Bitcoin Newsletter - Week 44 2024

Weekly update on all things Bitcoin

November 05, 2024

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TL;DR

  • BTC is up

  • Bitcoin dominance is up

  • Metaplanet Surpasses 1,000 BTC Holdings

  • Bitcoin ETF Inflows Slow Amid $3 Billion Surge

  • Interest Rate Cuts and Election Catalysts Boost Bitcoin Outlook

  • Microsoft Considers Bitcoin Investment

  • Mollah Claims to Be Satoshi Nakamoto

  • Emory University Makes Historic Bitcoin Investment

  • Russia hasn’t Fully Legalize Crypto Mining

  • US Tightens Foreign Crypto Mining Restrictions

  • Argentina's Central Bank Hosts Bitcoin Mining Exhibit

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Bitcoin Price

Crypto is up this week, with BTC being up 3.0% and ETH up 0.9%:

Bitcoin dominance has increased over the week, starting from 55.57% to a high of 56.78% and ending at 56.5%. Investor sentiment, regulatory changes, technological advancements, and the overall growth of the cryptocurrency sector shape Bitcoin's market dominance. Its reputation as "digital gold" also enhances its position, making it a key player in the market.

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.

Bitcoin recently experienced significant price fluctuations driven by short-term holder behavior and macroeconomic indicators.

On October 31, as Bitcoin's price fell below $70,000, short-term holders (STHs) transferred approximately 54,000 BTC—valued at around $3.76 billion—to exchanges, marking the largest sell-off since April, according to Glassnode.

This sell-off reflected dwindling profit margins, with the Short-Term Holder Spent Output Profit Ratio (SOPR) dropping below 1.01, indicating many were liquidating near breakeven.

Analysts identified potential support around $68,000 as exchange liquidity data suggested buying interest might emerge.

However, the market's sentiment shifted on November 1 after the U.S. nonfarm payrolls data revealed only 12,000 new jobs added in October, well below expectations of 106,000.

This weak employment report raised concerns about a softening labor market and fueled speculation that the Federal Reserve may consider interest rate cuts, which typically benefit risk assets like Bitcoin.

Consequently, Bitcoin rebounded past $71,000, with key support levels noted around $69,000 and $71,300.

The October monthly close was significant, erasing four months of losses and suggesting a bullish sentiment as traders monitor the interaction between market dynamics and economic factors.

Bitcoin (BTCUSD) Analysis:

As of November 1, 2024, Bitcoin (BTC) closed at $69,520, down $2,731.92. The short-term outlook remains positive, supported by a rising trend channel and a lack of immediate resistance, although caution is warranted as it hovers near critical support at $66,000. Medium-term trends suggest potential upside towards $84,547 following a recent break above $67,241, yet a dip below $71,000 raises concerns about possible declines. Long-term indicators show overall bullish sentiment, but vigilance is necessary due to recent price fluctuations.

Expected Trading Ranges: Support at $66,000; Resistance at $71,000.

Market Outlook

Bitcoin is currently trading at $69,520 within a rising trend channel. Short-term support is at $66,000, with resistance around $71,000. Medium-term targets point to $84,547, but volatility necessitates caution as the market navigates these key levels.

BTC/ETH ratio has seen an increase:

Over the past six days, the Bitcoin to Ethereum (BTC to ETH) conversion rate has shown an overall increase. It started at 27.02 ETH on October 26 and gradually rose, peaking at 27.89 ETH on October 31. While there was a slight decline to 27.58 ETH on November 1, this still reflects a general upward trend in the conversion rate during the past week, with a notable 14.84% increase for Bitcoin against Ethereum over the last 30 days.

“Bitcoin onchain data hasn’t looked this strong since Q1.”

— Charles Edwards

Financial News

Tokyo-based investment firm Metaplanet has emerged as one of Asia's largest corporate holders of Bitcoin, recently surpassing 1,000 BTC after acquiring an additional 156.78 BTC on October 28, 2024. This marks a significant milestone for the firm, whose stock price has soared by over 600% year-to-date, drawing investor interest due to its disciplined and strategic approach to accumulating Bitcoin.

With a total valuation of approximately $69 million in Bitcoin, Metaplanet ranks 19th among global corporate Bitcoin holders. The firm's focus on transparency and innovative measures, such as its partnership with the Bitcoin verification provider Hoseki, further enhances its reputation in the digital asset market.

After a remarkable six-day run with nearly $3 billion in inflows, the momentum for U.S. Bitcoin ETFs has decelerated. Coinbase reported $31.3 million in inflows as October ended, marking a cooling period after strong investments that saw BlackRock’s iShares Bitcoin Trust gain $317 million.

Meanwhile, most funds saw outflows except for Valkyrie’s Bitcoin Fund, which added $1.9 million. With Bitcoin ETF holdings now surpassing 1 million BTC, they rival Satoshi Nakamoto’s wallet balance and have reached half the asset value of gold ETFs in just ten months. Bitcoin is trading near $71,150, with analysts watching market volatility closely ahead of the U.S. election.

Bitcoin ETFs have recently experienced record inflows, led by BlackRock’s iShares Bitcoin Trust (IBIT), as the cryptocurrency approaches its all-time high near $73,500. On October 30th alone, IBIT attracted $872 million, marking its largest single-day inflow since its inception, while overall ETF trading volumes hit a peak of $4.75 billion.

Institutional and retail investors are driving this demand, seeing ETFs as a streamlined path to Bitcoin exposure. With 983,000 BTC held collectively by U.S. ETFs, analysts anticipate these funds will soon exceed Satoshi Nakamoto’s holdings, underscoring their impact on Bitcoin’s price and adoption.

WonderFi CEO Dean Skurka sees favorable macroeconomic conditions in Canada and the U.S. bolstering Bitcoin’s price over the next 6-24 months. The Bank of Canada’s recent 50 basis point rate cut and the U.S. Federal Reserve’s continued rate reductions are expected to stimulate both retail and institutional investment in digital assets.

Additionally, Skurka highlights the 2024 U.S. Presidential election as a significant factor, with crypto advocates favoring a Trump win. However, he suggests Bitcoin’s long-term outlook is positive regardless of the election outcome, as reduced interest rates and strong institutional demand via Bitcoin ETFs signal sustained growth.

Blockstream CEO Adam Back, an early Bitcoin developer and creator of the Hashcash proof-of-work system, highlighted the surging interest in Bitcoin among financial institutions, driven in part by U.S. spot Bitcoin ETFs. Back explained that major financial players are eager to expand Bitcoin-related offerings, while some sovereign wealth funds and nations are beginning to explore investments in the asset.

He also addressed how Bitcoin’s regulatory risks have significantly decreased, signaling increased stability. While noting Bitcoin’s resilience and security, Back emphasized ongoing challenges in blockchain scalability, mentioning the Lightning Network as a promising yet still-evolving solution for faster transactions.

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Adoption News

Microsoft shareholders are voting on a proposal to invest a portion of the company’s $3 trillion corporate treasury in Bitcoin, driven by inflation concerns regarding the US dollar. BlackRock, holding significant influence as Microsoft’s second-largest shareholder, is promoting this investment alongside its Bitcoin ETF for clients.

This decision could set a precedent for other major tech companies, such as Apple, Amazon, Google, Meta, and Nvidia, which collectively hold $377 billion in cash. Despite this, Microsoft has urged shareholders to vote against the proposal, highlighting a cautious approach toward digital asset investments.

At a recent event in London, British-Asian macroeconomist Stephen Mollah declared himself to be Satoshi Nakamoto, the pseudonymous creator of Bitcoin, coinciding with the 16th anniversary of the Bitcoin whitepaper's release. Mollah's claim was accompanied by promises of evidence, which ultimately included unconvincing screenshots after technical difficulties with his laptop.

While an event organizer alleged the presence of "cryptographic" proof, no such evidence was presented. Mollah, who has previously attempted to assert his identity as Bitcoin's creator, announced intentions to move Bitcoin from the Genesis block in the future, asserting he is the sole Satoshi Nakamoto, despite skepticism surrounding his credentials and claims.

BRICS nations, including Brazil, Russia, India, China, South Africa, and new members like Argentina, UAE, and Ethiopia, are considering Bitcoin for international trade to reduce reliance on the U.S. dollar. Matthew Sigel of VanEck highlights that mining Bitcoin is viewed as a strategic move for economic resilience among these countries.

Russia is leading in mining infrastructure, partnering with BitRiver and RDIF to enhance its capabilities. As Western sanctions hinder traditional financial access, Bitcoin may offer an alternative. This shift signifies a broader trend towards financial autonomy, potentially redefining global trade dynamics and the U.S. dollar's role.

Emory University has become the first U.S. university to invest in Bitcoin, committing approximately $15.1 million in shares of the Grayscale Bitcoin Mini Trust. This investment reflects a growing institutional interest in digital assets, signaling a significant shift from traditional investment strategies within academia.

By acquiring nearly 2.7 million shares, Emory joins the ranks of institutions diversifying their endowment portfolios in response to the rising popularity of cryptocurrencies. Additionally, Emory holds $768,269 in shares of Coinbase, demonstrating a commitment to innovation and financial diversification.

Florida’s CFO Jimmy Patronis has proposed exploring Bitcoin as an investment for the state’s $205 billion retirement fund, suggesting it could offer stability and diversification. In a letter to the State Board of Administration, Patronis highlighted Bitcoin’s potential as a hedge and likened it to “digital gold.”

His proposal includes launching a “Digital Currency Investment Pilot Program” through the Florida Growth Fund, mirroring efforts by states like Wisconsin and Michigan. Patronis’s push aligns with Florida’s stance on decentralized finance, especially following the state’s legislative ban on Central Bank Digital Currencies (CBDCs).

Mining News

Russia has introduced new laws that outline the regulatory framework for cryptocurrency mining, with President Vladimir Putin signing legislation that establishes legal definitions for mining activities and imposes requirements on registration and reporting. However, experts like Nikita Zuborev from BestChange and attorney Maria Agranovskaya clarify that this is not full legalization but a means to formalize industry operations.

Restrictions include bans on foreign entities and specific industry players from mining, along with potential regional restrictions due to power shortages. While the new laws bring mining out of a legal “gray area,” uncertainty remains around legal methods for selling mined digital assets.

The US has strengthened restrictions on foreign-owned crypto mining operations close to military locations, broadening the authority of the Committee on Foreign Investment in the United States (CFIUS) to scrutinize these activities. In coordination with the Department of Defense, the Treasury expanded rules to monitor and restrict foreign crypto operations near 227 sensitive military sites.

Treasury Secretary Janet Yellen emphasized national security concerns, and in May, President Biden ordered Chinese-backed MineOne to divest from a property near a Wyoming Air Force base. Major domestic companies like Marathon Digital are unaffected, while foreign firms like Bitdeer strategically locate outside restricted zones.

The Central Bank of Argentina (BCRA) has made history by launching a unique exhibition that showcases live Bitcoin mining equipment, becoming the first central bank globally to do so. Opened on October 31 at the BCRA’s Historical Museum, the exhibit, titled "Art, Artificial Intelligence, and the Future of the Economy," features Bitcoin mining rigs alongside artist Alberto Echegaray's “Moneyballs,” made from shredded currency.

This groundbreaking event reflects a potential shift in the BCRA's approach to digital assets, fostering discussions around currency dematerialization and the future of economic systems. Echegaray emphasizes the significance of the exhibition in bridging the gap between art and the evolving landscape of digital currencies.

In October, Bitcoin miners enjoyed a 25.05% increase in revenue, recovering from September's low earnings. As of Oct. 31, hashprice peaked at $54.52 per PH/s, though it later fell to approximately $46.55 as Bitcoin traded around $69,400. Overall, miners generated $1.02 billion, with a remarkable 241.91% jump in onchain fees from $13.86 million in September to $47.39 million in October.

Bitcoin's hashrate reached an unprecedented 765 EH/s, with faster block intervals averaging 9 minutes and 18 seconds, indicating a potential 7.5% difficulty increase expected on Nov. 4, 2024, as the mining landscape evolves.

In the wake of Bitcoin's April halving, miners are facing rising operational costs and declining revenues, prompting significant adjustments in their strategies, according to CoinShares' Q3 report. The average cash cost to mine one Bitcoin has risen to $49,500, up from $47,200 in Q1, with miners like Cormint and TeraWulf managing to maintain lower costs of approximately $15,000 and $19,000, respectively.

The industry is increasingly embracing artificial intelligence and diversifying income streams to cope with tighter margins, while some companies pursue mergers and acquisitions to enhance efficiency and increase their hashing power in this challenging landscape.

VaultCraft launches V2, Skyrockets to $100M+ TVL

VaultCraft debuts new Safe-secured platform, wins $100M+ Bitcoin commitment

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