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Internet Pioneer Marc Andreessen Sends Mixed Bitcoin Signals in New Interview

Alex McShane — Wed, 04 Aug 2021 09:10:51 -0400

Venture capitalist Marc Andreessen continues to send mixed signals on Bitcoin at a time when it remains unclear how supportive the influential firms he has founded are of the technology.

In a new interview with Bloomberg Tuesday, Andreessen, co-founder of the venture capitalist firm Andreessen Horowitz, discussed the work of Bitcoin inventor Satoshi Nakamoto, calling it “one of the most amazing things I’ve ever seen.”

“Most people, when they invent something this profoundly breakthrough, don’t realize how important it is at the time they invent it. Whoever this person, or thing, AI, government agency, is—they knew the importance of what it was from the very beginning such that they knew it was important to hide their identity,” he said.

Earlier this year, A16z raised nearly $2 billion for a crypto fund, but at the time gave no indications as to whether it would invest in bitcoin or companies building on its top layer networks like Lightning, which is currently a driving force in El Salvador’s economy.

Instead, in his full remarks, Andreesseen, one of Bitcoin’s earliest backers as a payments technology, appeared more interested in altcoins.

When asked about cryptocurrencies, Andreessen stated, “Many of the smartest people in computer science are going into this field,” he said, adding that it represented “a new kind of financial system” where people are “able to form trust relationships in an untrusted environment.”

According to Andreessen he now manages, “About $18 billion today.”

When asked what makes cryptocurrencies such as Bitcoin successful investments, Adreessen responded:

“There’s a fundamental technological breakthrough that has actually happened—an area of computer science called distributed consensus. It’s the ability for a lot of people and software on the internet to be able to form trust relationships in an untrusted environment.”

He continued, “Money is one application. There are many other applications, many other things that people are going to be able to do with this technology. Many of the smartest people in computer science are going into this field and they’re pushing it forward at a really rapid rate. So, to us, it looks like it’s just the eighth or ninth fundamental architecture breakthrough transformation happening in the tech industry. And we take it very seriously because of that.

Andreessen’s comments mirror those of SEC Chairman Gary Gensler yesterday. Both understand the immaculate conception origin story of Bitcoin but appear not to understand the lasting importance and change the technology is bringing to the world.

Indeed, when asked where investors should store their wealth, Marc Andreessen recommends they should, “Put it in an S&P 500 Index Fund,

“Don’t get fancy.”

Public Miner Hut 8 Now Holds Over 4,000 Bitcoin Worth $150 Million

Alex McShane — Wed, 04 Aug 2021 08:01:25 -0400

Publicly traded Hut 8 has seen its Bitcoin mining production increase by 50 percent in the wake of China's crackdown on its domestic industry.

Hut 8 Mining, one of North America’s largest Bitcoin mining operations, revealed Wednesday it produced 300 bitcoin, or an average of 9.7 BTC per day, this July.

All told, the figures were up 50 percent from previous months, an increase Hut 8 said was the result of the "ongoing prohibition on cryptocurrency mining in China."

The first publicly traded miner on the Toronto Stock Exchange and the first Canadian miner to be listed on The Nasdaq Global Select Market, the company's monthly filings offer a window into how North American operations are benefitting from the reduction in market competition.

During the month of July, for example, Hut 8 received and installed 920 new mining rigs, adding 73 peta hashes per second its production rate. This pushed the firm's total computational power to nearly 2.5 exahashes per second.

Notably, all of the bitcoin the company mined last month were put into cold storage, signaling Hut 8 believes its holdings will appreciate long term.

As of July 31, Hut 8 now holds 4,123 bitcoin worth over $150 million in reserve.

LocalBitcoins Cuts Deposit, Transaction Fees Between Wallets In Platform To Zero

Namcios — Tue, 03 Aug 2021 15:55:00 -0400

Person-to-person bitcoin exchange LocalBitcoins has announced it has cut down some fees on the platform to zero.

Bitcoin exchange LocalBitcoins has announced that deposit fees and transaction fees between wallets in the platform are now free. Launched in 2012, the platform doesn't touch fiat currency itself; users can transact with each other leveraging the platform that only intermediates the process – introducing sellers to interested buyers.

Initially, LocalBitcoins became very popular because the platform was more lenient on identity-verification procedures since it doesn't transfer money itself. Users could also go further to buy bitcoin anonymously through cash trades, where buyer and seller would meet on a local, public space – hence the platform's name.

However, LocalBitcoins has changed dramatically in recent years, arguably losing its go-to status for anonymous bitcoin transactions. In March 2019, the exchange released a statement saying that it would abide by new regulations in Finland, where it is based, and require users to verify personal information. The new rules, which would come into effect in November 2019, included four individual account levels per trade and BTC volume, requiring the verification of the source of funds in some cases.

Later that year, in May, LocalBitcoins banned Iranian users from the platform and withdrew all services from Iran. In June, the exchange further limited user ability to retain privacy by stopping customers from making in-person trades of bitcoin for cash. Finally, in August, LocalBitcoins strengthened its KYC requirements, even more, losing credibility in the anonymous bitcoin trading space.

However, the platform remains important for other use cases worldwide. In Nigeria, for instance, the central bank (CBN) attempted to restrict BTC trading by banning regulated institutions from dealing with bitcoin in February 2021. However, a few months after that, the country experienced an increase in bitcoin activity, with peer-to-peer BTC trading volume rising by 27% in Nigeria. But it isn't clear how much of that came from LocalBitcoins.

Why Bitcoin Is Intelligent With Aleks Svetski

Bitcoin Magazine — Tue, 03 Aug 2021 15:29:18 -0400

Aleks Svetski discussed his “Intelligent Guide To Bitcoin” and the misunderstandings about BTC that are often perpetuated.

Watch This Episode On YouTube

Listen To This Episode:

Many in the traditional financial space, government and academia have long dismissed Bitcoin as a silly toy for criminals and predicted that its price will go to zero. These predictions remain commonplace in the mainstream media to this day, despite the network’s astounding growth and the currency blasting past $30,000 prices and making inroads across the global economy. Upon reading a recent example of these crypto dismissal articles from an Australian professor, titled the “Dummies Guide To Crypto,” Aleks Svetski — CEO of Bitcoin DCA app Amber and Bitcoin Magazine contributor — felt that he needed to respond.

Svetski agrees with the author of the “Dummies Guide” that “crypto” is trash and that there is very little substance to the general “crypto” market. Aleks does however disagree that these assumptions are also true for Bitcoin. The reality is that Bitcoin is a very well thought out solution to a very important problem that has been plaguing humanity. Aleks’ response to the “Dummies Guide” is “The Intelligent Guide To Bitcoin.” In the article, Svetski covered what Bitcoin is, whether people should invest in it, the mining and energy factors and its downsides.

“Bitcoin Magazine Podcast” host Christian Keroles sat down with Svetski to discuss the key points in the article and debate how to best articulate them to people that think Bitcoin is just a silly toy.

SEC Chairman Draws Dividing Line Between Bitcoin, Crypto in Aspen Speech

Alex McShane — Tue, 03 Aug 2021 15:03:34 -0400

Incoming SEC Chairman Gary Gensler issued new comments about Bitcoin Tuesday, at times drawing a dividing line between the market’s largest cryptocurrency and imitators.

In a speech at the Aspen Security Forum, incoming SEC Chairman Gary Gensler issued new comments about Bitcoin Tuesday, at times drawing a dividing line between the market’s largest cryptocurrency and its wide field of imitators.

Of note is that Gensler took pains to establish credibility with the Bitcoin sector, recounting the history of the cypherpunk mailing list, citing Satoshi Nakamoto’s email announcing the project and repeatedly validating the network as a “real innovation.”

At one point he commented, “[Bitcoin] has been and could continue to be a catalyst for change in the fields of finance and money.”

Still, the event was billed as a non-partisan venue for global leaders, and the topic of discussion was most often national security. This meant at times Gensler made clear he supports stringent rules on companies and individuals seeking to build an economy around the protocol.

On several occasions, Gensler said that he as well as the SEC would be very interested in the identity of Satoshi Nakamoto, and during the Q&A, Gensler went so far as to ask the audience to come forward with any information on his or her identity.

Further, while Gensler only singled out Bitcoin among the cryptocurrencies by name, he described activities ongoing in the sector broadly and not always favorably.

“Primarily crypto assets provide a digital scarcity vehicle for speculative investment,” he said, adding: “Generally folks are buying these tokens in anticipation of profits.”

Unmentioned were developments such as the emergence of Bitcoin’s Lightning Network, and he repeatedly implied that bitcoin was not used by regular people as a unit of account or a medium of exchange, despite its ongoing adoption in El Salvador for such uses.

Neither did Gensler comment as to what extent altcoins such as Ethereum should be subject to the same regulations as Bitcoin, though he did note the growing ubiquity of other crypto assets, noting: “This is a truly worldwide market.”

He continued, “Unlike other trading markets, where investors go through an intermediary like the New York Stock Exchange, people can trade on crypto trading platforms without a broker — 24 hours a day, 7 days a week, from around the globe.”

ETFs and Economic History

Elsewhere, Gensler issued new remarks that shed light on how the SEC may act on the many exchange-traded fund (ETF) proposals now up for review by the agency, signalling that those based on Bitcoin futures may have the highest chance of approval.

“Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures,” he said.

Still, he was keen to frame the debate as part of a long history of conflict between private and public monies, noting an allowance for those backed by the faith and credit of governments.

Gensler, for example, began his speech by stating, “For those who want to encourage innovations in crypto, I’d like to note that financial innovations throughout history don’t long thrive outside of our public policy frameworks.”

Notably, some of his statements could be described as the antithesis of the sentiment among Bitcoin innovators, as he argued for the role of government as one that would continue to add trust to the financial markets, even those one day based on a Bitcoin standard.

Gensler concluded: “At the heart of finance is trust. And at the heart of trust in markets is investor protection. If this field is going to continue, or reach any of its potential to be a catalyst for change, we better bring it into public policy frameworks.”

Back To School With Bitcoin: How To Teach Your Kids About Bitcoin

Bitcoin Magazine — Tue, 03 Aug 2021 13:50:46 -0400

Here’s what you need for a year of self-sovereign education.

Bitcoin can be an important tool for learning about economics and computer science, especially as the broken education system struggles through the COVID-19 pandemic. As Mark Twain once said, “I have never let my schooling interfere with my education.”

Your back-to-school shopping guide should include books about Bitcoin.

Luckily, the Bitcoin Magazine store offers all of the books and devices you need for a self-sovereign education, starting with “Bitcoin Money: A Tale Of Bitville Discovering Good Money” for children as young as four.

For teenagers, you can set up a Bitcoin node with them for a hands-on lesson about computer science. Once you have the basic tools and hardware devices, including a full node and a bitcoin wallet, there are plenty of free open-source Bitcoin projects that teens can use to learn about coding as well.

Open-source bitcoin projects offer many ways to learn about computer science.

And, of course, no teenager’s Bitcoin curriculum would be complete without “The Bitcoin Standard: The Decentralized Alternative To Central Banking.” If you’re already considering homeschooling, there’s a wide range of books in our store that you can assign for original book reports and other projects for English class.

Meanwhile, university students can basically give themselves a PhD in Bitcoin just by reading our whole curriculum of top books about bitcoin. In terms of economic history textbooks, we recommend starting with “The Sovereign Individual: Mastering The Transition To The Information Age.” As for computer science, we recommend starting with “Programming Bitcoin: Learn How to Program Bitcoin From Scratch.” And, if coffee or tea helps you get in the zone while studying, don’t forget your Laserflip mug for good luck.

The Bitcoin Magazine store has all the school supplies you need to learn about digital money.

Prioritize your own self-sovereignty by getting the educational resources you need to learn all about Bitcoin. For more tools along the way, everything from hardware wallets to Bitcoin swag, it's all available in our store. Enjoy your year of self-sovereign education!

Six Reasons Why You Should Run Your Own Bitcoin Node

Arman The Parman — Tue, 03 Aug 2021 13:21:11 -0400

Here’s why it's necessary to participate in the Bitcoin Core network of nodes, for six simple reasons.

Let me explain quickly that a Bitcoin node is any computer which runs a piece of software (Bitcoin Core) that has some important jobs:

Your Bitcoin node needs to keep a copy of the entire Bitcoin blockchain. It has to connect with other nodes, forming a network of communication, which propagates transactions (transactions are kept in a “mempool”, i.e., the queue of transactions waiting to be included in the next block, and thus added to the blockchain). It needs to check that all additions to the blockchain are valid, and reject those that are not valid. It will provide details about the blockchain — such as balances — to other types of software that ask, like wallets. And it will provide a copy of the blockchain to any new node that wants to join. The new node then independently checks that every transaction in the copy it receives is valid. It does not actually “trust” the connected node.

To run a node, you download Bitcoin Core software, and then let it copy the blockchain from other nodes, and your node verifies each block itself. You then leave it on, and new blocks are received roughly every 10 minutes (the blocks contain transactions taken from the mempool). Your node will check if the block is valid, and if so, add it to its copy of the blockchain.

A dodgy block gets rejected, not because everyone else rejects it, and not because everyone copies their neighbor, but because the block is invalid according to the rules contained in the Bitcoin Core software, and everyone else that is running the same software will also reject that dodgy block.

Your Bitcoin wallet does not keep a copy of the blockchain, and is usually separate from Bitcoin Core (although Bitcoin Core does have a wallet feature). Your wallet just holds your keys. It has to ask a Bitcoin node, “Hey Mr. Node, this address of mine, does it have any bitcoin in it?” Technically that’s not quite accurate, but this is sufficient for now.

Running your own node means you don’t ask other people what their copy of Bitcoin Core is doing. It’s your own copy of Bitcoin Core, and you don’t need to trust other people. Your wallet can ask YOUR copy of the Bitcoin blockchain (making the digital connection between your wallet and node is the technically challenging and critical part, not just running the node — an article for another day).

So with the preamble done, let me next explain why it is important to run your own node:

Reason 1

Privacy.

When your wallet tells you your bitcoin balance, it asks a RANDOM public Bitcoin node what balance each of your addresses contains. It then gives you the results, and you see your total bitcoin in that wallet. Even empty addresses which you haven’t used get queried. Surveillance companies run some of these nodes. “What the Hell?” Yes, it’s true.

You are telling a random entity, possibly a surveillance company, your IP address (which can be used to identify you), and that you have a Bitcoin wallet, and ALL of your current and future addresses you'll use within that wallet, and all the balances of all those addresses, now and later. Providing this information to surveillance companies is dangerous for many reasons. For example, this data can be leaked intentionally — to the government when requested — or unintentionally (to hackers). Governments may target Bitcoiners with heavy wealth taxes or confiscation, as the US government once did for gold with order 6102 in 1933, and hackers may target you to extort or trick you out of your bitcoin.

Reason 2

You can confirm for yourself trustlessly that you are receiving real bitcoin.

For example, when you sell something, a technically sophisticated buyer could potentially manipulate which node your wallet connects to. They could send you counterfeit bitcoin, and your wallet would think it’s received real bitcoin because the malicious node lied to your wallet. Granted, this is very unlikely, but the fact that you can prevent it by running a node makes the development of this kind of attack not interesting or fruitful. What actually happens with this attack? The scammer somehow gets your Bitcoin wallet to read the wrong blockchain from a malicious node. He moves supposed bitcoin on THAT blockchain, not the real one, and your wallet thinks you’ve been paid.

If you get scammed in this way, you may accept this counterfeit as final payment, and may send goods in exchange for the fake bitcoin. One day, when you connect to a genuine Bitcoin node, your wallet will show that you never in fact received bitcoin. Your balance will be lower than what you thought it should be, because the fake transfer never existed on the real Bitcoin blockchain.

You can prevent this by connecting your wallet to a node you trust, but even better is to connect to your own node. “Don’t trust, verify,” is the Bitcoiner’s mantra.

Not doing this is kind of like accepting gold as payment, and asking a random person to use their XRF analyser to check if the gold you received is real. You don’t know if that random person is on the side of the buyer, or if they are honest.

You might ask, “No trust? Wait, aren’t I trusting Bitcoin Core when I download it? How do I know THAT’s not fake?” Yes and no. There are ways to verify that the software you downloaded is genuine, but that’s not for this article.

You might then ask, “Aren’t I trusting the developers that the genuine copy is behaving as I expect?” Actually yes, unless you write the software yourself, or read the code, or pay someone to read the code — but then you are trusting them. There has to be some level of trust, but the idea is to keep it to a minimum. (Just saying that might get me in trouble with the Bitcoin mob, shhh!) Most people (me included), can’t and won't read the code, so there is some element of trust. The trust is that hundreds, maybe thousands, of developers’ eyes are going over the code looking for errors and problems before it is released. It’s not easy to make changes to Bitcoin Core, and this is a feature, not a bug. Using the gold XRF analyser analogy, you are probably not going to build one from scratch to check whether or not your gold is real, and that’s okay.

Reason 3

Defend the Bitcoin rules from unwanted changes — like scarcity or block size.

If a group of "powerful" people banded together, as they did in 2017, and decided to try to change the rules of how Bitcoin works (for example, by increasing the block size), you can choose to not upgrade your node to the new system and keep your current node. If you are more than the minority, there will be a pool of people running the unchanged Bitcoin Core and a pool of people running the changed version — a fork. This is how Bitcoin Cash was born. The new version was unanimously rejected, but those who lost the war kept running their nodes and mining bitcoin cash as well. Those who owned bitcoin then also owned bitcoin cash. For a given address, there was one balance on the Bitcoin blockchain, one balance on the Bitcoin Cash blockchain.

If you weren’t running your own node at the time, you had no say in this war. Your wallet might have connected to a Bitcoin Cash node and someone might have paid you in bitcoin cash instead of with bitcoin. You then might have given up your goods in exchange for coins that didn’t meet the monetary policy you preferred.

Reason 4

If you run a node, and leave it on 24 hours a day, this helps the network.

The more nodes that are running, the faster transactions can propagate for everyone, and the harder it is to shut down Bitcoin. In order to kill Bitcoin, every single copy of the blockchain must be destroyed.

Reason 5

Be an "Uncle Jim".

In the future, it may be too challenging for EVERYONE to run their own node, but we don’t want people trusting random nodes. I imagine there will be a technical person in every social “circle of trust” ("Uncle Jim") for people to connect their wallets to. This tiny trade-off is far better than connecting to random public Bitcoin nodes.

If you learn to run your own node, then YOU also become a kind of human node, because you could one day help someone else to run and use their own node.

Reason 6

Coolness factor and street cred.

Running your own node is super cool, and gives you a great appreciation of the power of Bitcoin. You’ll probably end up buying more.

Conclusion:

Hopefully, it is clear now why you should run a node. There are various ways. If you want individual help, see here. For the computer illiterate, help is available at www.bitcoin4boomers.com.

This is a guest post by Arman the Parman. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Bitcoin Miner Stronghold Acquires Second Power Plant, Could Double Capacity

Namcios — Tue, 03 Aug 2021 12:54:42 -0400

Stronghold Digital Mining, a bitcoin miner powered by coal waste, has acquired a second coal refuse site in Pennsylvania with an 80 MW capacity.

Bitcoin mining company Stronghold Digital Mining has reportedly acquired a second coal refuse site in Pennsylvania. The firm also said it was "currently in negotiations" to obtain a third facility in the state.

The new power plant, Panther Creek, could generate a maximum of 80 megawatts (MW). If the company succeeds in actualizing that potential, the new facility could more than double Stronghold's total power capacity to 165 MW. The plant is located on a 33-acre site in the northeastern Pennsylvania borough of Nesquehoning.

"Coal refuse sites continue to wreak havoc across Pennsylvania," Greg Beard, the CEO of Stronghold, reportedly said. "We very much welcome the bipartisan political support to continue remediating these vast sites and return the land to the local community."

Stronghold is a vertically integrated bitcoin mining company that operates a wholly-owned, low-cost power regeneration facility in Pennsylvania. The company's business model is focused on converting coal waste directly into value through bitcoin mining.

When rain or snow meets sulfur-rich waste coal dumps, the largest water polluter in Pennsylvania is formed – waste coal acid mine drainage (AMD). The AMD then runs off and contaminates nearby streams and rivers, threatening aquatic life as a result. By converting the waste coal into power to mine bitcoin, Stronghold has sought to restore the usability of geographical areas that AMD had previously damaged.

In June, Stronghold raised $105 million in two private placements of equity securities and estimated to eliminate around 200 tons of waste coal for each bitcoin mined. On July 27, the bitcoin miner filed with the U.S. Securities and Exchange Commission (SEC) for a proposed $100 million initial public offering (IPO) on the Nasdaq.

Stronghold indicated in the filing that its current bitcoin mining operations consist of 1,840 rigs operating at 85 petahashes per second (PH/s). But if the public listing actualizes, the company said it plans to invest part of the proceeds in additional miners to increase its hash rate capacity.

CleanSpark Provides Updates On Bitcoin Mining Operations, Outlines Expansion Plans

Namcios — Tue, 03 Aug 2021 12:10:26 -0400

CleanBlok, the company's bitcoin mining division, currently has 7,500 rigs at 740 PH/s hashrate capacity powered by 95% carbon-free energy.

CleanSpark, a software and services company that ventured into bitcoin mining in December 2020, announced some updates on its Bitcoin strategies. The firm also shared insights on its energy mix, claiming that 95% of that is currently carbon-free, with plans to achieve 100% by 2022.

CleanBlok, the firm's BTC mining division, currently has over 7,500 rigs deployed with a hashrate capacity of 740 petahashes per second (PH/s). At present mining difficulty rates, the company said it presently produces 6 BTC per day on average. The firm expects that number to increase soon, as 1,670 rigs might be installed this month, and more machines are set to arrive in late August.

"We have experienced tremendous growth over a relatively short period of time, and we are very enthusiastic about the results," said Zach Bradford, CleanSpark's CEO. "In just the month of July, we have already produced nearly 70% of the bitcoins that we mined over the entire prior quarter, and we expect to continue to grow at a strong pace. We're on track to receive over 20,000 additional miners over the coming 12 months."

In July, CleanSpark produced 147.8 BTC, the announcement said. The increase in production was due to the company's mining fleet expansion and the recent decline in the Bitcoin network hash rate.

CleanSpark is a software and control technology solutions provider focused on the energy sector with the implementation of microgrids across a wide variety of settings, including residential, commercial, and industrial. Additionally, the company offers energy controls and microgrid modeling software.

The firm ventured into bitcoin mining through CleanBlok, its business unit dedicated to Bitcoin, in December 2020. Since then, the company has sought to expand operations by increasing the mining fleet, and it said it expects to exceed a hashrate capacity of 2,000 PH/s, or two exahashes per second (EH/s), by end-of-year.

National Fast Food Chain Quiznos To Accept Bitcoin This Month

Alex McShane — Tue, 03 Aug 2021 11:00:03 -0400

National fast food chain Quiznos is set to begin accepting bitcoin payments through a new partnership with Bakkt.

The pay with bitcoin in-store pilot is set to debut at select Quiznos locations in Denver later this month, according to a press release. Quiznos’ bitcoin payment solution is made possible through a partnership with Bakkt Holdings, a digital marketplace that has its own digital asset app.

The President of REGO Restaurant Group, which owns Quiznos and other national quick service restaurant chains, Mark Lohmann commented:

“Partnering with an innovative platform such as Bakkt is appealing to us for a number of reasons, primarily because it allows us to accept bitcoin directly at the point of sale as part of a quick and seamless transaction.”

Select Quiznos locations in Denver will allow customers to purchase their meals with bitcoin through the Bakkt App. Customers who use the app to purchase their meal with bitcoin will receive a reward of $15 worth of bitcoin.

Lohmann continued, “As we continue our digital transformation journey and respond to mobile and millennial consumer demand for alternative and cryptocurrency payment options, we are excited to offer yet another accessible way for customers to buy a meal, in this case, through the Bakkt digital asset wallet.”

Quiznos and Bakkt Holdings are the latest in a series of partnerships that enable bitcoin payment solutions. Bakkt Holdings is just one of many companies whose current mission is to make bitcoin and other cryptocurrencies as liquid and ubiquitous for consumers as fiat.

Bakkt Chief Revenue Officer Sheela Zemlin commented, “This is an exciting tentpole moment for us as we connect the next generation of customer experiences to the digital economy.”

Zemlin continued, “Through this partnership, we are introducing unique experiences to Quiznos customers by enabling them to take advantage of new ways to interact with digital assets and bringing bitcoin utility to the mainstream consumer market. We will closely watch how this pilot performs, with the potential to expand the partnership to additional Quiznos locations across the country.”

Fast Food Chain Quiznos to Begin Bitcoin Payments Trial This Month

Alex McShane — Tue, 03 Aug 2021 11:00:03 -0400

National fast food chain Quiznos is set to begin accepting bitcoin payments through a new partnership with Bakkt.

National fast food chain Quiznos is set to begin accepting bitcoin payments at select locations through a new partnership with digital payments provider Bakkt.

The President of REGO Restaurant Group, which owns Quiznos and other national quick service restaurant chains, Mark Lohmann commented:

Customers who use the Bakkt app to purchase their meal with bitcoin will receive a reward of $15 worth of bitcoin.

Bakkt Chief Revenue Officer Sheela Zemlin commented, "We will closely watch how this pilot performs, with the potential to expand the partnership to additional Quiznos locations across the country."

Hive Blockchain Has Purchased Over 10,000 Bitcoin Miners This Year

Alex McShane — Tue, 03 Aug 2021 08:42:07 -0400

Public Canadian mining firm HIVE Blockchain has announced an order of 4,000 Bitcoin mining machines.

The global Bitcoin mining arms race showed no signs of slowing down Tuesday, with public Canadian mining firm HIVE Blockchain announcing a recent order of 4,000 mining machines.

Revealed in a press release by mining chip manufacturer Canaan, the order adds to the 6,400 Bitcoin miners HIVE purchased from the company earlier this year.

According to data from HIVE, the combined operating aggregate hash power of the company will be about 850 Petahash per second when the new machines are deployed.

According to the order terms, Canaan will deliver 2,000 of the machines this month, and the other 2,000 in September, meaning this hash power will likely be deployed on the network soon.

Still, such orders are becoming more and more commonplace. Yesterday Marathon Digital Holdings, one of the largest bitcoin mining companies in North America, announced it will purchase 30,000 additional miners for $120 million.

One week ago, LUXXFOLIO Holdings announced that they too were actively mining bitcoin.

The large mining machine order from Canaan even comes just a month after the tech hardware manufacturer announced it would begin mining Bitcoin itself.

Indeed, Chairman and CEO of Canaan Nangeng Zhang commented that the company, which is publicly traded in the U.S. is seeking to work with clients to “capitalize on the enormous opportunities” in what he called a “fast-growing” industry.

Since China moved to crackdown on domestic Bitcoin mining, more Western companies are showing interest in competing for Bitcoin’s lucrative mining rewards. According to data from The Block, Bitcoin miners earned nearly $1 billion in revenue this July from activities.

A Look Back At July's Bitcoin Market

Dylan LeClair — Tue, 03 Aug 2021 08:24:13 -0400

A look at the supply changes, exchange activity, futures trading and more indicators of July's bitcoin market.

The below is an excerpt from the monthly recap by the Deep Dive, Bitcoin Magazine's premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

Supply Reaccumulation

The overarching trend in Bitcoin since the start of 2020, but more broadly, over the course of Bitcoin’s history, has been an increasing amount of the network's verifiably scarce supply becoming illiquid.

The hoarding of supply, or as bitcoiners call it, “hodling,” creates a virtuous cycle of adoption, as an ever growing number of proponents/adopters are competing to acquire an ever shrinking free float of supply, which in turn attracts more curious individuals to learn about bitcoin and the attributes which make it objectively the best monetary asset humanity has ever seen.

This broad trend of growing illiquid supply causes what some bitcoiners refer to as “number go up” technology, which is a great simplification of what bitcoin has done historically better than any other asset — accruing additional value, in exponential waves of adoption and price appreciation.

With an absolutely scarce supply, and an ever-increasing pool of network participants, betting on bitcoin to stop its trend of exponentially increasing in value over time is extremely unwise, even if growth on a percentage basis is less explosive than it was during the network’s early days.

Illiquid Supply

Read here for more information on the classification between liquid and illiquid supply.

As July arrived, a sudden and sharp increase in previously illiquid supply becoming liquid helped to send the price spiraling downwards as sentiment quickly changed and over-leveraged speculators sold positions at a loss, or were liquidated entirely.

Our views have stayed unchanged since the middle of May, that a deviation from the broad trend of illiquid supply increasing (thus more dollars changing for the marginal unit of bitcoin) does not mark the conclusion of the trend, but instead a momentary pause while coins are reaccumulated from weak hands.

Liquid Supply Change

One of the hardest things for many market participants to understand about bitcoin is that price does not go up on good news; price goes up when the marginal seller has been exhausted, which may or may not be influenced by the news cycle. It is the first point however that is fundamentally important to understand.

In a global market that has some liquidity in every technologically-able market on the planet, price is entirely set by the marginal buyer and seller; and against an ever-growing passive daily buyer base, the marginal seller is very often the driver of price.

This is why looking at illiquid supply can provide value to investors looking to visualize changes in trend and holder behavior.

On May 18, the previous 30 days saw 248,529 bitcoin re-enter the liquid supply, as 2021 investors capitulated for historic levels of realized losses on-chain in May and June. On July 6, we said the following regarding the on-chain reaccumulation that was taking place:

“When a breakout comes, it seems extremely likely to come on the upside, as strong-handed hodlers have once again begun to aggressively accumulate.” - The Daily Dive #016 - Price Consolidation Continues

The price has since rallied approximately 20% and we expect further momentum to the upside over the course of the third and fourth quarters of 2021.

Highly correlated to changes in liquid/illiquid supply is the aggregate bitcoin balances across exchanges. While not every buy/sell goes through an exchange (i.e., settlement between two counterparties directly on-chain for goods/services), the BTC/USD exchange rate is set by spot bitcoin demand for bitcoin across various exchanges.

WIth the sharp increase in liquid supply during the month of May came a corresponding increase to bitcoin balances across exchanges.

US Infrastructure Bill Author Promises Bitcoin Miners and Coders Will Be Exempt

Alex McShane — Tue, 03 Aug 2021 07:20:37 -0400

US lawmakers are moving to deny that provisions in a proposed $1 trillion infrastructure bill are intended to be as broad as interpreted by Bitcoin policy groups.

US lawmakers are moving to deny that provisions in a proposed $1 trillion infrastructure bill now moving through Congress are intended to be as broad as interpreted by leading Bitcoin policy groups.

Specifically, a spokesman for Sen. Rob Portman (Ohio), who drafted the bill, issued new statements to the Washington Post Tuesday aiming to clarify that Bitcoin miners and software developers would not become the target of the new legislation.

According to the news source, Portman is expected to further affirm this in remarks on the Senate floor, though no timetable was given.

"This legislative language does not … force non-brokers, such as software developers and crypto miners, to comply with IRS reporting obligations,” said a spokesman for Portman. “It simply clarifies that any person or entity acting as a broker by facilitating trades for clients and receiving cash, must comply with a standard information reporting obligation.”

The new tax-reporting requirement provisions for Bitcoin and other crypto transactions are designed to improve voluntary compliance with the IRS, making it easier for them to trace large crypto transactions that would otherwise go unreported.

However, many bitcoiners, and even lawmakers such as banking committee member Sen. Patrick Toomey (R-Pa.) are warning that the language in the bill is too vague and could be read to include bitcoin miners, rather than just brokers.

In a statement on Monday, Toomey warned, “Congress should not rush forward with this hastily-designed tax reporting regime for cryptocurrency, especially without a full understanding of the consequences.” He went on to deem the text as it currently stands as “unworkable.”

Other republicans are looking to the Treasury Department to issue more guidance to clarify that bitcoin miners and software developers will not be subject to the new rules, a GOP official told the Washington Post.

Of note, there are some new provisions included in the bill that have received support, including stipulations that payments made in Bitcoin over $10,000 would be required to be reported to the IRS.

However, it is the breadth of certain definitions that has earned criticism from D.C.’s strongest Bitcoin supporters, like Representative Warren Davidson (R-OH).

Speaking to Bitcoin Magazine this week, Davidson said the bill in its current form would be a disaster both for the Bitcoin industry and the American economy overall.

Congress image via Jeremy Buckingham on Flickr

Wells Fargo Now Offers Bitcoin & Crypto Exposure To Wealthy Clients

Alex McShane — Mon, 02 Aug 2021 18:31:22 -0400

Business Insider reports that wealthy Wells Fargo clients can now get Bitcoin & crypto exposure through the bank.

High-net-worth Wells Fargo clients can now get Bitcoin & crypto exposure, a company spokesperson informed Business Insider, making Wells Fargo the latest in a long line of traditionally conservative financial institutions to venture into Bitcoin.

In May, it was reported that the investment-research division of Wells Fargo Wealth and Investment Management was going to implement an actively managed Bitcoin and crypto strategy to its qualified investors.

The firm’s wealth and investment management arm oversees about $2 trillion in assets, making them among the largest wealth managers in the United States.

According to the research division’s president Darrell Cronk, the firm has been searching for "a professionally managed solution" for months, Business Insider reports. At the same time, Wells Fargo has been publicly wary of Bitcoin and other cryptocurrencies due to their regulatory vagueness.

In May, in an interview with Business Insider, Darrell Cronk commented, "We think the cryptocurrency space has just kind of hit an evolution and maturation of its development that allows it now to be a viable investable asset."

Cronk went on to allude that the massive market cap of Bitcoin combined with other cryptocurrencies lent them legitimacy in his view.

However, Cronk told Business Insider he views crypto as an “alternative investment” instead of a “strategic allocation”, but one which “can be a nice diversifier to portfolio holdings.”

It is unclear at this time how exactly wealthy clients at Wells Fargo are going to get exposure to Bitcoin, whether it is through outright purchasing Bitcoin or through a second order of price exposure, such as Grayscale Bitcoin.

Wells Fargo’s Bitcoin venture comes just days after traditional banking giant JPMorgan’s CEO said clients “see bitcoin as an asset class and want to invest,” and before them, in March, Morgan Stanley announced that they too would offer clients solutions for owning Bitcoin.

Notably, Wells Fargo’s global-investment-strategy team’s report on the investment rationale for cryptocurrencies is a testament to their understanding of Bitcoin’s supply and scarcity dynamics.

Cronk commented, “Anytime you reduce the supply of anything, even if demand holds constant, it should increase the price. Over time, as people become more familiar with these and as they become more mainstream, I think it will naturally go up."

Until the SEC approves a Bitcoin ETF, we can expect the actively managed crypto strategy at Wells Fargo to remain limited to qualified investors, namely, “an individual with an annual gross income of more than $200,000 or a net worth of more than $1 million,” according to Business Insider.

On the element of risk to Wells Fargo clients exposed to Bitcoin and other cryptocurrencies:

“There's a whole element of consumer protections and regulations that have to still evolve with the changing landscape," Cronk concluded, “we think there can be a viable investable option for those clients who show an interest."

Bull Bitcoin’s Pleb.Hodl On The Importance Of Orange Pills

Tyler Laroche — Mon, 02 Aug 2021 16:29:41 -0400

Pleb.Hodl, Bull Bitcoin’s new head of marketing, discussed his rabbit hold journey and the importance of welcoming precoiners.

Watch This Episode On YouTube

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In this episode of Bitcoin Magazine’s "Meet The Taco Plebs," I sat down with Bull Bitcoin’s newest head of marketing, Pleb.Hodl (@btcplebeian on Twitter) to discuss his unique Bitcoin rabbit hole story, his new position at Bull Bitcoin, the effect Bitcoin has on one’s mindset and much more.

Pleb.Hodl went into detail about his experience being “fiat pilled” coming out of university and the awakening that he had after being around people that advocated for bigger government. Along with this, we discussed the effects that believing in the ideals around Bitcoin has on individuals and society in general.

To finish, we delved into his new position at Bull Bitcoin and the excitement he has for the opportunity to work with the team there and build a phenomenal platform for true Bitcoiners.

Below are some more insights from Pleb.Hodl about his Bitcoin journey.

What’s your Bitcoin rabbit hole story?

My story starts with studying monetary economics at university and getting completely fiat pilled. It's embarrassing to admit being that lazy, ignorant and/or gullible now, but I bought it all. By the time I finished university, I very much believed in the idea of enlightened government by experts. When I first heard about Bitcoin, I was still under this spell and thought it was a suboptimal solution to our problems. I always thought the focus should be on making the government less corrupt and more competent. I would say the beginning of my path to Bitcoin was when I joined the board for the liberal party in my local riding. Being around people who believed in bigger governmentt, I got to see how they think and how hopelessly flawed my views were. That was 2015 and was the beginning of my red pill journey, which was a necessary precursor for my orange pill.

In 2016 to 2017, I started becoming more open to Bitcoin but still wasn't taking it seriously. I was also held back by my commitment to only investing in my own businesses... I was pretty cocky and didn't believe any investment had a better risk/return. By early 2018, a couple of things had happened:

One, bitcoin had crushed my returns over the previous year, even after a 60% drop from its all-time high. And two, something like five to 10 people that I respected were telling me I was wrong about Bitcoin.

One day, I just decided that, at least as an exercise in critical thinking, I needed to steelman my argument. Obviously, as anyone who has ever undertaken that task knows, I failed. I fell down the rabbit hole and didn't do much other than read about Bitcoin and listen to podcasts for the next year.

How has Bitcoin changed your life?

I mean, the most obvious way it has changed my life was by shifting my investment philosophy 180 degrees... I went from only investing in myself to committing my wealth and future savings exclusively to bitcoin.

It's a nearly impossible benchmark to beat unless you're starting a Bitcoin business, and I didn't have the financial or technical background to pursue anything like that. I've never known how to describe myself but it would be something like “analog entrepreneur”... I like building brick-and-mortar businesses where you get to interact with people and communities. As an entrepreneur, that made it difficult to expand my business or start new ones because they needed to be entirely funded by someone else. Investor discussions were always kind of awkward too because — although not explicitly — implicitly the discussion always rests on the investor asking the question "if you were me, would you make this investment?" and the entrepreneur answering "YES!" whereas my answer was, "No, you should put it all in bitcoin but you won't, so yes."

Beneath the surface my heart was in Bitcoin and in hindsight it was inevitable that my path would lead me to working in Bitcoin.

This is a really obvious and basic way that it's changed me but obviously, Bitcoin has this ability to change the way you see everything in life. It's been far more all encompassing than investing, too.

What is the most amazing thing about Bitcoin to you?

By far, the most interesting thing about bitcoin is its capacity to completely change individuals. A significant part of my worldview is that life is psychedelic. Everything from books to conversations to everyday experiences alters our consciousness... who we are and how we see the world. I've become obsessed with “Bitcoin as psychedelic” — I think it's inevitable that everyone in the world will be orange pilled. Whether it's consciously or subconsciously, Bitcoin will transform human consciousness on an individual level. This ability to shift all of humanity toward all of the values associated with low-time preference and away from high-time preference fiat values is what makes me completely obsessed... I really believe it's the most hopeful thing humanity has ever seen.

What are you most looking forward to in the Bitcoin space?

Bitcoin has consumed most of my time and energy since it first clicked for me in 2018. I guess the thing I'm most looking forward to (beyond the shift in human consciousness) — though it's already begun — is having an outlet for all of that energy... having started at Bull Bitcoin last month as the new head of marketing, I'm unbelievably excited to have the resources to start orange pilling on a large scale. One obvious thing we're focused on is customer acquisition, i.e., orange pilling no coiners. But Bull is such a unique company in terms of its commitment to using Bitcoin in the right ways... I'm really excited about being able to not just pursue surface-level orange pilling for bitcoin as an investment but deeper orange pilling with bitcoin as censorship-resistant money, freedom tech, etc. We have lots of projects in the works that will allow us to better educate our existing clients on self custody and privacy best practices that will hopefully nudge them further down the rabbit hole. It really feels like a unique opportunity for me to contribute to the Bitcoin project in a meaningful way.

Price prediction for the end of 2021, and the end of 2030?

For 2021, I'm going to be super boring and guess the middle of the range I have in mind... $85,000. I think anything can happen short term, especially if we see another round of lockdowns in the fall which I fully expect. With that being said, I think the ten-year bull run is far from over and I wouldn't be surprised to see $500,000 within 12 months.

For 2030, I would be surprised if we're still under $5 million. At that point, nominal predictions are kind of useless so let's say $5 million in 2020 purchasing power.

Hodl Hodl Resurfaces With Explanations After Announcing Forced Liquidations, Lacking Communication

Namcios — Mon, 02 Aug 2021 16:02:00 -0400

After arousing confusion with incomplete communication and forced liquidations on lending contracts, Hodl Hodl explains what happened.

On August 1st, peer-to-peer bitcoin trading and lending platform Hodl Hodl tweeted that the company was upgrading its security measures and contacting users individually through email. A few hours later, the firm shared it was force-liquidating some contracts in its lending platform, without further explanations. But today, Hodl Hodl released a PGP signed statement explaining the events and apologizing for the lack of proper communication.

“[We] have started migration/liquidation of user contracts to prevent the potential loss of funds,” the statement read. “Unfortunately, our recent internal and external audit identified that some user payment passwords might have been compromised. This affected a limited number of contracts, but we are taking proactive measures to ensure that everyone is safe.”

Hodl Hodl’s escrow-based lending system has three keys; the lender’s, the borrower’s, and another held by the company itself. These keys comprise the platform’s 2-of-3 multisignature escrow, where two signatures, and thus two keys, are required for spending funds locked in a lending contract’s multisignature address.

User private keys, from both lender and borrower, explained @6102bitcoin, “are generated using a user-specified ‘payment password’ in combination with a client-side random number generator.” If this password is weak, Hodl Hodl or a man-in-the-middle could discover what one or more keys are through brute-force attempts and steal the funds.

Additionally, Hodl Hodl’s platform was down for some time, stopping users from releasing funds since the company’s decryption mechanism is not yet public. If it was, users could decrypt the lend contract key using their own payment password and make a release transaction, sign it, and broadcast it in situations like this. Hodl Hodl previously said it planned to make the decryption tool public in Q3 2021.

It is still unclear, however, what the specific compromise has been. HodlHodl said that the company is still investigating these issues and building tools to facilitate the migration of funds from old escrows to new ones. Hodl Hodl said it is “going to publish a transparency report” once it finishes the investigations.

COC#3: Squeezed Supply, Shorts and Bitcoin Lemonade

Dilution-proof — Mon, 02 Aug 2021 15:14:58 -0400

This third edition of Cycling On-Chain takes a closer look at bitcoin’s ongoing supply squeeze and recent short squeeze.

Cycling On-Chain #3: Lemonade

Dilution-proof, August 1, 2021

Cycling On-Chain is a monthly column that uses on-chain and price-related data to better understand recent market movements and estimate where we are in bitcoin’s larger market cycle. After providing a broader look back and forward in the first edition, and discussing how Bitcoin has entered the geopolitical stage in the second edition, we’ll now take a look at the current, ongoing supply squeeze that recently led to a short squeeze in the bitcoin market that drove prices up steeply.

The last three months have been pretty rough for bitcoin from a price perspective. You could make a good case that, fundamentally, things have never looked better. But a period of over-leveraged speculation and (mostly irrational) fear in the markets have left their mark — particularly on the newer market entrants. Those times might be scary but are actually where the wheat is separated from the chaff or, in bitcoin terms, the weak hands are shaken out and the bitcoin ends up in strong hands. These HODLers of last resort don’t budge when price drops a double-digit percentage, but rather see it as an opportunity.

When life gives you melons, make lemonade – Elbert Hubbard, 1915

Lemonade. That is what this third Cycling On-Chain is all about. Times have been tough, but there are currently all kinds of squeezing going on that ensure that much of the available bitcoin supply will end up in strong hands in preparation for the next micro-, meso- or macro-cycle.

Squeezing Supply

A supply shock, sometimes also called a supply squeeze, is an event where the supply of a product or commodity that is actively being traded on the market changes and causes a price move. In Bitcoin, the halving events that occur every 210,000 blocks (roughly every four years) are the most famous supply shocks. During a halving the new supply issuance via the block rewards that miners receive when creating a new block is halved, triggering a large price increase in the subsequent year that is known as Bitcoin’s four-year cycle.

Bitcoin’s halvings are programmed into the software, but a supply shock can also occur when previously illiquid supply becomes liquid or vice versa. It is therefore interesting to assess to what extent supply is in the hands of entities that are or are not selling.

Using the data in the Bitcoin blockchain, it is possible to look at the ages of all the unspent transaction outputs (UTXOs) that have ever existed. Glassnode analyzed these “coin ages” and found that roughly 155 days is a historic cut-off point when the probability of a UTXO being spent becomes very low. Based on this, they created metrics for the short-term holder (STH) and long-term holder (LTH) supply.

Figure 1: Bitcoin price (black), circulating supply (blue), short-term holder supply (red) and long-term holder supply (green) (source)

As is evident, the STH and LTH supply fluctuate over time. An easier way to view the historical data is to divide the LTH supply by the circulating supply, which then represents the portion of the circulating supply that is estimated to be in the hands of LTH.

This Long-Term Holder Supply Ratio is displayed in the green line in Figure 2. The green color overlays represent periods in which the LTH Supply Ratio rises, which usually occurs during market downturns where price (black line) decreases or bottoms. The red color overlay shows the opposite: LTH Supply Ratio usually decreases when price rises, illustrating that long-term holders tend to sell against market strength and accumulate during market weakness. Long-term bitcoin holders are therefore usually seen as “smart money.” Being able to follow their economic behavior via the blockchain may hold valuable information about the state of the bitcoin market.

Figure 2: Bitcoin Long-Term Holder (LTH) Supply Ratio (green) and price (black) over time (source)

The LTH Supply Ratio also allows us to compare how current values for the portion of the total supply that is held by long-term holders compares to historical values. Figure 3 illustrates that the lowest LTH Supply Ratio reached during this latest $65,000 market top was not as low as those reached during previous market cycle tops. Of course it does not have to reach these levels, but shows that if $65,000 does end up being a larger macro market cycle top, it was characterized by lower LTH sell pressure than previous market cycle tops.

Figure 3: Bitcoin Long-Term Holder (LTH) Supply Ratio (green) and price (black) over time (source)

Since the Bitcoin blockchain is a public ledger, it is also possible to forensically assess to what extent unspent transactions come from or move to certain types of entities, such as exchange wallets. While this is unfortunate from a privacy perspective (make sure to check out @BitcoinQ_A’s privacy guide to learn how to optimally deal with this yourself), it allows Glassnode to improve upon the STH and LTH supply metric.

Using a proprietary algorithm to apply clustering based on forensic analysis of Bitcoin’s UTXO set, they created metrics for the illiquid, liquid and highly liquid supply. For the remainder of this column, the latter two are combined as “liquid supply” to keep the analysis simple.

Figure 4: The bitcoin price (black), circulating supply (blue), illiquid supply (green) and sum of the liquid and highly liquid supply (red) (source)

If you compare the original STH and LTH supply (Figure 1) with this illiquid and liquid supply chart (Figure 4), you’ll see that the changes in the latter are much more nuanced. This is likely the result of the applied clustering, as young UTXOs can still be held by illiquid entities with little to no history of selling.

Therefore, it is more helpful to look at the monthly net changes within these metrics, which is what Glassnode offers in their “Illiquid Supply Change” and “Liquid Supply Change” metrics. Figure 5 displays the illiquid supply change over time. The large amount of previously illiquid supply that became liquid around early May is clearly visible here, as well as the illiquid supply increases that have returned since the May 19 capitulation event.

Figure 5: The monthly (30-day) net change of bitcoin supply held by illiquid entities (source)

Because the bitcoin supply is increasing by every block and these increases are changing over time due to the halving-based supply issuance schedule, these values cannot be accurately compared to historical values. After all, a 200,000 bitcoin illiquid supply decrease was much more impactful when there were only 2 million bitcoin circulating (10% of the total) than it would be when there are 20 million coins circulating (1%).

This problem can be solved by dividing the illiquid supply by the circulating supply, creating a metric called the circulating supply-adjusted illiquid supply changes,” which is displayed in Figure 6. During the early years, the illiquid supply increased massively, a lot of which was likely related to coins being forgotten about or lost, as well as some of the early HODLers stacking sats before that became a thing. The relative illiquid supply decrease seen during the recent market downturn was the largest since the 2017 market cycle top, which was preceded by two more similar episodes during that bull run. The current illiquid supply increase is also the largest since mid-2017, before that cycle reached its final blow-off top.

Figure 6: The bitcoin price (black) and 30-day illiquid supply changes (green), adjusted for bitcoin's circulating supply (source)

Recently, Will Clemente and Willy Woo introduced the “illiquid supply ratio,” a metric that is calculated by dividing Glassnode’s illiquid supply by liquid and highly liquid supplies. An alternative version that is best labeled as “illiquid supply percentage” can be calculated by dividing the illiquid supply by bitcoin’s circulating supply. The latter metric therefore represents the portion of the circulating supply that is currently labelled as illiquid by Glassnode. Likewise, the liquid supply percentage can be calculated by dividing the liquid supply by the circulating supply, representing the inverse of the illiquid supply. Both metrics are displayed in Figure 7.

Figure 7: The bitcoin price (black), circulating supply (blue), illiquid (green) and liquid supply (red) percentages (source)

Next we’ll zoom in on the illiquid supply ratio percentage, which is visualized in figure 8. After Bitcoin’s genesis almost all of the bitcoin supply was considered illiquid, as network participants were CPU mining on laptops and desktops and mostly just toying around with the new software. When bitcoin started getting a market price and saw some early adoption as a neo-money, a larger portion of the supply started to become liquid, as these coins could now actually be spent. During the earlier years miners also may have been selling their newly mined bitcoin to cover overhead costs — especially after the introduction of GPU mining and later ASIC mining.

Figure 8 also shows that after each Bitcoin halving (vertical black striped lines), the rate of contraction in the illiquid supply slows — even turning into a positive growth rate immediately after the last two halvings. More simply put: as the bitcoin supply issuance declines and it becomes scarcer, its holders appear to become less and less inclined to part with their bitcoin. Will the low 70% illiquid supply ratio percentage that we saw during the previous bear market be the lowest ones that will ever be reached in Bitcoin’s existence?

Figure 8: The bitcoin price (black) and illiquid supply ratio (green) over time (source)

Figure 9 shows this same illiquid supply ratio percentage, but zooms in on the last year. Since the start of July, the illiquid supply ratio percentage increased drastically, as coins were being scooped off the market at a discount by holders with a history of being strong hands. Current illiquid supply ratio percentage values haven’t been seen since the bitcoin price was hovering just below all-time highs at around $55,000. This short-term trend suggests that the recent dump is now over and a new supply squeeze may be underway.

Figure 9: The bitcoin price (black) and illiquid supply ratio (green) over time (source)

Squeezing Shorts

The supply wasn’t the only thing being squeezed recently. Since the May 19 capitulation event, the bitcoin price has been in a downward consolidation and market sentiment was predominantly bearish. Bitcoin Twitter was actually so salty that you could mine salt by scrolling through the responses under the tweet of any on-chain analyst. This was also noticeable in the funding rates of bitcoin perpetual futures contracts that were mostly negative since then, which means that shorting bitcoin was so popular that you would basically need to pay a premium to go short. The increasing open interest since the May 19 capitulation while funding stayed negative further substantiates this.

These circumstances lined up to be ideal for a short squeeze to occur. A short squeeze happens when a relatively large portion of the futures market is going short with inappropriate risk management and a sudden price increase causes the collateral under these positions to become insufficient, triggering exchanges to liquidate these positions. This is particularly troublesome if a large portion of the open positions are naked shorts, which means that they use a different form of collateral to borrow the asset they’re shorting against. In the case of bitcoin, when fiat currencies or stablecoins are used as collateral for a short position that is then liquidated, the fiat or stablecoin collateral is used to buy the bitcoin that is needed to pay off the debt, which actually drives its price up further.

This is exactly what happened over the last two weeks. Figure 10 illustrates that since the May 19 capitulation event, price declined (black) while open interest (blue) increased, as funding remained negative (light green). When price resiliently bounced off the recent $30,000 lows, open interest actually increased further at increasingly negative funding, showing that the bears were basically doubling down. However, the bitcoin price just kept surging, liquidating a large number of these naked shorts, creating an over $10,000 price move over the course of about a week.

Figure 10: The bitcoin price (black), perpetual futures funding (light green), perpetual futures open interest (blue) and short liquidations (red) (source)

Squeezing Out The Weak Hands

During this recent bounce off the lows, the Average Spent Output Lifespan (ASOL) per entity on the network remained low, which means that the coins that moved on the bitcoin blockchain throughout this period were mostly relatively young. The Spent Output Profit Ratio (SOPR) per entity on the network did increase though, illustrating that the coins that were moved did so at a profit. This combination of trends is visualized in figure 11 and suggests that younger market entrants that were sitting on underwater positions might have jumped on this opportunity to sell some of their positions at a profit. This is once again an example of coins moving from weak-handed entities with low conviction to strong-handed new owners.

Figure 11: Entity-adjusted Spent Output Profit Ratio (SOPR) and Average Spent Output Lifespan (ASOL) over time (source)

When using terms like “smart money” and “weak hands,” we tend to consider institutional players to be the former and retail investors to be the latter, but this is not necessarily the case. Figure 12 displays the bitcoin supply that is held by entities with balances up to 1,000 bitcoin and shows that entities with balances of up to 1 bitcoin have been rigorously stacking sats throughout this entire bull run and never had a significant selloff. Entities with a balance between 1 and 100 bitcoin were selling portions of their stack since bitcoin broke its prior $20,000 all-time high until the May 19 capitulation event. But these smaller entities have been accumulating again since then. Entities with a balance of 100 to 1,000 bitcoin were mostly stacking when the bitcoin price neared its recent all-time high and have mostly sat on their positions ever since.

Figure 12: Bitcoin supply held by each entity tier, up to 1,000 bitcoin (source)

By definition, whenever there are buyers there are also sellers. On average, entities with balances up to 100 bitcoin were accumulating throughout the recent market downturn. They were therefore slowly depleting the highly liquid supply that was actively being traded on the markets, as we already saw in the illiquid supply changes. Since this last bounce off the $30,000 lows, almost 112,000 bitcoin have been withdrawn from exchanges (Figure 13), adding fuel to the fire that we may be in the midst of another supply squeeze.

Figure 13: Bitcoin balances on exchanges (source)

A Not-So-Sour Sentiment

The recent market turnaround seems to have had a noticeable impact on the market sentiment as well. In an informal monthly market sentiment poll, respondents were very clearly bullish on all timeframes, as can be seen in figure 14.

Figure 14: Bitcoin market sentiment poll, ending on July 31, 2021 (Voyager acquired Coinify, but their focus on stablecoins might leave their customers behind while Bitcoin walks toward full monetization.

New York-based bitcoin and cryptocurrency trading platform Voyager announced today the acquisition of Coinify, a cryptocurrency payment platform with customers in over 150 countries, for $85 million. But their focus on stablecoins instead of Bitcoin might be a hurdle long term.

Coinify allows merchants to accept bitcoin and cryptocurrencies in their businesses while receiving payouts in fiat currencies. The payments platform supports more than 20 national currencies and is available in Asia, Europe, North America, and South America.

Voyager is breaking into digital payments through the acquisition, something its co-founder and CEO Stephen Ehrlich told Forbes “is the next frontier.” The trading company plans to integrate its systems with Coinify’s platform to allow traders to make and receive payments directly through their digital accounts. Voyager aims to cut out fees associated with traditional payment infrastructures and on-chain transactions.

“We believe the USDC stablecoin is the best stablecoin on the market and that customers want to receive payments in that,” Ehrlich said. “We see this vision of payments being the next frontier on top of trading and investing.”

Payments, the medium of exchange role of a currency, follow the store of value role as adoption of a currency increases. But since a stablecoin is pegged to the dollar, there is arguably little benefit added to transacting with and holding it, besides easier and potentially cheaper cross-border payments.

When Strike, which leverages dollars and the Bitcoin Lightning Network to allow instant and cheap payment transfers worldwide without intermediaries, started implementing its services in El Salvador, it had to use a stablecoin to achieve basic functionality.

But after El Salvador made Bitcoin legal tender, Strike started working towards making the country’s biggest banks interoperable on Lightning. Strike founder Jack Mallers said the resulting system would replace the equivalent of automated clearing houses in the U.S. with the Lightning Network.

Although stablecoins might bring short-term opportunities to solve some of the banking system’s inefficiencies and setbacks, only Bitcoin can deploy permanent changes and benefits. Moreover, as bitcoin progresses in its path to monetization, it is set to keep growing in purchasing power against fiat currencies.

Companies, developers, and users alike have the opportunity to embark early on the financial revolution started by Bitcoin by leveraging the Lightning Network. The second-layer protocol enables cheap, fast, and private payments to be made with the world’s hardest money. The sooner merchants start accepting and holding BTC, the more they will be able to reap the benefits of Bitcoin’s eventual full monetization.

Fortune 500 Financial Firm NCR to Acquire Bitcoin ATM Operator LibertyX

Alex McShane — Mon, 02 Aug 2021 13:58:18 -0400

U.S. financial services firm NCR Corporation has announced an agreement to acquire LibertyX, a Bitcoin ATM operator launched in 2014.

Public U.S. financial services firm NCR Corporation has announced an agreement to acquire LibertyX, a Bitcoin ATM operator launched in 2014.

Revealed via a press release Monday, the company said the acquisition will “accelerate” its ability to provide Bitcoin and cryptocurrency buy and sell services to its market. NCR already has nearly 1 million ATMs around the globe.

Chief Technology Officer at NCR im Vanderham commented, “Due to growing consumer demand, our customers require a complete digital currency solution, including the ability to buy and sell cryptocurrency, conduct cross-border remittance and accept digital currency payments across digital and physical channels.”

LibertyX already offers Bitcoin ATM, kiosks and point-of-sale systems solutions, and its products can be found in hundreds of convenience stores, pharmacies, and supermarkets across the US.

In statements, NCR said it plans to offer LibertyX’s software solutions to banks, retailers and restaurants through the company’s existing software wallet and mobile applications.

The terms of NCR’s acquisition have not yet been disclosed, but they are expected to be released later this year.

The news comes at a time when NCR has been more active in expanding its offerings into the Bitcoin market, following its June announcement that 650 community banks and credit unions would soon be able to offer the ability to buy, sell and hold bitcoin through its services.

NCR world headquarters via Wikimedia

The Price Of Bitcoin Surged To $40,000 Despite Headwinds

Dion Guillaume — Mon, 02 Aug 2021 13:32:24 -0400

There are various things occurring that many may consider bearish; it appears that bitcoin just doesn’t care.

Last Week In Bitcoin is a series discussing the events of the previous week that occurred in the Bitcoin industry, covering all the important news and analysis.

Summary Of The Week

We’re back in the 40s, baby! Bitcoin spent most of the week hovering around $40,000, spurred by bullish news and unphased by the U.S. Senate’s planned attack on Bitcoin through their new infrastructure bill. There’s a lot to unpack from the week and we have a handy new timeline to show how different bits of news affected the price over the last week.

In short, Michael Saylor and MicroStrategy will keep HODLing, Amazon will not introduce bitcoin payments any time soon, large institutional investors are jumping on the bitcoin bandwagon and Kazakhstan is welcoming Bitcoin with open arms.

Highlights From Bitcoin Magazine Last Week

Timeline Of Bitcoin News This Week

Bullish News

Let’s start with the bullish news. Just over a week after dipping below $30,000, bitcoin rallied past the $40,000 mark, briefly touching $42,000. The sudden surge was fueled by a report that Amazon would start accepting bitcoin payments. Amazon later denied the report, but it has remained steady around the $40,000 range.

Another big move this week that most in the mainstream media have brushed past is Kazakhstan moving towards very open Bitcoin legislation. Besides their efforts to draw bitcoin miners to their shores, they will allow their citizens to open bank accounts dedicated to cryptocurrencies such as bitcoin and spend it across the country. Not quite El Salvador-level adoption, but more countries may follow Kazakhstan’s more modest playbook over El Salvador’s.

MicroStrategy had their quarterly earning call this week where CEO and bitcoin aficionado Michael Saylor reiterated that the company will continue HODLing in the long term, despite seeing their holdings account for a material loss in value as bitcoin dipped during the reporting period. MicroStrategy remains one of the most important large scale HODLers and their confirmation is a good sign for market watchers.

Then there’s a bunch of financial institutions that have jumped on the bitcoin bandwagon over the last week, including GoldenTree, a $41 billion hedge fund. One of Germany’s largest asset managers, Dekabank, is also reportedly considering investment in bitcoin which could open up doors for further European adoption. Finally, ProFunds announced the launch of the first bitcoin mutual fund in the US which may pave the way for more in the near future.

Bearish News

Then there’s the bearish news. Last weekend a report emerged signalling that Amazon would allow bitcoin payments in the near future, sending bitcoin on a run. Tuesday, Amazon denied these rumours, which surprisingly didn’t affect bitcoin’s price as much as one would expect. Although bearish in the short term, it’s not completely outrageous to assume they would allow bitcoin payments eventually.

Senator Elizabeth Warren made waves this week as she noted bitcoin and other cryptocurrencies put financial control in the hands of “shadowy super coders.” Many of her remarks and misconceptions during the week proved misinformed and bearish. However, she did make sure to mention that crypto would pave the way to financial inclusion for the unbanked.

The U.S. Senate is currently busy trying to get their $1 trillion infrastructure bill passed which includes a provision to regulate and tax crypto. This may prove very bearish and a lot of Bitcoiners have been vocal against the bill. Hopefully the Senate comes to their senses, otherwise it will see Bitcoiners and companies focusing on Bitcoin exit the U.S. en masse.

Finally, although not necessarily bearish, Bitcoin mining difficulty increased for the first time since May as miners resettle in new territories after the Chinese crackdown. With countries like Kazakhstan, Paraguay and several U.S. states welcoming bitcoin miners with open arms and favourable regulations and incentives, it’s likely that mining will now be better spread throughout the globe. The slight downside here is that any increase in mining difficulty can push inefficient miners to sell some of their holdings.

Verdict

It’s been a good week for Bitcoin and the best is yet to come. The fact that bitcoin has remained steady around $40,000 is good news, despite the U.S. infrastructure bill’s planned regulation around bitcoin being the biggest factor to negatively affect its price and outlook in the short term.

If you bought the dip last week, then you’ve already seen a decent return. But the best is yet to come. Bitcoin is a long-term investment and the entire point of bitcoin isn’t short-term riches, but rather long-term financial freedom. If the U.S. does end up pushing through its “bear bill,” it won’t be the end of the world.

This is a guest post by Dion Guillaume. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

Bank Of America Sees Opportunities With El Salvador’s Bitcoin Adoption

Namcios — Mon, 02 Aug 2021 12:01:04 -0400

BofA sees four upsides to Bitcoin adoption in El Salvador, including remittances, financial digitalization, and foreign investments.

Nayib Bukele, President of the Central American country El Salvador, tweeted yesterday screenshots of an economic viewpoint report by the Bank of America (BofA). Along with detailing why the bank is constructive on the outlook for El Salvador’s economy, the report also outlined the opportunities Bitcoin adoption as legal tender might bring for the country.

BofA said it recognizes how cross-border remittance inflows, which account for a substantial 24% of El Salvador’s gross domestic product (GDP), could benefit from utilizing bitcoin. The Bank of International Settlements estimates that the average cost of such remittance is over 10%, which bitcoin could reduce.

“Using Bitcoin for remittances could potentially reduce transaction costs compared to traditional remittances channels,” BofA said. “If using Bitcoin indeed lowers transaction costs, then for every dollar that the Salvadoran diaspora send home, a greater portion of that dollar could be received by recipients, increasing their disposable income and reducing the proportion of remittances lost to financial intermediaries.”

Another positive outcome Bitcoin might have on Salvadorans, the report said, relates to banking the unbanked. Since more than 70% of the adult population of El Salvador does not have access to the traditional banking system, Bitcoin can democratize access to electronic payments –– a “progressive touch.”

Additionally, BofA said that by making Bitcoin legal tender in the country, El Salvador gives more choices to its people, including consumers and merchants, who may choose under which monetary standard they prefer to transact and save.

“Bitcoin’s adoption could also bring [foreign direct investment] flows into El Salvador,” the report said. “There could be FDI from Strike (developer of the payments platform), Bitcoin miners, ATM manufacturers, among other types of firms.”

Shortly after announcing his country would adopt Bitcoin as legal tender, Bukele invited bitcoin miners to take advantage of El Salvador’s abundant geothermal energy. The clean, emissions-free energy source is powered by the country’s volcanos. Then, Bukele said he was “starting to design a full Bitcoin mining hub around it.”

Another FDI vehicle that El Salvador has already been receiving is bitcoin ATMs. In June, Athena Bitcoin reportedly started installing 1,500 bitcoin ATMs in the country. The company said the installation process would happen in phases, the first of which would see 14 machines installed in the country.

Casa Launches Dollar Cost Average Bitcoin Buying Service

Alex McShane — Mon, 02 Aug 2021 09:50:56 -0400

Casa is launching a product allowing users to purchase Bitcoin via automatic bank payments that are then sent straight to a user’s multisig wallet.

Bitcoin security services startup Casa is launching a product allowing users to dollar-cost average (DCA) into Bitcoin, purchasing BTC via bank payments that are then sent straight to a user’s multisig wallet.

DCA bitcoin buying solutions are growing popular on many exchanges, presenting investors with the option to make small recurring purchases to smooth exposure to price volatility and promote long-term investing habits.

Casa’s CEO Nick Neuman commented, “Our mission has always been to make Bitcoin self-sovereignty simple, and these new services are a major leap forward not just for Casa but for our industry and customers.”

Until this point, however, buyers using the industry’s more established exchanges had to manually transfer bitcoin purchased via such a strategy into their multisig wallets. Casa, by contrast, charges a purchasing fee of 0.99%.

As an incentive to sign up for the service, Casa is also offering a Recurring Buy Boost to all paying customers.

“The first 500 users will earn an extra 5% boost for every single recurring order they make between now and September 1,” the company said in the release.

“More people are educating themselves about Bitcoin every day, and they are realizing that coins held on-exchange are vulnerable to hacks and theft from both inside and out,” Neuman continued.

Neuman concluded, “Increasingly, Bitcoin investors understand that there is no point accumulating censorship-resistant money if your funds aren’t seizure resistant. By making security go hand-in-hand with usability, and by rewarding those who take a privacy- and security-first approach, we are making it easier than ever for anyone to take part in money’s next revolution.”

Marathon to Invest $120 Million In 30,000 New Bitcoin Miners

Alex McShane — Mon, 02 Aug 2021 09:08:30 -0400

Marathon Digital Holdings, Inc. announced today it will purchase 30,000 additional bitcoin miners for $120.7 million.

One of the largest bitcoin mining companies in North America, Marathon Digital Holdings, Inc., announced today it will purchase 30,000 additional Antminer S19J Pros for $120.7 million.

The new machines are expected to ship between January and June of next year, per a press release from Marathon. If deployed today, those ASICs would produce about 13.3 EH/s and represent about 12% of the network’s hash rate (as of August 1 the Bitcoin network represents 109 EH/s).

The new machines would further increase the scale of the Marathon mining operations by 30%, and are expected to bring the total number of bitcoin miners owned and operated by the firm to over 133,000.

Marathon’s CEO Fred Thiel commented, “Increasing our percentage of the total network’s hash rate increases our probability of earning bitcoin, and given the uniquely favorable conditions in the current mining environment, we believe it is an opportune time to add new miners to our operations.”

He went on to thank the team at Bitmain, manufacturers of the Antminer S19J Pro for expediting the company’s order, a sign of the increased competition for available machines.

The news comes after Marathon announced it would stop using its hashrate to censor transactions and mine only “compliant blocks” earlier this summer, at which time it also began to signal for Taproot, Bitcoin’s forthcoming software update scheduled for November.

Square Customers Buy $2.72 Billion Worth Of Bitcoin In Q2

Alex McShane — Mon, 02 Aug 2021 07:00:38 -0400

Payments giant Square has revealed its customers bought $2.72 billion worth of bitcoin in the second quarter of 2021.

In a new shareholder letter published Sunday, payments giant Square revealed customers brought in $2.72 billion worth of bitcoin in Q2 of this year.

Square’s total net revenue of Q2 this year was $4.68 billion, up 143% year over year, for a gross profit of $1.14 billion, up 91% since 2020.

But while Bitcoin has played a significant role in the company’s revenue in 2021, raking in 3x year over year return on their investment, the firm sought to portray its support for the network as necessary for building and fostering a more useful Bitcoin ecosystem.

“As we have offered individuals the ability to instantly send bitcoin free, unlock unique Boosts, direct deposit their paychecks, and more, customers have continued to find increased utility on the platform,” the letter read.

The company generated a gross profit of $55 million during the second quarter on Cash App fees related to the purchase and sale of bitcoin, which accounted for just 2% of bitcoin revenue. Excluding bitcoin, Cash app’s revenue was $606 million during the same period.

The shareholder letter attributed not only the success of the company but that of customer’s who invested through the platform to an increased demand for, and an ease of access and exposure to bitcoin:

“Our ecosystem continues to be a differentiator as we find that customers who are trading stocks or holding them in their portfolio have engaged more with other products like Cash Card or bitcoin and have generated greater gross profit per customer.”

Square has continued to roll out bitcoin purchasing features such as custom orders, which allow users to set specific prices at which to buy or sell bitcoin. Other recent innovations include the ability to choose one of three sats-per-byte fees on bitcoin withdrawals.

How Bitcoin Solves The Store Of Value Problem

Mind/Matter — Sun, 01 Aug 2021 11:00:00 -0400

The framework from which we evaluate the asset must take into account the problem that it solves.

When a valuation of a company is made, it is done by modelling future cash flows and discounting them to the present-day value in a discounted cash flow model. Fundamentally, this relies on the estimates of future cash flows to accurately determine what the current valuation for a company should be. All sorts of assumptions need to be made to accurately determine this competition in the marketplace — future demand for the product or service, and technological innovations all among them.

Another factor that has to be accounted for is monetary policy, which is something we’ve seen largely increase the value of equities as a result of looser monetary policy, cheap debt and pulling back future cash flows. So even though a discounted cash flow model is severely flawed, it can give us a starting point through which to value a company because there are fiat cash flows associated with it.

Looking at this through the lens of bitcoin, it has no fiat cash flows, so trying to determine a fiat valuation the same way we do for a company is entirely flawed. A better way to understand it is looking at it through the lens of “What problem does this solve?” Not only does this eliminate the issues presented earlier in the discounted cash flow model, but it also gives a relative framework through which to evaluate it relative to other assets.

One of the questions you should ask when evaluating any product is functionally, “What problem does it solve?” That’s the first question you should ask when evaluating a product; but functionally this is more important when evaluating an asset. Since bitcoin is both a product and an asset, understanding the product/market fit is a fundamental pillar in beginning to determine a dollar valuation for it.

That moves us to answering the question. When you begin to go down the line and look at the various asset classes, the answer becomes clear. It solves the store of value problem. But, not necessarily in the way that is commonly thought of as solving that problem. The way we can see this in the real world is to look at other asset classes and ask “Does this solve the store of value problem?” What we see is that no other asset or asset class does, leaving a gap in the market (people that want a sound place to store their monetary energy) and the products that solve that (more on that below).

Gold is technically a store of value that’s broadly kept up with the money supply in recent decades, however, it is a failed store of value. The reason it’s a failed store of value, is that while gold has kept up with the M1 supply, it has failed to keep up with real estate — and the bonds that back that real estate. This is largely due to physical properties of gold that make it a poor store of value. Lack of easily verifiable supply, not being salable, and largely centralized in practice make it fully unfit to store value. And the market has determined that to be the case. Real estate has eclipsed gold many times over as it functionally — along with bonds — became the de facto store of value of the late 20th and early 21st century.

The bond market serving as a store of value “worked,” at least to some degree, until the 2008 financial crisis when nominal yields went close to zero and real yields went negative. Since bonds (Treasury and agency – and lately even corporate and junk bonds) cannot even keep up with the pace of inflation, bonds have now also become a completely failed store of value.

Real estate then would be the next place one would look for a store of value — and for the last decade plus, it has served that purpose. However, real estate (especially residential) was never intended to serve as a store of value. Among the issues that prevent real estate from being a long-term store of value are it’s reliance on monetary policy (without the credit expansion and fiscal policy it cannot sustain), demographic shifts in populations (baby boomers in the United States hold the vast majority of the real estate value, and younger generations do not have the wealth to buy these homes at record values), and salability across time and space (real estate is time consuming to transfer and takes multiple third-party intermediaries).

That leaves us with equities, and why nominally, we’ve seen record high valuations for equities over the last decade plus. Not because equities provide a true stable store of value (again we are discounting unknown future cash flows to come up with the valuations here), but because everything else has failed. The problem with equities is that functionally rates cannot go much lower, so they are close to being “tapped out” as a store of value (they can continue to go higher nominally, if the government implements Universal Basic Income payments).

Circling back to bitcoin and trying to come up with a dollar valuation around it, it solves the problems that gold faces (it’s more salable, censorship resistant, and less centralized), while also being less likely to be subject to manipulation (through the ease of storing your own keys). That gives us a really low-ball end on which we can say we could value bitcoin at — and that’s above gold's market cap — $10 trillion.

Again though, gold is functionally a failed store of value so this is just a starting framework for which we would set a lower-bound estimate. I think the broader valuation that we can use is the bond market. The global bond market is between $130-300 trillion depending on different sources/estimates. Conservatively, if we assume bitcoin solves the store of value problem better than bonds and real estate — and this is definitely true on a long enough time scale, as bonds have lost real value for over a decade — then we can safely assume it solves the store of value problem better than the bond market. Therefore, a $130 trillion valuation is a safe, conservative estimate for bitcoin’s valuation framework. This would put the price per coin at approximately $6.5 million per coin, based on today’s U.S. dollar value. That’s arguably extremely conservative, as it does not account for the derivatives market which is estimated to be over a quadrillion U.S. dollars.

This is a guest post by Mind/Matter. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

A Bipartisan Case For Bitcoin

Ammar Naseer — Sat, 31 Jul 2021 11:00:00 -0400

Bitcoin need not be a politically splitting idea, as there are benefits to be had from progressives and libertarians alike.

As the U.S. Senate approaches the finish line of the upcoming infrastructure deal, Coindesk has reported that congress is considering legislation with an escalating adversarial posture against the nascent digital asset industry. These policy changes need to be thoughtfully scrutinized rather than rushed, as they risk creating unintended consequences.

Physical infrastructure does not need to compete with emerging digital financial infrastructure. Like the early days of the internet, Bitcoin represents a digital infrastructure that can unlock economic opportunities for progressives and libertarians alike.

Approximately 1 in 6 Americans now owns cryptocurrencies, and nearly 80% of millennial consumers are interested in learning about cryptocurrency to understand them better. You do not want to demonize this voting block as “shadowy super coders.” Policy leaders would be well served with a reminder that Bitcoin is a liberating technology that holds appeal across the political spectrum. Here’s a brief reminder of Bitcoin’s bipartisan appeal:

Why Progressives Like Bitcoin:

- Financial inclusion: Bitcoin can bank the underbanked – creating a more inclusive financial services infrastructure where anyone can store and send money, unencumbered by discrimination. Over 14 million Americans are unbanked and nearly 50 million Americans are underbanked even in 2021, and these figures disproportionately impact Black and Hispanic households. Rather than leaving these households to be serviced by predatory lenders, progressives would be well served by embracing a technology which makes access to financial services as easy as access to the internet.

- Incentivize greener energy: Bitcoin’s incentive design rewards cheaper energy production. Climate change advocates would be happy to understand how this design can accelerate the global energy transition to renewable energy, particularly solar and wind energy. This represents an opportunity for Americans to make productive use of excess energy, to create jobs, and to continue to lead with innovations that help the transition to a greener future.

Why Libertarians Like Bitcoin:

- A free market of sound money: Libertarians looking to minimize government intervention should be attracted to the free market nature of Bitcoin. As early as 2021, the European Central Bank recognized Bitcoin as an asset built upon Austrian economic principles – principles which embrace a market based approach to creating financial wealth for the next generation of Americans.

- Strong property rights: The right to own property is enshrined in Article 17 of the Universal Declaration of Human Rights, and similarly emphasized in the United States constitution. Defenders of civil liberties will find that Bitcoin supports the Fifth Amendment (right to private property), and the Fourth Amendment (protection from unreasonable searches and seizures). Private property ownership is the basis for economic prosperity, and digital assets represent a new frontier to extend these modern civil rights.

Accenture: Bitcoin Helps Young Girls In Afghanistan

Regardless of your political beliefs, Bitcoin represents an opportunity to liberate people from authoritarian suppression. As early as 2013, young girls in Afghanistan without access to banking services were able to make money online by accepting Bitcoin. PayPal wasn’t available in the country at the time – but Bitcoin gave them a permissionless path towards prosperity. These are the very human faces of the people we are looking to liberate – you do not want to demonize them.

Yes, we need regulatory clarity and we need to pay our fair share of taxes. But you need to be thoughtful not to destroy an emerging digital financial infrastructure by pitting it against physical infrastructure. This industry enjoys bipartisan support from voters – and lawmakers should be well served by embracing this innovation rather than antagonizing this voting bloc.

This is a guest post by Ammar Naseer. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

Why The $35 Trillion In United States Retirement Accounts Should Be Spent On Bitcoin

Phil Geiger — Fri, 30 Jul 2021 15:10:50 -0400

American retirement savings represent a new beachhead for bitcoin — we just need to make sure people hold their own keys.

“Many adults are struggling to save for retirement and feel that they are not on track with their savings. While preparedness for retirement increases with age, concerns about inadequate savings are still common for those near retirement age.” —Federal Reserve Website

Despite the Federal Reserve’s tone-deaf admission that many Americans struggle to retire when one of the central bank’s primary mandates is price stability, as of March 2021, there were approximately $35.4 trillion trapped in tax-advantaged retirement accounts. For many Americans, retirement accounts make up a vast majority of their overall net worth.

As the dollar continues to inflate and bitcoin continues to outperform any other form of savings, it’s natural that Americans will increasingly tap into their retirement savings to gain exposure to bitcoin. This is great news for bitcoin, but many risks emerge if these funds ultimately centralize in a few custodians’ hands.

Contrary to what many Americans might expect, anyone can hold the private keys to their bitcoin IRA instead of relying on a third party. However, navigating the US retirement rules and regulations can be difficult. This article can be used as a high-level starting point but nothing in this article should be taken as financial advice.

How U.S. Retirement Accounts Work

Retirement accounts (such as IRAs, 401(k)s, 403(b)s, 457 plans and others) allow contributions in the form of traditional funds, Roth funds or a mixture of both.

Traditional retirement account: Contributions receive an up-front tax deduction or exclusion from taxable income. Those traditional funds can be withdrawn after age 59.5 without penalty, but they will still be taxed upon withdrawal at ordinary income tax rates.
Roth retirement account: Contributions receive no up-front tax benefit. However, after age 59.5, all Roth funds — including all appreciation — may be withdrawn completely tax-free.

In either a traditional or Roth account, all capital gains and other investment income are free of tax as the assets grow.

Bitcoin: The Retirement Inflation Hedge

Historically, the 5 to 8% annual yield delivered by typical retirement accounts may have surpassed the real inflation rate of the dollar. Regardless, it definitely beat the official government-reported inflation rate. In 2021, however, there is no serious argument that such a yield is outpacing inflation.

Fortunately, today we have bitcoin, a revolution in savings technology with average yields over 100% per year when measured in U.S. dollar terms (past performance is no guarantee of future results). With its strict supply limit, bitcoin is an attractive savings vehicle for funds not intended to be touched for a few decades.

Unfortunately, marrying this new savings technology with traditional savings vehicles such as retirement accounts typically require significant trade-offs. Legacy retirement accounts, at best, might offer investments in the Grayscale Bitcoin Trust (GBTC) or stock in companies that hold large bitcoin reserves such as MicroStrategy (MSTR). But either of those options requires trusting the relevant institutions to actually hold all of the bitcoin they claim to hold (don’t trust, verify). And none of those investments grant savers access to any keys, putting the institutions in total control of your retirement’s destiny.

Enter The Self-Directed Checkbook IRA

Fortunately, a growing number of companies can help you use your retirement funds to buy bitcoin and hold the keys yourself. A self-custodied Bitcoin IRA combines the best of bitcoin self-sovereignty with retirement tax optimization.

Instead of leaving a large portion of your wealth invested in assets that are barely keeping up with inflation in a legacy IRA or 401(k), you can introduce bitcoin, the strongest currency that the world has ever seen, into your retirement portfolio by using just a couple of hardware wallets and completing some legal paperwork.

How Does A Bitcoin IRA Work?

The best bitcoin IRAs use a structure known as a self-directed checkbook IRA. This is an IRA that provides you with total control over your retirement assets. Unlike the first generation of self-directed IRAs, self-directed checkbook IRAs allow the underlying assets to be custodied by you instead of an IRA custodian.

Structurally speaking, in a self-directed checkbook IRA, your IRA owns one singular asset: an investment trust entity. That investment trust owns your underlying investment assets (in our case, bitcoin). Despite the investment trust being owned by your IRA rather than by you directly, you are sole named trustee. This means that you and only you are in charge of investment selection and custody.

Here are the five basic steps to convert a portion of your retirement to bitcoin and hold your own keys:

Set up an investment trust (the most common checkbook entity used today, although in the past sometimes LLCs were used instead).
Set up a custodial IRA account with a licensed IRA custodian that accepts checkbook-style investments.
Rollover (transfer) your legacy retirement account into the new IRA account and direct the IRA custodian to invest into your investment trust, which means they move your retirement funds into your trust’s checking account.
Onboard your investment trust with an exchange, linking the investment trust’s checking account.
Purchase bitcoin and secure it in cold storage with your private keys.

Common Questions About Self-Directed IRAs

Why not just liquidate the old retirement account to buy bitcoin?

Early withdrawals from retirement accounts come with taxes and steep penalties, sometimes up to 40%. Getting 40% more bitcoin today is significantly better than taking the tax hit. You’d also miss out on the tax benefits of holding bitcoin in a retirement vehicle.

Isn’t a retirement account antithetical to bitcoin?

Purchasing bitcoin in a retirement account while holding your own keys combines the sovereignty, permissionlessness, and savings power of Bitcoin with the lesser-known opportunities available in the legacy financial system. Even though your licensed IRA custodian technically holds the IRA, you hold the private keys to the bitcoin addresses. Not your keys, not your bitcoin.

Why not just wait for an ETF?

An ETF will not allow you to hold the private keys to your retirement. A centralized custodian will still hold your bitcoin. An ETF will be far less secure from remote hacks or custodial hacks and significantly more prone to confiscation. Further, future Bitcoin ETFs will most likely function as bitcoin derivatives lacking the safety of real bitcoin. It’s also worth noting that we’ve all been waiting for a bitcoin ETF since 2015, to no avail.

What’s the best way to do this?

The company I work for, Unchained Capital, has published a comprehensive guide with the KeyKeeper IRA team. Out of the available options for self-custodied IRAs, I’m confident we have the smoothest and fastest process to get a portion of your retirement accounts rolled over and bitcoin delivered to your cold storage.

However, there are other options for bitcoin IRAs out there. Here are four things to consider when investigating:

Can you hold the keys to your retirement account’s bitcoin?
What is the fee to purchase bitcoin and are there limitations to where you can buy it? Marking up bitcoin purchases is how many of these companies make their money.
What is the annual fee for the accounts and is there a charge based on assets under management? You don’t want your retirement accounts to get more expensive as the value of bitcoin increases.
What is the timeline from start to finish? It can be painful for your retirement funds to be out of the bitcoin market for extended periods if you try to exit GBTC.

What about privacy?

As with any IRA, the year-end value of a bitcoin IRA must be reported to the IRS annually. It is important to note that this disclosure is only of the U.S. dollar value of the holdings, not of any bitcoin addresses or other data. Regardless of whether you secure your bitcoin in collaborative custody with a provider like Unchained Capital, in your own multisig setup or with a single hardware wallet in a drawer, the reporting obligation remains the same. With this in mind, eliminating single points of failure with a collaborative custody vault has very little downside.

The annual reporting requirements are a trade-off when considering whether to set up a bitcoin IRA. But if you have existing retirement accounts that you want to rollover into bitcoin, the alternative is making an early withdrawal and paying the penalty, making the one-time privacy trade-off when purchasing bitcoin from an exchange, and ending up with up to 40% less bitcoin as a result.

Conclusion

U.S. retirement accounts are currently sitting on the melting ice cube of the devaluing dollar. Moving retirement assets into bitcoin opens up the opportunity to convert some of the $35.4 trillion stuck in these accounts to bitcoin secured by millions of private keys distributed among millions of Americans. This is the greatest untapped source of American “dry powder” that can flow into Bitcoin. Still, this transfer must be undertaken intelligently while educating savers about the benefits of holding private keys.

Controlling the private keys to your retirement is a large responsibility. But holding your private keys is the only reliable way to protect Bitcoin savings from hacks, inside jobs, central bank debasement, haircuts and confiscations. The process is consistently getting easier. Due to the superior security that comes with holding private keys, we believe over a billion people will hold the keys to their wealth within the next few decades.

Not your keys, not your retirement.

This is a guest post by Phil Geiger. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

Hardware Bitcoin Security And Blockstream’s Jade Wallet

Bitcoin Magazine — Fri, 30 Jul 2021 14:41:17 -0400

Two hands-on hardware wallet developers discuss bitcoin custody and its technicalities

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In this episode of “The Van Wirdum Sjorsnado,” Aaron van Wirdum conducted one more interview without his regular co-host Sjors Provoost. Instead, he was joined by Blockstream’s Lawrence Nahum, one of the developers behind the Jade wallet; and Ben Kaufman, one of the developers of the Specter wallet, which is specifically designed to work with hardware wallets.

Van Wirdum, Nahum and Kaufman talked about what hardware wallets are, and discussed the design tradeoffs that different hardware wallets have taken by focusing on — the Trezor, Ledger and Coldcard specifically. In this light, Nahum and Kaufman explained what secure elements and secure chips are, and why some hardware wallets choose to rely on using such chips more than others.

Then, Nahum explained which tradeoffs the Jade wallet makes. He also detailed how an additional server-based security step is used to further secure the Jade wallet, and he briefly outlined some additional differences in hardware wallet designs, for example those focused on usability.

Finally, van Wirdum, Nahum and Kaufman discussed whether the concept of hardware wallets are a good idea in the first place, or if it would perhaps be better to use dedicated smartphones to store your bitcoin.

$41 Billion Hedge Fund GoldenTree Has Added Bitcoin To Its Balance Sheet

Alex McShane — Fri, 30 Jul 2021 14:07:58 -0400

GoldenTree, with $41 billion in assets under management, is one among a growing number of traditional hedge funds purchasing bitcoin.

GoldenTree, run by Founder and Chief Investment Officer Steven Tananbaum, has added bitcoin to its balance sheet, The Street reported earlier today.

GoldenTree, with $41 billion in assets under management, is one among a growing number of traditional hedge funds purchasing bitcoin.

According to The Street, GoldenTree has purchased bitcoin to diversify the conservative, debt-based strategies it has used in the past. The primary sources of this information chose to remain anonymous while reporting the sensitive business information to The Street.

One of the sources said that recently executives at GoldenTree have been considering hiring general crypto investment and operational experts.

However, the source added, the partners at the hedge fund are already experienced in “trading crypto and making VC-style investments in blockchain companies.”

Notably, despite Tannabaum and partners Deeb Salem and Joseph Naggar’s prior participation in a funding round for Borderless Capital, a business that is concentrated around an altcoin, GoldenTree is at this time choosing to purchase bitcoin only, The Street reported.

How much bitcoin the hedge fund has purchased, how much it plans to purchase and what sort of custody solution they will use remains unknown.

Elizabeth Warren Is Trying To Limit Financial Inclusion

Mike Hobart — Fri, 30 Jul 2021 13:45:16 -0400

Despite groundbreaking work occurring within Bitcoin, our “progressive” leaders continue to make backwards progress.

If you’re a member of the Bitcoin community, whether self-proclaimed or working with an entity such as Bitcoin Magazine, you should be well-experienced with the chaotic nature of the narratives and politics around Bitcoin — and the sweepingly ignorant inclusion with “cryptocurrencies” in general.

Bitcoin has become the favorite target for champions of Environmental, Social, and Corporate Governance (ESG) narratives, namely Bitcoin’s energy use and environmental impact. Now, Nic Carter has quashed that conversation. Swiftly and effectively, Nic has done an exemplary job at defending the energy sector and miners with his silver tongue and numerically-inclined mind, especially with his piece “The Frustrating, Maddening, All-Consuming Bitcoin Energy Debate.”

Politicians had seemingly not learned via observation as institutional investors got a flood of aggressive rebuttals by bitcoiners — both investors and politicians alike — that were backed by more fact and data than any of the detractors had been capable of providing. Yet now Senator Elizabeth Warren is confident enough to think that she can succeed at condemning Bitcoin where the rest have failed. Well, she’s wrong.

Now, let me clarify. This is not a piece that has the intent of tarnishing Senator Warren’s career or reputation or what-have-you. I don’t care about the senator, personally. However, I want there to be some form of rebuttal to the flood of narratives and claims against Bitcoin that are literally, factually incorrect. The best way to provide some correction to Senator Warren and her peers is to address these claims directly. I’m not a fan of passive-aggressive responses when it comes to education. I prefer to face the challenges head-on.

Firstly, Senator Warren made the already infamous claim that Bitcoin “puts the system at the whims of some shadowy faceless group of super coders and miners, which doesn’t sound better to me.” So how, exactly, would we describe our current banking system? Arguably in a similar manner, just without the “super coders” aspect, considering that much of the banking and financial system does not operate on any level of public transparency, especially when compared to the Bitcoin network.

Senator Warren, your defense of the legacy financial system is a direct affront to financial inclusion, individual property rights and freedoms. You cannot support a system that provides such strong barriers to entry that 6% of our own citizens don’t have bank accounts. That’s 14 million Americans! And, on top of that, we have rules that state that you literally have to be rich in order to invest in assets that are likely to appreciate in value. Our own rules state that you can’t allow your money to earn a significant yield unless you are already rich. How absolutely asinine is this? This directly excludes the vast majority of the U.S. populace.

I personally don’t like how Senator Warren aimed to significantly diminish the fantastic work that the Bitcoin core developers have done throughout Bitcoin’s 13-year life by referring to them as “shadowy super coders.” How many networks can tout a 99.98% uptime while handling consistent growth and implementing upgrades without having to take the network down? Oh, and you know, all while securing nearly $750 billion worth of users’ savings, investments, daily income and spending (shout out to El Salvador). The fact that many of these developers prefer to operate under pseudonyms and avatars simply points to how radical the legacy financial system is in defending the hill it is so intent to die upon. These folks are so concerned with an aggressive riposte from the incumbents that they lean on anonymity while working on financial inclusion for the world.

To go a bit further, thanks to the Bitcoin network’s simplistic functioning at the base layer, an entity by the name of Strike, captained by Bitcoin’s Champion of the People, Jack Mallers, has now brought a functionality to money transmission that will shift paradigms on all types of trade the world over. Instantaneous money transmission, globally, for virtually zero fees. You can send money from anywhere in the United States to any location in the world for a mere pittance. Prepare the viking funeral for companies like Western Union who would’ve charged 30% in fees to do this. Not to mention dragged their big, fat, fiat clown-feet sending that money in a “timely manner.”

Even excluding the revolutionary work that Jack and Strike are doing, the amount of transparent data that is available on the Bitcoin network — its transactions, the value of those transactions, the numbers of active users, etc. — is absolutely unparalleled.

Ask any one of the cancerous number of banks that exist across the country to provide this kind of data to you and they’ll laugh you right out of the building while trying to convince you to dig your own grave in debt.

Secondly, iBtcoin promotes financial inclusion. Banks do not. I’ve already touched on the inclusion via remittances and the ease-of-use of apps like Strike. But if anyone wants to get some bitcoin, they can buy it from an individual that’s willing to sell (peer-to-peer), which can be done over the Lightning Network with Strike or via services like LocalBitcoins — no bank account necessary. Bitcoin promotes saving and even revives saving as a wealth accumulation strategy. Inflationary monetary policy does not.

Cue The Fiat Champ: Jerome “Jay Pow” Powell

Watch: Fed Chair Jerome Powell on YouTube.

Jay. Good ‘ol Jerome Powell. My man. Where would bitcoin be if not for your flaccid response to an economic climate that is your job to reel-in? You do realize that as you endlessly print money for the sake of keeping zombie corporations afloat you end up stifling innovation? Were Blockbuster allowed to receive mulligan-money do you think Netflix would have been allowed to prosper as it did? How many more jobs resulted from Netflix upheaving Blockbuster? Oh, and how many more patients got served thanks to Blockbuster liquidating locations into the hands of Jason Williams (founder and former President & CEO of FastMed)? The inflation stimulated by the Federal Reserve has utterly dissolved that process of creative destruction, resulting in what we now know as “stagflation.” Where nothing improves, because everyone is incentivized to just sit, play nice and not cause a ruckus.

The American Dream was sold as: work hard, work towards your dreams and passions, save money, accumulate wealth, buy your own home and raise a family. The Federal Reserve has systematically destroyed the American dream via a middleman hack by inserting itself between the Constitutional dollar and the American citizen. Thanks to the antics of this central bank (that hasn’t been audited by an external entity since the 1950s, by the way), the ungodly amount of inflation that has occurred has caused average cost of living, home prices and investment asset valuations to break free from Earth’s gravity while average income has remained flat.

So, Senator Warren, I invite you to engage in an intellectually honest conversation around Bitcoin and its value propositions. There are many. And I am not expecting the learning and understanding to come easy; there are a multitude of complex mechanisms at play here. Bitcoin makes plays on SHA-256 encryption, Metcalfe’s Law, Maslow’s Hierarchy, the Kardashev Scale, Pareto Distribution (shoutout to Aaron S), the Law of Diminishing Returns, the Law of Big Numbers and the list goes on and on. Bitcoin is blurring the lines between technology and asset, physical and digital, “real money” and “magic internet money.”

All of the Bitcoin Bulls that stand before you today started out once as Bitcoin critics. In my opinion you can’t become a bull without questioning every single aspect of Bitcoin and its operations.

To that effect, I think I can speak for all Bitcoiners in saying: bring on the challenge. If you’re willing and capable of engaging in honest dialogue, we have individuals that will answer any and all questions you have, professionally and respectfully. On top of that, we also have a library of eloquent writers that have put together a number of tomes that are well worth the read.

For your ease, I have provided a brief list that I personally recommend:

“The New Confessions of an Economic Hitman” by John Perkins
“The Psychology of Money” by Morgan Housel
“The Price of Tomorrow” by Jeff Booth
“Layered Money” by Nik Bahtia
“Fed Up” by Danielle DiMartino Booth

So, all I ask is one thing: engage with us. There are many reasons why nearly 20% of Americans have entrusted their hard-earned cash with Bitcoin. It would behoove all to at least do your own research (DYOR) and at least start looking. Because I can promise you one thing: Bitcoin adoption is not about to slow down.

I am confident that you’ll come to a similar conclusion.

This is a guest post by Mike Hobart . Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

Congressman Warren Davidson On How The Last-Minute Bitcoin Tax Bill Is Bad For America

Bitcoin Magazine — Fri, 30 Jul 2021 13:16:04 -0400

Congressman Warren Davidson explained how the cryptocurrency tax addition to the Senate infrastructure bill is bad for the U.S.

Watch This Episode On YouTube

Listen To This Episode:

Unless you’ve been living under a rock for the past 48 hours, you’ve likely heard about the last-minute addition of a cryptocurrency tax to the U.S. Senate’s forthcoming infrastructure bill.

In this episode of the “Bitcoin Magazine Podcast,” host David Zell sat down with one of D.C.’s strongest Bitcoin supporters, Representative Warren Davidson (R-OH), to talk about the specific language and potential impact of this cryptocurrency tax legislation. As it stands now, the bill’s language is so broad that it could apply to a myriad of crypto-related activities that have no business being taxed. Worse still, the additional compliance costs that this bill could trigger would gravely jeopardize the viability of companies and startups in the Bitcoin space. Davidson blasted its stunningly poor verbiage, lamenting that it must have been written by people either totally ignorant about the industry or worse, by people looking to harm it. In his view, passing the bill in its current form would be a disaster both for the cryptocurrency industry and the American economy overall.

Davidson spoke about how this bill marks a departure from America’s longstanding role as a nation that spearheads innovation. Should it pass with its current language, he warned, America risks missing out on one of the most revolutionary technological strides in history and falling behind our adversaries in this vital innovation.

“America led in the Industrial Revolution, the advent of the automobile and the development of the internet,” said Davidson, “and now America is about to forfeit that leadership with this new technology.”

The congressman discussed how the bill might be altered for the better and how much time there is to fix it. At the end of our discussion, Davidson called on the Bitcoin community to jam up the phone lines of their elected officials and implore them to fight the cryptocurrency tax language in the bill. You won’t want to miss this.

What Caused This Mid-Cycle Bitcoin Price Correction

Ansel Lindner — Fri, 30 Jul 2021 13:04:47 -0400

Factors ranging from regulation in China to the Taproot protocol upgrade were driving bitcoin price charts to a decisive point for weeks.

The bitcoin price rallied last week, but the move did not come out of the blue. While some people attributed the spike in price to the fake news about Amazon planning to accept bitcoin, the charts had been signaling a move was coming, approaching a decisive point for weeks.

I attribute this mid-cycle correction to three dominant and simultaneous narratives that, before resolved, caused major uncertainty and price declines. These events affected sentiment in all segments of the bitcoin market — miners and retail, developers and high-net-worth individuals. Any single one of these narratives on their own could have caused a dip, but all three together combined to cause a major drag on price.

A New Chinese Ban On Mining

The plunge in mining hash rate resulting from the Chinese mining ban (highlighted in red above) turned the mining industry upside down. Miners were dramatically affected, already dealing with a global chip shortage, and then this news was added to their plate. Retail holders and traders were also affected by this development, being bombarded with negative headlines for weeks.

Hash rate (the cumulative computer speed at which miners search for the next block) peaked just prior to the ban, on May 9. I suspect that this is when miners in China began hearing rumors of what was to come. The official public statement from the Chinese Communist Party banning mining came on May 21. Over the next four weeks, hash rate kept falling, in total crashing from 190 exahashes per second (Eh/s) to 58 Eh/s at the bottom.

This was unquestionably a huge concern for many casual investors. Would the network be able to deal with such a fundamental blow? Those deeply into the weeds in Bitcoin, however, were much less worried about this situation. Bitcoin is adaptable. Blocks were found a little slower, but continued to tick away. Difficulty adjusted down a few times as designed, and the network itself suffered no lasting damage. The hash rate plunge finally bounced on June 27 and as of this writing, is up 98% off the lows.

The recovery will be slow but steady as Chinese mining equipment is moved or sold, ending up in more friendly and distributed jurisdictions and resulting in a more robust mining industry. Investor uncertainty decreased rapidly as the hash rate bounce continued into July. Today, the network is stable and strong.

Grayscale Trust’s Record Unlocks

The second major cause of uncertainty in this period was the Grayscale Bitcoin Trust (GBTC) release schedule (highlighted in gray above). This narrative affected the sentiment of high-net-worth investors and professional trading outfits in the space. There was a fairly strongly-held belief among whales that their peers would be leveraging into arbitrage trades immediately after unlock periods.

Source

A quick 101 on the GBTC: GBTC is a closed-end trust, where investors can get exposure to the trust’s underlying asset, bitcoin, without personally holding the bitcoin, similar to an exchange-traded fund (ETF). Accredited investors can buy new shares directly from Grayscale at the price of net asset value (NAV) (the spot price equivalent), increasing the supply of outstanding shares, then after a six-month lock-up period, can sell the shares on the secondary market to investors of all types. Buying new shares from Grayscale requires Grayscale to go out into the market and buy bitcoin, causing a rise in price.

There is also a feedback loop aspect. As price rises in bitcoin, it drives more secondary market demand and a higher premium, then more demand for new GBTC shares and more spot buying by Grayscale. It pays well as long as the premium in the secondary market lasts. For example, if the premium is 20%, investors can buy a share of GBTC at NAV then, six months later, sell it at a 20% gain. (It’s slightly more complicated than that, but that’s the basic idea.)

For GBTC’s short lifespan, it had always enjoyed a premium, but in the week of February 23, price on the secondary market slid into a discount, meaning that the price in the secondary market went below NAV. It effectively cut off the feedback loop, and demand by accredited investors to buy new shares abruptly stopped, hence Grayscale buying bitcoin stopped as well.

Long story short, market participants were tracking the six-month lockup periods for blocks of shares. Some analysts were expecting a large price drop coinciding with the last and largest unlock on July 17. It was not uncommon to hear price predictions in the mid-to-low $20,000s. When the dip failed to materialize, the uncertainty around GBTC disappeared.

The GBTC discount has recovered from 15% to only 6% today, and is quickly approaching parity.

Bitcoin’s Taproot Upgrade

The third narrative for bitcoin was the Taproot upgrade (highlighted in orange above). This narrative affected developers and long term HODLers. They are well aware of the recent history of Bitcoin upgrades turning dirty, and were understandably concerned this upgrade could lead to similar division. Afterall, Taproot is the first soft fork for Bitcoin since the hotly-contested SegWit upgrade in 2017. In general, there was much less drama around this upgrade from the beginning, people were still uncertain just how it would play out.

Bitcoin upgrades are slow and meticulous things, because it takes years to work through the process in a decentralized and trustless way. No one individual nor one group is in charge to tell people to upgrade. The hardest thing is simply getting everyone to agree.

The nature of the Bitcoin upgrades as soft forks makes this process a little bit easier. A soft fork is a change that is backwards compatible with previous versions, it does not enable new behavior that would break old, non-upgraded nodes. (There is a lot of nuance missing from that statement, but that’s the general idea.) Coordination techniques used by more centralized altcoins are not possible in Bitcoin, so it becomes a lengthy, uncertain process of open and public debate.

Despite all this, a loose compromise was reached and on May 1, two activation mechanisms were initiated, one called Speedy Trial, the other a simple date for activation in the future. If Speedy Trial was successful in reaching a critical level of support by August 11, the two mechanisms would merge into one. If not, the main Bitcoin application would have to go back to the drawing board, and it might result in a network split.

The community didn’t have to wait long, Speedy Trial was a great success, locking in activation very quickly on June 12. The whole process turned out to be relatively painless and transparent, but it was the result of years of prior back and forth discussion, planning and compromise. Taproot will fully activate in November.

This upgrade flew somewhat under the radar this summer, but when it was locked in, many of the hardcore Bitcoiners, people deeply involved in the space, breathed a big sigh of relief. There would be no community split like in 2017.

The Rest Of 2021

These three major narratives are mostly wrapped up, but there are still some minor lingering issues. A few relatively insignificant GBTC unlocks are scheduled for the rest of July and into August. Miners have not completed their recovery, but are well on their way. I expect, by the end of the year, hashrate to be back to full strength and breaking all-time-highs in computational speed. Taproot is locked in but not activated. That doesn’t come until November. A few well respected cypherpunks in the space are still concerned, but they are nuanced arguments not shared by everyone.

The exciting thing is what happens now. If and when the GBTC price turns back into a premium, it will provide a strong incentive for investors to buy new GBTC from Grayscale, forcing Grayscale to buy bitcoin on the open market. Therefore, the effect of GBTC on price for the remainder of the year will likely be positive.

Miners will be less beholden to a fickle authoritarian state like China. Perhaps that leads to cost savings if in a friendlier jurisdiction that has less corruption, leading to more hoarding or expanding of hash rate.

Finally, Taproot enables many new high-powered features in the Bitcoin protocol. It will open up many unseen opportunities for financial services and businesses of all types.

The second half of this bull market will be intense.

For more content like this, Ansel Lindner writes a weekly newsletter at BitcoinAndMarkets.com.

This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The Semantics Of The Bitcoin Layers

Lommy — Fri, 30 Jul 2021 12:38:25 -0400

While we casually talk about Bitcoin having multiple layers, the word itself has historical meaning.

The Semantics Of A Bitcoin Layer

The idea of a layer comes from two worlds, each of which uses a layered approach in a distinct manner: the world of money, and the world of networks. In this article we will briefly explore both worlds. After the concept of layers has been established, we will relate the layered framework to Bitcoin, which is a unique and new hybrid of both money and technology. We will introduce the nuance of layers, and propose that distinction in language is used in the absence of redefining historical context or using an entirely different nomenclature.

Layers A La Moneys, Historically

Monetary layers have emerged many times throughout the course of history for a variety of reasons. Most notably, layers occur as a mechanism to ease the transfer of money from one party to another.

Let us consider the U.S. dollar during the pre-1971 era. Both gold and silver were legal tender and could be used to make transactions. These precious metals are not easily divisible and have other physical characteristics that make them undesirable to use in day-to-day transactions, such as ease of transport. For his reason, a second monetary layer emerged: one in which the bank held gold deposits on your behalf, and provided you with an IOU note representing that deposit. This note would be redeemable for the gold, and the bearer of this note has claim to the gold deposit.

Instead of transacting with gold, individuals would now transact with the notes representing the gold. As we would see later in history, this system was rife with corruption. This is the story of the U.S. dollar and the ultimate failure of the gold standard. For an in-depth dive into the world of monetary layers, I recommend reading Nik Bhatia's "Layered Money".

Layers A La Networks, Historically

The digital world brought with it the emergence of digital networks — most notably, the internet. The internet as we know it and use it today is a layered architecture referred to as the Internet Protocol Suite, or TCP/IP for short.

A layered protocol approach allows us to reach consensus and break very complex ideas down into separate components. It also provided interoperability such that end users can plug in with their own products or software.

Layers A La Bitcoin

Conversations about applying the layered framework to Bitcoin often end with little to no consensus, as Bitcoin distorts and blurs traditional intuitions. This distortion stems from Bitcoin being both a money and a network, each of which, historically, has a layered framework that is distinct from the other. Most disagreements about bitcoin layers are due to the proponents talking right past each other.

Let's start with some common ground, where most folks would agree: Bitcoin Layer 1. The Bitcoin protocol is enforced by the operation of full nodes. These nodes store the entire Bitcoin blockchain and validate the legitimacy of transactions that miners include in blocks. Generally, the first layer of Bitcoin is the set of interactions that falls within the full node enforced protocol: cryptographic ownership of a UTXO, a transaction from address A to address B, the block height of the current block, etc. Simple, right? That's because the first layer of Bitcoin fits cleanly within both the Layer 1 monetary application and the Layer 1 technological application frameworks. They reconcile with each other entirely.

The Bitcoin Protocol:

Monetary Layer 1: Check

Network Layer 1: Check
"The full node enforced protocol is the Layer 1 of Bitcoin": Check

As we continue on to the second layer of Bitcoin, it is important to understand why we need a layered approach in the first place. Everything in life has trade-offs, including Bitcoin. The Bitcoin protocol is optimized for both dentralization and security on its first layer, which is achieved through limited block space and ten minute block intervals. These critical parameters severely throttle the amount of transactions that the Bitcoin blockchain can process, which is in the ballpark of five to seven transactions per second. However, these parameters allow for more individuals to run a Bitcoin full node (decentralization) as well as enabling a competitive fee market for transaction confirmation (security). For these reasons, scaling Bitcoin to billions of users on the base layer is not possible. The Bitcoin blockchain will be the global settlement layer used by individuals, banks, and corporations willing to wait a few minutes and pay an on-chain fee for final settlement. The Layer 1 blockchain will be used for finality, while other layers will be used for other applications, such as day to day transactions (a coffee being the classic example).

Having said that, it is useful to explicitly define what solution a layer is providing to the Bitcoin network. Often, layers are trying to solve the limited transaction capacity of BTC on the main blockchain, as described above. This is not to say that some layers may not focus on other problems (such as privacy), but for simplicity and the scope of this writing, we will examine layers with transaction scalability applications.

In theory, the approach of solving transaction scalability is quite simple: many transactions shall be embedded within one on-chain (Layer 1) transaction. We lock some BTC away, pass it around to each other indefinitely, then throw it back to the mainchain for settlement. At the heart of it, this is a Layer 2 Bitcoin application. It is now an appropriate time to introduce the concept of "on-chain" and "off-chain" transactions, which some would argue is more clear than using the jargon of layers and all of the semantic baggage that comes with it. Put simply, an on-chain transaction is any transaction that occurs on the Bitcoin blockchain (I send some BTC to a BTC address that you provide me), while an off-chain transaction is any transaction that occurs off the Bitcoin blockchain (I send “IOU” BTC balance from my Cash App account to your Cash App account). By definition, all Layer 2 solutions on Bitcoin make use of off-chain transactions as they are not in the scope of the full node enforced protocol.

A Monetary Layer Relationship To Bitcoin:

By following the historical concept of a monetary layer, we can define a Bitcoin monetary Layer 2 as any form of off-chain interaction that transfers a balance of BTC from one entity to another. The transfer of a BTC balance can happen in the form of an IOU, or in the form of actual ownership. This kind of monetary Layer 2 interaction can happen in many forms: through a third party, through the transfer of a private key, and even peer-to-peer via a network Layer 2 (discussed later). The recipient of this interaction has a claim to that amount of BTC on-chain, but does not receive exclusive ownership to the actual on-chain BTC until a separate on-chain transaction occurs.

It is important to note that not all monetary layers are created equal. They come on a spectrum of trustlessness, and many are entirely antithetical to the ethos of Bitcoin. Although we may not like it, the precedent of monetary layers has been established by history and we would need to redefine historical and semantic context to avoid Bitcoin’s association with monetary layers. Alternatively, we could avoid the concept of monetary layers and use different nomenclature entirely.

A Network Layer Relationship To Bitcoin:

By following the historical concept of a network layer, we can define a Bitcoin network Layer 2 as an interoperable protocol that is cryptographically pegged to the mainchain in a trustless manner. Being that the Bitcoin protocol forms a network, it is understandable that a network layer approach would be used to enable a multitude of operations. A transaction scalability capability would be a prime application for a network Layer 2 on Bitcoin. This would enhance features of Bitcoin without compromising any optimizations of the first layer. Any form of transaction scalability network layer would also be considered a monetary layer by its very nature of facilitating transactions off-chain.

What we actually consider a network layer on Bitcoin is going to be a bit controversial, but it is worth exploring and defining. For starters, a network layer must be a protocol that is interoperable with the Layer 1 Bitcoin protocol. Secondly, a network layer on Bitcoin respects all of the sovereign aspects of Bitcoin’s Layer 1 protocol. This includes its peer-to-peer nature, and its disintermediated verifiability. A network layer must not make use of IOUs in any form, as requesting to redeem BTC would invalidate the non-custodial nature of Bitcoin. For now, these qualifications are enough.

Combining Concepts:

There is a clear and important distinction to make when referring to a layer on Bitcoin. I propose that something be referred to simply as "a layer" only if the criteria for a network layer is met. Otherwise, it is just a monetary layer and should be referred to as its application name (ie. Cash App), or explicitly stated to be a monetary layer in the historical context of the words. The reason for this is that the historical context of monetary layers are in contradiction with the Bitcoin ethos, and conflating the two sets a bad precedence of language.

I do not believe we should redefine language and historical context to fit our agenda. For that reason, we must be precise in our words or create a new nomenclature entirely. Although it may be technically correct to refer to a monetary layer as a layer of Bitcoin, I believe it to be a dangerous precedent. We have seen the gold standard fail through a monetary layered framework, and applying this same framework to Bitcoin would undermine the sovereignty that Bitcoin enables.

Let’s be mindful of both the monetary and network layered aspects and walk through some actual examples:

A Bitcoin Exchange:

A Bitcoin Exchange is a custodial service which allows users to trade fiat for BTC. These exchanges generally allow users to transfer “IOU” BTC balances to other users. Specifically, this includes Cash App, Coinbase, Venmo, and many others.

The Bitcoin Exchanges:

Monetary Layer 2: Check

Network Layer 2: NO

"Exchanges are a Layer 2 of Bitcoin": NO

The Liquid Network:

Liquid is a federated sidechain that operates independently but pegged to Bitcoin. The Liquid Network allows the general public to transfer BTC to L-BTC (the Liquid Network native asset), but requires functionary members to approve transfers of L-BTC back to BTC. Once a user has L-BTC, they can transfer it to other individuals using the Liquid Network. From the perspective of Bitcoin, this is an off-chain transaction, with L-BTC acting as “IOU” BTC.

The Liquid Network:

Monetary Layer 2: Check
Network Layer 2: NO
"The Liquid Network is a Layer 2 of Bitcoin": NO

The Lightning Network:

The Lightning Network is the only layered application mentioned thus far that meets the criteria of being a Bitcoin network layer. Lightning allows users to maintain cryptographic ownership of the BTC they are interacting with, and allows users to redeem an on-chain UTXO without the approval of any third parties. The Lightning Network makes use of a multi-signature and channel based operation schema, which is largely beyond the scope of this article. For now, it is just important to know that the Lightning Network is trustless and peer-to-peer.

The Lightning Network:

Monetary Layer 2: Check

Network Layer 2: Check

"The Lightning Network is a Layer 2 of Bitcoin": Check

Conclusion

There is a historical precedent for layers in both money and networks. Bitcoin is unique in that it is both a money and a network, which means it has distinct money and network layers that are often at odds with each other. I propose that something be referred to as a “layer of Bitcoin” only if it meets the criteria for a network layer. If only the money layer framework criteria is met, the application in question should be referred to by name, or explicitly noted to only be a monetary layer in the historical context of the words.

I want to note that I am not trying to mandate speech or tell you what you cannot say. I just believe this nuance to be important, as we are trying to escape the failures of all money that came before Bitcoin. If you found what I've written to be convincing, then feel free to join me!

If you've made it this far I hope that my perspective was clear and coherent. I’m sure this entire article could have been summarized in a few tweets, but I wanted to articulate all of the nuance that I believe this topic deserves. Do you agree with the premise? Disagree with the premise? Let me know what the f***is a layer on twitter @thefuckisalommy. Cheers.

[1] https://medium.com/breez-technology/lightning-btc-iou-62e3a712c913

[2] https://docs.blockstream.com/liquid/technical_overview.html

[3] https://www.layeredmoney.com/

This is a guest post by Lommy. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

Robo-Advisor Wealthfront Adds Bitcoin Exposure Offering

Namcios — Fri, 30 Jul 2021 12:18:39 -0400

Robo-advisor giant Wealthfront will now let its 400,000 clients invest up to 10% of their portfolios in bitcoin through GBTC.

Robo-advisor giant Wealthfront has announced it will provide its nearly 400,000 clients with the option to get bitcoin exposure through Grayscale Bitcoin Trust (GBTC).

The firm, which provides a hands-free approach to investing and has $25 billion of assets under management (AUM), announced the new addition to its offerings on July 29. But clients will be limited to allocating up to 10% of their portfolios in bitcoin.

Wealthfront claimed the limit to be a protection because they consider GBTC an investment “riskier and more volatile than most ETFs.” The company also added new ETFs to its menu of investment options, including ARK, cannabis, self-driving cars, and fintech options.

But when it comes to bitcoin, those with brokerage accounts with Wealthfront will be given only one option for BTC exposure – GBTC. Grayscale’s bitcoin trust shares attempt to follow the BTC/USD market price, minus expenses and fees. Naturally, however, the investor won’t possess real bitcoin.

Wealthfront said it chose that investment vehicle because buying bitcoin “can feel intimidating – it takes time and effort to research all of the options, set up a wallet, and monitor an additional account.”

However, buying bitcoin and transferring it to a self-custodial wallet has become hassle-free nowadays. An individual can start small, using an exchange and their mobile phone as a wallet, and build up from there. Eventually, buying KYC-free bitcoin and using privacy-conscious tools will become effortless.

Additionally, going down the Bitcoin rabbit hole will enable the investor to acquire as much bitcoin as they see fit and custody it themselves to become a fully sovereign individual.

The University Of Pennsylvania Continues to Hold Donated Bitcoin

Alex McShane — Fri, 30 Jul 2021 12:09:22 -0400

The University of Pennsylvania confirmed today it still holds part of a $5 million donation it received earlier this year in Bitcoin.

As reported by the New York Times, John Zeller, senior vice president alumni relations at the university, stated that this decision was partly informed by the wishes of the anonymous donor.

"The donor's goal was to make a gift of that magnitude, a promotable gift, to say, 'If you're interested, we're in the crypto world, and we can accept it.'"

The bitcoin gift was announced by the university with the amount of publicity usually reserved for larger donations of fiat investments such as stocks, bonds and real estate, but of note is that it did not follow all of the usual processes.

Zeller commented, "Our policy had been to traditionally sell everything immediately, even if it had been $5 million in stock.”

As for Bitcoin, however, Zeller said, “We liquidated some; we're holding some.”

As detailed in the news article, the development follows years of wider discussion among nonprofits about how they should treat donations made in the cryptocurrency.

Lesser discussed in recent years have been benefits for donors, such as the ability to void capital gains taxes when bitcoin is donated to a charity.

Perhaps the greatest benefit, however, lies with international donations made in bitcoin, as final settlement of those donations can occur in as few as 10 minutes for extremely low fees.

Whereas, all international fiat transfers are subject to extremely high fees and final settlement between central banks takes days (at best) and can take weeks and even months. Some would argue, due to the invariable threat of confiscation, final settlement in the fiat world never really occurs at all.

Therefore, it is becoming more widely believed that bitcoin can be a preferable donation strategy for international aid organizations.

Tom Pageler, chief executive of Prime Trust, a firm that custodies bitcoin on behalf of businesses and donors such as UNICEF, said in an interview with the publication: "You can have the local office in the region convert the crypto into the local currency, and now you don't have to pay the wire fees on the transfers."

Pageler continued: "You can get money there immediately."

Large donor-advised funds such as Fidelity Charitable (over $35 billion in assets) and Schwab Charitable ($17 billion) both accept and have seen an increase in bitcoin donations.

According to a spokesperson Stephen Austin, Fidelity received $13 million in cryptocurrency donations in 2019, $28 million in 2020, and $150 million so far this year. It is unclear what percentage of these donations were made in bitcoin.

John Zeller, who helped facilitate the bitcoin donation to Penn, concluded, "It's very nice to have the capacity to do it when a donor says, 'I have some Bitcoin.'”

“We can accept it now without it grinding the university to a halt."

The University Of Pennsylvania Received A $5 Million Bitcoin Donation Earlier This Year

Alex McShane — Fri, 30 Jul 2021 11:06:30 -0400

The University of Pennsylvania received a $5 million bitcoin donation and confirmed it still holds some of the donation in Bitcoin.

The University of Pennsylvania has received an anonymous bitcoin donation worth $5 million to its business school. The bitcoin gift was announced by the university with the amount of publicity usually reserved for larger donations of fiat investments such as stocks, bonds, and real estate.

In an interview, John Zeller, senior vice president for development and alumni relations at Penn stated, "The donor's goal was to make a gift of that magnitude, a promotable gift, to say, 'If you're interested, we're in the crypto world, and we can accept it.'" This comes after years of discussion among nonprofits about whether they should accept Bitcoin.

The benefit for the donor is that any future capital gains taxes are voided when the bitcoin is donated to a charity. Although it is difficult for a donor to commit to a fixed amount of bitcoin denominated in US dollars, any commitment denominated in bitcoin can easily be kept, as one bitcoin equals one bitcoin.

Perhaps the greatest benefits of international donations made in bitcoin are that the final settlement of those donations can occur in as few as ten minutes for extremely low fees that are independent of the donor and recipient’s locations. Whereas, all international fiat transfers are subject to extremely high fees and final settlement between central banks takes days (at best) and can take weeks and even months. Some would argue, due to the invariable threat of confiscation, final settlement in the fiat world never really occurs at all. Therefore bitcoin can be a preferable donation strategy for international aid organizations.

Tom Pageler, chief executive of Prime Trust, a firm that custodies bitcoin on behalf of businesses and donors such as UNICEF, said, "You can have the local office in the region convert the crypto into the local currency, and now you don't have to pay the wire fees on the transfers." He continued, "You can get money there immediately."

Another problem that international aid organizations face is scrutiny over the lack of transparency about how their received funds are allocated. Due to the distributed, transparent nature of the Bitcoin blockchain, the allocation of donations held in bitcoin are completely traceable and accessible.

Pageler added, "if I'm the Red Cross and moving crypto around the world, it's all on blockchain, so I can see when it's cashed and used. There's the ease of it."

Regarding Penn’s history of liquidating investment donations, Mr. Zeller said, "Our policy had been to traditionally sell everything immediately, even if it had been $5 million in stock.” Although, of the recent bitcoin donation, he said, “We liquidated some; we're holding some.”

Large donor-advised funds such as Fidelity Charitable (over $35 billion in assets) and Schwab Charitable ($17 billion) both accept and have seen an increase in bitcoin donations. According to a spokesman Stephen Austin, Fidelity received $13 million in cryptocurrency donations in 2019, $28 million in 2020, and $150 million so far this year. It is unclear what percentage of these donations were made in bitcoin specifically.

John Zeller, who helped facilitate the bitcoin donation to Penn concluded, "It's very nice to have the capacity to do it when a donor says, 'I have some Bitcoin.'”

“We can accept it now without it grinding the university to a halt."

The University Of Pennsylvania Continues To Hold Some Of A $5 Million Bitcoin Donation Made Earlier This Year

Alex McShane — Fri, 30 Jul 2021 11:06:30 -0400

The University of Pennsylvania received a $5 million bitcoin donation and confirmed it still holds some of the donation in Bitcoin.

In an interview with the New York Times, John Zeller, senior vice president for development and alumni relations at Penn stated, "The donor's goal was to make a gift of that magnitude, a promotable gift, to say, 'If you're interested, we're in the crypto world, and we can accept it.'" This comes after years of discussion among nonprofits about whether they should accept Bitcoin.

The benefit for the donor is that any future capital gains taxes are voided when bitcoin is donated to a charity. Although it is difficult for a donor to commit to a fixed amount of bitcoin denominated in US dollars, any commitment denominated in bitcoin can easily be kept, as one bitcoin equals one bitcoin.

Perhaps the greatest benefits of international donations made in bitcoin are that the final settlement of those donations can occur in as few as ten minutes for extremely low fees, the cost of which is independent of the donor and recipient’s locations. Whereas, all international fiat transfers are subject to extremely high fees and final settlement between central banks takes days (at best) and can take weeks and even months. Some would argue, due to the invariable threat of confiscation, final settlement in the fiat world never really occurs at all. Therefore bitcoin can be a preferable donation strategy for international aid organizations.

Tom Pageler, chief executive of Prime Trust, a firm that custodies bitcoin on behalf of businesses and donors such as UNICEF, said in an interview with the New York Times, "You can have the local office in the region convert the crypto into the local currency, and now you don't have to pay the wire fees on the transfers." He continued, "You can get money there immediately."

Pageler added, "if I'm the Red Cross and moving crypto around the world, it's all on blockchain, so I can see when it's cashed and used. There's the ease of it."

According to John Zeller, Bitcoin donations to Penn have been contracted through NYDIG since the beginning of 2020. The $5 million bitcoin donation in May was made in part to help attract attention to Penn for other bitcoin donations. The advantage of institutions such as Penn holding rather than selling donated bitcoin, is that a donation held in Bitcoin has appreciated long-term, whereas any donations exchanged for US dollars can only depreciate in value.

John Zeller, who helped facilitate the bitcoin donation to Penn concluded, "It's very nice to have the capacity to do it when a donor says, 'I have some Bitcoin.'”

“We can accept it now without it grinding the university to a halt."

One Of Germany’s Largest Asset Managers 'Considering' Bitcoin Investment

Alex McShane — Fri, 30 Jul 2021 09:48:28 -0400

Dekabank is reportedly considering investing in Bitcoin after a new law takes effect Monday, though it says "no decision has been made yet."

Dekabank, one of Germany’ largest asset managers, is considering investing in Bitcoin, a spokesman for the firm told Bloomberg today.

The news comes in advance of a new German law taking effect Monday that would make it possible for Spezialfonds to invest up to 20% of holdings in Bitcoin.

In Germany, special funds are mainly used for investments by institutions such as pension companies and insurers. Under this new legislation, Dekabank would become just one of about 4,000 German firms eligible to buy Bitcoin.

Dekabank, which currently holds $403 billion in assets under management, said the following in response to Bitcoin Magazine:

"Deka doesn’t offer any open-ended special AIFs that can invest in cryptocurrencies at the moment. Currently we are reviewing our options but to be clear, no decision has been made yet."

Elsewhere in the report, Kamil Kaczmarski, a financial services adviser, noted that traditionally conservative German investors might experiment with Bitcoin at a “low level” at first, out of caution for the perceived short-term volatility of Bitcoin.

By his estimate it may be at least five years before most of the funds reach the 20% threshold.

Collectively, institutional investors that have access to Spezialfonds that can buy Bitcoin currently manage about $2.1 trillion.

Tim Kreutzmann, an expert on crypto assets at BVI, the competence center for the German funds industry, commented “Most funds will initially stay well below the 20% mark.”

Under the new law, multinational investment bank and financial services company Deutsche Bank AG could also begin to offer funds that buy Bitcoin, but they have not yet announced any plans to do so.

Image via Dekabank website

Large Pockets Are Aggressively Accumulating Bitcoin

Dylan LeClair — Fri, 30 Jul 2021 08:32:30 -0400

On-chain data shows that large-pocketed investors have begun to aggressively accumulate bitcoin.

The below is a recent edition of the Deep Dive, Bitcoin Magazine's premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

Big Money Making Moves

On-chain data has started to show that large-pocketed investors have begun to aggressively accumulate bitcoin.

OTC Desk Outflows

Looking at the seven-day moving average of OTC Desk Outflows, over the course of 2021 there has been a pretty strong correlation between spikes in outflows and local bitcoin bottoms. This can be attributed to the fact that institutions and big money do not like buying an asset that is being heavily bid, as these players may even be able to move the market themselves if they are impatient.

Thus, when the price falls meaningfully, these players rush in to accumulate at a discount. That is exactly what we have seen over the last week, and the price has responded with eight straight days of higher closes.

Exchange Balances

Disclaimer: With exchange balance data, it is possible that that is an internal move that is mislabeled and subject to further change.

Once again, it is possible over the short term that the data is a mislabeled internal transfer, but it is very likely that this is not the case.

If correct, more than 60,000 BTC has been transferred off exchanges over the last 24 hours. A truly staggering amount, this would mean that massive institutional buyers are in the water and actively accumulating.

The daily net outflow from exchanges would be by far the largest seen since the start of 2020, and you would have to go all the way back to May of 2016 to see one of larger size.

Bitcoin Miners Consider Relocating to Paraguay In Wake of China Ban

Alex McShane — Fri, 30 Jul 2021 08:04:11 -0400

As many as eight China-based Bitcoin mining firms are said to be looking to relocate operations to Paraguay, home to abundant hydroelectric energy.

As many as eight China-based Bitcoin mining firms are said to be looking to relocate operations to Paraguay in the wake of the country’s crackdown on its domestic industry.

Estimates suggest this migration could take place over years, and that as many as 500,000 machines could eventually be installed in the country, touted for its abundance of renewables.

The figures come from local media reports in Latin America, led by cryptocurrency news source Criptonoticias, but since publicized by larger outlets including Argentina’s largest financial daily, Ámbito Financiero.

Quoted widely is Juanjo Benítez Rickmann, CEO of the Paraguay-based mining firm Digital Assets S.A. and advisor to a recent bill presented earlier this month seeking to regulate miners in Paraguay and to attract foreign businesses.

Rickman reports that the effort is so far working, with one mining operation in the process of installing 90,000 bitcoin mining rigs. Further, he says other unnamed firms have made contact with miners in Paraguay over the weeks since the Chinese exodus.

Whether or not the development turns into a trend, there may be good reason for displaced Bitcoin miners to consider Paraguay, which is estimated to have 5,500 MW in surplus renewable energy that could be transformed into hard money via Bitcoin mining.

Hydroelectric power, which constitutes nearly 100 percent of the country’s electricity generation, is otherwise sold to neighboring countries, with Argentina and Brazil consuming the lion’s share.

Paraguay generates the most renewable electricity per capita in the world through hydroelectric dams, with its two largest hydroelectric dams based in Itaipú and Yacyretá. Both are capable of generating around 8,500 MW of power of which Paraguay consumes less than half. The Itaipú Dam is currently the largest power plant in the world.

Given such surplus reserves, Benítez Rickmann is confident Paraguay can help China’s Bitcoin miners find a more permanent based of operations, concluding:

“In China 6,000 MW were turned off and that coincides with what there is in Paraguay that has an energy surplus of 5,500 MW. It is very attractive for them.”

Still, it’s worth noting that Paraguay's regulatory efforts have faced criticism from abroad, with some believing the legal environment in El Salvador to be more progressive in its attempts to support and bolster the Bitcoin industry.

Photo by Diego Allen on Unsplash

MicroStrategy Pledges to Add More Bitcoin to Corporate Balance Sheet

Alex McShane — Thu, 29 Jul 2021 18:08:41 -0400

CEO Michael Saylor struck a defiant tone during a Q2 investor call, pledging to add more Bitcoin to its balance sheet while continuing to advocate for the cryptocurrency.

Publicly traded business intelligence firm MicroStrategy is pledging to add more Bitcoin to a corporate balance sheet that already includes 105,000 BTC worth roughly $4 billion.

Speaking during a live video call with investors Thursday, CEO Michael Saylor and CFO Phong Li struck a defiant tone at a time when the mainstream press has taken aim at the firm for its focus on accumulating Bitcoin amid its recent market downturn.

However, Saylor appeared unassuaged by criticism, stating: “Our macro strategy is to acquire and to hold Bitcoin. We’ll help explain Bitcoin to the regulators, to the public and to the media.”

“We think acquiring Bitcoin at this time is going to be a wise move. We feel like there is a land grab right now to acquire as much as we can,” he said.

Elsewhere, Saylor said he was “pleased” with the investment (to date the firm has invested over $2 billion in Bitcoin), while describing an improving economic environment for Bitcoin despite negative news catalyst that have seemingly deterred retail investors of late.

“The China exodus was a really good thing for Bitcoin. The result was a decentralization of mining throughout the world,” Saylor said. “Long term, the Westernization of Bitcoin is good for Bitcoin, the U.S. dollar and Western technology.”

Still, in the question-and-answer portion of the event, Saylor faced no shortage of questions, including whether the company would consider investing in other “crypto assets" including Ethereum.

Saylor replied, “Our strategy is to focus on Bitcoin. I can plug Bitcoin into the entire digital economy and it makes everything better. Bitcoin fixes everything.”

“The least risky, most diversified investment strategy is to simply hold Bitcoin.”

For his part, Li backed Saylor’s statements arguing the investment has “generated substantial value for shareholders” and noting that the company is still in the early stages of deploying its Bitcoin strategy.

“Going forward you can expect we will purchase additional bitcoin,” he said.

Why Bitcoin Will Take Over The World With Eric Yakes

Bitcoin Magazine — Thu, 29 Jul 2021 17:28:38 -0400

In this episode of the “Bitcoin Magazine Podcast,” Eric Yakes describes how bitcoin is taking over the financial world.

Watch this episode on YouTube.

Listen To This Episode:

It is often difficult for people new to Bitcoin to grasp the enormous innovation that it represents. A lot of background education that most people do not have is needed for someone to begin to grok what reinventing money really means. Eric Yakes, Author of the 7th Property: Bitcoin and The Monetary Revolution, wrote 4 fantastic articles for Bitcoin Magazine breaking down the foundations of money in society and why Bitcoin is the best money ever invented.

Host Christian Keroles sat down with Eric to discuss the four articles one by one and reflect on what money is and what Bitcoin could mean for society. The first article, The Dimensions of Money, focuses on what money is, how it works and what makes a good money. It is important for people to understand that money is a good or a product and that different properties make a monetary good ideal. According to Yakes, money helps society transfer value across time, space and scales. This is realized in the properties of scarcity, durability, acceptability, portability, divisibility and fungibility. According to Yakes, Bitcoin fulfills these roles better than anything we have ever had before serving as money.

Articles two through four focus on why Bitcoin makes the world a better place, how it works today and into the future. Yakes has a very historical approach to defining the problem set that Bitcoin was invented to solve and illustrating how Bitcoin is a novel and valuable solution to this historic problem that has affected every human on earth.

This is the perfect podcast to give to your bitcoin curious friend that needs a bit more understanding to fully take the orange pill! Please enjoy this show and all of Yakes’ fantastic articles.

Part 2: What Bitcoin Does that Changes the World.

Part 3: The Fundamental of How Bitcoin Works.

Part 4: The Monetary Properties of Bitcoin.

Follow Erik on Twitter @ericyakes and his author page on Bitcoin Magazine.

The Infrastructure Bill Shows Why Bitcoiners Need To Be Politically Active

Trystine Payfer — Thu, 29 Jul 2021 17:03:20 -0400

This is simply the latest development that shows the lack of understanding amongst policy makers.

The Senate procedural vote held late Wednesday night was a big step forward in the difficult process of brokering such a large infrastructure package in Congress. This is, however, the very first step for the package, and requires a few more hurdles before it reaches President Biden’s desk for an official signing to become law.

Naturally, the actual text of the bill was not released prior to this procedural vote, which means that one can only surmise what the circulating draft language from various fact sheets could mean for bitcoin holders, miners, and related companies.

The fact that all of us in this industry are trying to interpret what the broad and vague language could mean for bitcoiners is indicative of two things in particular — the senators, and their staffers, are highly uneducated on both bitcoin and on the innovative and tenacious nature of bitcoiners.

This should be a wake-up call for bitcoiners to bring their education and fiery passion for a bitcoin standard beyond the 280-character limit on Twitter and into the legislative halls.

While we do not know what the future of our American government will look like, we do have to navigate the current legacy system while we actively lay the groundwork for a new monetary system rooted in proof-of-work.

Bitcoiners are some of the most knowledgeable individuals on economic principles and theories today, but they are also some of the most reserved individuals to educate those who make decisions that directly affect our lives and the U.S. economy.

I urge bitcoiners to shed the laissez-faire attitude to government and to instead become Bitcoin champions in their communities, and with their local representatives.

Immediately contact your Senator to share your concerns with the proposed infrastructure bills (both the $1 trillion physical package, and the $3.5 trillion budget reconciliation), and be sure to reference both specific issues with the language and state your concerns about the cost to the taxpayer.

Worth noting — the $3.5 trillion budget reconciliation bill will be difficult to pass and is already receiving pushback from both Senate and House members.

We all know that this bill will not be the last attempt to milk bitcoiners for additional sources of revenue to support federal or state programs, but it could be one of the last with minimal advocacy and pushback from bitcoiners.

Bitcoiners have jumped in the lifeboat, but we must now survive the waves of misinformation about inflation and our floundering U.S. dollar. The most peaceful and bright future relies upon immense education about bitcoin and how it is the solution to these unfeasible spending packages. This education needs to be shared at city council meetings, county supervisor meetings, state house legislative sessions, churches, and beyond.

Federal Outreach:

Search for your senator’s name on senate.gov and go to their website to contact their district and/or capitol office.
The most effective strategy is to cite specific line items from the bill once the text is released. But this may be difficult considering the speed at which the legislation could move so be sure to at least urge your senator to reconsider support for the proposed legislation until considerable changes are made.
Additionally, once this bill leaves the Senate it will go to the House; do the same form of advocacy ahead of time, by reaching out about your concerns now. Search for your representative on house.gov and go to their website to contact their district and/or capitol office.

This is a guest post by Trystine Payfer. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

Six Reasons To Withdraw Your Bitcoin From Exchanges

Arman The Parman — Thu, 29 Jul 2021 16:18:43 -0400

Here’s why you need to hold the keys to your own bitcoin and never store large amounts on exchanges.

#1 – If your coins are on an exchange, you need permission from the exchange to spend them. In your own custody, you can do whatever you want and pay whomever you want, whenever you want, at the fee you want.

You will understand this if you’ve ever wanted to move your bitcoin from an exchange and you were blocked because you needed to provide more identification documents or prove your source of income. You may have been blocked because you reached a 24-hour limit of value you are permitted to withdraw. Your funds may have been unavailable due to unscheduled system maintenance. It is your bitcoin and yet you are in a powerless position.

Bitcoin doesn’t actually care who you are or how much you are transacting. You can move 100,000 bitcoin and you’ll be free to do that without any resistance any time of the day, even on Christmas Eve, if the bitcoin was in your possession.

#2 – Your coins might not really be there. What you see is a promise that if you ask for your bitcoin, they will give it to you. But if the exchange gets hacked or if the CEO fakes his death and takes the private keys or if the government steps in, all coins could go bye-bye.

Newcomers log into their exchange and see “Balance = 1.0 bitcoin” and they think that is their bitcoin. It is not. That is a number on a screen. The bitcoin is on the Bitcoin blockchain, the global distributed ledger. The entity that can move that bitcoin from one address to another is the entity that has the private key that generated that address. The user of an exchange does not have the private key, the exchange does! It is their bitcoin. The bitcoin belongs to whoever has the private key. This is crucial to understand.

The exchange just has a legal agreement that the bitcoin belongs to the user and they show the user their balance. But the user just has a login name, a password, and a promise. Not a private key.

A little sinister trick that blockchain.com employs is a 24-word password to log in to the website. This LOOKS like a bitcoin private key, but it is not. It is just a website-password. Blockchain.com has the private key. This is quite misleading, and confuses beginners as to the true nature of how Bitcoin works.

Many exchanges have been hacked and coins have been stolen from those exchanges:

Mt. Gox is the first and most famous.
Quadriga CX, a Canadian exchange, went bust after the CEO — the only person in the company with access to the private keys (allegedly) — died (allegedly) while on a trip to India. The users lost all their bitcoin.
Cryptopia, an exchange in New Zealand. They got hacked and users lost their funds.
Binance. $40 million worth of bitcoin was stolen but Binance was wealthy enough to make their users whole. Embarrassingly, the CEO called for a rollback of the Bitcoin blockchain to recover lost funds but was laughed out of town.
Most recently, the CEO of a Turkish exchange fled the country with $2 billion worth of bitcoin.
There have been many others that I had not previously even heard about.

There is no way to tell if an exchange really got hacked or if it was an inside job from a rogue employee. The bottom line is: if they hold your bitcoin, you are trusting them to act honestly and safely.

You might not trust yourself with self-custody. That is understandable. But it is your responsibility to educate yourself on self-custody or at least only partially-custodial collaborative custody. Most early Bitcoiners are likely sitting on a lot of bitcoin. They must step up and look after their coins. People brand new to bitcoin can store their initial small stacks on exchanges and it won’t matter too much. But you, you are early. You must take responsibility. All the information is available online and free.

#3 – If coins are left on the exchange, they can engage in fractional reserve lending, effectively inflating the supply of bitcoin. If there is a mass withdrawal by the public, exchanges can and have gone bust if they don’t have the coins that were promised. Coins go bye-bye.

Fractional reserve is the fraudulent practice for accepting a deposit, and then lending it out, but the depositor is given the illusion that their money is still available. Somehow this is both common and legal in the fiat banking world. If one bitcoin is deposited and then is loaned out, the depositor should not have access, similar to a term deposit. This would be full reserve or one-to-one banking.

If the depositor requests their funds, then what is returned to them is another depositor’s funds instead and, in theory, no one is hurt. But if many people want their funds at once, then the obligations cannot be fulfilled.

This practice not only inflates the supply of money but is a systemic risk.

By withdrawing your coins, you eliminate the risk to you of a bitcoin bank run.

Trace Mayer, a once loved Bitcoiner, started Proof-of-Keys Day, on the anniversary of the first Bitcoin block, January 3. It started a movement where Bitcoin users celebrate by withdrawing all their coins from exchanges all at the same time, putting stress on the system, to keep the exchanges honest. Any exchange that was running on partial reserves could be exposed if enough people participated.

#4 – One day governments may outlaw withdrawals to private wallets, leaving your coins stuck and vastly less valuable. The real bitcoin economy would consist of the open peer-to-peer market outside of the exchanges while the coins trapped inside exchanges would be useless.

I am fully expecting governments to make it extremely difficult or outright ban coins from leaving exchanges into private wallets. We will fight back, no doubt. But the effort by governments will be futile. Most bitcoin is not on exchanges. My estimate is that about two million coins of the 18.7 million mined are on exchanges.

Bitcoin’s future is as peer-to-peer money, with most payments made on the Lightning Network. Coins on an exchange cannot serve this function. Exchange coins will always have a middleman that you will require permission from to make payments.

Coins stuck on the exchange due to laws cannot be used as bitcoin is intended and they will be less valuable. If I offer a service and charge in bitcoin, I will only accept real bitcoin outside of exchanges. I will not take payment from trapped bitcoin to my exchange wallet. I will not be alone. Therefore, there will emerge a price difference between real bitcoin and IOU exchange-trapped bitcoin.

#5 – Powerful people who want Bitcoin to fail MAY be naked shorting it on futures markets. If we, The Resistance, buy bitcoin and extract it from the trading pool, we will eventually enforce a decoupling of the price of paper bitcoin vs physical bitcoin.

We are fighting the people who print fiat. It’s easy for them to naked short bitcoin and suppress the price because they can print money and therefore have no real risk.

*Click here to read more about how naked shorting can affect the price of assets.

Here’s why they’ll fail: there is an army of Bitcoiners, true believers, who are regularly buying bitcoin and withdrawing coins from exchanges. Most of the coins are off exchanges already. If the naked short attack succeeds in driving down the price, Bitcoiners will eagerly scoop up the cheap sats and remove even more bitcoin from the exchanges.

Miners can somewhat replenish the supply of coins on exchanges. Currently, miners could theoretically dump 900 bitcoin per day onto exchanges. When HODLers remove 900 bitcoin a day, the price is relatively steady. Wild fluctuations in price can happen despite this, of course, as traders buy and sell coins between each other. But as more and more coins are removed and as mining supply diminishes (halves every 4 years), there will come a point when not enough bitcoin is available. This will cause a decoupling of the paper price of bitcoin on the futures market and real bitcoin that is demanded by HODLers or merchants.

Be a part of the army to bring this day forward and make bitcoin successful sooner. Regularly stack bitcoin — Dollar Cost Average (DCA) — and remove the coins from the exchange.

#6 Unless you take coins into your own custody, you will never fully appreciate how Bitcoin works.

If you don’t appreciate it, you won’t buy enough of it. And this you will regret.

You will need to learn more about self-custody and run a node. This will also blow your mind and get you closer to the truth of how amazing this technology is. You might even start using the Lightning Network and be totally obsessed. In a good way.

This is a guest post by Arman the Parman. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

An Open Letter To My Children: Energy And Bitcoin

Mark Maraia — Thu, 29 Jul 2021 13:43:45 -0400

A heartfelt message from a father to his children in regards to the life-energy saving properties of Bitcoin.

Dear Jen and Matt,

As we reflect on Independence Day this year I was inspired to write this letter. If you’re going to put your life savings into something that will hold its value — energy — across time and space it helps to understand your choices.

You can think of each hour of your labor — your energy — as having been traded for U.S. dollars when you work. So you’re storing your labor in U.S. dollars. All else being equal, if I work an hour and I’m able to save the money I was paid for that hour, I want that money to keep its value over time for later spending.

CEO of New York Digital Investment Group, Ross Stevens, calls the money you trade for the work you do as your “life force.” I want to save my life force or my parent’s life force for spending or investing in those things I value most. If I wait a year or two or ten to spend it, I want it to hold value throughout that time period.

U.S. dollars do that very poorly.

Our labor can also be viewed as a form of energy that we most often store in the form of money. Anything that stores and preserves that energy is preferable to anything that leaks or dissipates energy. Something that holds 99% of its value over time is better than something that loses its value by 5-10% every year.

This is the basic dilemma which all workers face today in every country.Every fiat currency in the world is being inflated to zero which is another way of saying it’s leaking energy. It’s also our government and central bankers quietly robbing us of our life force or energy every time they flood the system with more dollars… without anyone realizing that’s what they’re doing.

So energetically what are your options?

Option 1:

You can hold your energy or life force or savings in fiat currency like the U.S. dollar. Right now the interest paid on U.S. dollars is essentially zero and the real interest rate is double-digit negative when you consider the current level of the Federal Reserve’s money printing. That means if you had $10,000 in your bank on January 1, 2020 and you didn’t spend any of it but only thought of all the things you could buy with it, that same $10,000 has less purchasing power today, meaning you can now buy way less with your $10,000 than you could have in 2020.

If you go back to the creation of the Fed in 1913 you realize that storing your life force in U.S. dollars is very inefficient. Because of inflation, one U.S. dollar today has lost about 98% of its purchasing power since the Fed was created.

However, that doesn’t make it personal enough to fully grasp how undesirable this is. Stated in terms of life energy or life force, it means the Fed and our government has stolen 98% of the life force or energy produced by workers since 1913. Governments and central bankers are horrible allocators of capital and particularly poor at preserving our life energy across time and space. And as bad as that sounds, there are central bankers and governments in other parts of the globe that are far worse than ours.

Option 2:

Another option is to make investments in companies like Apple, Google, Facebook or Netflix in hopes that they increase in value faster than the Fed devalues or debases the U.S. dollar. That means we have to gamble with our life force. Right now, the most sophisticated investors in the world will tell you we are experiencing asset inflation because of the Fed’s inflationary monetary policy. That means more people are taking their life energy or life force and investing it (gambling really) in the stock market in hopes it will keep pace with the currency debasement. This has become particularly noticeable to many more people since March of 2020. However, what people don’t realize about this strategy is it requires you to put your life energy at risk in order to preserve it’s buying power over time. And it also treats our most vulnerable (those with no wealth) worse than those who have money to invest.

Option 3:

You can also invest your money, life energy or life force in commodities like gold or silver. Because of its relative scarcity, the inflation rate of gold is about 2% per year. That means that over a 25-year time frame it will have lost 50% of its value. Much better at storing energy than the U.S. dollar but still not very impressive. Real estate is another option for storing monetary energy which I’ll write about separately in another letter.

Option 4:

Today you have a fourth option that is orders of magnitude better than anything before it: bitcoin.

Money Is A Battery

Perhaps a better way to think about money as energy is to consider an everyday analogy that we understand all too well: the battery in our cell phone or tablet computer. I’m sure most of us prefer a cell phone with a long battery life for the same reason I prefer a monetary unit that has a long battery life. Something that stores energy (purchasing power) and has almost no leakage over time is much more desirable as money than something that loses its charge (value) quickly.

If I store my life energy in the Argentinian peso, its energy will deplete by 50% in one year thereby making saving for retirement “mission impossible.” Storing my life energy in the U.S. dollar is certainly preferable to storing it in the Argentinian peso. However, we are living in an age where every currency is rapidly losing its value. All fiat currencies are in a race towards zero. There has never been a period in human history where fiat currency wasn’t debased into worthlessness.

Enter bitcoin. Ross Stevens explains this problem very clearly in an interview he gave in May, a portion of which I transcribed:

The period of March to August of 2020 was a tough period for me. What struck me was the profound unfairness of the fiat monetary system. The profound unfairness of the impact of well-intentioned central bank activities. Well intentioned; but the results were profoundly unfair. The explosion of wealth inequality was breathtaking. And we haven’t seen anything yet. The explosion of business inequality. The system favors the big companies over the small companies. As an individual, if you did not own assets going into 2008-09 the American dream got pretty far away. You were left far behind. But if you didn’t own assets going into March of last year the American dream is gone man. It is a speck in the distance. And that’s terrible. That’s not us. That’s not our country. We’re the greatest country in the world.

We’ve had enormous inflation in the American dream…

We can define real estate and retirement as the two pillars of the American dream. When the Fed comes in and buys Treasuries and MBS [mortgage backed securities] they are buying houses. So if you owned a house already; golf clap. But if you didn’t? Too bad. That’s not fair.

What’s a private version of Social Security? It’s an income annuity. Ten years ago with $1,000,000 you could get $100,000-$120,000 per year in income. Today? You might have $30-40,000 per year in income. Retirement is becoming largely unaffordable.

But the biggest shift in my thinking during that period was about cash in people’s portfolio. There is a disproportionate impact of cash in a poor person’s portfolio and non-poor portfolio. With someone who has a net worth of $10,000 the percentage of their portfolio that is cash is 90-95% or 100%. If someone has $5,000 net worth it’s probably 99-100%. If they have $1000 net worth it’s the same. Someone with $1,000,000 maybe that percentage in cash is 10, 20 or 30% but not 90-95%. And the problem with that is cash is radically depreciating in value. Cash is no longer an asset, cash is a liability. And the more the Fed prints, the more the non-cash portion of the wealthy person inflates and the cash portion deflates. The poor have few or no non cash assets. They are SOL. That is a terrible, terrible result.

Bitcoin has been called wealth insurance. Who needs insurance the most of any kind? It’s the most vulnerable people. The most vulnerable people need the wealth insurance.

And it’s also life insurance as well. Not in the sense that there is big payout if you die. It’s more in the sense of big payout while you live. MM: A way to store your life’s energy.) It’s not a payoff in fiat money, it’s a payoff in personal sovereignty. It’s freedom and dignity. And if all you own is fiat and that’s a melting ice cube… you lose your dignity every single day the Fed prints. And that is not okay.

The good news is we finally have a monetary system governed by rules not rulers. And it’s open to all. So everybody gets to choose; which is great. You can stay in the fiat standard where a very small group of people get to print an unlimited amount of new units of money (just not for you) or you can opt into the bitcoin standard in which no one gets to do that - including you.

You can decide which is more fair.

Money at its core is simply energy and the bottom line is this: Bitcoin is a highly effective way of storing your life energy. Fiat is a horrible way to store your life energy. Fiat wastes energy. Bitcoin reduces monetary entropy or waste to zero. No one’s forcing you to hold bitcoin, but when you look at money through an energy lens the choice is clear.

Love,

Dad

If you would like to reach out to the author please email him at mark@markmaraia.com

This is a guest post by Mark Maraia. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Israeli Draft Bill Aims To Force Investors To Report Bitcoin Holdings Above $61K

Namcios — Thu, 29 Jul 2021 13:11:02 -0400

An Israeli draft bill seeks to demand that investors report bitcoin holdings above $61,000 to tax authorities, bitcoin advocates oppose.

On Tuesday, a draft law was published by the Ministry of Finance of Israel that would demand investors there to report bitcoin holdings more significant than $61,000 to tax authorities.

According to the proposed bill, the reporting requirement for bitcoin and cryptocurrency holders aims to optimize tax collection. If approved, the bill would mandate that anyone in the country who transacts bitcoin or cryptocurrency will have to report holdings worth $61,000 or more to the authorities.

The bill has reportedly already received opposition from the Israeli Bitcoin Association (IBA) and other bitcoin advocates.

The head of regulation at IBA, Nir Hirshman, reportedly said that the association contacted senior officials at the Israeli Tax Authority (ITA) as soon as it saw the draft bill. The letter was reportedly addressed to Eran Yaakov, the head of the ITA, and focused on explaining why the association is opposed to the proposed legislation.

The letter reportedly stated that no other assets have similar reporting requirements, which effectively discriminates against bitcoin holders. Additionally, such reporting would harm bitcoin holders' privacy due to creating a single point of failure –– a database that could be leaked, compromising people's security.

Israel has been testing its central bank digital currency and is also cracking down on cash usage with the new bill. The ITA, the governmental agency that proposed the draft, reportedly aims to reduce the country's volume of "black capital" and expose unreported assets and income. But Hirshman disagrees.

"This is a bad proposal that will harm bitcoin investors and won't add even one dollar to tax collection in Israel," Hirshman told CoinDesk. "We believe that the demand to report crypto assets holdings in fiat terms will accidently turn normative law abiding citizens to tax offenders, just because they missed a spike in one of their assets holdings."

It is unclear how Israeli law enforcement would effectively track and enforce the new reporting requirements. Although not anonymous, Bitcoin transactions are pseudonymous and can support strong privacy. If the user dedicates to learning about and employing privacy best practices in Bitcoin, there is arguably little the government can do about it.

Hand-tied to a third-party database, and therefore a single point of failure, the bitcoin holders not willing to go the extra mile can have both their privacy and security compromised. But the draft is open for public comment until July 31, so there's still time for the Israelian people to show how harmful this proposal can be if enacted and change the bill to a better version.

Greenidge Generation To Repurpose Old Coal Ash Landfill Into A New Solar Farm

Namcios — Thu, 29 Jul 2021 12:44:17 -0400

Bitcoin miner Greenidge announced today its plans to expedite the closure of an old coal ash landfill and turn it into a solar farm.

Bitcoin mining firm Greenidge Generation announced today its plans to expedite the closure of a forty-year-old coal ash landfill in the Finger Lakes region, New York, and turn it into a new solar farm.

“I am thrilled that the success of our clean bitcoin mining operation is not only creating great high-tech jobs for residents here, and supporting local businesses, but will now also facilitate the development of renewable energy at this old landfill site," said Dale Irwin, President of Greenidge Generation Holdings Inc.

The company, which in May committed to being carbon neutral by 2021, has since been purchasing carbon offsets from a portfolio of U.S. greenhouse gas reduction projects. The goal was to offset the carbon footprint of its natural gas-powered bitcoin mining plant in Upstate New York by June.

Now, Greenidge will reinvest part of that plant’s profits to repurpose the old Lockwood Hills coal ash landfill into a new solar farm. The company intends to work with the New York State Department of Environmental Conservation to “safely cap and close the landfill and relinquish its existing permit to operate the site,” the announcement said.

Greenidge said it plans to launch a Request for Proposals to evaluate the solar farm project, which it expects to generate up to 5 megawatts of power.

The Lockwood landfill was constructed in 1979 to dispose of coal combustion residuals (CCR) and other wastes produced by the power generation facility prior to Greenidge assuming ownership in 2014.

The landfill remains open and operational today. But according to the announcement, the site will soon stop accepting waste and, once the closure process begins, various steps will be taken to prevent erosion and water infiltration there.

Greenidge Generation Holding Inc. is the parent company of Greenidge Generation LLC, the vertically-integrated bitcoin mining and power generation facility in Upstate New York. The 106-megawatt natural gas plant allows Greenidge to mine bitcoin and meet the power needs of homes and businesses in the Finger Lakes region.

In early July, Greenidge announced its plans to establish a second bitcoin mining operation in South Carolina. A couple of weeks after that, the firm shared it had partnered with Foundry Digital to buy 2,300 bitcoin miners and finance another 6,000. Greenidge also joined the Foundry USA Pool as part of the collaboration.

Compass Mining To Offer U.S. Clients Tax-Efficient Bitcoin Mining

Alex McShane — Thu, 29 Jul 2021 11:53:19 -0400

U.S. Clients of Compass mining can now mine bitcoin directly into a Choice Individual Retirement Account without triggering a taxable event.

U.S. Clients of Compass mining can now mine bitcoin directly into a Choice Individual Retirement Account without triggering a taxable event, per a press release sent to Bitcoin Magazine.

Under the current tax laws, revenue from Bitcoin mining is taxed as income. Currently, miners must also pay capital gains taxes when they are forced to sell some of their bitcoin to cover other tax obligations.

Through mining in a Choice account, miners avoid taxes on their bitcoin revenue in the short term and potentially indefinitely, depending on which type of IRA they use.

In the statement sent to Bitcoin Magazine, Compass explained: “tax-efficient mining presents enormous benefits to retail miners and empowers them with another tool to mine even more profitably at a smaller scale.”

Choice is an independent, qualified custodian regulated by the South Dakota Division of Banking and an offering of Kingdom Trust Company. In May of 2020 Choice became the first retirement provider to offer a single account for all client retirement assets, physical or digital, legacy or traditional. The Choice platform currently hosts over 125,000 retirement accounts, with over $18 billion assets under custody.

Compass mining allows users to effectively mine without worrying about the logistics of mining through purchasing and renting machines that are then housed, maintained, and operated on the client’s behalf. It is the fastest growing marketplace for average investors to mine profitably at a wide range of scales. Retail miners are provided access to the same high-quality mining hardware and verified hosting facilities as large scale industrial competitors.

In July, Compass Mining reached over 450 petahash (PH) of hashrate across all its mining customers. The tax benefits of mining to a Choice IRA account are limited to retail miners who have purchased hardware through Compass. The mining payouts are then sent directly to the Choice account.

Ryan Radloff, CEO of Choice commented, “Being able to purchase a Compass miner within your IRA and mine bitcoin in a tax-advantaged account is an incredible opportunity. Our entire team is excited to work with Compass and as the industry continues to evolve.”

Survey: 85% Of Bitcoiners Care About An Exchange Funding Bitcoin Development

Casey Carrillo — Thu, 29 Jul 2021 11:15:52 -0400

According to a survey conducted by OkCoin, a large majority of Bitcoiners care about helping fund Bitcoin development.

The development of Bitcoin, to those unaware, can seem like a mysterious machine acting behind hidden curtains. Not unlike the Wizard of Oz, hidden behind all of the smoke and fire are normal human beings dedicating their lives to improving the network which we so cherish.

In a recent ebook done in partnership with Brink and OpenSats, bitcoin exchange OkCoin conducted a survey in which “Most respondents of our poll were unaware of the lack of funding for Bitcoin developers... Once aware, a majority of them became in favour of supporting development.”

The results indicated that 85% of respondents care about their bitcoin exchange funding development, 69% would like their exchange to provide yearly grants, and 25% would like their exchange to match contributions to developers.

Many do not know how Bitcoin’s development is funded, and yet Bitcoiners are ready and willing to support this development once known. How could they not, given all the incredible progress we’ve experienced so far.

Bitcoin’s development is a product of forum posts and IRC chats, an open source community of progress that is as decentralized as the protocol. Since this is true, the funding for such development has been relatively inconsistent. Recently, along with the increase in the price of bitcoin, there has been a push for increased exposure for bitcoin developer funding, and some exchanges and nonprofits have begun their own action.

The ebook lists examples such as OkCoin, who “has contributed $1,000,000 in funding directly to Bitcoin developers or to nonprofits supporting Bitcoin developers to date,” via an Open Source Developer Grant, and nonprofits like Brink which, “have supported six Bitcoin developers and have $3 million pledged for fellowships and grants.”

Also mentioned are aggregations in which those looking to contribute can find ways to donate to developers. These include Bitcoin Donation Portal, a portal designed to connect donors to developers, BitcoinACKS, a “bounty” board for developers, and Github Sponsors, an open source contribution portal.

All in all, the development of the trillion dollar network relies on a small group of people. In a way, the support we offer them is a mirror of our belief in the ability of the network to persist. While development may seem “expensive” at times, there can be no amount of bitcoin too much to spend on the improvement of the network.