Welcome back to Analysed, our detailed analysis of what is happening in the world of Bitcoin and beyond.
Analysed: 15th – 29th May 2020
At a glance, these weeks post halving have been uneventful – there has been no moon-shoot past $10,000 USD for Bitcoin, no implosion of global economies and no second coming of Satoshi.
But only taking a glance would be doing Bitcoin a disservice – a self-proclaimed claimed Satoshi was put on trial by a ghost from 2009, a South American nation can’t get its gold, and big banks continue to play mental gymnastics.
Read on for these stories and much more in this edition of Analysed.
Bitcoin Market Summary
With many eager new eyes watching Bitcoin post-Halving, we were treated to an anti-climax only Bitcoin can deliver. Prices did not shoot to $100,000 overnight, nor did they plummet to $0, with the currency’s (in)famous volatility seemingly taking a holiday. Instead, a gradual sideways consolidation occurred, with a brief dip to $8,500 USD ($12,750 AUD) shaking out weak hands in the market before a +4% rally on Friday 29th shooting prices north of $9,500 USD ($14,250 AUD).
The effect of the Halving continued this fortnightly trend of non-events – a pessimistically predicted “mining death spiral” never came to fruition while hashrates stabilised at upwards of 90 terahashes per second (in line with December 2019 averages) with the first mining difficulty adjustment resulting in a 6% decrease. The knock-on effects of this will continue to be felt as new supply restrictions are bedded-in over the coming months.
Traditional Market Overview
Global markets continued to push towards upwards with some not-so-subtle money printing prods.
In the US, the S&P 500 returned to December 2019 lows in excess of 3000 on the back of a continued bull market despite now carrying more than 40 million unemployed Americans on it’s back. The S&P closed Thursday trading up more than 5% over the last fortnight. 1 in 4 US workers have filed for unemployment benefits. St. Louis Fed also released their Federal Debt projections.
Echoing the March predictions of Raoul Pal (@RaoulGMI), market analyst Sven Henrich (@NorthmanTrader) recently commented his disbelief at the current state of US in a series of rapid-fire tweets – surmising that “We are witnessing the largest asset bubble inside of a recession ever.”.
Japan has just received a stimulus booster shot of their own, with Prime Minister Shinzo Abe approving a package exceeding $1 trillion USD in an attempt to ease the nation out of recession. Effectively doubling the existing stimulus announced in April to $2.2 trillion USD ($3.3 trillion AUD), stimulus now sits at nearly 40% of Japan’s GDP.
In a sign of these centralised times, Australia’s own Jobkeeper payment was discovered to have fallen nearly $60 billion AUD below its $130 billion AUD budget due to technical oversight and modelling inaccuracy. Economist Saul Eslake commented “At least the error was ‘the right way around’, Imagine the mess we would be in now if they had underestimated the cost by $60 billion instead of overestimating it.”. The conversation has now shifted to how Australia should spend this $60 billion.
Deflation has emerged as a serious point of conversation amongst analysts in the face of foreign markets fleeing to the USD for security. Watch this space and hold on to those Sats, it seems we’re only just getting started.
Venezuela Files Claim Against Bank Of England Over Gold Holdings
One of the most important stories to emerge this fortnight has come from Venezuela, with the Maduro administration filing claims against the Bank of England in an effort to regain control of it’s gold stores valuing in excess of $1 billion USD ($1.5 billion AUD).
Venezuela has recently been crippled by a collapse in global oil prices and harsh COVID lockdown restrictions, leading the Maduro administration to attempt a sell-off of gold stores. However, Britain does not recognise the Maduro administration as legitimate leading to all transfers of Venezuelan gold out of the Bank of England’s custodial services being blocked.
Not only does this highlight the politics of value storage, but also one of physical gold’s intrinsic flaws – you’ve got to store it somewhere, and when you reach a threshold that becomes a lot more difficult and expensive.
If only there was a way to securely store $1 billion USD without putting faith in an outside party. Don’t be like Maduro, be like a different Venezuelan – Javier Bastardo.
Wall Street Can’t Make Up Its Mind On Bitcoin
Goldman Sachs recently put on a bemusing presentation to investors, presenting a bearish outlook for Bitcoin. Amongst the gems produced was the assertion that Bitcoin was not scarce due to the existence of thousands of other cryptocurrencies and that it was the biggest bubble or mania in history. Goldman Sachs also claims that the US economy is nearly recession-proof.
Goldman also alluded to Bitcoin being susceptible to hacking and inadvertent theft, seemingly not understanding the difference between an exchange and Bitcoin itself.
This comes after JPMorgan Chase announced they would be opening accounts for Bitcoin exchanges, beginning with Coinbase and Gemini despite CEO Jamie Dimon previously stating in 2017 that Bitcoin was a fraud worse than tulip mania and that he would fire any employee that traded it because they’d have to be stupid.
Betting odds haven’t been released for when Goldman Sachs openly buys into Bitcoin. If JPMorgan Chase is precedent, we won’t have to wait long.
Highlight Of The Week
A Giant Wakes From Slumber Carrying Strong Words
On the 26th of May, 2020, 145 wallets with unspent and untouched coinbase rewards (7250 BTC; $100m~ AUD) woke from their slumber carrying a cutting message:
“Craig Steven Wright is a liar and a fraud. He doesn’t have the keys used to sign this message.
The Lightning Network is a significant achievement. However, we need to continue work on improving on-chain capacity.
Unfortunately, the solution is not to just change a constant in the code or to allow powerful participants to force out others.
We are all Satoshi”
For those uninitiated, Craig Steven Wright, often known as CSW or “Faketoshi” is an Australian figure that has laid claim to being the architect of Bitcoin. This claim has become somewhat of a running joke amongst the Bitcoin community. Wright is currently facing notable legal scrutiny for these claims, with Arthur van Pelt (@MyLegacyKit) offering a good run-through of specifics.
Wright previously submitted a list of Bitcoin addresses he claimed to have control over (known as the Tulip Trust), despite also claiming he did not have the capacity to prove this control. Included on this list were the wallets used to sign the above message, issuing a relatively straightforward conclusion about these mythical holdings. Wright and his supporters have now claimed this was, in fact, 7D chess proving Wright to be Satoshi via gold medal worthy mental gymnastics.
Initial whispers were that these wallets fit the “Patoshi pattern”, referencing the dominant miner during the earliest stages of Bitcoin – believed to be Satoshi Nakamoto himself; though these whispers were quickly shut down by independent analysts and BitMEX Research.
Calls for on-chain capacity improvement without fundamental changes pointedly push back against Bitcoin imitators like those pushed by Wright. Seemingly we are all Satoshi, except Craig.
Bitcoin celebrated a pretty special day this past fortnight – on May 22nd, 2010, Laszlo Hanyecz (@HanyeczLaszlo) purchased two pizzas for 10,000 BTC (current value $95 million USD). This was the first ever use of Bitcoin as a currency in the real world, and laid the foundations for where we are now. In retrospect, this was the most expensive pizza purchase in history, and it seems it will only get more expensive as we move forward.
Stack Sats and take care,
Jamie Grohman for Analysed by Amber.