TWR: Bitcoin Smashes Through $17k — Testing $19k ($24k CAD)

“Back in this bit** like I never left, stand for some sh** that you never rep, passing through stages in life, through the ups and downs like it’s all just another test” -Nipsey Hussle

Firstly, RIP to a real one. Not only was Nipsey a great rapper (my favourite) and an important community activist, but he was also an outstanding advocate for crypto. Here’s a clip of him doing a pretty great job putting crypto in layman’s terms:

The lyrics came to mind when Bitcoin cut through $17k like a hot knife through butter Wednesday and I woke up to a headline from Bloomberg proclaiming that Bitcoin “is back”. Thanks for the coverage Bloomberg (finally), but Bitcoin never left in the first place.

There was a lot of activity on the desk this week. We saw the vast majority of the volume on the buy side — CAD&USD/BTC and we saw an increase in flows from alts to BTC. We were also privileged to help new entrants buy their first Bitcoins — it’s always an interesting feeling to have a newbie come across our desk to buy their first Bitcoins and walk away with more than I’ve managed to accumulate over 3.5 years… ugh… I digress.

I’ve pointed this out over the last few weeks in these weekly segments but the type of money coming into Bitcoin is not the same as the money that poured into the market in late 2017. The difference between then and now is that most Bitcoin sold today will never see the daylight again — they’ve disappeared into deep cold storage. Buyers today are professionals with long term vision and staying power.

Before I move on to this week’s topic, let’s check in on our pal “Salty” Ray Dalio shall we?

Ah, it looks like Ray Dalio has stepped back his comments from last week! Brilliant. Truthfully, I’m a big fan of Ray Dalio and deeply admire his work. It only makes sense that one day Ray joins our side…one day.

Bitcoin miners in China are having a rough 2020.

From supply chain disruptions caused by COVID lockdowns, to excessive flooding during Sichuan monsoon season, this year has been challenging for miners in China.

As the Chinese government is cracking down on the exchange of crypto and legal currency, 74% of miners surveyed say that they are facing a major problem paying electricity bills. Due to the government’s nationwide card-breaking operation, investors are choosing not to exchange CNY for crypto. This is making it increasingly difficult for miners to exchange their mined Bitcoin for CNY… and they need CNY to pay for power.

This is another fascinating example of how government pressure/crackdowns tend to reflect positively on the price of Bitcoin. Restricting supply only makes Bitcoin more scarce…add an extra pinch of demand and you’ve got yourself a recipe for a moon party.

We’ve noticed through our consulting experience in the mining space that miners are looking to lift and shift their operations to other parts of the world amidst an uncertain geopolitical landscape. This recent news might accelerate the transfer of mining from China to the United States, Kazakhstan and other countries — which is not a bad thing. There have been concerns that mining was becoming too centralized with China having upwards of 65% of global hashrate. Now, those concerns seem to be alleviated as other countries are positioning themselves as attractive places to mine. Bitcoin is all about decentralization, so naturally this is good (especially if Canada continues to support the industry).

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