Blockstream Markets Weekly — April 30, 2021
Bitcoin bounces, Roubini warns of stagflation, JPM launches BTC fund, Nexon buys $100M BTC, SEC pushes VanEck ETF decision back to June, China’s top 3 telcos have been mining Bitcoin, Tesla tests liquidity, Fed signals more upside for BTC and stonks, and Facebook & Apple struggle to get off Zero
By Jesse Knutson
What’s happening in the markets?
The $6 trillion dollar man
Bitcoin is on pace to snap a two-week losing streak with a ~ 10% rebound off of last week’s low.
Bitcoin’s bounce this week was supported by continued gains in US equities following strong 1Q21 GDP growth, the Fed signaling low rates for a long time to come, Apple, Facebook, and Samsung all beating analyst estimates, and President Biden announcing another $1.8T in spending — bringing Biden administration spending in the first 100 days to a grand total of $6T.
With tapering plans shelved, it looks like rates will likely remain low for the foreseeable future. Goldman thinks (chart below) the Fed doesn’t begin tapering until at least the end of next year, with rate hikes not expected until the end of 2023.
For risk assets like stonks and Bitcoin, that means number go up.
The legacy system’s blowoff top
As notorious Bitcoin critic, Nouriel Roubini, noted earlier this month, “there is no shortage of inflationary threats on the horizon”. Roubini warns that stagflation (high inflation, low economic growth) is probably on its way. Roubini is wrong on Bitcoin, but probably right on stagflation.
This week saw a deluge of inflationary data points, including Biden’s $6T total stimulus spending, the ECB’s balance sheet hitting a new all-time high and gaining to 75% of Eurozone GDP, Lumber prices now +232% since the start of the pandemic, and copper, housing, and stocks all hitting new all-time highs.
As of 4Q20, global debt was already 356% of global GDP. I think we’re well into the parabolic territory now.
The herd is coming
Newsflow this week remained light after last week’s sell-off.
One of the key themes of the week, though, was corporate adoption with reports that South Korea‘s Nexon had purchased $100M of Bitcoin, Bitcoin passing Tesla’s liquidity test, and China’s top three telcos all caught mining Bitcoin.
In market news, JP Morgan launched an actively managed BTC fund, Skybridge Capital told investors not to sweat Bitcoin’s volatility, and the SEC pushed back the VanEck Bitcoin ETF decision to at least June.
Unlucky number seven
Bitcoin looks likely to end the month down ~-7%, ending a six-month win streak. Six up months in a row is already the best run of gains since 2013, so some degree of consolidation was inevitable.
After a surge in liquidations last week, monthly options expiry today, a funding rate reset, and the first monthly decline since September of last year, I think price is probably decently positioned to move higher. The next few weeks will be interesting.
In the near term, price looks wedged between the 100-day moving average at ~$51,000 and the convergence of the 20-day and 50-day moving averages at ~$57,000. The sooner Bitcoin can regain its footing above the 50-day the better.
Longer-term, though, with US rates likely low for the foreseeable future, a continued deluge of inflationary data points, unprecedented government spending, and incoming tax hikes it’s hard to see how Bitcoin doesn’t continue to grind higher.
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Bitcoin markets news
- Said to be preparing an actively managed fund as early as this summer
- The fund will be offered to clients in JPMorgan’s private wealth division
- Follows similar offerings from Morgan Stanley, Galaxy Digital, and NYDIG
- NEXON purchased 1,717 bitcoins at an average price of around $58,226
- Represents less than 2% of the firm’s cash on hand
“…Our purchase of bitcoin reflects a disciplined strategy for protecting shareholder value and for maintaining the purchasing power of our cash assets…”
- Data centers operated by China Mobile, China Unicom, and China Telecom said to have all been issued ‘emergency notices’ to report on their activities
- This is likely more the result of enterprising employees and officials leveraging access to hardware and power than it is a government or corporate strategy to build a Bitcoin position
- Elon Musk said Tesla sold 10% of its Bitcoin holdings to demonstrate Bitcoin’s liquidity, but also said that he hasn’t sold his personal Bitcoin
- Tesla had previously acquired more than $1B worth of Bitcoin, with the sale generating $100M of profit
- Musk also commented that Bitcoin had passed Tesla’s liquidity test
- The SEC announced Wednesday that it would push back its VanEck ETF decision to June 17
- The VanEck application is one of three filings acknowledged by the SEC
- Lots of rumors heading into Facebook and Apple numbers that updated financials would reveal newly added Bitcoin positions
- Nothing yet. Though probably just a matter of time
- Thinks this bull market is still younger than the previous two (meaning in total length, number of days)
- Says that drivers include extraordinary monetary supply growth and still early stages of the adoption cycle
“You have to accept 20–30% pullbacks in the bull cycle”
”We continue to be pleased with our bitcoin strategy. We successfully raised more than $1 billion of additional capital in the quarter to expand our bitcoin holdings, which now exceed 91,000 bitcoins”
- The price per 1,000 board feet of lumber is at an all-time high of $1,188
“Supply, which is already backlogged, simply can’t catch up as demand continues to grow with the start of the home building and home renovation seasons.”
- Comes less than a month after the administration’s $2T infrastructure plan
- The proposal includes $1 trillion in new spending and $800 billion in tax credits, much of which is aimed at expanding access to education and child care
- The Wallstreet Journal says that Biden’s stimulus spending is now up to $6T. Given he’s just 100 days into his administration, that’s $60B of spending/day
What inflation? Median CPI is at a multi-year low
- A great chart from Lyn Alden below, it shows that while CPI is only at 2.6% (and median CPI is actually at a multi-year low), virtually every other way of measuring inflation is way higher
Chart credit Lyn Alden
Goldman sees US economic growth peaking this quarter
- So this is what strong economic growth feels like…hmm…
- This time next year should be fun
Chart credit Goldman Sachs via Holger Zschaepitz
Goldman expects tapering 1H next year, rate hikes 2H23
- This is probably positive for risk assets like Bitcoin and stonks
Chart credit Goldman Sachs via Zerohedge
Lumber prices hit all-time high
- Supply has been constrained by government covid lockdowns and will likely get worse as we enter the North American building season
Chart credit Fortune
Copper on pace for an all-time high
- Metals of all kinds are on a rip, but copper is leading the pack
- Rally is fueled by stimulus, near-zero interest rates and signs of recovery
- Copper is also a clean energy play as it used extensively in EV and solar power systems
Chart credit Bloomberg
Case-Shiller U.S. National Home Price Index hits ATH
- Pretty wild given that 16.5 million Americans are still receiving unemployment benefits
Chart credit FRED
Monthly options expiry — this time it’s different
- Over the last eight months, Bitcoin has tended to trade up off the monthly options expiry
- The last three months have seen selling into the days leading up to the expiry
- This month was a bit different with the bulk of selling coming a week before the monthly options expiry
- We’ll have to wait and see if the pattern established over the previous few months holds