2024.16 - Half

IMHO

In the early hours of 4/20/2024 (UTC time), Bitcoin celebrated its 4th Halving, officially entering its 5th Epoch.

It's always interesting to compare the state of the network between halvings. The obvious comparison may be price —BTC was trading around $8.7k on the previous halving May 20, 2020— but there's also tons of other interesting metrics to compare like hashpower, transaction volume, daily throughput value, etc.

Here's a snapshot of the state of Bitcoin at the moment of this halving:

What IS a halving?

I've read so many ludicrous bad takes on this, it's worth taking a moment to explain:

1. New bitcoins are produced at a pre-determined rate each time a new block is minted. The miner who mints the block receives these new bitcoins (usually known as the block reward or subsidy) plus all the fees associated with the transactions in the new block.
2. The amount of new bitcoins created with each block is adjusted every 210,000 blocks (which comes out to roughly 4 years), we call this event a halving.
3. It's called a "halving" because the amount of new bitcoins issued with new blocks is cut in half.
4. In the beginning the Bitcoin protocol rewarded miners with 50 Bitcoin each block. In 2012 that was cut to 25. In 2016 to 12.5. In 2020 to 6.25 and now we have entered into the 3.125 per block era.

"So the miners are now rewarded with LESS Bitcoin for their efforts?"
YES

"And you celebrate this?"
YES

"WHY?"
Two main reasons:

• The first is celebrating the proper functioning of BTC's mechanical, virtually immutable monetary policy. This monetary policy is one of the cornerstones of BTC's value. If it were easy to change BTC would be another shitcoin.
• The second is that historically, the halving has triggered BTC's NGU ("Number Go Up") engines. IF history rhymes (a big if) BTC should close the year between $100-$200k.

The natural way to think about why halvings have pushed price up in the past goes something like this:

"During the past epoch, miners earned roughly 900 BTC per day in aggregate (which would come to $29M if we use a $32.2k average price). They need to sell some of that BTC to pay for their fiat costs (mostly energy).

After the halving, their fiat costs don't change, so they'll naturally need to sell at a a higher BTC price in order to offset their overhead costs, ie they'll HODL harder."

But isn't it "priced in"?

This has been the question with halvings for a few cycles now. There are largely There are three main camps of thought here.

The First Camp:

• The Efficient Market —"everyone knows about it so, of course it's priced in"— camp. Which assumes future demand is predictable and participants are not retarded understand what a halving is.

To them, I submit the following tweet from a dude with over 100k followers who claims to have made a fortune in memecoins:

The Second Camp (I'm here):

• The "it's impossible to price in an overnight doubling of marginal production cost" camp. Which is another way of saying "the halving may be proced in, but the effects of the halving can't be priced in"

The Third Camp:

• The "daily sell-pressure from miners is small compared to BTC's total trading volume, making the halving irrelevant" camp.

Considering the brutal amount of energy (which can be inferred by the mining difficulty level) being expended by miners , I think saying an event which essentially halves the productivity of their fiat overhead is "irrelevant" is flat out wrong. Let's revisit in December

The Larger Point

Setting NGU discussions aside, the importance of a credible monetary policy cannot be understated. The lack of one has been the downfall of many an empire.

At a personal level, the debasement of money is nothing less than the theft of our life's work. More often than not, our savings are trapped in the jurisdiction we are born and subject to the monetary (mis)management of the government in turn.

People try to get around these monetary traps in creative ways, but often fail.

I'm with Hunter Horsley on this one. Don't overthink it. The halving is very bullish. Just have a little patience

Bitcoin News

Hot Sauce

The ETFs are doing just fine, thank you very much. Grayscale continues to see outflows and the rest continue to see net inflows.

Some disclosures have started to flow in, giving us a fitst look into who's buying these ETFs. So far we're seeing a lot of the "Hot Sauce" approach, firms adding a dash (often less than 1%) to their portfolios.

Mental Seal

If you've been following for a while you may get a sense that Dave is here to teach the world a big lesson on Bitcoin. He could have easily added a few million a few years ago, instead he's made every wrong call in the book. All because he's not willing to put in the work and actually understand BTC

I'm not saying its easy, the number of subjects you could use as a prism to understand Bitcoin can be daunting

But you don't need 5 PhDs, you simply need to apply yourself.

Building

There used to be a lot of noise around VCs and "crypto" mostly wild, short-term speculation looking for a quick payout. BTC VCs are different. They have to be. Longer time-frames, stronger fundamentals. Lynne is the perfect guide to dive into what's happening in that space.

WTIMF?

The IMF published a rather surprising (non-disparaging) working paper around Bitcoin and cross-border flows.

1. Bitcoin is increasingly used as a hedge against risk
2. Bitcoin is used as freedom money in autocratic regimes|
3. Bitcoin’s biggest use case is the global south to protect against currency debasement and financial instability
— Daniel Batten

Curioser

Last week we mentioned a single custodian controls the addresses that hold the rewards for 9 different pools. It turns out many pools are trying to mine the exact same blocks too —as opposed to each running their own block templates.

This is worrysome. Whether its the result of laziness or of centralization is irrelevant. Ocean Mining pool is the only pool offering hashers a choice of different templates (as well as payments directly from the coinbase). I hope more pools follow their lead, or more hashers switch to Ocean.

Krypto News

"Crypto" can be lethal to your portfolio

RUiNED

Runes, a new "shitcoin-on-top-of-Bitcoin" launched with the halving block.

I won't go into the details of runes because it's a scam and you should stay away from it. But the one good thing about it is that in the mania of the launch they sent fees into the stratosphere (it'll pass).

How "crazy" did fees get? Absolutely insane.

There had never been a time where fees surpassed the block reward by such a wide margin. This won't last, but godspeed to the miners.

Oh, hilariously, a lot of those expensive fees were for naught. It's like an auction where if you don't win you still lose the money.

High fees create some real and obvious inconveniences, things are already starting to calm down, I hope we'll be back to normal soon.

Fiat News

Rubicon. Crossed.

The decision to freeze the assets of Russia's Central Bank was already a significant blow to the USD as an international reserve asset. Now they have decided to seize those assets and use them to fund Ukraine.

This is a blatant weaponization of the USD will make all nations think think long and hard about where to store its reserves going forward.

The USD is a new beast from this day forward.

Stranger Things

I don't have the exact quote but a famous investor said something like:

"When long-standing correlations cease to exist, it mean the rules have changed somewhere" —Famous Investor ;-)

My candidate for the biggest driver of all this strangeness is something even the IMF is saying out loud now: US GDP is being driven by unsustainable levels of debt.

Mind the Gap

The disproportionate rise in "Household Net Worth" vs. "US Median Wage" simply means an acceleration of the rate at which asset owners are getting richer while wage earners are getting poorer.

Das Angst

It's interesting to see Germany —the strongest economy in Europe— has citizens whose median wealth ($66.7k) is well below that of their EU bretheren.

Dystopian News

Bigger Brother

The government can spy on you lawfully now. Yay.

"The provision effectively grants the NSA access to the communications equipment of almost any U.S. business, plus huge numbers of organizations and individuals."

Plunder

How does the world's most indebted country find the largesse to fund wars on the other side of the world?

mAIverick

Drone fighter jets, whar could possibly go wrong?

Price News

Bitcoin Surfing

Bitcoin has not been able to climb back on The Board ($67.8k) and I don't think it will this coming week (chart gods must be appeased with a red April candle), plus "slow summer" is coming.

Dip Fishing

I was too shy to suggest placing on order around $60k last week, I won't repeat the same mistake this week. If I were fishing for dips, I'd place orders around $62.5k and a hail mary close to $60k.

Calm Chart

The April red candle seems to be holding, I'll bet it will last through the month. Historically, this (immediately post-halving) has been a good moment to stack hard. Pluse bear in mind, summers are usually the doldrums for BTC, so we could have several "sideways months"