Bitcoin Fundamentals Report #168

A weekly newsletter summarizing important sectors in bitcoin

by Ansel Lindner


This week...  US Infrastructure bill, Kyle Rittenhouse update, failing public health experts, EU to ban bitcoin mining?, Nigerian CBDC, and dollar break out.

In Case You Missed It...



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Market Commentary

Weekly trend Consolidation off high
Media sentiment Negative
Network traffic Rising, still low
Mining industry Very strong
Market cycle timing Second half of bull market


Hello dear reader,

I'm back after about a week of illness. Last weekend, I started to feel sick and it carried on into this week. It might have been covid, but I didn't take a test yet. We skipped recording a new Fed Watch episode, but I did put out a Bitcoin Pulse and worked on some new stuff for an upcoming op-ed in Bitcoin Magazine. All is well, and I'm back to the grind.

Let's dive in.

US Infrastructure Bill

It's been several months since I commented on the Infrastructure Bill, with the language hidden inside that will affect bitcoin. I didn't think it would pass in that form to be honest. Biden's approval rating is at historic lows for a first term President, people are worried about inflation, partisan bickering was quite loud, I thought it would have to go back to the drawing board.

Well it didn't; it passed, and Biden signed the $1.2 trillion bill into law this week. Is it bad for bitcoin? Some think so, but I'm not worried about it. The popular momentum is already turning away from the money experts, and bureaucrats toward bitcoin. It's simply too late to enforce draconian laws on it, the only question is how soon is it officially adopted.

The new rules aren't even written yet, and it doesn't go into effect until 2023 or something like that. So, there's lots of time. Already, there are two efforts to get the language changed.

From Bitcoin Magazine:

Representatives Patrick McHenry (NC-10) and Tim Ryan (OH-13) have today introduced the Keep Innovation in America Act, a bipartisan bill seeking to fix the “digital asset” reporting requirements in the infrastructure bill turned into law this week.

“The Infrastructure Investment and Jobs Act that President Biden signed into law on Monday...includes digital asset reporting requirements that threaten to push innovators and entrepreneurs overseas,” Rep. McHenry said in the same statement. “We can fix these poorly constructed standards and ensure they are compatible with how this new technology actually works. The Keep Innovation in America Act will address these issues and provide additional clarity on the scope of these requirements.”

And the second one, also from Bitcoin Magazine:

U.S. senators Ron Wyden, chairman of the Senate Finance Committee, and Cynthia Lummis are introducing a bill to amend tax reporting requirements in the infrastructure legislation set to become law on November 15, Bloomberg reported.

“The new bill, the text of which was obtained by Bloomberg News, seeks to override a provision in the infrastructure legislation that cryptocurrency investors say is overly broad and would stifle growth of digital currencies,” per the report.

Kyle Rittenhouse Update

Thank God, Kyle is innocent of all charges! This was a pivotal case at a pivotal time in US history. It was a win for common sense, which we all know is under attack, a win for confidence in the courts, and a huge loss for MSM and Marxists.

There have been two big cases in the US that should bring a little optimism to people, Kyle's case and the OSHA vaccine mandate getting shot down in Federal court.

Vaccines and Public Health Everywhere Get an "F"

Case numbers are once again surging across Europe and many parts of the US, despite relatively high percent of vaccinated. In Gibraltar for example, the most vaccinated country by far (99+%), it was reported this week coronavirus cases are exploding. Are we to believe that these cases are a majority unvaccinated? LOL

Gibraltar is not alone. Netherlands returns to partial lockdown, Austria returns to full lockdown, Iceland ramping up restrictions, Singapore is experiencing a surge in covid deaths, the most vaccinated US State, Vermont, is hitting record numbers of infection. The vaccine is failing almost everywhere in preventing coronavirus cases, and all-cause mortality is rising dramatically, too; a complete failure of public health policies.

USMortality.com, all ages
USMortality.com, 25-44 year olds

All-cause mortality is going up quickly! So far, 2021 has seen a stomach turning 43% increase from average in all-cause mortality for people aged 25-44. Whether this is adverse reactions, drug-related or suicide related, public health must target all-cause mortality to be considered effective. If you have 10,000 fewer covid deaths but 100,000 more deaths total, you failed badly.

And just this morning, Official Public Health England Data Says COVID Infection Rates Higher in Vaxxed Than Unvaxxed.

Fresher information has fortified this conclusion of the summer. In every age group over 30 in the UK, the rates of Covid infection per 100,000 are now higher among the vaxxed than the unvaxxed.


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Quick Price Analysis

Weekly price* $57,841   (-$5,233, -8.3%)
Market cap $1.090 trillion
Satoshis/$1 USD 1,731
1 finney (1/10,000 btc) $5.77


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Bitcoin Daily Chart

We all get a little impatient when price is ready to breakout but doesn't seem to want to make the move.

Price is still very near ATHs with plenty of support below. There has been some FUD (fear uncertainty and doubt) this week with the Infrastructure Bill which included that language that affects bitcoin, as well as the MtGox bankruptcy plan getting finalized meaning 100s of thousands of coins will be released to people who have been waiting since 2014. The bears say these coins will be dumped on the market, I'm doubtful.

The chart looks good here. The obvious place for a bounce is at the bottom of the channel with other support around $52,500.

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Mining and Development

Previous difficulty adjustment +4.69%
Next estimated adjustment +2.5% in ~8 days
Mempool 3 MB
Fees for next block (sats/byte) $0.73 (9 s/b)
Median fee (finneys) $0.49 (0.08)

Mining News

Sweden and Norway are now calling for an EU ban on bitcoin mining! Seriously. China has already made this mistake and it appears the EU is going to also shoot themselves in the foot.

Banning bitcoin mining is like banning an essential part of the financial industry. It's a new area of technology, a huge incentive against waste and for efficiency, and is going to be a staple industry of the future. It's like if your country were to ban cars in 1900 because they are bad for the environment. Idiotically stupid.

Some people might think this is part of a nefarious plan by banking elites to outlaw bitcoin mining everywhere, but it's so stupid, it can't be a carefully measured plan. They are rushing to judgement based on fear for the climate.

We know they don't know much because this was a line in the Reuter's story about Norway:

Under the proof of work system, computers must solve mathematical puzzles in order to validate transactions that occur on a given network.

The process is designed to become more difficult as the number of blocks of validated transactions in the chain increases, meaning more computing power - and therefore energy - is required.

Proof-of-work (PoW) does not validate transactions. Validating transactions is a trivial process done on every node running bitcoin. It uses a minute amount of energy.

PoW has to do with blocks (transactions are in blocks, but a different thing). Mining is the process of burning energy to enter a lottery for the privilege to add a block to the block chain. Decentralization requires PoW. Proof-of-stake is much older than bitcoin and doesn't work, that's why bitcoin had to have PoW. These other coins that use Proof of stake can do so only because they have a centralized backstop in their system, whether that's a founding team, company, or network infrastructure. (By the way, ethereum has three forms of centralization)

Mining is not "designed to become more difficult" either. It is designed to maintain 10 minute blocks. If the hash rate drops, so does the difficulty. The reason the amount of computer power increases with time, is because the price of bitcoin rewarded to miners increases with time, as well as the speed and efficiency of the mining computers.

Hash Rate

Bitcoin Visuals

Difficulty

Bitcoin Visuals

Altcoins / CBDCs

Nigeria launched their own CBDC called the eNaira back in October and I have been waiting to read reports on its success and/or failure. This week, they are reporting that the wallet has been downloaded 500,000 times, which is a good start, but we'll see if it continues. I doubt that pace keeps up for long.

CBDCs are simply unnecessary and don't offer anything new to consumers, other than perhaps access for people without bank accounts. These people could simply get an account with the central bank and download that app, and have no need for the CBDC.

The IMF also came out with a blog post about the eNaira this week, saying the following.

Like digital currencies elsewhere, the eNaira carries risks for monetary policy implementation, cyber security, operational resilience, and financial integrity and stability. For example, eNaira wallets may be perceived, or even effectively function, as a deposit at the central bank, which may reduce demand for deposits in commercial banks. Relying as it does on digital technology, there is a need to manage cybersecurity and operational risks associated with the eNaira.

What people, like those working at the IMF, are starting to realize is that CBDCs are whole new types of money. The current money we have is based on deposits at a bank, and it is printed in the process of a loan. A CBDC is not the same money. It's like a silver dollar in your hand to a dollar in your bank account, they are legally the same, but have different properties. They are different things and if their prices were allowed to float relative to each other, their values would differ.

This is the major problem I've been pointing out more years about CBDCs. They are different forms of money and hence will have a spread, whether or not it is legally allowed to. In my opinion, the CBDC token start out naturally as less valuable, if they were allowed to float, simply because it's not used everywhere. However, if it is offered at par value it will have to face an ever-present uphill climb for adoption.

I'll write more on this in another post...


Miscellaneous

Dollar Surge

I'm the only real deflationist in bitcoin and it's lonely, let me tell you. I feel like a broken record sometimes, as people wrongly make claims about money printing and inflation, I have to point out the dollar is strengthening.

The first response I usually get from inflationists is the DXY (dollar index) is measured against other currencies, so they are just devaluing faster than the dollar. Wrong. Check out oil (high but not close to all-time-highs), silver, gold, interest rates, etc etc. All these things point to the dollar not inflating rapidly.

Also, we can compare CPI inflation for these other currencies. European CPI based on a basket of goods is 4% while the US CPI is 6%. Wait what? CPI is telling us that the US dollar is devaluing faster versus a basket of goods than the Euro, but the dollar index (majority weighted against the Euro) is spiking, which implies the opposite? Yep.

The solution to the problem is my broken record, QE and government spending are not money printing, they are temporary market manipulation. CPI or prices is not inflation. Inflation is about money supply. Right now prices are increasing due to supply destruction, not more money.

Anyway, I'll have to write about that more in a separate post as well. That's all for today. Thanks guys, check you next time.

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November 19, 2021  |  Issue #168  |  Block 710,470  |  Disclaimer

Meme by: @SwanBitcoin

* Price change since last week's issue

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