Bitcoin Briefly #28
2024-04-05 - 2024-05-03
🚨 PSA - if you use Samourai, Wasabi, or Phoenix wallets, consider moving your funds to a new wallet.
Here’s what I’ve seen over the past 4 weeks. DM me your thoughts & feedback.
Markets
🎊 Bitcoin price is at $61k, up 7x from $8.6k at the last halving. Bitcoin’s annual issuance of 0.85% is now less than that of gold.
📊 US Bitcoin ETFs: Blackrock’s IBIT 0.00%↑ had 71 days of consecutive inflows (the 10th longest daily inflow streak), bringing in $15.5B during that time. May 1st was a particularly rough day for the ETFs - the first day IBIT had outflows. Head of digital assets for BlackRock says sovereign wealth funds, pension funds, endowments, etc. will be allocating positions in the Bitcoin ETFs in the coming months. Collectively, the ETFs hold 818,510 bitcoin (~4% of the total supply).
🤑 Bitcoin ETF purchases have so far been mostly driven by retail. 13F filings support this claim, showing how investment management firms are slowly buying the ETFs. Notably, 2 firms from Kansas and Minnesota put in $20M each, representing ~5% of their total portfolios. BNY Mellon also bought $1.2M of Bitcoin ETFs.
🇭🇰 Hong Kong Bitcoin ETFs began trading on April 29th and disappointed speculators. Adam Back suggests that adjusted for market size, they were 22x stronger than the US ETF launch. These Hong Kong ETFs differ from US based ones because they offer “in-kind” creation and redemption, allowing existing bitcoin holders to get into these ETFs without incurring a taxable event.
🏢 Microstrategy’s MSTR 0.00%↑ latest earnings call on April 29th highlighted how they did not adopt the new FASB guidelines, and also bought an additional 122 BTC. Notably, more corporations continue to adopt the Bitcoin Standard. Since May of last year, there's been a 43% increase in bitcoin held by public companies…
Block SQ 0.00%↑ has 8,038 BTC on its balance sheet and will be investing 10% of its monthly gross profit from bitcoin products into bitcoin.
Alliance Resources ARLP 0.00%↑, a $2.8B coal mining company, has been mining Bitcoin since 2020 with its excess power and now holds 425 BTC.
Japanese Metaplanet ($TYO:3350) put $6M into BTC, offering Japanese investors a way to gain Bitcoin exposure without incurring an unrealized gains tax.
🏦 12 of Morgan Stanley’s funds, which collectively manage $90B, have filed with the SEC to get Bitcoin ETF exposure.
📜 Bitcoin sign guy’s original notepad sells at auction for 16 BTC.
Regulations
“First they ignore you, then they laugh at you, then they fight you, then you win.”
- Gandhi
🚨 If you’re a Samourai Wallet user, it’s likely that your xpub has been compromised (a master public key, allowing anyone holding it to derive all your past/present/future Bitcoin addresses), unless you’ve used Dojo. Highly recommend moving those funds to a new wallet.
🚨 Recent lawsuits have also led Phoenix Wallet and Wasabi Wallet to exit the US, so please move funds to a new wallet.
🥷 Samourai Wallet founders were charged with money laundering and unlicensed money transmission, facing 25 years. One of the founders plead not guilty on a $1M bond. Francis Pouliot (BullBitcoin) says “operating software that proposes transaction templates to end-users, without taking custody of funds, is not money transmission”.
🌪️ The Tornado Cash case is setting dangerous precedents… “The DOJ also makes it explicitly clear that they consider anyone who helps someone transfer value, even without giving up custody, as a money transmitter under the "any and all means" working in Section 1960.” This means that your ISP, bank, network carrier, MacBook, usb cable, frying pan, etc. could be a money transmitter and force KYC. Swan Senior Analyst Sam Callahan adds context that the founders could’ve made efforts “to hinder it once it became clear that Tornado Cash was being used for illicit activity. Instead, they chose to keep everything up and running and continued to directly profit from it… making a killing from the tokens they created out of thin air.”
📜 The FBI published a PSA to avoid money transmitters that do not collect KYC, register as a money services business, or adhere to AML requirements. Ironically, “there are 43 unique words from the BIP39 wordlist in the FBI's PSA on money service businesses. That should make 7,347,251,430,341,222,400 Bitcoin wallets.”
🔲 Square and CashApp are being investigated for processing crypto transactions linked to sanctioned countries and terrorist organizations.
🇷🇺 Russia is banning the creation of domestic crypto exchanges and payment services, while exempting mining and holding.
🇬🇧 New UK regulations allow the police to seize bitcoin from a suspect without having to arrest them.
🇳🇴 Norway passed new legislation related to data centers, signaling more potential scrutiny for Bitcoin mining. The Minister of Energy believes mining is linked with large greenhouse gas emissions, even though most Norwegian Bitcoin miners use stranded hydropower. Notably, 55% of global Bitcoin energy mix is powered by sustainable sources, higher than any other global industry.
🌊 The IMF published a paper on cross-border bitcoin flows, highlighting how Bitcoin is used as (1) a risk-off hedge against global uncertainty, (2) tool for capital flight, and (3) inflows are highest in emerging and developing markets.
🙇♂️ The DoJ charged Roger Ver with tax fraud for evading capital gains. Even though he renounced his US citizenship in 2014, he was arrested this past weekend in Spain for not paying “exit taxes” on transactions from 2017.
4️⃣ After pleading guilty and paying $4B to the DoJ in November, Binance founder CZ got sentenced to 4 months in prison this week.
Scaling / Projects
🍊 Microstrategy announced Orange - a decentralized identity solution for businesses that uses inscriptions in witness data to store and manage DIDs, leveraging UTXOs for DID control. It’s been controversial given (1) the digital ID concept, (2) failure of Bitcoin-based DID projects in the past, as well as (3) its usage of inscriptions.
⚡️ As of April 30th, Coinbase customers (except NY and Canada) can now instantly send, receive, or pay via Lightning, powered by David Marcus’ Lightspark.
🌀 Steve Lee (Spiral) explains why Bitcoin should move slow & steady, but not ossify, as there are still critical bugs in Bitcoin’s code that need to be fixed, like in the Great Consensus Cleanup.
🥕 Roasbeef (Lightning Labs) demos the first mainnet Taproot Assets TX on LN.
🥜 CalleBTC previews (1) a Cashu ecash USD prototype, allowing anyone to be their own Tether, and (2) Cashu gateways, where “you give me cash and I make a Lightning payment for you” atomically.
🤖 Sulu Solutions announced Sparkwall, a way to monetize APIs using L402, as well as prevent absurd AWS bills by making spam more expensive.
🔐 Bitcoin Core v0.27 was released, notably turning P2P v2 on by default, meaning that clearnet nodes’ traffic is now encrypted end-to-end.
📜 Lisa Neigut breaks down all the covenant proposals.
🧢 Bitcoin’s supply cap may break… in the year 42,913.
Mining
⛏️ Matt Corallo published his thoughts on MEVil - one of the biggest threats to bitcoin. He also criticized the centralization of mining pools, advocating for Stratum v2 as a short term solution, with P2Pool / Braidpool being longer term ones.
🌓 During the halving, a lot of speculators tried to get in on Runes / Ordinals craze. This briefly led to highly profitable blocks, crazy network fees, mempool sniping, and burnt transactions.
🧱 Jack Dorsey’s Block is building 3nm ASICs.
🇰🇪 Gridless, backed by Block, is now running a 500 kW mining operation using a Kenyan volcano’s geothermal energy.
🤖 Morgan Stanley suggests that AI data centers can get online faster and cheaper by converting or acquiring Bitcoin mining facilities.
🌊 Ocean announces support for BOLT12 (multiple Lightning payments using one QR code), improving their mining pool payout transparency and reducing their dependence on the base layer.
🔋 It’s estimated that Bitcoin is now secured by 20 GW of electricity, which is like 20 nuclear reactors powering 14.5M households.
Stablecoins
🇻🇪 Venezuela's state-run oil company PDVSA plans to increase digital currency (USDT) usage in its crude and fuel exports as the U.S. reimposes oil sanctions, though Tether will freeze wallets evading Venezuelan sanctions.
🏦 In Q1 2024, Tether made $1B in net operating profit, as well as $3.5B in mark-to-market gains on its bitcoin and gold holdings. With their Bitcoin strategy, that means they’ll funnel another $150M into bitcoin. As of March 31st, they’ve held 75,346 BTC.
📲 Telegram is making it easy for its 900M users to send USDT to each other, through its TON blockchain. Its CEO, Pavel Durov, has a few hundred million dollars in bitcoin and his bank account - no other assets… there is no second best.
💸 Stripe will start supporting global stablecoin payments this summer.
💳 Visa made a stablecoin dashboard, showing $2.4T in 30-day volume.
Top articles from newsletter #27:
🇺🇸 Reminder that the US government still has more BTC than Microstrategy.