Transcript 0:00 [upbeat music] Welcome back to Bitcoin Season Two. I'm Charlie Spears. 0:16 Bitcoin Season Two is about new faces and new topics on the oldest blockchain, Bitcoin. 0:21 We do episodes live stream, like today, uh, on Mondays, a VOD normal podcast episode on Wednesdays, and on Fridays, we have writers' room where Colin and I talk about interesting topics. 0:35 We shoot the shit about stuff in Bitcoin. But right now, Bitcoin is screaming. We are up over a hundred thousand. In fact, I'm gonna look at my chart. Holy smokes. 0:44 Hundred seven, closing at a hundred and eight thousand dollars on this beautiful Monday morning. But what is happening? Because right now the price is up. 0:55 At this point in historical bull markets, we should be seeing crazy amounts of on-chain activity, and yet we see on-chain activity on Bitcoin, uh, at very, very negligible compared to where it was a year ago this time. 1:11 Then now that we have a Bitcoin ecosystem of assets on top of Bitcoin, we're not seeing a whole lot of activity in those markets either. 1:19 In fact, a lot of these secondary markets for Bitcoin-denominated assets like ordinals and runes, are down in Bitcoin terms. Where is this coming from? Stay tuned, and I'll get into it. 1:33 Bitcoin Season Two is brought to you by Botanix. 1:36 Botanix Labs is pioneering a new direction for DeFi with the first EVM L2 running on Bitcoin that's built to be forward secure, decentralized, and share gas fees generated by the network with users. 1:49 See the future of DeFi at Botanix. botanixlabs.xyz. Yeah. So if you're listening to this, I'm, I'ma apologize. This is gonna be a very visual and charts-heavy episode. 2:01 I'll try to describe what I'm looking at, but I'm gonna be pulling out a lot of the charts. 2:05 Every live stream, every Monday, one of these like roundup things, I usually hit the metrics, and I talk about interesting things that I'm seeing. 2:14 I'll usually pull up a few Dune dashboards, the Genie data dashboards, but today is a very dashboard-centric episode. 2:22 Um, so again, as I said, Bitcoin a hundred thousand dollars now, strongly above that at 107K, and yet the numbers of stuff in Bitcoin are not that impressive comparatively. Think about this. 2:36 We are forty to fifty percent over our previous all-time high of sixty-eight, sixty-nine thousand dollars per Bitcoin. 2:44 Um, historically, we should see the markets roaring, uh, for Bitcoin ecosystem-type behavior, yet here we are. Let's sk- Let's start out by looking at the Bitcoin dominance chart. 2:58 If you're not familiar, Bitcoin dominance is basically take the overall market capitalization of all other cryptocurrencies, and we say we're gonna chart how Bitcoin compares stacked up to all the other crypto combined. 3:12 And what we saw was, 3:14 zooming really far out, basically 2017 here, um, we saw Ethereum pop up onto the scene, and it created this like explosion of different other L1s and other types of, um, uh, fungible tokens in the crypto ecosystem. 3:31 And so Bitcoin as a share of overall, um, overall crypto market cap plummeted from ninety-five percent down to thirty-five percent as an all-time low in 2018. 3:46 Then as the entire crypto market pulled back, Bitcoin inched upwards, hitting a most recent high of seventy-four percent dominance across the entire crypto ecosystem in '19. That was the bottom of that market. 3:59 Then we saw last cycle, '20 through '22, um, 4:04 other layer ones like Solana and yes, Cardano and, uh, whatever have you come in and, uh, eat away at Bitcoin's market dominance, hitting a bottom of thirty-seven percent back in Sept- uh, September of 2022. 4:20 But since then, we have seen two full years of Bitcoin's dominance across the entire crypto market cap, uh, grind upwards in the most like steady grind upwards, following this line. 4:32 Again, I'm not doing TI, I'm just drawing this line just to show you. So now we are at sixty percent or so. 4:38 Right now we're down a little bit to fifty-seven percent, and that just tells the story of the energy coming back into the Bitcoin ecosystem when, um, historically, we would see, uh, by this time in the mark- i- in the market, in a bull market, we would see Bitcoin's dominance begin to decline, yet it continues to inch upwards. 4:58 We wrote a piece on this back in, um, uh, back, uh, last week on, um, Bitcoin's dominance, where I basically made the point that, 5:14 um, dominance may not fully even tell the whole story because this doesn't take into account other, um, Bitcoin demand, um, specifically like MicroStrategy. Um, let me pull up the chart. Um, uh, 5:32 something like MicroStrategy, where here we have MicroStrategy actually carries a premium over its Bitcoin denomination, a premium of about two and a half multi- two and a half times the value of Bitcoin on its balance sheet. 5:46 And just accounting for that would add a m-- about point seven percent, or you might say, uh, seven hundred seventy basis, seventy basis points, five hundred basis points, whatever. 5:59 Seven per-- point seven percent to the overall, uh, Bitcoin dominance. And, uh, so there's like we have these other demand for Bitcoin assets and, and also Bitcoin dominance takes into account, um, [lip smacks] 6:11 a stable coin. So do we consider, do we think stable coin should be a part of this dominance indicator? I think they're less useful than they used to be. So, um, all eyes on that. 6:23 So with the context of Bitcoin dominance rising, Bitcoin at a hundred and seven, almost a hundred and eight thousand dollars now, why is on-chain activity low? Here's mempool.space. 6:36 Right now, transaction fees are seven to eleven sats per vbyte, which means it's gonna be like between one dollar and one fifty, uh, US- USD to send a normal transaction to be included in the next one or two blocks. 6:50 So, um, historically, we've seen, uh, by the time we're at, uh, two times over Bitcoin's previous all-time high, we've seen, um, these numbers be much higher. Like, look at this. 7:04 I mean, twenty twenty-one, um, when Bitcoin was three times over its all-time high at sixty some odd thousand dollars in early twenty twenty-one, we saw fees at, um, eighty to ninety sats per vbyte. 7:18 Given that we're only at, say, fifty percent over the previous all-time high, that would be, say, January, and that's looking at, um, about, uh, double where the current fee rates are today. 7:32 And, uh, this is interesting because, like, theoretically, we would expect Bitcoin on a long timeline to have, uh, more fees, uh, on average each cy- each cycle as Bitcoin transitions to more of a fee-based mining revenue model. 7:50 Yet this is still kind of not-- Right now, it doesn't seem to be playing out a ton. Let's just look at, um, the numbers for ordinals. We have, uh, seventy-three point six million inscriptions to date. 8:03 Um, eighty percent to ninety percent of those are BRC-20s. And here we have, uh, the total inscriptions to date. 8:11 They have, uh, increased pretty s- uh, significantly after they fell off a cliff when Runes launched at the halving. 8:18 So now we're getting, um, a hundred to a hundred and twenty thousand inscriptions per day, um, with an ei- monthly average of eighty-five thousand for the past thirty days. 8:30 And this is, again, mostly BRC-20s, which have resur-- which have, uh, experienced a resurgence in, um, uh, in China particularly. Um, total fees spent on BRC-20s is a hundred and ninety-one million. 8:45 Uh, all-time fees for inscriptions is two hundred and seventy-eight million, still a quarter of a billion dollars towards, um, BRC-20s. And yet, like, the inscription fee spend has kind of smoothed out a little bit. 8:57 Now, it has-- it kind of fell off a cliff, as we expected, um, toward, uh, right at the halving and has been basically anemic for half a year. 9:07 Over the past thirty days, though, we've seen daily inscription fee spend, uh, tick up to, like, you know, a hundred and fifty to three hundred thousand dollars per day. So we've seen some increase in that. Um, 9:20 let's take a look at Domo's marketplace dashboard. Um, let's just see what the volumes are doing here. Um, it's a couple days old, but you can get the idea. 9:34 Um, we crossed over five billion in total, uh, trading volume across all secondary markets. This is just ordinals inscriptions, not including runes. Um, marketplace volume has ticked up a little bit. 9:49 Um, it was, uh, at kind of an all-time low in August and September, seeing only like, um, sometimes less than a million dollars per day of, of volume, sometimes like half a million dollars per volume. 10:02 And, uh, and now we're at anywhere from five to ten million dollars per day in volume. It's being pretty much dominated now by Magic Eden and OKX. 10:13 Magic Eden, uh, right now being, uh, a little over half of the volume for trading these assets. I will, you know, caution a little bit because, um, I've-- this is kind of a common, 10:29 like a little bit of an open secret, that a lot of the volume on OKX, which is not on-chain volume, is probably wash trading. 10:37 So I, I don't like to make that claim, but there's multiple sources which have, uh, suggested this is true, and we don't know exactly how much of that is wash trading, but it is a non-negligible amount, so we do have to be, you know, mindful of some of the numbers from OKX. 10:55 Um, and, uh, we are seeing net new users continue to grind upwards, um, maybe a couple thousand of new users per day. Um, let's take a look at Liquidium. 11:11 Um, Liquidium's weekly volume, according to this, uh, dashboard from Shudu, uh, Liquidium's weekly volume has been increasing since it bottomed out in September. 11:20 Liquidium is a lending platform, kind of like the lending platform for ordinals, BRC-20s and runes. And, um, right now we see over half the volume on average per week is going to be runes-based. 11:32 Sixty-one Bitcoin in runes lending volume, uh, thirty-five in ordinals. This is still down from its all-time high in April of this past spring, 11:45 but, um, yet we are seeing a very strong trend here from the bottom in September. Um, let's go look at, 11:56 uh, Hoshi's runes data, where we have daily runes, uh, new runes on-chain volume. 12:06 Uh, here we have, uh, runes basically flat and almost dead through the summer, um, and now increasing, uh, i- in, uh, October through December. 12:19 And he has this, uh, great chart here which shows daily exchange volume percentage, which indicates, uh, that the market is about fifty/fifty Magic Eden and, uh- OKX. 12:29 Again, as I said though, OKX's numbers are difficult to, like, get a real number because of wash trading. So certainly, Magic Eden is a higher percentage of this overall number on this chart. 12:40 But, uh, we do see, uh, an interesting story developing, which is at least according to stated trading volume, these two markets are about neck in neck. Um, that said, I just kind of 12:59 numbers here. Um, we're not really seeing the explosion in on-chain trading, nor are we seeing the explosion in, uh, net new fee activities on Bitcoin. 13:12 We've seen a little bit of like resurgence in the market and a little recovery, but it hasn't been this kind of like mania that a lot of people have predicted. 13:21 Now, um, the other side of this is, well, perhaps the market's gotten more efficient, and this is certainly a, a good c-- this is a, this is a believable, compelling case. 13:31 Like maybe the market is less bad at burning money to inscribe new things on chain. Now, we certainly saw a lot of fee overpayments in s- December and January of last year as like mainly an Asian-driven 13:48 fungible token speculation mania kicked off and created crazy high fees on Bitcoin, again, this time last year. But now we're seeing, uh, you know, volume recover, and we're not seeing as much of an impact on chain. 14:03 In fact, as I said at the top, on-chain volume remains to be kind of like de minimis. That said, let's look at this. Um, 14:16 uh, in the past thirty days, uh, on Magic Eden, we've seen the floor prices for many of these top collections, Puppets, NodeMonkes, OMB, CATs, Pizza Ninjas, Frogs. Um, 14:29 the floor prices of most of these are up a little bit. Like it's a little bit across the board. You see Frogs and Puppets are down fifteen percent from where they were a month ago. 14:38 But like your other, uh, your other, uh, collections, NodeMonkes, OMB, Runestone, uh, Quantum Cats, all up anywhere from one to fifteen percent. 14:51 Now, this is down from their all-time highs in Bitcoin-denominated terms, uh, in, uh, from, uh, spring of twenty twenty-four earlier this year. 15:03 But I mean, let's just like look at, uh, let's just look at, um, the Quantum Cats chart. Um, so 15:15 I think it may help because Quantum Cats peaked at, um, like point four BTC, uh, in, uh, April of this past year, and now they're at point two one BTC. Um, 15:32 in dollar-denominated terms, this is actually roughly flat because in April of this past year, we were sitting at sixty thousand dollars, uh, per Bitcoin. 15:48 So at sixty thousand at point four is going to be roughly the same price as point two one at a hundred and ten thousand dollars. 15:56 So what's interesting is that we're seeing a lot of these collections, like Quantum Cats, retain their, 16:05 uh, their pricing power in US dollar terms while Bitcoin goes up and while their Bitcoin-denominated price goes down. 16:15 So this is an interesting observation like, so you, the listener, I ask, um, are these, uh, secondary assets, these luxury JPEG, these luxury assets which are NFTs on Bitcoin, um, 16:29 are these, uh, really-- do these have more of a static US dollar value? How do you vet measure whether you have a successful, uh, uh, v-value in... Well, how do you measure like success? 16:43 Do you think that you're, uh, you've been successful if the US dollar value of your inscription has gone up, or do you wish that you had kept it in Bitcoin? 16:54 These are more rhetor- rhetorical questions that I ask, and I, that I want to try to bring some like context to the market for you, the user. Um, let's go back to some more charts. This is a chart from Merch 17:10 on Bitcoin transaction fees, uh, and transaction type across the whole ecosystem. Um, this chart shows the, uh, transactions by percentage. 17:27 So, um, it takes like normal financial transactions on Bitcoin as regular transactions, runes transactions, and inscription transactions, and BRC-20 transactions, 17:38 and says, "Let's-- of overall, of a-all the transactions per day on Bitcoin, you know, how do they break down?" 17:43 And what we've seen is really since March twentieth, over half the transactions on Bitcoin have been runes transactions, as you can see here from the green. 17:53 We're talking like not just fifty percent, but often sometimes, um, seventy to eighty percent of all transactions on Bitcoin in a day are runes transactions. 18:06 Um, in the past couple weeks, we've seen BRC-20s again catch a bid and actually on a couple days surpass, uh, runes transactions. 18:15 For example, like on the twenty-eighth of November, forty-six percent of transactions on Bitcoin were BRC-20s and three percent were runes. Um, 18:24 so what we're seeing is even though like Bitcoin continues to be adopted by corporations and put on- You know, balance sheets like Michael's MicroStrategy or some of these Bitcoin miners like Marathon or Riot who are now hoovering up Bitcoin left and right, issuing convertible bonds or notes or however, I don't know what you call them. 18:44 On chain, we are seeing these custodians have virtually no footprint and virtually no impact on chain. 18:52 In fact, we're just seeing that there's like now a divergence between what I would say Bitcoin holders and active Bitcoin users, where the active Bitcoin users are now the majority of like the activity and interesting things happening in the Bitcoin economy. 19:09 Whereas the like custodianed, corporatized balance sheet Bitcoin, the MicroStrategy Bitcoin is kind of just being sequestered away and held among kind of like gold on a balance sheet. 19:22 And this is a really interesting phenomenon because I don't think we've seen something quite like this in a previous cycle where you have such a divergence among the entire Bitcoin asset class for Bitcoin users who use it as a kind of platform that may be an issuance platform for their fungible tokens or their JPEGs or whatever kind of ecosystem DeFi shenanigans you want to pull versus 19:50 the like Bitcoin as a savings or kind of balance sheet, like pristine balance sheet assets. So this is a really interesting phenomenon to observe right now because Bitcoin is now well into a bull market. 20:03 We're at $100,000. It shows no signs of stopping. And we have now multiple different Bitcoin ecosystems which don't interact with each other currently. 20:17 That said, the last kind of like Bitcoin ecosystem and trend that I want to watch, and I've brought it up here on this podcast a few times before, is the trend of Bitcoin staking. So 20:31 I will pull up Bitcoin layers as dashboard. Shout out to the Bitcoin layers. They are tracking like the amount of Bitcoin that is staked. Now, if this is surprising to you, well, I thought Bitcoin is proof of work. 20:45 Well, yes, Bitcoin itself is proof of work, but there is a trend right now to take Bitcoin, lock it up and use it as an asset to stake other blockchains. The main like project that is doing this is called Babylon. 21:02 I had an interview with David Say of Babylon Chain this past summer on the podcast. I recommend you go and watch it again. Babylon from August previous episode on Bitcoin season two. 21:14 So we're seeing now Bitcoin deposits increase. 21:18 We saw 1000 added Bitcoin staked last summer, another 22,000 in November, and recently another 20 and 30,000 for a total of 56,000 Bitcoin staked on Babylon. 21:38 This is interesting because this makes Babylon a larger holder of Bitcoin than Riot Blockchain, one of the largest mining companies who's been hoovering up Bitcoin. 21:51 It makes it larger, I believe, than Marathon Digital, another public mining company who's like got the largest Bitcoin balance sheet or maybe high or maybe hot. I forget. 22:02 But what we're seeing is if I were to kind of hand wave and identify this trend and a point I made in our previous newsletter is that technically Babylon is adding more Bitcoin to its staking protocol. 22:16 It's adding Bitcoin at a faster rate to its staking protocol than MicroStrategy was early on. So this is very interesting because this represents a material trends now 50,000 Bitcoin. This is this is 22:32 multiple, I think multiple billion dollars in Bitcoin staked through this protocol. And there seems to be significant demand. It's $6 billion worth of TVL. So 22:49 this is a really interesting phenomenon that we're seeing. We have, I would say, the corporatized Bitcoin, the staked semi-custodian Bitcoin and the on-chain Bitcoin user behavior. 23:05 These are now three major different ecosystems which don't have as much interaction with each other as you might expect. So that said, 23:18 I think this is one of the most interesting divergences happening in the overall Bitcoin ecosystem. And that's why Bitcoin is getting kind of weird. 23:26 I titled this episode on on our Twitter stream, the Bitcoin eco is getting weird at 100K. That's because it is getting weird. Like Bitcoin is starting to look, it's starting to have many different faces to it rather than 23:39 just the face of your Michael Saylor bull tard boomer. Now you have a bunch of different actors all interacting with Bitcoin and using it for very different things now. 23:55 So as always, I'm going to try to cover this stuff for you under Bitcoin season two. Thanks for hanging with me during this very metrics and visual heavy episode. If you listen to it, thanks for trudging through. 24:08 I recommend you go look at the live stream so you can visualize it. Otherwise, make sure to subscribe to the Blockspace newsletter, newsletter.blockspacemedia and or blockspace.media as the primary website 24:22 and hop in our Telegram chat. Yes, we have a Telegram chat. Hit me up if you want to be invited to it. I will be adding people. We'll be doing some deeper dives on Bitcoin analytics and stuff happening on chain in there. 24:35 Otherwise, I will see you all.
