Multiple blocks have been mined over the past week in which transaction fees were larger than the 6.25 BTC block subsidy. The average % of revenue from transaction fees over the past 30 days is 18%.
If you’re tired of sitting on the sidelines and not participating in this mining revenue rally, you can buy turnkey ASICs through the Blockware Marketplace. The sign-up process takes less than five minutes, and as soon as your transaction is confirmed on-chain you will instantly begin hashing.
Hashprice: Miner revenue per terahash per day remains at year-date-highs of ~$0.12. A re-test of the cycle low could be in order in the immediate aftermath of the 2024 halving. Miners with the most efficient ASICs and lowest power costs will be able to endure the drop in revenue, just as they endured the 2022 bear market. However, rising TX fees and a rising BTC price could mean that, even with the decreased block subsidy, hashprice doesn’t reach its 2022 low.
Energy Gravity: At a typical hosting rate today, new-gen Bitcoin ASICs require ~$16,219 worth of energy to produce 1 BTC.
All content is for informational purposes only. This Blockware Intelligence Newsletter is of general nature and does consider or address any individual circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal, business, financial or regulatory advice. You should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.