Welcome to the 43rd issue of the Broker’s Beat. This week, we analyze how Elon Musk and Vitalik Buterin briefly crashed the markets with their actions and comments.
BY THE NUMBERS
“SkyBridge Capital’s Anthony Scaramucci, whose company runs its own Bitcoin fund, has taken to Twitter to comment on the recent move of Elon Musk as he announced Tesla backing out of Bitcoin payments.”
“Data acquired by Finbold indicates that bitcoin’s estimated annual consumption of 143 TWh as of May 5, 2021, is at least eight times higher than Facebook and Google’s combined consumption of 17 TWh. The social network consumption stands at 12TwH while Google’s annual energy usage is at 5 TWh. ”
Source: Coin Telegraph
“Crypto mining firm HIVE Blockchain Technologies sold one of its data centers in the Norwegian municipality of Narvik, which it previously held since 2018.”
“Greenidge power plant, located in Upstate New York, is back in the news, with a planned expansion of its power usage. The once-abandoned power plant was purchased by equity firm Atlas Holdings for mining bitcoin (BTC).”
“New cryptocurrency Chia positions itself as an eco-friendly alternative to Bitcoin—which uses more energy each year than the whole of Sweden—thanks to its use of storage space rather than computing power. But its green-friendly credentials are looking shaky. Not only are we starting to see signs of HDD and SSD shortages, but it also vastly reduces the lifespan of these drives.”
THE BITCOIN BEAT
Elon Candle Re-emerges, again. Late trading in North America or rather Bitcoin received a jolt following the release of a memo from Tesla’s Elon Musk. The company is apparently suspending acceptance of BTC as a form of payment for vehicle purchases. Twitterati, as expected, was set on fire. Is this the result of a recent poll about accepting Dogecoin instead?
In hindsight, it now makes sense to connect the dot, offloading BTC off the balance sheet of the company to maybe free up cash for alternative crypto assets.
BTCUSD tanked on the news, down 8.85% on the day and dangerously approaching psychological levels of $50k. For now, it remains inside the bubble (blue oval). A break lower, as I mentioned in my earlier notes, will take the pair to challenge the lows of April 25th ~ $47k.
We are seeing flows from both sides on the desk and a growing interest in other BTC alternatives.
According to Glassnode, Bitcoin supply held by long term holders has returned to what they deem “accumulation mode”. We’re seeing 8% more of the circulating supply sitting in dormant wallets, which is a positive sign for the HODLing trend.
As we’ll discuss a bit further below, the Bitcoin mining difficulty has increased by 21.5% today. This may be the largest positive difficulty adjustment in almost 7 years, and expect it to change the rate at which miners sell their coins considerably.
Additionally, stablecoin reserves continue to rise on-exchange, and we don’t see this trend letting up anytime soon. Investors are ready to buy the dip, and the below chart shows the degree of bullish sentiments we’re picking up right now.
The total estimated number of terahashes per second on the Bitcoin network has reached a new all-time high on Tuesday when it came up to 178,112M at its highest point. From there we have seen a slight pullback with the valuation currently sitting at 176,794M.
On the graph above we can see that this new high came only slightly above the previous one. But it also came after a decline to 131,796M made on the 23rd of April. Considering the recovery we have seen in the hash rate estimate in one go, we could now see a higher degree pullback potentially to the zone of around 160M. But it would still be expected to continue on going up and make new highs in the near future.
From the 26rd of April when the miners revenue estimate was around $47.39M we have seen an increase to $71,663M on the 7th of May. On Monday it was slightly lower at around $70M mark from where we have seen a pullback.
Currently, it is sitting at a $64,58M level as is in a downward trajectory. From mid-February, we have seen the formation of the ascending channel whose resistance line was interacted with on Monday’s high. This is why now we could expect to see this valuation going back to retest the channels support level which would bring it down for a higher low of around $50M area.
But this structure looks like a consolidative range and is likely to lead to a breakout and new highs afterward.
We’re a little later getting this issue out today because of all the news in the last 24 hours. As you likely know by now, both Elon Musk and Vitalik Buterin “rug-pulled” crypto in a sense.
First, Musk had some unfriendly words to say about Bitcoin’s energy consumption and stated Tesla would not be accepting payments in Bitcoin because of that. This doesn’t mean he’s selling any of his personal Bitcoin, but does change the gravity of the “Tesla is bullish on Bitcoin” argument.
Second, Vitalik Buterin donated a bunch of altcoins he had been given to charity, as well as a significant amount of ETH. These were cryptocurrencies who had sent the funds to his wallet without solicitation or approval, so it is understandable that he would want to avoid accidentally giving tacit approval to this practice and inadvertently pumping the coins. However, it also caused a ripple effect across the market with a huge drop in the price of BTC and ETH.
What has been interesting to note is how much the news affects the industry. I’ve seen a lot of people mistake the effect of the sell with the effect of the selling news. They are very different, and crypto-naysayers who equate them don’t realize that whale sales wouldn’t have nearly the same effect as the sales above.
But it does highlight that we’re still in the time of “icons” who have a larger sway over prices than is probably healthy for the sector. And this is something that we’ll hopefully evolve out of soon.
That’s all for this week! If you have any questions about what we talked about here or would like to explore trading with us, please reach out here.