State of the Coin: Green Candle Goes to the Nashville Bitcoin Meetup
State of the Coin: Week ending 2021-12-10
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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 news from 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).
Check out the video version here!
Let’s take a look at this week’s State of the Coin
A look off chain:
Spiral announces Lightning Development Kit: Block’s (formerly known as Square) Bitcoin-focused subsidiary Spiral announced their Lightning Dev Kit (LDK) this week. The kit reduces friction points that otherwise make it difficult to integrate Bitcoin’s Lightning Network (a second layer technology) into apps, which can facilitate instant bitcoin payments and allow developers to focus on things like UI/UX. Once implemented, LDK enables instant bitcoin payments on games, apps, and other Bitcoin applications. The LDK library is available in both Rust and Swift programming languages. You can check out the video announcement here.
Crypto goes to Washington: On Wednesday, executives from several large cryptocurrency firms appeared before the U.S. Congress to answer questions about the growing industry. Noticeably missing from this meeting of the minds was the CEO of Bitcoin. At the end of the day, here are my takeaways: legislators understand that digital assets are here to stay, they need to figure out how to regulate them, and large KYC custodians seem to be willing to play ball. What does this mean for you? It means it’s more important than ever to hold your own keys - despite what they say, regulators very rarely care about “protecting the consumer.” They want control over your money - don’t give it to them via third party custodians who have access to your personal data.
Microstrategy just keeps buying: BREAKING: According to an SEC filing Thursday, MicroStrategy purchased an additional 1,434 bitcoins between November 29 and December 8 for $82.4 million. The average value of each coin was ~$57,477. The purchase comes just over a week after their last announced purchase of more than 7,000 BTC for $414.4 million. The company now holds ~122,478 bitcoins, acquired at an average price of $29,861 per coin, with an aggregate purchase price of $3.66 billion. At the time of writing, the company’s bitcoin holdings are worth ~$6 billion. Good for Saylor and the Microstrategy team, but I will continue to hourly cost average $0.50 to stack my sats #SorryNotSorry.
Instant payments coming to WhatsApp: Meta (formerly known as Facebook) announced that it will begin rolling out instant payments on WhatsApp to select users in the U.S. The payments are made using Novi, a digital wallet created by Meta, and transacted in the Pax dollar (USDP; 1 USDP = 1 USD). It remains unclear whether Novi will expand to include Bitcoin payments, but my guess is that Meta will re-launch its efforts to develop their own digital currency (they abandoned Diem several months ago due to regulatory difficulties).
Down goes AWS: On Tuesday there was a massive Amazon Web Services outage that disrupted many popular websites and, you guessed it, several crypto platforms, including Coinbase and Binance. Here’s the simple takeaway from this: if you cannot access your money because AWS goes down, you are not operating in a decentralized protocol and you do not truly own that money. Let this be a lesson.
Tell me USD is failing without saying USD is failing: In lieu of USD,Russia and India are opting to use national currencies for mutual arms deals. Alexander Mikheev, head of Russia's state arms exporter Rosoboronexport said that "Rosoboronexport has almost fully abandoned settlement in the US currency.” Both India and Russia have been in talks over the ways to promote mutual settlement of payments through the "rupee-rouble transfer" route, which will help reduce cost, time, and potential risks involved in payments.
Terrible Take of the Week
This week’s terrible take of the week comes from Vitalik’s Endgame article. Hey, what’s the worst that could happen on a centralized blockchain? Oh, I don’t know, I guess they could stop the protocol entirely.
Nashville Bitcoin Meetup Notes
This week I attended the Nashville Bitcoin Meetup (@nashbitcoiners) and learned a lot about mining - here are a few key takeaways:
Biggest benefit of home mining: Non-KYC (know your customer) stacking mechanism. Want to stack sats without working through an intermediary platform (e.g. Coinbase) that collects your personal data (and could be subjected to audits and subpoenas for that data)? Home mining is certainly an option.
Always consult a professional electrician. You’re spending a lot of money on a mining rig (sometimes 10-15k USD), make sure your electrical setup is prepared to handle the energy demands of your miner…if you’re not, the likelihood of malfunction and/or permanent damage is high.
The main friction points for home miners are acquisition (finding and purchasing a miner from a reliable source), noise, and heat.
Acquisition: While the market has become more reliable in recent years, there are still scammers looking to grab your bitcoin and run. Always do your due diligence when purchasing and remember, don’t trust, verify.
Heat and noise: Proof of work is a feature of Bitcoin, not a bug. This means your miner will be working hard to hash, generating a tremendous amount of heat and noise. According to many of the speakers, these are both considerable and can be difficult to manage. Prior to purchasing a miner, think about how you will cool the rig and reduce noise, particularly if you live in close proximity to others.
Cooling is all about heat exhaustion. Don’t overthink cooling - it’s all about getting cooler air in and then dispersing heat. This can be accomplished, for example, with exhaust tubes that drive hot air away from the mining rig. Reducing heat will also reduce the rig’s fanning, which will reduce noise.
Admittedly, I knew very little about mining pools and how they worked prior to the meetup, so I was glad that this came up as a topic of discussion. As an individual miner, you have a lower likelihood of “winning” a block. Rather than trying to go it alone, you can point your miner toward a mining “pool” which receives hashing power from many miners, increasing its likelihood of “winning” a block. In return for your contributions to the pool, you receive a portion of the block reward.
Most pools are PPS (Pay Per Share), meaning your portion of the reward is dependent on the size of your computational contribution to the pool.
If you do this, you are technically relying on the pool to distribute rewards - that is, it is not entirely trustless. Different pools have different payout and fee structures.
Although I learned a lot more, I think I’ll leave it here for now. I encourage anyone interested in home mining to check out Diverter’s “Mining for the Streets” article here.
We’re always looking for guest writers! If you or someone you know would like to be featured on State of the Coin as a contributor, let us know! You can email us at greencandleit@gmail.com or DM us on Twitter (@Greencandleit)!
A look on chain
Let’s take a look at on-chain data from Glassnode!
Price update: After plummeting to prices not seen since early October, we have bounced back to a steady $56-58k range. Keep panic selling on omicron news anons, I’m here for your coins. As of this writing, in the last week, BTC’s USD price is down 16.3%; in the last month, it is down 29.3%; in the last year, BTC price is up 161.3%.
S2F Model Update: Although price currently remains well below stock-to-flow model projections, the model has historically performed well immediately prior to halving events (see red circles below). The model has a predicted USD value of $121k in March of 2024, when the next halving event is expected to occur. Remember, BTC is a long term investment, not a “get rich quick” vehicle. To learn more about the S2F model, check out this article by PlanB.
200 Week Moving Average: I’ve decided to include a quick view of price vs the 200 week moving average. Some use this moving average as a (very) rough floor model.
SOPR: The Spent Output Profit Ratio (SOPR) is computed by dividing the realized value (in USD) 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). SOPR continues to hover close to 1 - in my opinion, this is bullish given the volatility over the last few weeks. Even when we see dramatic drops in price, we don’t see large downward spikes in SOPR - people are not selling at a loss when price drops suddenly.
Hash rate: Hash rate is approaching all time highs. After steadily climbing to peak levels in early 2021, hash rate crashed following China’s ban on mining. Hash rate was quickly redistributed and is now approaching all time highs - the resilience of miners is truly amazing!
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)! Elon nails it again…
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!
Dan and Brandon
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, Brandon Keys, and occasionally a guest writer; 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. None of the authors of this article are financial advisors. We encourage all readers to do further research and do your own due diligence before making any investments.