Blockware Intelligence Newsletter: Week 157
Bitcoin on-chain analysis, mining analysis, macro analysis; overview of 12/6/24 - 12/13/24
It costs $100,000 to buy 1 Bitcoin.
It costs $40,000 to mine 1 Bitcoin.
Bitcoin: News, ETFs, On-Chain, etc.
1. Bitcoin Trades Sideways $100,000
If you had told me earlier this year that this would be the title of a newsletter section in 2024, I would have been ecstatic. Bitcoin facing friction around the $100,000 mark is unsurprising given the psychological effect of such a large price milestone.
On every time frame (long, medium, and short) the set up is bullish:
Short: Clear formation of a bull flag, positive near term catalyst of a Strategic Bitcoin Reserve (SBR) after the Trump Inauguration in January
Medium: SBR, Fed Rate Cuts, Broader Macro Bull Market, Halving-Induced Supply Shock / Historic Bitcoin Cyclicality
Long: Fiat Debasement, Widespread Bitcoin Adoption
2. BlackRock Suggests 2% Bitcoin Allocation
In a recent report called “sizing Bitcoin in portfolios”, BlackRock recommends a 2% allocation to Bitcoin. The 2% figure was derived from the fact that within a typical 60-40 portfolio, each of the Magnificent 7 stocks represent roughly 1-2% of the total portfolio. Equal exposure into BTC can enhance the returns of the portfolio without exposing it to too much excess volatility – ideal for institutional investors.
“Those stocks (Mag7) represent single portfolio holdings that account for a comparatively large share of portfolio risk as with bitcoin. In a traditional portfolio with a mix of 60% stocks and 40% bonds, those seven stocks each account for, on average, about the same share of overall portfolio risk as a 1-2% allocation to bitcoin. We think that’s a reasonable range for a bitcoin exposure.”
3. BTC Capturing 2% of Global Wealth = $857,000 per Coin
Total global wealth currently equals $900 Trillion. This is effectively Bitcoin’s ‘Total Addressable Market.” Bitcoin is a savings technology, competing with Real Estate, Stocks, Bonds, and Gold as assets with which humans can use to store value.
Bitcoin capturing just 2% of the “wealth pie” will result in a Bitcoin market cap of ~$18 trillion, and a price of ~$857,000 per Bitcoin.
This provides a great perspective on how early we still are to Bitcoin. A 2% allocation is minor in the grand scheme of things, but it will impact the Bitcoin price by orders of magnitude.
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General Market Update
4. Long Duration Treasury Yields on the Rise
Investors are continuing to express their concerns about long-term inflation and fiat debasement. While assets like Bitcoin & Gold push to all-time highs, long-duration US Treasuries are plummeting (yields rising).
The 10-year yield is up nearly 20-basis points this week to 4.379% while the 30-year yield is up ~4.599%.
We are on the verge of the 4th consecutive year of negative returns for long-duration treasuries ($TLT). Meanwhile, Bitcoin and gold are reaching new all-time highs.
Listen carefully to what the market is telling you: inflation IS NOT transitory. High inflation is here to stay and you need to purchase hard assets in order to preserve your purchasing power.
5. MicroStrategy to Enter Nasdaq 100
At the time of writing this has not been 100% confirmed but the PolyMarket odds are up to 90%. The Nasdaq 100 ($NDX) is one of the largest, most liquid stock indices in the world. There are hundreds of billions of dollars that passively allocate to this index every single year – this will provide more structural buy pressure for $MSTR. Moreover, MicroStrategies inclusion into the $NDX provides the market with yet another signal towards the significance and success of a Bitcoin treasury strategy.
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Bitcoin Mining
6. RIOT & CleanSpark Announce Convertible Note Offerings
The parade of convertible note offerings keeps marching down the proverbial streets of the Bitcoin world. This week Riot & CleanSpark became the 3rd & 4th large, publicly traded US Bitcoin miner to replicate the MicroStrategy play: issuing convertible notes, enabling low (or zero) interest rate borrowing in order to grow their Bitcoin treasury.
Riot raised $525 million at 0.75% interest and CleanSpark raised $550 million at 0%
Bitcoin companies with access to public capital markets are quickly realizing the tremendous advantage they have. There is a race to acquire as much Bitcoin as possible and public companies have tools at their disposal that are unavailable to private investors or entities.
7. Energy Gravity
At a typical hosting rate today, the average miner requires ~$65,000 worth of energy to produce 1 BTC (green line). The orange line shows how many $ (output) miners are able to earn for each kWh of power (input).
This metric is different from the chart at the top of the newsletter. This one looks at the aggregate cost of production (combination of all miners) while the former chart breaks it down by machine type
To learn more about Energy Mass & Energy Gravity, read our report here.
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.