Fundamentals Report #141

The energy FUD is strong this week. We break it down and give a positive takeaway. We update price analysis, mining and network status, and Tether.

Fundamentals Report #141

A weekly newsletter summarizing important sectors in bitcoin
by Ansel Lindner and Jeff See

In Case You Missed It...

This week's Bitcoin & Markets content

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Bitcoin in Brief

Weekly price $51,202   (-$6,196 -10.8%)
Market cap $957 billion
Satoshis/$1 USD 1,953
1 finney (1/10,000 btc) $5.02
Median fee confirmed (finneys) $9.47 (1.65)
Market cycle timing Halfway through bull market
Weekly trend Heavy consolidation
Media sentiment Negative
Network traffic Below average
Mining Very strong

Market Commentary

The next big FUD (Fear Uncertainty and Doubt) narrative is being pushed hard right now in bitcoin. It claims (without evidence) that bitcoin is bad for the environment and is a concern for "climate change".

It is a perfect narrative for all the perennial opponents of bitcoin to take advantage of, namely altcoins, establishment lackeys, and even some large companies.

Crypto Climate Accord

The Crypto Climate Accord is inspired by the Paris Climate Agreement. The Accord is a private sector-led initiative for the entire crypto community focused on decarbonizing the cryptocurrency industry in record time.

This is laughable on multiple levels, for starters they use "crypto" to mean bitcoin, but  it is to be expected. So far the Crypto Climate Accord only has two signatories, Argo and DMG mining operations, but there are 40+ "supporters". Important supporters include Consensys (basically Ethereum) and Ripple, two of the large marketing-driven altcoins that have proven successful in forming campaigns which disparage bitcoin and pump their Ponzi schemes.

This Accord is simply a coordinated attack on bitcoin, which is painted as energy inefficient, wasteful, and a source of pollution. None of these criticisms are very compelling when you take a close look. However, the way these schemes work is to create unbacked citation. Now, people wishing to write a hit piece on bitcoin can simply cite something the Crypto Climate Accord members have said, even though it's baseless.

This vapid thinking has even leaked over to companies investing in bitcoin as cash balance diversification like Tesla.

Tesla and Musk

This week, Tesla stopped accepting bitcoin for their vehicles just weeks after beginning. This makes Tesla once again at the center of the bitcoin news cycle. Two weeks ago, Tesla said they sold 10% of their bitcoin holdings to test bitcoin's liquidity, now Elon tweets that they are concerned with bitcoin's carbon footprint.

We suspect Tesla didn't sell very many (if any) vehicles for bitcoin in those few short weeks, which added up to the following thought process. 'If we haven't sold any cars for bitcoin, and certain radical climate activist customers are threatening to drop support over this, why not just stop accepting bitcoin?'

It has to be something like that, because it is completely faulty reasoning as per the environmental impacts, especially about transactions. There is no marginal difference in bitcoin's energy use per transaction. It's a baseless claim in the first place.

Lots has been written in the bitcoin space about this, which we'll explore in a new Climate section in future issues of the Fundamentals Report. We recommend checking out this article by Gigi, Bitcoin's Energy Consumption: A shift in perspective.

Positive takeaway!

Despite all the FUD and climate alarmism currently aimed at bitcoin, the price is relatively unaffected. Where just a couple months ago $50,000 felt high for bitcoin, now it is the new normal. Price has crashed back to $50k after multiple rounds of negative news.

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Quick Price Analysis

Weekly BMI |  2 : Bullish

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Price dramatically sold off back down to our support zone we have included for many weeks. Several indicators and oscillators are of interest as well. As the price dipped to a lower low (although daily candle closes were effectively even) the RSI was divergent with a higher low, as well as the MACD with a higher low. When these two happen together the signal is stronger, both are pointing to a reversal.

Many people will point to Elon and Tesla's tweets recently as the cause for this dip. While that appears to the exact thing that instigated the sell off, it did not "cause" the sell off. The conditions were already present. In other words, conditions were looking for an excuse to sell off and test support again. Bulls had failed to buy enough of the available supply and the Tesla tweet sparked the selling.

We must note that volume was lower on this sell off, and has been declining. This means the selling is slowing and becoming exhausted. Supply restrictions build-up with time and result in a surge in price several months later. We see this pattern everytime, especially with things like the halvings.

Overall, people new to bitcoin might think the volatility is hard to handle, but this is how price discovery works. You have to have the stomach for the volatility and FUD to get 10x gains.


Taproot Signaling

Probably not this period, on target to be over 50%, but Taproot activation is getting closer to a reality.


The miners put in a lot of work this last week, confirming all the transactions with a fee of 2 sats/b or more, leaving approximately 50mbs worth of transactions with 1 sats/b in the mempool.

Source: Mempool.Space

Miner Profitability

Yesterday, difficulty adjusted up over 21.5% (!), indicating the hashrate that went offline due to power issues in China is back online. Once again, calls for a mining death spiral and the China-controls-bitcoin-mining FUD were totally wrong.

The difficulty is at an ATH despite the ongoing micro-processing chip shortage that is affecting nearly every industry in the world, not just bitcoin. The chip shortage limits the ability for miners to expand their operations by adding more hashrate and as price and profits rise, we should expect them to hold onto more of their profits. This is exactly what glassnode shows in the chart below where they track miner's onchain behavior. Miners holding is yet one more source of supply restriction for the next leg up in price.

Source: Glassnode's The Week On-Chain article

Stablecoins/ Altcoins / CBDC

Tether released the much awaited Reserves Breakdown recently. As a reminder, the Tether FUD is that they are fractional reserve and printing money to pump the price of bitcoin. What we see Tether's supply is fully backed, but with different assets.

Source: Tether

We've said for years that it would be smart of Tether to diversify their reserves to protect them from seizure and increase their liquidity. If governments wanted to freeze Tether reserves it would be trivial if held in cash. However, if it is cash equivalents it can be more securely held and moved.

There is much we can learn from this breakdown as well, but we haven't had the opportunity to do that analysis just yet. Bottom line is Tether is fully backed and the FUD is once again wrong. A small caveat to perhaps add yet further fuel for the fire of this controversy is that this result hasn't been verified by a third party yet. We'll keep you posted as always.


Bitcoin doesn't need a marketing department because it already incentivizes individuals to spread the meme once they've joined the network. Ed Carpenter, an Indy car driver-owner, decided to give bitcoiners an opportunity to fund his #21 car at the Indy 500, one of the biggest motor races in the world. The car features a QR code containing the address for people send donations to; 70% of which will be donated to open source projects with a focus on privacy in bitcoin. Ed is also allowing his employees to be directly paid in bitcoin!

We suspect Ed is in for a hell of a ride as bitcoiners tend to support these types of efforts. Based on the attention his car receives, other drivers may decide to try a similar model using bitcoin, reshaping how athletes fund and monetize their operations. Full article here.

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May 14, 2021  |  Issue #141  |  Block 683,602  |  Disclaimer

Meme by @no_problama