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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).
Video Version
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Let’s take a look at this week’s State of the Coin
A look off chain
Marathon Digital buys 78,000 BTC miners: Marathon Digital Holdings, a publicly-traded bitcoin mining company, announced the purchase of 78,000 Bitmain ASIC rigs at a cost of ~$879 million. According to Marathon CEO Fred Thiel, “with this latest purchase of S19 XPs, we will be growing our Bitcoin mining operations to approximately 199,000 total miners and 23.3 EH/s by early 2023.” Marathon will receive 13,000 machines per month between July and December of 2022.
Iran bans mining, again: Iran has ordered bitcoin miners to shut down to ease power demand on the country’s energy grid during the winter months. The ban will apparently be lifted in March. Mostafa Rajabi Mashhadi, director of the state-run Iran Grid Management Co. and a spokesman for Iran’s power industry, said the ban is an attempt to reduce the risk of blackouts and ensure power stability to households across the country. They are however allowing mining companies to enter into agreement with renewable energy power plants to maintain operations. “Legal miners can enter into agreements with renewable power plants at negotiable terms and rates,” Mohammad Khodadadi, who heads the Tavanir department responsible for the mining industry, told the ISNA news agency.
Mexican billionaire says stay away from fiat: In giving advice heading into the new year, Ricardo Salinas Pliego - Mexico’s third richest billionaire - said: “Stay away from fiat money. The dollar, the euro, the yen, or the peso — they are all the same story. It’s fake money made of paper and lies. The central banks are printing more money than ever before. Invest in bitcoin.” Advice well-received, Ricardo.
Central Bank of Russia to restrict exchange transfers: The Central Bank of Russia is still trying to figure out their course of action with non-CBDC digital assets. While nothing has been set in stone, it seems likely that the CBR will attempt to limit the ability of Russian citizens to transfer money from state institutions into crypto exchange platforms. Russia’s population is ~146M, accounting for nearly 2% of the global population.
MICROSTRATEGY KEEPS BUYING: Michael Saylor’s MicroStrategy, a business-intelligence software company with a propensity for accumulating bitcoin, said it bought 1,914 additional bitcoins between Dec. 9 and Dec. 29 for ~$94 million. The company paid an average price of $49,229 per bitcoin, it said in a statement. As of Dec. 29, they held ~124,391 bitcoins, purchased at an average price of $30,159. At current BTC price, their coins are worth ~$5.9 billion. MicroStrategy raised funds for the purchase by selling shares.
Guest Writer: @ChrisReichelt7
Optimism in 2022
The New Year is upon us and it’s time for a fresh start! Auld Lang Syne and New Year’s resolutions abound. Unfortunately, after the Champaign cheer wears off, it can be a bit hard to remain optimistic. Global debt is at an all-time high. Current US debt (as of this writing) sits at $29.37 trillion, or $232,240 owed per taxpayer. US debt to GDP is at a record high of 122.5%, higher than World War II, World War I, or the Civil War, which were all prior peaks and represented existential risks to our way of life.
The Shiller PE Ratio, a measure of market valuation, is the highest it’s been in 20 years, and just shy of all-time highs. US inflation has been in the news as of late too, and unless you’ve been hiding under a rock, you already know it’s the highest it’s been since June of 1982.
The Consumer Price Index, CPI, which is the basket of goods used to calculate inflation, has been modified 8 times since 1978, changing for the worse, the ruler by which inflation is measured. Without an immutable yardstick, how can anyone accurately measure changes through time? Here’s the answer: it’s a deceptive practice and you can’t. A final macro trend of note is that the US trade deficit keeps making new records as Americans are importing far more than we produce on the global stage. These trends are concerning at best and down-another-bottle-of-champagne-to-forget at worst.
But enough macro doom prognostication. There are plenty of reasons to be pessimistic. That’s easy. Everyone can do it and it's free ninety nine. It takes courage, insight, and a dedication to build a better world. And optimism pays. As Carlos Helu puts it, “Courage taught me no matter how bad a crisis gets ... any sound investment will eventually pay off“, and one investment is shining brighter than ever.
Bitcoin is gold 2.0, digital property, individual sovereignty, a global monetary protocol, a digital battery, a transparent international market, an incorruptible financial yardstick, and yes, the next evolution of money. As governments around the world continue to debase fiat currencies in an effort to buoy market and asset prices, bitcoin continues to be the best performing asset in human history with a compound annual growth rate of 155%. It continues to have the best risk adjusted returns. Today, five governments, thirty six publicly traded companies, and an estimated 106 million people own bitcoin. These figures are growing year over year.
Yet FUD abounds. This past year saw hype over ESG concerns, a China mining ban, denial of spot ETFs, as well as PlanB’s Stock to Flow model price miss for November and December. Skeptics are piping up once again. It’s easy to forget however that price discovery is never a linear process and systematic shocks occur. How does one see the signal through the noise? Zoom out.
Metcalfe’s law states that the value of a network is proportional to the square of the number of connected users in the system. Bitcoins average daily trading volume of $10 billion is today on par with the most popular large cap stocks and market cap is slowly but surely on the rise. These metrics were mere optimistic dreams a year ago, yet today are reality. The trend here is clear.
Reflecting on 2021, there’s many reasons to be concerned, but for the New Year, there’s much to be optimistic about. Zoom out. More people are leaving dead end jobs for new opportunities than ever before. Time with family is up. Awareness and activism on global inequality is increasing. A spot bitcoin ETF, enabling every day retirement accounts a low market correlation store of value, is on the horizon. More and more people are taking charge of their financial future via the bitcoin off ramp. It’s easier than ever before. All that’s required is a low time preference and self-study. As Henry Ford said, “Whether you believe you can do a thing or not, you are right”. Optimism in 2022 is simply a better investment and life strategy.
Keep stacking.
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)!
Quick word about stacking tax-advantaged sats!
Do you want to HODL BTC in a tax-advantaged retirement account? Check out Choice by Kingdom Trust! Click this LINK to find out more!
A look on chain
Let’s take a look at on-chain data from Glassnode!
Price update: Looks like we’re heading into a New Year's fire sale! As of this writing, in the last week, BTC’s USD price is down 2.8%; in the last month, it is down 17.6%; in the last year, BTC price is up 74.1%.
S2F Model Update: Although price currently remains below stock-to-flow model projections, the model has historically performed well immediately prior to halving events. 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.
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.
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)! This week we’re featuring a meme from PUBLORD (@publordhodl):
Learn more!
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.