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In our Friday articles, we take a deep dive into the current state of Bitcoin. We previously published a series debunking the FUD surrounding Bitcoin - you can find those links at the bottom of this article. Every Friday we will continue to publish brief State of the Coin newsletters to keep subscribers up to date on BTC with both on-chain analytics and off-chain momentum of the Bitcoin industry. For full disclosure, Brandon and Daniel are strong believers in Bitcoin and both have allocated portions of their portfolios to BTC (HODL baby).
Let’s take a look at the State of the Coin
A look off chain:
Everything is infrastructure - including cryptocurrencies: On Tuesday the U.S. Senate passed a $1T infrastructure bill. Included in the bill was a tax reporting provision with extremely vague language around the term “broker.” The provision would require any party who transfers any digital asset to adhere to a strict set of tax reporting rules. Many worry that the language could be interpreted to include crypto miners and software/hardware developers and would not be limited to obvious crypto brokerages like Coinbase.
Despite bipartisan efforts to amend this portion of the bill and provide a clearer definition of who could be considered a broker, the bill was passed in its original language. On Monday, prior to the bill’s passing, Senator Ted Cruz said: “Let’s recognize if we gathered all 100 senators in this chamber and asked them to stand up and articulate two sentences defining what in the hell a cryptocurrency is that you would not get greater than five who could answer that question. Given that reality, the barest exercise of prudence would say we shouldn’t regulate something we don’t yet understand...We shouldn’t destroy people’s lives and livelihoods from complete ignorance.” Well said Ted.
The bill will now go to the House of Representatives. This infrastructure package is a massive, complicated bill. To learn more about the crypto provisions in the bill, read here and here.
Coinbase smashes market estimates: Coinbase announced Q2 earnings on Tuesday and handily beat market estimates. They posted revenue of $2.23B (~21% higher than estimated), $1.15B in adjusted EBITDA versus $962M expected, and a massive $6.42 EPS versus an expected $2.82.Monthly users increased from 6.1 million to 8.8 million and trading volume rose to $462B from $335B from Q1 to Q2. For those thinking cryptocurrencies were a fringe asset, think again.
Vaneck files for Bitcoin Strategy ETF: On Tuesday, wealth fund manager Vaneck filed to list the “Bitcoin Strategy ETF,” an actively managed fund that leverages BTC futures, pooled investment vehicles, and other ETFs that provide indirect exposure to BTC. Vaneck joins a list of other applications for Bitcoin ETFs - last week ProShares and Invesco both filed applications with the SEC (ProShares Bitcoin Strategy ETF and Invesco Bitcoin Strategy ETF). Vaneck controls an impressive $63B in AUM. Institutional buy-in continues, as investors pressure fund managers to provide exposure to Bitcoin and other digital assets.
A look on chain:
We’re continuing to get our feet wet with Glassnode on chain data!
Price update: Price remained relatively stable around $45k this week. There seems to be accumulation occurring at this price, which may fortify the 42-45k band as a new bottom in this cycle.
SOPR: The Spent Output Profit Ratio (SOPR) is computed by dividing the realized value (in USD) divided by the value at creation (USD) of a spent output. Or more simply: price sold / price paid. Values greater than 1 indicate that coins are being sold for profit (typically bullish) and values less than 1 indicate coins are being sold at a loss (typically bearish). After a sharp spike following the price jump two weeks ago (likely investors who got in during the early spring bull finally realizing profit), SOPR reset at 1 and has hovered above 1 consistently, which is a strong bullish signal.
Difficulty ribbon compression: Compression and inversion of difficulty ribbons have historically indicated upward price movements. Ribbon compression remains extremely bullish.
S2F Model Update: Price continues to track back toward S2F model predictions, but we currently remain well below the model. We’re still relatively early in this cycle and historical data (at least as little as we have) tends to show larger price-model deviations earlier in each cycle (see below: the model tends to fit orange/red tighter).
BTC vs Gold as an inflation hedge: In our breakdown of the U.S. Federal Reserve’s newest data, we included a YTD correlation between BTC and gold prices. We found a strong negative relationship between the two assets (r = -0.62) and noted that while gold was down ~10% over the last year, BTC was up ~43%. This may be a sign that investors view BTC as a stronger store of value than gold during times of inflation in the fiat system.
In general, off-chain news continues to support institutional buy-in and on-chain data appear bullish. It’s an exciting time for the Bitcoin community!
BTC Meme of the Week! What would the BTC community do without memes? Every week on State of the Coin, we feature our favorite meme of the previous week. If you create or see a meme that you like and want us to consider featuring it, tag us on Twitter or instagram (both @Greencandleit)!
See the original tweet:
New to Bitcoin and looking to learn more? Check out our introductory series, where we walk through common misconceptions about the world’s leading cryptocurrency!
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Happy Friday everyone - get after it this weekend!
Brandon and Dan
Disclosure: The authors of this writing hold positions in cryptocurrency mentioned in this article. That cryptocurrency is Bitcoin. The article was written by Daniel Kuhman and Brandon Keys, and it expresses the author's own opinions. They are not receiving compensation for it. The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock or cryptocurrency. Brandon and Daniel are not financial advisors. We encourage all readers to do further research and do your own due diligence before making any investments.