Weekly Recap - 04.09.2023

🧠Quote(s) of the week:

“1 BTC in self-custody is better than 1,000 BTC in FTX IOUs.

1 BTC in self-custody is better than 10,000,000 shares of the Blackrock Bitcoin ETF.

Many will learn this the hard way.

April 5, 1933

August 15, 1971″

– Joe Burnett

“If you take out $100K in debt for college people will congratulate you.

If you take out $400K in debt for a new home people will congratulate you.

But if you buy 1.0 BTC for $25,000 people tell you it’s a risky investment.

The moral of the story: WE ARE EARLY”

-TheBTCTherapist

🧡Bitcoin news:

➡️ The next thing has nothing to do with Bitcoin or is it? One of the world’s most popular types of rough diamonds has plunged into a pricing free fall, as a growing number of Americans choose engagement rings made from lab-grown stones instead. In the analogy to the CrYpTo market, you can say that diamonds are real-world NFTs/Shitcoins. There’s a lesson in this for those paying big $$ for NFTs/shitcoins or in the upcoming bullrun AI tokens or whatever hype we will encounter. Apparently, Diamonds are not rare and (Kayne’s voice) Diamonds are NOT forever. – Source Fortune

Remember there will only ever be 21 million Bitcoin

➡️ Long-awaited Bitcoin and crypto accounting reform has been passed in a unanimous vote by FASB, allowing companies to use fair value measurement on their books – Bloomberg

Why is this big news: Previously companies could only value their Bitcoin at the lowest price since they bought it, which meant they would have to record losses, but not gains when the price recovered. “This historic news will help facilitate global adoption by making it easier for companies such as Google, Apple, Tesla, Microsoft, and Amazon to hold Bitcoin.”

If you want to learn more about FASB and if you need help understanding the importance of this rule change, please check the following thread by James Lavish:

https://twitter.com/jameslavish/status/1592228100934438913

➡️ The first spot Bitcoin ETF will be approved between October and March 2024, says $676 BILLION fund manager AB Bernstein.

➡️ Some interesting stats in the Iris Energy (Bitcoin miner) monthly investor August update:

– Negative 8c power at Childress in August, $56k mining profit per BTC. Yes, you read that right a Bitcoin miner paying -$0.08 per kWh, negative 9 cents per kilowatt hour!

– Targeting next-gen compute and generative AI with NVIDIA H100 GPUs

– Avg hashrate of 5,493 PH/s, 410 BTC mined, $11.5m revenue

Don’t forget that miners are also paid by grids to mine Bitcoin when there is excess power and insufficient demand! The operation of electrical power grids will rely on Bitcoin in the future:

Iris Energy was “paid to produce Bitcoin last month in Texas.

~US$28k per Bitcoin in *negative* electricity costs;

plus ~US$28k per Bitcoin when we sold it.”

Again! You read that right, they got paid $28k per Bbitcoin by Demand Response programs. Then they sold those “free” Bitcoin for $28k each.

Mindblowing!

And it’s not only Iris Energy. Also, RIOT got paid. Bitcoin miners are so good at balancing the grid during shortages that they get paid millions to do so.

In August, RIOT platforms earned $7m from ERCOT for ancillary services to reduce demand, less than 1% of the program.

They earned $24m in power credits from their retail provider TXU/Vistra for selling back pre-purchased power

They made 84,000 megawatt hours available to the grid, enough to power nearly 100k homes for a month, & and ensure that no consumers experienced disruptions.

On the 7th of September: “ERCOT saved the Texas grid from outages today by deploying Ancillary Services, including Bitcoin miners.” – Pierre Rochard

Bitcoin miners played a big role last week in stabilizing the grid in Austin and other areas of Texas.

Real value for the power companies whose charter is to provide reliable, resilient, and dependable energy to the people.

The future of Bitcoin mining is so unimaginable I will just keep stacking sats. For some of you stock pickers you might want to deep dive into RIOT, and Iris Energy.

➡️More Mining news: A renewable, modular data center from Peth company DC Two is now operating at biogas company LMS Energy’s Victorian facility.

I quote Daniel Batten:

“DC Two (Australia) = first landfill gas-powered Bitcoin Mining outside the US

-Nodalpower: 4.8MW

-Vespene: 1.6MW

-DC Two: 0.8MW

Total: 7.2MW, mitigating 90,000 t CO2e emissions/yr”

Sources: https://www.crn.com.au/news/renewable-modular-dc-two-data-centre-operational-at-lms-energy-site-in-victoria-584842

➡️ Grayscale lawyer asked to meet with the SEC “as soon as practical” to discuss converting Grayscale’s Bitcoin trust into a spot ETF.

“Grayscale is the 2nd largest Bitcoin holder with 628K BTC in their possession ($16B). Arkham Intelligence reveals that the funds are distributed among more than 1,750 addresses, each holding 1,000 BTC or less.” – Bitcoin News

Personally, I couldn’t care less if they will have a Bitcoin ETF or not. I’m not buying GBTC even for speculation. Paper Bitcoin is for idiots.

➡️ Bitcoin supply on exchanges has increased by 3.1% over the past two weeks. No clue why! But if people want to sell cheap sats, fine by me.

➡️The IMF had no data backing their claims that Bitcoin would have a negative impact on El Salvador’s economy. Yet they continuously pushed falsehoods on Elsavador’s Bitcoin legal tender law.

The first major bank, Santander, to point out that President Bukele’s Bitcoin policy has delivered a new growth model. “It also suggests the potential for an alternative growth model with high tech the obvious extension from the BTC launch two years ago.”

El Salvador’s bonds are up 90% this year! Best performing in the world.

➡️ “In quiet apathy, great adoption is occurring. Full Bitcoin wallets are approaching all-time highs, while the price is still -60% down. The number of addresses with a balance of over $1000 is back at the 2021 peak.” – Charles Edwards

🏦Banks:

👉🏽”2023 has been the biggest bank run in a very long time. US banks have lost roughly $633.85 billion in deposits since January.

-Deposit flight

-Credit contraction

-Economic contraction

Not great for the US economy.” – Joe Consorti

👉🏽”Usage of the Fed’s emergency bank funding facility jumped by $328 million last week. It now stands at a new record high of $108 billion, even as the regional bank crisis is “over.” The current rate banks are paying the Fed on these loans? An alarming ~5.5%. The banks that almost collapsed are now borrowing record levels of expensive debt from the Fed.” – The Kobeissi Letter

Two things that come to my mind. 1. 2008 vibes, and 2. If it is that bad in the US, how bad are the EU banks?

🌎Macro/Geopolitics:

Debt of various types is the biggest issue right now. The rate hikes only exacerbated this issue. Zombie economic countries/ zombie companies/zombie households are a real problem. One difficulty away from insolvency:

👉🏽 World debt has rapidly increased since 1997. (Please study the Asia crisis and the ramifications – https://www.thebalancemoney.com/what-was-the-asian-financial-crisis-1978997) And is now around $225 trillion. Again, this is not sustainable.

In the US “over the next year, a record $7.6 TRILLION of US debt is set to mature. In other words, 31% of all outstanding US government debt will mature over the next year. Previously, this was not a problem as we have had historically low rates for 15+ years. This debt would simply be refinanced at the same or even lower interest rates. How about now? Interest rates have more than doubled over the last 2 years and refinancing this debt becomes a bigger problem. US interest expense is about to skyrocket.”…”The US debt-service costs are now at their highest since 2009 as rates soar. Over the next year, this will continue to rise as US debt is refinanced at higher rates. Yet another sign that $4 trillion in “free stimulus” is not really free.”…” Meanwhile, the US is issuing record levels of debt to cover deficit spending. Over the next 2 quarters, the US is set to issue nearly $1.9 trillion in Treasury debt. Deficit spending is pushing rates higher.”- The Kobeissi Letter

👉🏽And it’s not only the US that has a debt problem. China’s economy is in trouble:

“34 out of the top 50 private real estate developers in China are suffering delinquencies. According to Bloomberg, the remaining 16 developers face a combined $1.5 billion of bond payments this month. In January 2024, these remaining 16 Chinese developers will face a massive $3.0 billion in bond payments. This all comes just weeks after Evergrande filed for Chapter 15 bankruptcy. Meanwhile, the Chinese HY real estate index is down 82% in 2 years. China seems to be on the brink of a credit event.”- The Kobeissie Letter

On top of that China’s US Treasury holdings just hit $835B, a 14-year low. How will that affect the worldwide economy?

👉🏽Bankruptcy filings have spiked to levels last seen during C19 and the Financial Crisis. All the QT from the FED tends to have a lagging effect on the economy. Things are not looking good for small businesses.

👉🏽 “The debt-to-income ratio for all homebuyers in the US just hit 40% for the first time in history. Even in the 2008 financial crisis, this ratio peaked at ~39%. This comes as total household debt just hit a record $17.1 trillion and credit card debt crossed $1 trillion for the first time ever. Consumers are borrowing at a record pace all while savings are declining and rates are rising.” – The Kobeissi Letter

These are just facts and raw data. An increasing number of indicators suggest a market/macro correction. Private debt/income is the highest in history, public debt/tax rev the highest in history, and we’re about to enter a recession. This is “why Bitcoin” inflation and our current financial systems turn us into debt slaves. Bitcoin, no debt.

👉🏽 Corporate bankruptcy filings in 2023 are the highest in 11 years, and we still have 4 months until the year is over. Corporate bankruptcies are rising at the fastest pace since 2010 (barring the pandemic), and are double the level seen this time last year. It’s likely just the start of a wave of corporate defaults: A decade of cheap money instilled a false sense of invincibility in business executives and private equity managers who forgot that bust normally follows boom. Now, a combination of weakening demand, surging inflation, over-indebted balance sheets, and much higher borrowing costs will prove too much for weaker borrowers.

Just another part of the everything bubble. Everywhere you look = pain at the moment. Remember from last week’s Weekly Recap:

“According to the Fed’s own “best indicator,” the probability of a recession is at its highest level since the 1980s. The interesting part is that the “Soft landing” narrative is now the consensus. This also happened in 2000 and 2006. Both instances ended in severe recessions. While it’s always a possibility, trading with the objective of time a recession timing is not worth it. The market tends to have many fakeouts before a macro recession happens.”

People/companies are borrowing at record-high levels while saving at historically low levels.

What could go wrong?

👉🏽”The median inflation rate of G20 countries is 4.2% year-on-year. In the US inflation is at 3.7%. That already feels high. But the 20 countries with the highest inflation have a median rate of 42.5%. If you haven’t experienced that first hand it is really hard to understand how bad that is for the people living there.” – Ecoinometrics

👉🏽 “Germany’s utopian energy fantasies are getting wrecked on the sharp rocks of reality. A solar industry magazine reports that 15% of Germany’s solar panels could be defective.” Here is the article: https://t.co/kyuJx9rmiU

Data/Numbers:

-15% of Germany’s solar power is disintegrating.
-10 GW could be affected = €2 billion ($2.18 billion) in replacement costs.
-Only a fraction of the affected panels have likely been detected so far.

So let me get this straight. The “green” alternatives are expensive to maintain, unreliable, and also falling apart while they phase out the traditional energy sources that built their economy.

How much economic pain will Germans have to endure before politicians turn the nuclear reactors back on? Billions spent on ‘renewables’ would have been better spent on nuclear, or at least a mix of both!

“Fortunately for the grid, the power isn’t needed because Germany is just losing its industries instead of growing the clean energy supply.” This is not just a catchy line:

From my Weekly Recap a while ago:

Overall industrial production is at the same level as in 2007. Of Germany’s 6 major industrial sectors, only the electrical industry managed to rise above its pre-corona level in 2019. Germany’s flagship industries, automotive and mechanical engineering sectors, are stagnating. The situation is particularly bad for the chemical industry.

👉🏽 Recently we received the news that China was dumping US treasuries. Now also Saudi Arabia is dumping their US Treasury holdings.

Feb 2020: $184B Jun 2023: $108B

Source: https://t.co/ei5Y2sC8bF

Think of the long-term impact on the country. US Treasury holdings & and USD were/are what made the US the superpower of the world. What will happen if everyone dumps USA debt who will fund their borrowings? Dedollarization? By no means I am saying the Saudis are doing this to undermine the USA. The world is too complex. See it from another lens. The Saudis needed to sell treasuries to make ends meet during Covid (because oil prices crashed and their budget), and we have to wait how China and the Saudis will react after the next Fed monetary expansion cycle…what will be the effects?

I just hope we won’t get into a currency battle, Study history, and you will know that will always lead to bullets.

I hope the Saudis just needed $.

They need $ to pay for football players, like Neymar, Benzema etc. Right?

Anyway,

Opt out: Bitcoin🧡

Credit: I have used multiple sources!

My savings account: Bitcoin

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Get your Bitcoin out of exchanges. Save them on a hardware wallet, run your own node…be your own bank. Not your keys, not your coins. It’s that simple. ⠀⠀⠀⠀⠀⠀⠀⠀

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