Bitcoin Newsletter Week 18 2024

Weekly update on all things Bitcoin

May 07, 2024

TL;DR

  • Bitcoin Price is Down 0.8% This Week

  • Block Launches DCA Program to Procure Bitcoin

  • Bitcoin Valued at $175B Held by ETFs, Nations and Companies

  • Hong Kong's Bitcoin ETFs Stumbles in Their Quest for Traction

  • MicroStrategy Unveils the Orange Decentralized Identity Protocol

  • Bitcoin-Backed Synthetic Dollar Hits the Scene Promising a 25% Yield

  • Snowden Launches Dig at Bitcoin Devs

  • Bitcoin Miners Achieved Second-highest Monthly Revenue in April

  • Bitcoin Miners Amp Up Sales Amidst Sluggish Demand Surge

  • Bitcoin Mining Becomes U.S. Foreign Politics

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Bitcoin Price

Crypto is stagnant this week, with BTC being down 0.8% and ETH up 1.0%!

Bitcoin dominance has been decreasing over the week, starting at around 52.1%, topping at 52.12% and ending the week around 51.3%. Capital often starts to flow into ETH and other altcoins as the price is increasing for more risk-on assets as well, causing a lower Bitcoin dominance as we have started to see over the course of multiple weeks.

It’s going to be interesting to see whether this trend will continue in the short term, as capital in crypto tends to flow initially to BTC and then further out on the risk-curve, starting with altcoins like ETH and then into mid- or low-cap coins.

The Bitcoin halving is coming up this week. If history is any guidance we will continue to see BTC dominance climb up until after Bitcoin halving, whereafter people start to look for higher return moving further on the risk curve entering altcoins. This typically starts with ETH, and then on to mid- and low cap coins. Other coins being moved into are typically “ETH killers” like SOL, AVAX and other other L1s. Yet ETH is still the king amongst altcoins, as price action this week also shows.

With BTC dominance decreasing and the ETH price decreasing more compared to BTC, the BTC/ETH ratio is trending up or and stay stagnant around 19.9 ETH per BTC, underlining that BTC continues to be king in crypto, but alts like ETH are gaining momentum.

Financial News

The payments company Block (SQ) has initiated a dollar-cost averaging (DCA) strategy to increase its existing substantial bitcoin (BTC) holdings. Under the leadership of CEO Jack Dorsey, the company started allocating 10% of its monthly bitcoin-related gross profit towards purchasing additional bitcoin starting in April, with intentions to continue this practice throughout 2024.

Block reported $80 million in bitcoin gross profit for the first quarter, as per its earnings data. If this profit level persists for the rest of the year, the company would accumulate an additional $24 million worth of bitcoin under this initiative.

Block already possesses significant bitcoin reserves, having acquired 4,709 bitcoins in October 2020 and an additional 3,318 tokens in early 2021. With the current price hovering around $59,000 per bitcoin, this stash is now valued at approximately $4.7 billion. In addition, Block announced their Q1 2024 results:

  • Revenue: $5.96B (up 19% year-over-year)

  • Net Income: $2.09B (up 22% year-over-year)

  • Earnings-per-share: $0.85 per share

VanEck's recent report reveals that approximately $175 billion worth of bitcoin is currently held by various entities, including ETFs, nations, and public and private companies. The report highlights a growing interest in bitcoin among institutional investors, with hedge funds, asset management firms, and endowments increasingly recognizing its potential as a store of value.

This amount represents around 15% of the total bitcoin supply, as estimated by CoinGecko. Despite fluctuations, with bitcoin's market capitalization standing at approximately $1.2 trillion, its price has seen a decline in the past week, dropping from over $64,000 to $57,000.

Hong Kong's spot Bitcoin exchange-traded funds (ETFs) have significantly underperformed their U.S. counterparts during their first week of launch. Data compiled by Farside Investors reveals that the three spot Bitcoin ETFs introduced on April 30th in the East Asian city have garnered a total of $262 million in assets under management (AUM), most of which was subscribed before the listing. However, their asset inflows amounted to less than $14 million in the initial week, a stark contrast to the billions that flowed into U.S. spot Bitcoin ETFs in January.

Although the Hong Kong spot crypto ETFs were anticipated as substantial improvements over their U.S. counterparts, their performance has fallen short. These ETFs are denominated in three fiat currencies and offer in-kind transfers, allowing investors to directly buy and redeem ETF units via Bitcoin.

Adoption News

MicroStrategy (MSTR), recognized as the largest corporate holder of bitcoin, has unveiled its intention to create a decentralized identity service utilizing Ordinals inscriptions. Earlier this year, the software consulting firm repositioned itself as a "bitcoin development company," pledging to contribute to the advancement of the Bitcoin network through various avenues, including financial markets, advocacy, and innovation.

The introduction of "MicroStrategy Orange" signals the company's commitment to realizing this objective. Founder Michael Saylor disclosed during the company's Bitcoin For Corporations conference on Wednesday that the primary aim of MicroStrategy Orange is to establish decentralized identities on the Bitcoin blockchain, ensuring trustlessness, tamper resistance, and durability.

Hermetica has announced the launch of the first-ever Bitcoin-backed synthetic United States dollar with yield-generating capabilities in the latest development for Bitcoin-native decentralized finance (DeFi). Slated for release in June, the new synthetic dollar, USDh, will offer users yields of up to 25%.

The new synthetic dollar will enable Bitcoiners to hold and earn yield on their U.S. dollars without the need to trust the banking system or gain exposure to non-Bitcoin-related products. The launch of the first Bitcoin-backed synthetic dollar comes two months after Ethena’s USDe launched with a 27.6% yield for holders, creating widespread concerns about the protocol’s sustainability.

Hermetica is a Stacks-native DeFi protocol on Bitcoin and part of a wider movement known as Bitcoin DeFi (BTCFi), which aims to bring DeFi capabilities to the world’s first blockchain network.

Edward Snowden, the former United States National Security Agency contractor, known for leaking classified information and accused of espionage, made waves on the X social media platform this week.

Snowden, recognized as a whistleblower and residing in Russia until 2022 when he was granted citizenship, has become a prominent figure in the media. He enjoys celebrity status, particularly within technology circles, and is renowned for championing freedom and privacy issues.

In a recent post, Snowden cautioned Bitcoin developers about the urgency of integrating privacy features at the protocol level, emphasizing that time is running out. This warning coincided with the announcement of zkSNACKs, the developer of Wasabi Wallet, shutting down. While the exact nature of Snowden's warning remains unclear, he has long been associated with cryptocurrencies like Bitcoin and is a vocal advocate for their adoption and development.

Mining News

During April, Bitcoin miners earned their second-highest monthly revenue in the past year, coming close to the record earnings seen in March. Despite a slight dip from the previous month, miners collectively amassed $1.79 billion. This figure, although lower by $220 million compared to March, surpassed the revenues of December 2023, which amounted to $1.56 billion.

According to data from The Block crypto metrics, miners earned $1.79 billion from block rewards in April, with on-chain fees contributing $281.47 million to this total. March remains the month with the highest earnings over the same period, with miners raking in $2.01 billion, although on-chain fees were significantly lower at $85.81 million.

Miners have transferred a significant volume of BTC to spot exchanges, causing an imbalance in the market. Following the halving on April 19th, miners' earnings have notably declined due to the 50% reduction in block rewards.

At present, mining entities are liquidating their holdings to cover operational expenses. However, if this trend persists and miners' profitability turns negative, it could exert further downward pressure on the price of BTC.

The heightened selling activity by miners has resulted in BTC supply surpassing demand. The cumulative BTC balance on over-the-counter (OTC) desks began to rise when the cryptocurrency reached its peak of $73,000 in mid-March. Since then, OTC supply has continued to increase, reaching its highest level since November 2022, while demand has shown signs of slowing down.

In a letter addressed to National Security Advisor Jake Sullivan, Defense Secretary Lloyd Austin, and Treasury Secretary Janet Yellen, Senators Warren and King pressed the Biden administration on May 1st to provide insight into potential connections between the Iranian government and local cryptocurrency miners.

Warren and King assert that cryptocurrencies mined in Iran might be utilized to evade U.S. sanctions and support terrorist groups such as Hezbollah. They also claim that these funds may have been used in Iran's recent attack on Israel in April.

Iran has faced sanctions from the U.S. and other international entities since 1979. Earlier this year, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on several entities engaged in the illicit export of technology from multiple U.S. companies to Iran.

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