Blockstream Markets Weekly — January 29, 2021

Blockstream buys $25M in MicroBT rigs, Elon pumps Bitcoin, Goldman Sachs mulls crypto custody, Harvard and Yale buy Bitcoin, Coinbase readies for IPO, record weekly inflows into BTC investment products…and the peasants revolt with GME

8 min readJan 29, 2021

By Jesse Knutson

What’s happening in the markets?

BTFD

Bitcoin on pace to finish at the top end of the week’s range, recovering after two consecutive weeks of declines. End of week gains were boosted by an almost +20% jump Friday Asia time after Elon Musk changed his Twitter bio to “#bitcoin.”

Gains today left tests of the 50-day moving average earlier in the week and two weeks of FUD (fear, uncertainty, and doubt) in the rearview mirror, with newsflow turning decidedly more positive this week.

Gains in Bitcoin came despite a bounce in the USD. Bitcoin looked to be catching a bit of a sentiment boost from GameStop (GME) and a rally in aggressively shorted retail favorites before rocketing higher Friday Asia time.

Elsewhere, we saw tentative signs of improvements in the US economy, with unemployment gains falling below 900,000 for the first time in three weeks and continued optimism that a recovery in the economy will drive risk assets, like Bitcoin and stocks, higher.

However, a rebound in the dollar probably remains one of the main caveats to a continuation of Bitcoin price appreciation in the near to mid-term.

The mining space is heating up

Headlines this week were dominated by more indications of broadening institutional adoption and an uptick of activity in the mining space.

This week's top story was obviously Blockstream’s purchase of $25M worth of MicroBT mining rigs. We’ve got a lot going on in the mining space and welcome investors to reach out to discuss our capabilities and products.

Also, in the mining space, listed gaming company The9 (NCTY) announced a deal to deploy 26,000 mining rigs at facilities throughout China and HUT8 (HUT) secured financing for an $11.8M purchase of new hardware.

Goldman Sachs, Harvard, Yale, Bridgewater…who’s next?

Coinshares’ weekly flow report highlighted a record $1.3B of inflows into ‘crypto’ investment products last week, 97% of which went into Bitcoin products.

In line with that, there were several institutional adoption headlines this week, including Goldman Sachs reportedly looking at an expansion into digital asset custody, speculation that many university endowments have already invested in Bitcoin, and Bridgewater slowly getting up to speed on Bitcoin.

Likewise, we also saw some new details on Coinbase’s upcoming IPO, which is reportedly targeting a late 1Q21 direct listing at a valuation thought to be around $50B (the previous whisper was as high as $78B).

The peasants revolt

One of the top stories in markets this week was the GameStop roller coaster ride.

The GME saga is the market equivalent of a peasant revolt involving a mob of Reddit users ripping the faces off of Wall Street hedge funds. The story so far has involved a ~ 1,200% two-week price rip, short-sellers losing an estimated $5B, a $7B hedge fund teetering on bankruptcy, crap shares outperforming blue chips, and hedge funds globally learning the game isn’t much fun once the rabbit gets the gun.

The reaction by the-powers-that-be was predictable; more censorship and a further tightening of the pressure cooker, as Robinhood halted trading in GME and Discord banned the r/WallStreetBets server.

There couldn’t be a better advertisement for the power of decentralization and the importance of censorship resistance. It feels like no matter how this plays out; all roads lead to Bitcoin.

What’s next

We’ve let a lot of steam out over the past couple of weeks, and price action is starting to look more constructive again.

The 50-day moving average continues to provide a strong line of support despite a couple of tests this week. As mentioned last week, $30,000 marks the convergence of both the 50-day moving average and the Stock-to-flow implied fair value price. We’ve now spent almost four weeks above the $30,000 level. That’s more time than we spent between $20,000 and $30,000 and is important to building a solid base for another move higher.

Rounding out positive signals this week, we also saw aggregated funding rates flip negative (a positive price signal as shorts pay longs), a sharp uptick of stablecoin inflows, and a record $1.3B of inflows into Bitcoin investment products (charts all below).

Onwards and upwards.

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Bitcoin markets news

Blockstream buys $25M of MicroBT mining machines

To be deployed at facilities in the US and Canada.
Watch this space! More news is coming!

Tesla CEO Elon Musk sends Bitcoin sharply higher

Bitcoin jumped ~ 20% higher after Musk changed his Twitter bio to “#bitcoin” and posted: “In retrospect, it was inevitable.”
Follows an unprecedented rally in GME and several other aggressively shorted retail favorites.

Goldman Sachs said to be mulling an expansion into crypto custody

Has reportedly released a request for information (RFI) to explore digital asset custody.
Thought to be part of a broad digital strategy, citing stablecoins in relation to recent missives from the U.S. Office of the Comptroller of the Currency.

Harvard, Yale, and Brown endowment funds have bought Bitcoin

Harvard, Yale, Brown, and the University of Michigan, as well as several other colleges, have been buying crypto (I think they probably mean Bitcoin) directly on exchanges.
Some of the university endowment funds have reportedly held accounts with Coinbase for as long as 18 months.

Coinbase said to opt for a direct listing, valuation around $50B

A direct listing means the company will opt out of the more typical book-building process, the associated investment bank fees, and prevent institutional investors from arbing a discount to dump on retail.
Slack and Spotify both opted for the direct listing route.
Recently, Coinbase had been rumored to be seeking a mid to high digit $70B valuation. It’s last publicly disclosed valuation was during their Series E at $50B.
IPO is expected in February or March. It will be an important data point for the space. If it goes well, you’ll see many ‘crypto’ businesses benchmarking that price and looking to go public.

Bridgewater’s Dalio finally gets BTC…oh wait…no, he still doesn’t

Bridgewater Associates, the world’s largest hedge fund, is looking at Bitcoin as an asset as investors seek alternatives to bonds and currencies.
In the firm’s “Daily Observations” note to clients on Thursday, founder Ray Dalio said,

“…To have invented a new type of money via a system that is programmed into a computer and that has worked for around 10 years and is rapidly gaining popularity as both a type of money and a storehold of wealth is an amazing accomplishment…”

Dalio went on to say that he expected new entrants into the ‘crypto’ space to eventually come along and displace Bitcoin. Bitcoin’s first mover advantage, the billions in infrastructure supporting it, the brand, and most importantly, its unique degree of decentralization (to the point where we don’t even know who the founder is) will be incredibly hard, likely impossible, to replicate.
Watching mainstream finance figure out the inflation hedge value of Bitcoin and then struggling to get up to date with the rest of the value proposition and industry dynamics is both surreal and painful to watch.

ARK Investment: BTC will be an inflation hedge for tech companies

Last week, bitcoin miner Marathon Patent Group bought $150m in Bitcoin.

“I think we’re going to hear about more companies putting this hedge on their balance sheet…particularly tech companies who understand the technology and are comfortable with it”

Tether surpasses $25B AUM

A $5B increase in just the past month.
Tether continues to be the target of a lot of criticism from the United States (interesting given that Tether doesn’t service US clients). Still, the price has remained stable, implying that solvency concerns across broader markets are low.

Coinshares: Last week saw record investment product inflows

The report cites record investment product inflows last week of $1.3B. 97% of total inflows went into Bitcoin products, despite comprising just 83% of digital asset investment products.
Ethereum saw inflows of just $34M last week.
The author thinks that total investment products represent just 6.5% of total Bitcoin trading turnover.

Nasdaq listed miner to buy 26,000 Bitcoin mining machines

The9 (NCTY) announced an agreement to buy 26,007 bitcoin ASICs as part of its plan to launch a cryptocurrency mining initiative.
Most of the hardware has already been deployed to Xinjiang, Sichuan, and Gansu.

Scaramucci: GameStop phenomenon is positive for Bitcoin

Smartphones and low-cost trading are democratizing the formerly insular and highly concentrated business of money management.
SkyBridge has an overall Bitcoin exposure of around $385 million.

Most crypto hedge funds underperformed Bitcoin last year

The average rate of return for actively managed ‘crypto’ funds was 166% vs. a 300% gain in Bitcoin.
Of a total of 820 funds, only 10 funds registered more than 300% growth.
Buying and holding Bitcoin is a tough strategy to beat in a bull market.