Bitcoin News Roundup: September 6th, 2023
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Greetings and salutations my fellow plebs. My name is Walker and this is THE Bitcoin Podcast.
It’s Wednesday, September 6th, 2023. At the time of recording, the Bitcoin block height is 806,503 and the value of one Bitcoin is still one Bitcoin.
Today’s episode is the Bitcoin News Roundup. I’m going to go over the big stories, run through a few rapid fire news, then zoom out and give you some perspective…
You can find all the links and accounts mentioned in this episode via the article version of this show, linked in the show notes, or by going to bitcoinpodcast.net/words
I’d like to thank everyone who has listened and subscribed to THE Bitcoin Podcast, because I just passed 10,000 audio downloads of the show, with people listening in from all over the world.
Before I get started on the news roundup, I wanted to let you know I’ve started recording Bitcoin Talk episodes of THE Bitcoin Podcast. You can watch the full video interviews at BitcoinPodcast.net, on Twitter @WalkerAmerica, YouTube.com/@WalkerAmerica or @WalkerAmerica on Rumble…
And of course you can always listen to these episodes wherever you get your podcasts. Last week I released my discussion with Jeff Booth, and soon I’ll be releasing my talk with Preston Pysh.
Without further ado, let’s get into the Bitcoin News Roundup.
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FAS-B is for Bitcoin
Earlier today, Bloomberg Tax reported “Long-Awaited Bitcoin Accounting Rules to Capture Rises, Dips: Under new rules expected to be published by year end, companies that hold or invest in cryptocurrency will be required to report their holdings at fair value, a measurement that aims to capture the most up-to-date value of an asset—including rebounds in value after prices dip.”
FASB stands for Financial Accounting Standards Board. It’s a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles within the United States in the public's interest.
Via Bitcoin Archive: “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. This is HUGE! 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 the gains when the price recovered.”
James Lavish has a great thread breaking down the previous rules that were applied to Bitcoin, and I’ll link it in the article, but here is an illustrative example from James:
A public company uses some extra cash to buy $1M of Bitcoin, and lists the holding as a Digital Asset on its balance sheet, worth $1M
Then the Bitcoin price rises 20%
In its financials, the company cannot recognize this increase and must maintain Bitcoin at $1M.
Then, let’s say that Bitcoin falls 50%, and is now worth 60% of where the company bought it
In its financials, the company must recognize this decrease as an impairment in value and list its Bitcoin holdings at $600K, with a $400K loss.
Even if Bitcoin then trades back up, $600K would remain the carrying value for the company’s balance sheet going forward
The only way to recognize price recovery is to sell the Bitcoin and trigger a *capital gain*
This is exactly what happened to MicroStrategy.
Speaking of MicroStrategy… Michael Saylor, Chairman of MicroStrategy, responded to the news saying:
“Fair value accounting is coming to #Bitcoin. This upgrade to FASB accounting rules eliminates a major impediment to corporate adoption of $BTC as a treasury asset.”
The Fair value accounting rules kick in starting in 2025, and I suspect we’re going to see a lot of forward-thinking companies follow MicroStrategy’s lead and put Bitcoin on the balance sheet.
Grayscale Pump
On Tuesday August 29th, Bitcoin enjoyed a nice little green candle. After starting the day in the high 25 thousand range, it pumped up above $28,000 before settling back today into the low $27,000 range. A week later, we’re back in the high 25 thousand range, so all’s fair in love and Bitcoin.
But what caused this price action and prompted a plethora of fleeting green candle memes?
Well, Grayscale, which operates GBTC (the Grayscale Bitcoin Trust) previously filed with the SEC to convert their Bitcoin trust into a spot Bitcoin ETF, but were rejected. Grayscale then sued the SEC and yesterday, the court released its ruling on the case.
Via Bitcoin Archive: The Court ruled against the SEC's rejection of a Bitcoin ETF, saying: "The denial of Grayscale's proposal was arbitrary and capricious...because the commission failed to explain its different treatment for similar products."
Understandably, people were very excited about this, and by the fact that Bitcoin enjoyed a nice pump on the news, as it seems we’re one step closer to seeing a spot Bitcoin ETF approved, with the SEC running out of excuses to reject applications.
Via CNBC: First Bitcoin ETF could be coming soon as court rules in favor of Grayscale over SEC… The U.S. Court of Appeals for the D.C. Circuit has paved the way for Bitcoin exchange-traded funds
As I and countless others have said ad nauseum: it’s not a matter of IF, but of WHEN a spot Bitcoin ETF is approved. And maybe that when is going to be a bit sooner rather than later thanks to this ruling.
Here’s some added context on the situation as it relates to Grayscale specifically, courtesy of Dylan LeClair:
Don't forget how large $GBTC is. They hold >600k BTC, and was the single largest driver of the 2021 bull run from a flows standpoint.
Today's discount move from -26% to -17% is the equivalent of 56,000 BTC returning to the AUM of $GBTC if shares are marked to market.
Last point on $GBTC for now,
Ignore what Grayscale says, their interest is the status quo; no ETF approvals & continue milking a 2% fee on 600k BTC.
ETF approvals would mean either:
1) Fee dropping by 75% to 0.50%
2) Massive outflows from trust
Either way, revenue collapses.
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Grayscale loses from a BTC denominated revenue perspective unless their AUM balloons at least 4x (assuming 50bp fee) - not gonna happen, already holds 3% of BTC supply.
BlackRock, Fidelity, etc. all want their share - management fee will be a race towards 0% to consolidate AUM.
Zooming out from the technical side a bit, while I love to see the SEC get schooled in court, and this decision is certainly worth celebrating, it’s also worth putting in perspective, which is exactly what Edward Snowden did on Nostr. Here’s what he said:
I know everybody's excited about the SEC losing in court, and it is indeed an important victory, but it's worth bearing in mind that Gensler knew he was acting outside the law long before the verdict. The largest institutions care less about what is legal than what they can get away with.
Given how long it takes the courts to rule, it is a reminder that in the context of the government's own misconduct, there are limits to the utility of law.
Security Budget Groundhog Day
As the Bitcoin price continues to crab walk sideways, it seems like everyone is coming out of the woodwork to debate Bitcoin’s “security budget problem.”
Now, it is my humble opinion that Bitcoin does not have a security budget problem. Bitcoin is repricing the entire world around us, and that’s extremely difficult for most people–even many Bitcoiners–to understand. Jeff Booth breaks this down beautifully in the Bitcoin Talk we had together – I recommend you check it out.
But instead of me talking more about the “security budget problem” right now I’m going to read you a note Lyn Alden shared today on Nostr, which summarizes the situation in a way only Lyn can. Here it is:
“We should change Bitcoin now in a contentious way to fix the security budget” is basically the same tinkering mentality that central bankers have.
It begins with an overconfident assumption that they know fees won’t be sufficient in the future and that a certain “fix” is going to generate more fees. But some “fixes” could even backfire and create less fees, or introduce bugs, or damage the incentive structure.
The Bitcoin fee market a couple decades out will primarily be a function of adoption or lack thereof. In a world of eight billion people, only a couple hundred million can do an on chain transaction per year, or a bit more with maximal batching. The number of people who could do a monthly transaction is 1/12th of that number. In order to be concerned that Bitcoin fees will be too low to prevent censorship in the future, we have to start with the assumption that not many people use Bitcoin decades out.
Fedwire has about 100x the gross volume that Bitcoin currently does, with a similar number of transactions. What will Bitcoin’s fee market be if volumes go up 5x or 10x, let alone 50x or 100x? Who wants to raise their hand with a confident model of what Bitcoin volumes will be in 2040?
What will someone pay to send a ten million dollar equivalent on chain settlement internationally? $100 in fees per million dollar settlement transaction would be .01%. $300 to get it in a quicker block would be 0.03%. That type of environment can generate tens of billions of dollars of fees annually. The fees that people pay to ship millions of dollars of gold long distances, or to perform a real estate transaction worth millions of dollars, are extremely high. Even if Bitcoin is a fraction of that, it would be high by today’s standards. And in a world of billions of people, if nobody wants to pay $100 to send a million dollar settlement bearer asset transaction, then that’s a world where not many people use Bitcoin period.
In some months the “security budget” concern trends. In other months, the “fees will be so high that only rich people can transact on chain” concern trends. These are so wildly contradictory and the fact that both are common concerns shows how little we know about the long term future.
I don’t think the fee market can be fixed by gimmicks. Either the network is desirable to use in a couple decades or it’s not. If 3 or 4 decades into Bitcoin’s life it can’t generate significant settlement volumes, and gets easily censored due to low fees, then it’s just not a very desirable network at that point for one reason or another.
Some soft forks like covenants can be thoughtfully considered for scaling and fee density, and it’s good for smart developers to always be thinking about low risk improvements to the network that the node network and miners might have a high consensus positive view toward over time. But trying to rush VC-backed softforks, and using security budget FUD to push them, is pretty disingenuous imo.
Anyway, good morning.
Cambridge Revises Bitcoin Energy Estimates
The Cambridge Centre for Alternative Finance recently revised their Bitcoin energy consumption methodology.
Tl;dr: Cambridge now estimates that Bitcoin uses about 25% less energy than they previously stated.
Why is this important? Because the Cambridge data is frequently used as the go-to resource for academics and less-than-academic critics of Bitcoin’s energy usage.
Here’s a couple of the key points provided by Daniel Batten:
1. CCAF model overestimated by 16.8% in 2021, and 10.2% in 2022. This is in alignment with my previous research where I suggested earlier this year that their model was overestimating by 20.6%
https://batcoinz.com/improving-our-estimate-of-bitcoin-energy-consumption/
2. Clear evidence that GreenpeaceUSA's claim that Bitcoin used "as much energy as Sweden" was incorrect, and was based on CCAF historical overstatements
3. CCAF say explicitly that based on new estimates: Bitcoin energy use is "comparable to ... tumble dryers in the US"
4. CCAF have not yet revised their emissions estimates beyond the direct impact of revised energy consumption.
5. They are still overestimating emissions by 67.6% due to emission intensity calculations that are both overestimated, and out-of-date (have not been updated since Jan 2022). This is an improvement upon the previous estimates which were out 106%
Daniel has a bunch of other points and analysis, which you can access via the article version of this episode linked in the show notes, but I want to round out this segment with a quote from the CCAF report:
…we decided to thoroughly re-examine the ASIC mining hardware distribution generated by our previous CBECI model and cross-check the results against other metrics from publicly available data. We found that more recently released equipment appeared to be underrepresented, and equipment nearing the end of its lifecycle was overrepresented.
…we will explore the consequences of these changes when applied retroactively.
The first and most noticeable discrepancy appears in 2021, where our previous CBECI model estimated an electricity consumption of 104.0 TWh, 15.0 TWh higher than the revised model estimate (89.0 TWh).
The 2022 estimate was adjusted downward by 9.8 TWh, from 105.3 TWh to 95.5 TWh. To put this in perspective, the revised figure is comparable to the electricity consumption of countries like Belgium (83 TWh) or the Netherlands (113 TWh), [31] the energy use of tumble dryers in the US (108 TWh)
Emerging concepts we have yet to consider but could reasonably be expected to lower our emission estimates include the potential to mitigate methane emissions by mining operations collocating next to oil fields and utilising otherwise flared natural gas, [32] using and subsequently sealing orphaned gas wells, [33] and mitigating methane emissions from landfills, [34] but also extend to other novel concepts such as waste-heat recovery. [35]
Drain the Exchanges
On August 31st, the Bitcoin balance on exchanges reached a 5-YEAR LOW of ~2,238,653 Bitcoin, according to data from Glassnode.
This suggests that people are truly listening to the endless urging of “toxic” Bitcoin Maximalists to “get your Bitcoin off exchanges!”
It’s important to point out that data like this is not perfectly accurate. It may not reflect the totality of Bitcoin on exchanges–maybe some exchanges aren’t counted in this number from Glassnode–so the actual number may be slightly different.
But what matters in my opinion is not the raw number of Bitcoin on the exchanges, but the trend. Over the last five years, even though new Bitcoin are issued every 10 minutes of every single day, the balance on exchanges is lower than it was five years ago. That means more Bitcoin is off exchanges and in self-custody than five years ago. That’s a good thing, especially as we see massive institutional whales like BlackRock coming onto the scene, ready to gobble up Bitcoin and “keep it safe for you.”
Miss El Salvador Orange Pills Miss Universe
Miss El Savador (AKA Miss Bitcoin) Alejandra Guajardo posted a photo on Twitter and Nostr last week, saying:
Here I am trying to orange pill Miss Universe @rbonneynola @missuniverse and Miss Aruba @kkarendsx. What would you like these beautiful and influential ladies to know about #Bitcoin?
Some of the people who responded to her posts made the suggestion to set the Miss Universes up with lightning wallets, and to post their Lightning Addresses so people could send sats and show them the power of the Bitcoin Lightning Network.
Over the next few days, Alejandra posted multiple videos with the ladies, showing them setting up Wallet of Satoshi, and later posted Miss Aruba’s Lightning Address and Miss Universe’s Lightning Address.
The next obvious step will be to get the Miss Universes set up on Nostr as well, where they can receive sats on anything they post.
I’m sharing this story because I think it’s amazing to see the ladies of Miss Universe interacting with Bitcoin on social media for all to see. As Neil Jacobs pointed out, Bitcoin isn’t just “nerd money” anymore. Like all great technological advances, it would never have begun without passionate nerds, but now Bitcoin is for anyone who is open to learning. You don’t need to be a technical expert to interact with Bitcoin; it’s as easy as downloading an app.
Not only that, but Bitcoin might be the first real chance at bringing about “World Peace,” and I know that’s something the Miss Universe crowd can get behind.
Shoutout to Miss El Salvador for being a wonderful ambassador for both Bitcoin and her beautiful country.
Rapid Fire News
Via Bitcoin Archive: Oman’s Minister of IT and Communications inaugurated the launch of project with 200MW of #Bitcoin mining.
Via Glassnode: Amount of HODLed or Lost Coins just reached a 5-year high of 7,854,417.274 Bitcoin
Via Forbes: Nansen pointed to on-chain data that showed some 90% of (PayPal’s) PYUSD is currently held in wallets controlled by the PYUSD issuer Paxos, with holdings on crypto exchanges accounting for 7% of the total supply and only 3% held by traders.
Via Glassnode: Number of Bitcoin Addresses Holding 1+ Coins just reached an ATH of 1,019,117
Via Riot Platforms: Riot Produces 333 Bitcoin While Realizing Expanded Benefits of Power Strategy.
“August was a landmark month for Riot in showcasing the benefits of our unique power strategy,” said @JasonLes_, CEO of Riot. “Riot achieved a new monthly record for Power and Demand Response Credits, totaling $31.7 million in August, which surpassed the total amount of all Credits received in 2022”.
Via Glassnode: Number of Addresses Holding 0.01+ Coins just reached an ATH of 12,349,387
And via Bitcoin Archive citing Max Demarco’s documentary featuring Mi Primer Bitcoin: El Salvador to add #Bitcoin education to ALL public schools next year!
Zoom Out
To wrap up today’s show, let’s zoom out, and talk about the passage of time and time preference…
In April 2024, Bitcoin will undergo another scheduled Halving, where the amount of Bitcoin issued per block is cut in half from 6.25 Bitcoin to 3.125 Bitcoin. In the current cycle, the total amount of Bitcoin issued will be 1,312,500. In the next cycle, starting in April 2024 and ending around four years later, the total amount of Bitcoin issued will be half that, 656,250. In the cycle after that, only 328,125 Bitcoin will be issued, and so on until the maximum supply of 21 million Bitcoin has been issued, around the year 2140.
Now, 2140 sounds like a long ways away, and it is. Most of us will likely be dead by then unless we figure out some wild anti-aging remedy that doesn’t involve using children as blood bags, because that’s just fucked up.
But while 2140 is a long ways away, 2036 is not far away at all… On September 6, 2023, we are closer to the start of 2036 than we are to March, 2010, which is when Bitcoin first started trading on exchanges.
After the 2036 halving, the Bitcoin block reward will be 0.390625 Bitcoin per block, and the Bitcoin issued in that cycle will be: 82,031.25 BTC (0.390625 BTC x 210,000 blocks).
In the fiat world and the crypto world, people are constantly trying to convince you to think short-term. To have a high-time preference. It’s usually in an effort to catastrophize a situation and make you act impulsively, either to pursue pleasure or avoid pain.
Anyone who tries to force you to pursue a particular course of action by pushing false urgency upon you likely does not have your best interests at heart, and is certainly not thinking long-term.
So today, I just want to remind you to take a deep breath and zoom out. Remember that you will die... But you’re probably not going to die today… So stack some sats, then go outside, get some sunlight and touch some grass. You’ll be OK.
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And that’s a wrap on this week’s Bitcoin News Roundup.
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