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February 10, 2021

Tesla’s Treasury, Bitcoin Volatility and Miners w/ByteTree


James Bennett, CEO of ByteTree, discussed on-chain insights and observations over the past week. Prices have surged more than 20% in the past week, as Tesla directed USD 1.5 billion of its Treasury to bitcoin. Tesla CEO Elon Musk then tweeted about it, even putting bitcoin as his Twitter handle, causing the price to spike from USD 32,000 to USD 38,000 before retracing a bit.

(00:57) “So looking here we could see that’s pushed the price up toward the USD 50K mark. I think today we sit around USD 47K. And volatility continues to rise, and so at a similar time as we’ve seen to June 2020 and then that late-stage bull market in late 2017 and early 2018. So up at around 110% annualized volatility. Do be careful out of there, a lot of price action happening,” said James.

Miner Revenues

It has been an extremely exciting week because miner revenues are now just USD 1 million below the December 20217 all-time high of about USD 55 million in a day. At last check, they stand at USD 54 million.

(1:59) “This is just extremely bullish for the long-term success of the network. There was obviously the block reward halving in May 2020 that saw the number of coins that Bitcoin miners were awarded as a reward halved. And we can see that has not had a long-term impact on the revenues. How is that possible? Well because fees have made up a larger portion,” said James, stressing that this is important for the network to thrive after 2140 when no more bitcoins will be mined.

On-Chain Core Activity

(3:14) On-chain core activity is taking the torch from the institutional audience as retail piles in. That is not to say that institutional interest isn’t growing, as evidenced by fund flows and Tesla’s latest moves. But what is interesting to note is the rate of change of those core network participants vs. high-value traffic, as illustrated in the chart below. The top quintile of transactions is represented in blue and the bottom is represented in gold, both in USD.

Miners Rate of Inventory

(4:33) Next, we are looking at the rate of inventory decline that we’ve seen over the last 74 days on the far right vs. the history of bitcoin from 2015 onward. The bitcoin price is in gold so you can see the cycles. In blue, you can see the level of inventory that miners are holding.

4:59 “I’ve highlighted two trends that occurred since 2015. One is from January 2015 up to 2017. That dark blue line shows the gradient that miners are selling their inventory, or floating their inventory up. And then again up toward the right portion we’ve got mid-2018 through to late 2020, again a similar decline. Both of those were during the steady phases of the bull market/late bear market going into the next bull market. But what’s really interesting here is the rate of inventory decline accelerates toward the end of a cycle,” said James, adding that this suggests there really is some time to run in this bull market.

Miners’ Rolling Inventory

(6:16) Lastly is miners’ rolling inventory, and it looks at changes in inventory levels over a six-week rolling period. This is how many new bitcoins are being mined vs. how many bitcoins are going out, and it gives us a slightly better reading on short-term sentiment.

(6:49) The miners’ rolling inventory (MRI) is in blue and the bitcoin price is in gold. Notice the spikes in MRI. A 100% MRI means miners are sending out everything they are mining. If it is above that, they are sending out even more than that. We can see through the 2017 cycle that MRI peaked three times as miners saw increases in price and quickly offloaded inventory into the strong market bid. Ths indicated short-term peaks. The same pattern appears to be playing out today.

7:46 “So as they say good things come in threes. This also as the previous slide indicates that there is potentially quite some more time for this bull market to run,” said James.

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Gerelyn Terzo
Gerelyn caught wind of bitcoin in mid-2017 and after learning about the peer-to-peer nature of Satoshi's creation has never looked back. Previously she covered institutional investing and fintech for several major trade publications. Gerelyn resides in Verona, N.J.

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