Bitcoin Miners Are Selling. But Not For Profits.

Welcome to BRC’s Breakdown.

We started last week’s newsletter saying – December is a slow month for the markets. But the markets proved us wrong. Especially, Indian equities and crypto markets, which are ending the year on the high and in the green.

Here’s a preview of what we’ll cover:

• Macro: Crypto Rises, as Bond Yields and Crude Oil Falter

• Around The World: RBI Keeps Repo Rate Unchanged

• Crypto: Miners are selling BTC for 2 reasons

• AI: Dancing TikTokers are being replaced by AI

Macro: Crypto Rises, as Bond Yields and Crude Oil Falter

Crypto was the star asset class by a mile- with Bitcoin rising over 11% for the week and Ethereum increasing 9.5%.

In contrast, Gold dropped over 3%. The momentum in crypto continues to build in the run-up to a decision on the US Spot Bitcoin ETF applications - currently expected to be announced during the first half of January.

The bullish sentiment can be seen clearly in funding rates for Bitcoin (and other large-cap crypto tokens) turning significantly positive.

In the US, bond yields declined, especially in the long end, as expectations of a soft landing increased. The decline in bond yields in Europe was more pronounced. US equities continued their strength led by technology stocks. With crude oil & natural gas prices declining sharply, the energy sector was the worst performer in the US.

Total nonfarm payroll employment increased by 199,000 jobs in November, and the unemployment rate edged down to 3.7%. The headline jobs number in the November employment report was at expectations, however, employment for the previous two months was revised down by a combined 35,000 jobs.

Around The World: RBI Keeps Repo Rate Unchanged

Following the BJP’s victory in 3 state elections last weekend, India was the strongest large stock market globally with the NIFTY 50 increasing 3.5% last week. Small & mid caps remained strong but lagged the rally in large caps. The 10-year bond yields in India dropped by 2.5 basis points.

At its meeting on December 8th, the Reserve Bank of India kept the repo rate unchanged at 6.5%. The RBI raised the GDP growth projection for FY24 to 7% from 6.5% earlier on buoyant domestic demand and higher capacity utilization in the manufacturing sector. CPI inflation projected at 5.4% for FY24

Miners are selling BTC for 2 reasons

Miners are the supply part of the Bitcoin value chain. And many of them are selling their Bitcoin at a profit. These are not just regular miners too, they’re early-stage miners.

Just last week, an address that belonged to a miner moved over 1,000 BTC worth $41 million to – trading desks and custody services. The last time these miners moved was back in 2010, less than two years after Bitcoin was created by Satoshi Nakamoto.

This is not a new trend. Over the past few weeks, mining pools and companies sold their Bitcoin to pay for overhead costs. These costs include fixed hardware like mining rigs and processors, as well as recurring costs like electricity. Due to the rising price of BTC, up 150% year-to-date, miners notched a revenue of $44 million in the past 30 days, 2023, an 18-month high.

The reason for this selling is two-fold – profit taking and preparation.

• Profit taking – to take advantage of the rising price of BTC and convert their paper profits to actual dollars.

• Preparation – to upgrade mining equipment and move to countries with lower cost of electricity in anticipation of the halvening

Bitcoin’s halvening is less than a year away and miners are preparing to rise above their competitors. With mining rewards set to decrease by 50%, miners want to earn as much as possible until the halvening. Even after the halvening, they want to sustain top-spots and are selling their BTC to upgrade their equipment.

AI: Dancing TikTokers are being replaced by AI

Alibaba, the Chinese e-commerce company’s researchers worked on the paper for a new AI model called – Animate Anyone. In this model, they want to literally do that – animate people doing things people do. And they’re starting with TikTok dances.

The model has taken scores of raw data in the form of viral TikTok clips of famous creators. It then studied these clips and changed their – clothing, dance styles, music, and appearance.

Although the output currently is not as good as the original creator’s post, it will improve through learning. The concern is – these models can potentially be used to create millions of deepfakes of original creators who have put out content on social media platforms.

Top Headlines Of The Week:

• National security representatives of – the US, Japan, and South Korea – met last week to discuss North Korea’s crypto terrorism

• US broking app Robinhood is expanding its crypto services across the EU

• Fidelity Digital Assets sits down with the SEC to discuss the premise of their spot BTC ETF