Blockstream Markets Weekly — April 16, 2021

Miner revenue surges, Pantera says BTC will hit $700k, $5.6B HF Brevan Howard allocates 1.5% to Bitcoin, Semiconductor tightness likely to continue, Turkey bans crypto, Novo says we’re due a washout, and Bitcoin ETF action heats up across North America

8 min readApr 16, 2021

By Jesse Knutson

What’s happening in the markets?

Sparkle and fade

Bitcoin faded slightly off of a new all-time high to end the week +4%. Gains this week bring the weekly winning streak to three in a row putting Bitcoin on track for the seventh consecutive month of gains.

The end of week pullback looks to have been driven by a number of factors, including: declines in Coinbase after its public listing this week, a drop in US equity futures, profit-taking after a new all-time high of almost $65,000, a correction in overheating altcoins, and a new crypto ban in Turkey.

It’s not all bad news

News flow was more mixed this week, but it wasn’t all bad. Top stories this week included reports that $5.6B hedge fund Brevan Howard could allocate 1.5% of AUM to Bitcoin, North America’s first Bitcoin ETF breaking the $1B AUM mark just two months after launch, and SEC Bitcoin ETF applications increasing to eight in total.

Pantera also had a good note out this week showing how Bitcoin adds about $200 for every million users it adds. The report notes that if Bitcoin is eventually adopted by every smartphone user on the planet it could eventually hit a peak price of $700,000 or 15% of global M2.

For miners, the good news included reports from TSMC and analysts indicating that the global semi shortage, especially at the ≤ 7nm level, could persist for years. Chip tightness means that hashrate growth will likely remain constrained and miners with hardware already in the field will likely continue to take in record revenues. Miner revenue jumped to $80M/day today, implying annualized industry-wide revenue of $29B.

Was Coinbase a disappointment?

Cionbase’s valuation after yesterday’s session settled at ~$60B off an initial high of ~ $100B. Given that Coinbase’s listing was executed via a direct listing and not an initial public offering, I think some volatility is probably to be expected.

There was no investment bank pre-set price, no support from allocated institutional investors, and no lockups on insider selling.

$60B still makes Coinbase one of the largest financial service providers in the world, so it’s probably a bit early to call it a disappointment.

While I think Coinbase share performance is probably tied to Bitcoin price, a continued slide in Coinbase shares is unlikely to have much of an impact on Bitcoin’s longer-term price performance.

What is dead may never die

There were some hard to ignore signs of irrational exuberance percolating throughout the broader digital asset space this week.

Particularly a resurrection of dinosaur altcoins, non Bitcoin cryptocurrencies that were popular in the last cycle and that most of the market had largely written off. There were some really big moves this week , including:Dogecoin +313%, XRP +64%, ETC 60%, BSV +49%, and BCH +43%.

Looks like we’re already starting to see some mean reversion here.

Resistance becomes support

With close to 100% of the top 50 altcoins outperforming Bitcoin over the past 90 days, I think Mike Novogratz is right; we’re probably due a washout. Eventually, I think that probably ends with a rotation back into Bitcoin, but short-term Bitcoin may get caught in the downdraft.

Last week’s resistance just north of the $60,000 level is now support. If Bitcoin can hold its ground here, then I think we’ll be in a good position to resume an upward trajectory in the coming weeks.

📬 Register your email to receive Blockstream Markets Weekly delivered straight to your inbox. 📬

Bitcoin markets news

Coinbase will lift valuations across the space

I think Coinbase’s first few days of trading were actually pretty successful, it faded off an early high, but I think that’s largely to be expected
Current price puts its market cap at US$60B
This is going to encourage more of the space’s bigger company’s to go public and will also probably wet VC appetites for private companies raising money

TSMC lifts CAPEX another $2B, shortage likely to persist for years

Will lift its already record-high $28B annual CAPEX to $30B this year
Earlier in the month, TSMC committed to a total $100B spend over the next 3 years
Fabs are currently running at over 100% utilization, and they are still unable to meet client demand
My former colleague, seasoned Taiwan equity analyst Kirk Yang, said that low-end automotive demand could see some relief in the next six or nine months, but capacity will likely remain tight for years
For Bitcoin, I think this could mean hashrate growth is constrained for longer than many are anticipating

Brevan Howard to start buying Bitcoin

The article mentions the $5.6B hedge fund will begin buying digital assets, I think this probably means Bitcoin as they mention precedents like Paul Tudor Jones
Says that the fund is looking to initially allocate ~ 1.5% of AUM or US$84M

Hashrate dips after Chinese coal mine accident

Not exactly sure of the connection here, but there are reports of BTC mining farm shutdowns in the wake of the incident
The article reports power outages across the region and 21 people still trapped in the mine
The seven-day average global hashrate is down about -4% from its peak on April 11, 2021

Canada lists first inverse Bitcoin ETF

Will be part of a pair of ETFs launched by Horizon ETFs Canada, allowing investors to take both long and short positions

A total of eight issuers have filed BTC ETF applications with the SEC

The approval of multiple ETFs in Canada, anticipation that Gary Gensler — the nominee to be next SEC chairman — will be more Bitcoin-friendly and investments from numerous financial and technology sector heavyweights has significantly increased the probability of SEC approval

North America’s first Bitcoin ETF breaks $1B AUM

Comes just two months after its initial launch
The Purpose Bitcoin ETF now has a total of $1.46B CAD ($1.16B USD) under management
The Purpose Bitcoin ETF has shown how important a first-mover advantage can be. I would expect the SEC to recognize this and probably approve several American ETFs at once when the time comes

Robinhood restores trading after crypto outage

The outage looks like it only lasted for a few hours
Judging by the comments on their Twitter notification, it looks like there is some suspicion that the outage was caused by volatility in smaller, super high beta cryptos. Dogecoin is +313% this week. Lots of Shiba Inus in the comments

Cathie Wood’s ARK funds added ~ $250M of Coinbase stock

Bought the stock for three of ARK Investment Management’s actively managed funds
ARK also holds a ~ 5% stake in GBTC and has a $500,000 price target on Bitcoin

Turkey bans Bitcoin payments

Turkey has announced a ban on all direct and indirect cryptocurrency payments
With surging inflation and a weakening currency, authorities are obviously keen to tighten domestic capital controls

Novogratz warns of market washout

“I’ve seen a lot of weird coins like Dogecoin and even XRP have huge retail spikes, which means there’s a lot of frenzy right now…that never ends well, and so we’ll probably have a washout at one point.”

Charts

Bitcoin price vs user growth is freaky deaky

Pantera this week noted that the relationship between Bitcoin price appreciation and user growth is ‘pretty freaky deaky’

Chart credit Pantera

Bitcoin’s terminal value is $700,000

Pantera reports that Bitcoin price increases by about $200 for every additional million users
Given that 3.5B people globally have smartphones, that could put the terminal value of Bitcoin at $700,000 and total market cap at $15T or 15% of global M2
Facebook has 2.7B active users. It’s not impossible

Chart credit Pantera

Overheating altcoins about to get hit by mean reversion

The chart below shows that nearly 100% of the top 50 altcoins have outperformed Bitcoin over the previous 90 days
This is the highest reading in about three years
Think it implies a fairly high probability of mean reversion and a rotation into Bitcoin

Chart credit Blockchaincenter.net

This time last year…

Bitcoin is up about 850% YoY

96% of SPX constituents > 200D MAVG

Just over 96% of S&P 500 constituents closed above their 200-day moving average this week
That’s the highest reading on record (chart goes back to 2002)
A pullback in equities would likely weigh on Bitcoin price

Chart credit Charlie Bilello

Hashrate falls following reports of China shutdowns

Not exactly sure of the connection here, but there are reports of BTC mining farm shutdowns and inspections in the wake of a coal mining incident in China that has 21 workers trapped underground
The chart below shows a ~ 4% drop in the 7-day average hashrate from the April 11 high

Chart credit Blockchain.com

Miners could make close to $30B this year

Industry-wide miner revenue jumped to $80M/day today. Annualized out that implies full-year aggregate revenue of $29B
Higher Bitcoin prices and constrained hash rate growth will likely see this number continue to grind higher until the global semiconductor supply shortage is sorted