Blockstream Markets Weekly — Sep 24, 2021

By Jesse Knutson

China

Bitcoin is on pace for the worst weekly close in eight weeks after being hit by a one-two combination out of China.

Bitcoin started the week under pressure as global stonks got sucked into Evergrande’s downdraft. Trading improved into the end of the week following reports that Evergrande had reached an agreement with bondholders on an $84M bond payment due this week.

The CNY drifted down to a one-month low earlier in the week but managed to recover somewhat after authorities announced pumping a total of $71B into the banking system over the previous five working days.

Bitcoin’s tentative recovery after a milder-than-usual quarterly options expiry was hit with a second round of China news to finish the week with reports that China had ratcheted up capital controls to include a blanket ban on all digital asset transactions.

Sovereign dip buyer

China dominated price action this week with the Evergrande saga weighing on stonks at the start of the week and reports of a stricter Peoples Bank of China crypto ban later in the week.

News flow outside of China was mostly positive, though. One of the most interesting differences between this cycle and previous cycles is that we now have both listed companies and national governments buying the dips. A top story this week was El Salvador buying into price weakness earlier in the week. It will be interesting to see if they bought the Friday dip as well. They may have to start checking their fingers.

Twitter’s long-awaited Bitcoin integration was another big story. The new tipping feature will initially be launched for iOS users and rolled out on Android in the coming weeks. I discussed the potential impact of Lightning Network-powered micropayments with Christian Decker recently for an upcoming episode of Blockstream Talk. This is something that I think could potentially really shake up the social media business model.

In terms of institutional news, we saw more capital being allocated to the mining sector with Genesis raising $431M, $1.5T Invesco teaming up with Galaxy on their BTC ETF application, and Robinhood saying they may add BTC to their balance sheet.

Why now?

There appears to be a lot going on in China at the moment.

Given the context of the housing crisis playing out in China and the economic slowdown, I wonder if the crackdown on digital assets is more about tightening capital controls than as an effort to ‘meet carbon goals’.

I wonder if the real motivation is more a clearing of the field to prepare for a broader release of the digital Yuan or a signal that China is reading for a surprise currency devaluation to stimulate growth.

Funds Flow

Fund flows looked to have accelerated across most Bitcoin investment products this week but were led by Canada’s largest Bitcoin ETF. The Purpose Bitcoin ETF saw inflows over the previous ten days of 369 BTC, the largest ten-day inflow in 72 days, bringing total BTC under management to within 6% of the fund’s all-time high of 22,592 BTC.

Green October

Bitcoin is tracking a -12% drop in September. September is almost always a down month. Over the previous eight years, Bitcoin has ended lower in September six times.

The fourth quarter is normally better, though. Over the previous eight years, Bitcoin has ended higher in October six times. November is the same. The median October gain is +22%. The median November gain is +16%.

This cycle is starting to lag previous cycles pretty significantly. If a catchup rally is in the cards, odds are it occurs in the fourth quarter.

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• China banned all crypto transactions and vowed to stop illegal mining
• The People’s Bank of China announced that all crypto-related transactions will be considered illicit financial activity, including services provided by off-shore exchanges
• China’s planning agency says the crackdown is important to meet carbon goals…sure….

• Twitter will now allow users to tip their favorite creators on the social network using Bitcoin
• The company announced on Thursday that its Tips feature will now roll out globally to all Apple iOS users this week and will become available for Android users in the coming weeks
• As Jack Mallers points out, this also has implications for the global remittance market as well

• El Salvador’s President, Nayib Bukele, tweeted earlier in that week that the country had bought another 150, bringing their total stash to 700 BTC

• Genesis Digital Assets has secured $431 million in funding to expand its mining operations
• Investors included Stone Ridge, its Bitcoin subsidiary NYDIG as wells as Skybridge Capital

• Coinbase CEO, Brian Armstrong, said in a recent podcast that about 50% of the people he speaks to look at the crypto industry as a risk while the other half have realized that it is a huge opportunity
• Of particular concern, Armstrong notes, is the perception that there is a high degree of illicit use, but as Coinbase has previously noted on their website, research shows that illicit activity in crypto accounts for less than 1% of its transactions

• Robinhood Crypto COO Christine Brown says Robinhood might put BTC on its balance sheet

• Invesco manages $1.5 trillion in assets globally, including roughly $470 billion in ETFs and indexed strategies
• Invesco is now listed as a sponsor for the bitcoin ETF that Galaxy filed for in April
• Galaxy Digital CEO Mike Novogratz said at the Mainnet 2021 conference Wednesday that he expects a “really volatile” regulatory environment over the next six to 12 months

• Coinbase’s COO confirmed the company plans to publish a regulatory framework for policymakers in the U.S. in the coming weeks

“We should all care about transparency and clarity. The reason we went out with that tweet storm is because we didn’t feel like there was transparency and clarity to the way things were being regulated”

Seasonality. Septembers are usually bloody

• September is almost always a down month. Over the previous eight years, Bitcoin has ended lower in September six times
• The fourth quarter is normally better, though. Over the previous eight years, Bitcoin has ended higher in October six times. November is the same. The median October gain is +22%. The median November gain is +16%

Chart credit: Cryptocurrency News

Fund flows improve, Purpose BTC ETF

• The Purpose Bitcoin ETF saw inflows over the previous ten days of 369 BTC, the largest ten-day inflow in 72 days
• Brings total BTC under management to within 6% of the fund’s all-time high of 22,592 BTC

• Ecoinometrics is definitely worth a follow on Twitter. Lots of great charts
• We are starting to really lag the previous two cycles. Interestingly, though, the average growth of the previous two cycles points to a price peak into the end of the year. Fingers crossed

Chart Credit: Ecoinometrics

Source: https://medium.com/blockstream-markets-weekly/blockstream-markets-weekly-sep-24-2021-1c4a7a4fee3e?source=rss——cryptocurrency-5