The News Block #24 (02/13/2024)
Bitcoin Breaks $50,000, Putin Says U.S. is Killing the Dollar, Yellen Admits Prices Won’t Fall, Biden Calls Out Shrinkflation, MicroStrategy Evolves into Bitcoin Development Company
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Bitcoin Smashes Through $50k As GBTC Outflows Slow:
Bitcoin started the week breaking above $50,000 per bitcoin for the first time since 2021. Will it make a new ATH this year?
The recent rise in Bitcoin’s price can be attributed (at least in part) to the growing success of the spot Bitcoin ETFs, which continue to see significant demand and inflows.
This is the kind of price action a lot of people were waiting for with the ETF approvals but was delayed by GBTC outflows after its conversion. Investors, traders, and bankruptcy estates sold GBTC for various reasons over the last month. This created a large amount of selling pressure on Bitcoin itself.
The good news? The amount of GBTC being sold each day has steadily declined.
Last Friday, GBTC saw its lowest daily outflow to date - only $51.8 million. To put that into perspective, at its peak, GBTC outflows totaled more than $600 million in one day. It’s no surprise that we’ve seen Bitcoin’s price begin to run again now that the GBTC selling is slowing down.
Currently inflows are dominating: Blackrock’s ETF has already crossed $4 billion in assets under management, and Fidelity’s has eclipsed $3 billion in their first month of trading alone.
According to Senior Bloomberg Intelligence Analyst Eric Balchunas, these two ETFs are the most successful launches after one month in the entire history of ETFs going back thirty years!
But we’re not out of the woods yet. There’s a chance GBTC selling could ramp up again soon. Cryptocurrency lender Genesis has filed a motion with a bankruptcy judge to sell nearly 36 million GBTC shares worth more than $1.5 billion.
If approved, Genesis will sell these shares in the coming weeks to raise cash to pay back its clients. This means another large GBTC selling event, along with more pressure on Bitcoin’s price, could be on the horizon.
Despite this Genesis news, it’s safe to say that the majority of the GBTC outflows are likely behind us, and Bitcoin’s price now feels ready to benefit from the new wave of demand coming in through these ETF products.
Putin Says US Killing the Dollar With Own Hands:
Tucker Carlson's highly anticipated interview with Russian President Vladimir Putin has garnered more than 200 million views on X.
No, they didn’t bring up Bitcoin. But we did hear talk about the declining power of the U.S. empire.
In this wide-ranging (and at times awkward) interview, Putin at one point criticized the U.S. for its policies involving the U.S. dollar, including when the U.S. weaponized it and placed sanctions on Russia, freezing its Treasury reserve assets. He called this one of the U.S.’s “largest strategic blunders” and said that the US is “killing the dollar with its own hands.”
Listen in to this clip:
Many countries around the world are diversifying away from the dollar. It’s happening slowly. Putin made a lot of important points alluding to the fact that dollar hegemony is increasingly in jeopardy. The dollar’s status won’t collapse overnight, but it seems to be undergoing a death by a thousand cuts.
This is likely part of why we have seen a record amount of gold buying from central banks worldwide over the last two years. Central banks bought more than 1,000 tons of gold in 2023. For reference, in 2020, that number stood just above 200 tons.
Putin said a much greater percentage of Russia’s trade is now denominated in currencies other than the dollar, like the ruble and the yuan.
These comments highlight the problems in our centralized traditional financial system. The U.S. continues to print money and weaponize the dollar against its adversaries. Now, countries all over the world are increasingly dumping dollars for alternatives to diversify their reserves and protect themselves. In the end, this only threatens the dollar’s role as the global reserve currency, which was Putin’s main point.
Bitcoin could soon be one of those alternatives, being a neutral monetary system that no country can control or censor, making it the perfect asset for a country to allocate to in order to diversify its reserves and protect itself against the risk of seizure and censorship. Major global powers aren’t there yet, but I don’t think that’s far off in the future.
And it’s not Bitcoin that is a threat to the U.S. dollar. When politicians say that, it’s just an invisibility cloak to hide the fact that their own policies are threatening the dollar’s status around the world.
Yellen Admits That Prices Won’t Come Back Down:
Another individual we heard from last week was Treasury Secretary Janet Yellen.
First, Yellen testified before the House Financial Services Committee to explain the work of the Financial Stability Oversight Council (FSOC). The FSOC is in charge of identifying risks in the financial system and preventing a future crisis from unfolding.
In her testimony, Yellen said that the Council is focused on risks associated with “crypto-assets” and urged Congress to pass legislation to better regulate stable coins and the crypto spot market, but she specifically said the spot market of crypto assets that are “not securities.” The only one that’s been officially stamped ‘not a security’…is Bitcoin. I would argue the area that needs more regulatory clarity is the thousands of unregistered crypto securities.
Yellen also testified before the Senate Banking Committee and had some interesting things to say about the current inflation picture.
When asked about the rise in prices of necessities like food and gas, Yellen admitted that she does not expect prices to come back down to pre-pandemic levels but said this wasn’t a big concern. She said, "We don’t have to get prices down because wages are going up.” Despite the rapid price increases, she even argued that the average American is better off today than in 2019.
This led to a contentious exchange between Senator John Kennedy from Louisiana:
When you look at the data, the facts don’t hold up for Yellen. Real average hourly earnings were negative for 25 months straight as inflation raged. The metric only recently went positive in May 2023 as inflation fell:
This means that worker wages continuously lost purchasing power for more than two years. They will never get this purchasing power back.
And although the CPI has come down, inflation still remains uncomfortably high for too many. January CPI came in at 3.1 percent year-over-year, well above market expectations and still above the Fed’s 2 percent target. Prices are still increasing, just at a slower rate than before.
Biden Administration Calls Out Shrinkflation:
Speaking of affordability – let’s turn now to the video President Biden posted on X on Superbowl Sunday about “shrinkflation” and how upset he was that it’s happening to his favorite snacks:
I’m sure you’ve felt this yourself at the grocery store. The paper towel rolls feel smaller, the bag of potato chips has more air and fewer chips in it, and you swear that toothpaste used to be bigger a year ago.
This isn’t your imagination; this is shrinkflation – when a company reduces the size or quantity of a product while maintaining or increasing its price. Shrinkflation is one of the most insidious of all types of inflation because it’s difficult to track and occurs gradually, often going unnoticed by the consumer until years later.
The problem with the Biden video is that instead of blaming the inflationary fiscal policies of bureaucrats, he blames ‘greedy companies’ trying to exploit the consumer. The reality is companies typically engage in shrinkflation primarily as a strategy to cope with rising costs without directly increasing the product’s price.
The real culprit to the broad rise in prices is the government running multi-trillion dollar deficits and debasing the currency, which leads to companies engaging in tactics like shrinkflation to avoid raising prices.
As my friend Jeff Booth said in response to the video:
The beauty of Bitcoin is that it’s impossible for someone to “pull off a fast one” and shrink the value of my savings little by little. Because of this, I can sleep easy knowing the value of money is preserved over the long term.
They can shrink the value of fiat and the products, but they can’t shrink the value of my Bitcoin.
MicroStrategy Evolves Into Bitcoin Development Company:
To wrap up, an exciting announcement came from MicroStrategy last week: it announced plans to become the first Bitcoin Development Company.
MicroStrategy Executive Chairman Michael Saylor said that MicroStrategy will do everything it can to grow the Bitcoin network through strategies like “Bitcoin advocacy initiatives” and “software development related to Bitcoin, Lightning, Cloud, and AI.”
Given that MicroStrategy owns 190,000 bitcoins, it makes sense that it would start to use its resources to help support the Bitcoin network itself. The more development in the ecosystem that occurs, the more applications come to market, the more robust the Bitcoin industry and network becomes, and the more likely that MicroStrategy’s investment will continue to rise in value.
This is hugely bullish, a Fortune 500 company announcing plans to develop software for Bitcoin and Lightning is great. I have a feeling that MicroStrategy will be the first of many tech companies that will allocate resources to supporting and growing the Bitcoin network.
Until next week, keep stacking.
- N₿
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