Blockstream Markets Weekly — Sep 10, 2021

Energy and infrastructure giant Macquarie partners with Blockstream on mining, BMN tracking Bitfinex Securities listing, El Salvador buys 550 BTC and makes Bitcoin legal tender as Ukraine legalizes BTC and Panama looks set to follow

By Jesse Knutson

What’s happening in the markets?

Bad news is good news

Bitcoin looks to have stabilized somewhat after a liquidation-driven flash crash earlier in the week and is now on pace to end down ~ 10% for the worst weekly drop in four months.

Stonks continued to plow new highs as market data showed economic growth lagging behind economist expectations and likely putting a nail in the coffin of taper talk for the time being.

Despite a pick up in volatility, Bitcoin strangely finds itself in roughly the same position as this time last week; just north of the 200-day moving average and again eyeing a break above the $50,000 mark.

What a week

News flow was very positive this week despite one of the largest intraday price swings in months. This week was arguably one of the biggest weeks in terms of adoption headlines in Bitcoin’s history.

Stories this week included, energy and infrastructure giant Macquarie partnering with Blockstream on carbon-neutral Bitcoin mining, the Blockstream Mining Note on track for listing on Bitfinex’s new STO (security token) exchange, the Ukrainian parliament unanimously legalizing Bitcoin, Bitcoin becoming legal tender in El Salvador, Panama introducing a bill to follow suit, Starbucks, McDonald’s and Pizza Hut accepting Bitcoin in El Salvador and El Salvador buying the dip and adding 550 BTC to the national coffers.

The sovereign domino chain

This week El Salvador became the first country to both adopt Bitcoin as legal tender and hold it on its balance sheet. Bitcoin is now an integral part of President Nayib Bukele’s economic strategy.

The Bitcoin and Lightning Network experiment being embarked on in El Salvador is going to be a very interesting, real-time battle test of Bitcoin, the infrastructure around it, and the potential for disruption.

The international and domestic remittance market is one area to watch. On average, remittances account for 50% of total monthly household income, the bulk of that is skewed to rural communities. 94% of households use wire transfers for everyday necessities.

On the payments side, Twitter was awash this week with images of consumers using the Lightning Network to purchase coffee and meals in El Salvador.

El Salvador also added 550 Bitcoin to the national coffers this week; buying 400 Bitcoin on Monday and an additional 150 Bitcoin into the Tuesday price dip.

In a nearly unanimous vote, the Ukrainian Parliament also adopted a law this week that legalizes and regulates Bitcoin and other digital assets.

Two weeks ago, normally conservative Cuba, passed a law to recognize and regulate cryptocurrencies, citing efforts to drive economic growth.

Panama appears to be next in line and is kicking around a draft of its own cryptocurrency law. There have also been rumblings from Uruguay, a major regional power producer, and Brazil.

If El Salvador is successful, expect the dominos to fall at an accelerated rate.

Hogs slaughtered

Bullish sentiment had been on the rise coming out of the long weekend in the US and generally positive news flow over the previous few weeks pushed industry-wide leverage to the highest level since Bitcoin’s mid-April all-time high.

Not surprisingly a modest price wobble was all it took to kick off a liquidation cascade with $3.5B worth of trades and 330,000 traders liquidated in just 24 hours.

News flow and sentiment are still constructive and there was no fundamental reason for the pullback other than excessive greed and too much risk in the system. These kinds of sharp pullbacks are typically the easiest for Bitcoin to recover from.

Pigs make money, but hogs get slaughtered.

Groundhog Week

After a bit of mean reversion in volatility, a surge in liquidations, and a weekly low all the way down to $42,000, we strangely find ourselves in a place not that different than this time last week — just north of the 200-day moving average with an eye to making another stab at $50,000 resistance.

I think the setup still looks pretty good despite the wobble; funding rates have retreated to the lowest level in two weeks, but remain positive, aggregate leverage has corrected to the midpoint of the twelve-month range, BTC on exchange took another leg lower and is now sitting around a three year low, and news flow really couldn’t get much better.

Last week I highlighted the decreasing volatility and the probability of an incoming Bollinger Band Squeeze. It’s not uncommon in this kind of setup to see a head fake before revealing a more significant move in the opposite direction. I think the mean reversion in volatility is probably just getting started. John Bollinger commented yesterday that he’s constructive on the setup as well, so right or wrong on the tea leaves, at least I’m in good company.

Bitcoin markets news

  • Macquarie is an Australian investment bank with ~$600B AUM and a big focus on green energy and renewables
  • Macquarie is one of the biggest players in global energy markets and the largest manager of infrastructure and real estate assets globally
  • Mining is essentially an infrastructure investment business, so makes a lot of sense to see giants from traditional assets allocate some balance sheet to the mining space
  • Follows Blockstream’s previous green mining partnerships with Aker and Square
  • Follows Bitfinex’s announcement this week of a new Security Token platform
  • Paolo Ardoino, CTO at Bitfinex Securities said:

“Bitfinex Securities Ltd provides a regulated platform serving small and medium-cap companies that are currently underserved by existing, inefficient capital markets…We will challenge the incumbent stock exchanges by leveraging the enhanced efficiencies of the blockchain with the aim of one day creating the most liquid exchange in the world”

  • The new listing will allow BMN investors better liquidity and more precise price discovery
  • In a nearly unanimous vote, the Ukrainian Parliament adopted a law that legalizes and regulates cryptocurrency
  • Said to be part of a wider push by Kyiv to lean into Bitcoin
  • By 2022, the country plans to open the cryptocurrency market to businesses and investors, according to the Kyiv Post
  • El Salvador has become the first country in the world to make Bitcoin legal tender
  • President Bukele previously suggested that legalizing Bitcoin would spur investment in the country and help the roughly 70% of Salvadorans who don’t have access to “traditional financial services”
  • As dollarized economies suffer all the downside of inflation and get none of the upside, adopting Bitcoin is a prudent role of the dice to offset currency debasement and position the country to lead in a high growth industry
  • The fact that we now have nation-states buying the dip seems like an important point in Bitcoin’s history
  • El Salvador bought 400 Bitcoins on Monday and an additional 150 Bitcoins into the Tuesday price dip
  • Very encouraging to see some of the largest food and drink franchises in the world now accepting Bitcoin
  • This will provide them with an interesting trial that we may see eventually ported over to other, larger markets
  • Tapiero is a well-known fund manager who previously spent time with Tiger Management, Duquesne Capital Management, and SAC Capital Advisors.
  • His new fund is backed not only by a titan of finance, Alan Howard, but public pensions like the Municipal Employees’ Retirement System of Michigan

“I still think Bitcoin is going up to $400,000 or $500,000 and potentially more, but it’s not going to be a straight shot and you’re going to have lots of volatility”

  • Panamanian Congressman Gabriel Silva has introduced a bill to regulate the use of digital currency within the nation. The proposed bill in Panama would recognize Bitcoin as a national alternative payment method.

“Today we present the Crypto Law. We seek to make Panama a country compatible with the blockchain, crypto assets, and the internet. This has the potential to create thousands of jobs, attract investment and make the government transparent”

  • Coinbase co-founder and CEO Brian Armstrong went public with the battle he says the SEC has now picked with his company’s proposed lending product
  • At the heart of Armstrong’s issue is that other crypto platforms have already been offering interest on crypto assets, similar to the way banks pay interest on cash deposits
  • Many platforms don’t support onboarding from US users for fear of triggering action from the likes of the SEC or the NYAG
  • Interesting to see how the tables have turned. For much of the previous 20 or 30 years, international investors have struggled to gain access to innovation in the US. Now it seems the SEC is intent on making it hard(er) for US investors to gain exposure to the innovation happening in global markets
  • The deal gives Canaan the option to sell up to 200,000 mining rigs to Canaan
  • If executed will reportedly be the largest mining rig deal ever
  • Genesis Digital has previously purchased over $93 million of Canaan’s mining machines. Included in the renewed partnership deal was the sale of an initial 20,000 mining machines, which included the purchase option of up to an additional 180,000 machines
  • Will probably depend on Canaan’s ability to get chips for those rigs. Have heard they are in the queue for 5NM allocation from TSMC , but we will have to see how that plays out
  • Visa supports 180 currencies globally and has 170M users
  • In a recent interview with a local Brazilian news outlet, Eduardo Abreu, vice president of new business at Visa, revealed the company’s intentions to integrate Bitcoin onto its platform for both payments and as a store of value
  • Not sure why this is being rolled out in Brazil specifically


  • The estimated all exchange leverage ratio from cryptoquant, suggests that leverage across the space had surged to levels on par with Bitcoin’s all-time high in mid-April
  • Not anymore. A wave of derisking has significantly reset leverage across platforms

Chart credit: Cryptoquant

  • On longer-term charts circulating on Twitter, it looks like its down to around a three year low
  • This should be price positive as demand recovers from this week’s flash crash and supply on exchange looks to be trending increasingly thin

Chart credit: Cryptoquant

  • I’m sure this is a huge part of the demand behind USD stable coins where it’s very common to earn > 5% interest on savings
  • I think this is also part of the squeeze pushing fixed income investors into alternative investments like Bitcoin

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