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17th August 2023 > > The ECB and Glassnode.


tl;dr

The ECB makes another monumental mistake to add to its collection. Glassnode challenges some of the CCC team’s assumptions.


Market Snap








Market Wrap

Concerns over the direction of interest rates hit all risk assets, concerns that are overblown. Central Banks are always late to the party, and their current actions add to potential recession woes. Quantitative easing will be back before you know it.


Macro worries aside, we are at a critical juncture in the short-term prospects for the price of BTC, for reasons grounded in facts and reality, not some techie nonsense.


Occasional Series – The ECB (European Central Bank)

It is very rare for perma-tanned Convicted Criminal Christine Lagarde, head of the ECB, and I to agree about anything at all.


And that is not about to change.


Last week, along with her horribly mistimed increase in the base rate for the eurozone, the ECB stated that it would no longer pay interest on reserves held at the ECB by commercial banks. This was followed by the Bundesbank stating it will no longer pay interest on money held by the German government at the central bank. It is possible that the ECB will decide to cancel interest rate payments on the debt that eurozone governments have sold to their own central banks.


This may seem arcane to you, but make no mistake, this is a default by the ECB, and by national central banks, and potentially by all EU sovereign states. Quantitative easing was one of the two greatest policy mistakes of our times (lockdown in any shape or form being the other one), and this ripping up of commercial liabilities incurred by the ECB and during the execution of QE will echo down the ages.


Lagarde does not understand the extent and depth of the problems she has just caused.


On the upside, this lackadaisical approach to legal and moral obligations shows the futility and frailty of a eurozone CBDC, simply reinforcing the desperate need the world has for a truly decentralised financial system embodied by the ethos and philosophy of Bitcoin.


We have front row seats to the greatest technological revolution of all time. Just how exciting is that?


Curious Cryptos’ Commentary – Glassnode

Glassnode’s latest report suggests that we might be in for a period of BTC price weakness (https://insights.glassnode.com/the-week-onchain-week-33-2023/).


The cost base for LTH (long-term holders) sits at $20.3k whilst that for STH (short-term holders) sits at $28.6k:











Some short-term coins are destined to become long-term coins (almost all purchases made by the CCC Treasury for example) but some can be assumed to be speculative in nature. These weak hands have a low tolerance for unrealised losses. Now that we are at the point where STH are collectively moving into a loss, weak hand sellers into price weakness is to be expected. It’s that old buy high, sell low game, which I don’t believe to be a sustainable strategy over any long period of time.


Total supply owned by LTH continues to increase, now sitting at 14.6mm BTC, whilst STH are at a multi-year low of 2.56mm BTC:











Glassnode comments:


“Overall, this suggests that conviction of Bitcoin investors does remain impressively high, and very few are willing to liquidate their holdings.”


This got me thinking about the next halving again, predicted to be on April 25th 2023, at 11:25:15 UTC.


The CCC has so far taken a contrarian stance to every single other commentator out there. Past halvings have been associated with bull-runs and new ATHs for the price of BTC. But I cannot help but feel uncomfortable when such a large cohort all jump to the same price conclusion. My initial reaction is that with each halving, the impact on supply reduces by 50% each time. That is why it is called the halving. The impact of each halving on the price must become less influential over time.


But it seems that increasingly BTC is moving into diamond hands. Miners continue selling, the US government continues to sell its Silk Road stash, insolvency proceedings (e.g. Mt. Gox, Voyager, and soon FTX) continue to liquidate cryptos assets to pay off creditors, but most of this supply is ending up in the LTH part of the ledger.


To some extent this might be explained by what many perceive to be a weakness in BTC – a lack of utility compared to say smart contracts on Ethereum. And those critics do have a point. But one must never forget that gold has few applications in industry, and its adoption by jewellers is driven by customers’ desire for a public display of owning wealth, rather than any superiority in ease of use.


So, though for now, I am sticking to my plan for my trading stash (as opposed to my investment stash) that the halving will be to sell the rumour, buy the news, my conviction is lessened by this latest Glassnode report.

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