Transcript 0:00 [upbeat music] It is a race between Michael Saylor and Bitcoin layers. 0:18 That is, who can acquire more Bitcoin, the Bitcoin or on-chain economy or a corporate treasury? Now, I am kind of manufacturing this race a little bit, but the race is on. 0:30 Michael Saylor is buying a crap ton of Bitcoin, uh, seemingly like every week, and it's only accelerating. 0:37 But at the same time, we see a lot of, um, like Bitcoin staking or like locking Bitcoin or wrapped Bitcoin, uh, kind of heating up as Bitcoin becomes this kind of like pristine asset that the broader crypto economy demands. 0:54 I will dive into this a little bit more this episode. If you're listening, this is gonna be more of a visual-heavy episode. This is a Monday live stream. 1:02 I typically do more of an analysis approach on Mondays, live stream onto our platforms, YouTube and X. And, uh, I typically pick like a topic and go over some charts and try to play the armchair anal- analyst a bit. 1:18 Um, so make sure you stay tuned. I will talk about the Bitcoin, uh, corporate treasury versus Bitcoin layers race right after our word from our sponsor. Bitcoin Season 2 is brought to you by Botanix. 1:33 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. 1:47 See the future of DeFi at Botanix, botanixlabs.xyz. So first, let me cover some basic metrics. Um, I'm gonna share my screen here. 1:56 If you're listening, I'll try to talk through this a little bit, talk through what I'm seeing. And if, uh, you're watching, then obviously you see it. So let's kick it off. 2:06 Before I get into kind of the main-- the meat of the, of the, of what I'm talking about today, let's just hit mempool.space. It's usually where I begin my day, checking mempool.space. 2:19 And, um, fees are, you know, in the single digits, six to 11 sats for vByte right now. We saw over the weekend, um, fees drop down to like two sats for vByte. 2:30 In fact, we saw, um, one of the, uh, like, uh, one of the lower boundaries or one of like the lower, uh, like transaction, 2:41 uh, uh, events over the weekend with, uh, very little transaction activity and the mempool started clearing. 2:48 As you can see here from this graph, uh, this pink part at the bottom is these like all these one to two sat vByte transactions, which are just sitting there waiting for the higher, uh, fee transactions to clear so that those can go into blocks. 3:03 Right now, we have, um, roughly ninety to a hundred blocks worth of transactions. So if transactions stopped immediately right now, we would have... 3:14 You know, it would take about a hundred blocks to clear all of the transactions kind of in the backlog. About a hundred blocks, that's, uh, not quite-- that's about two-thirds of a day. This is about, you know, 18 hours. 3:27 Um, then we're halfway through a difficulty adjustment. Blocks have been coming in roughly 10 minutes. We're only targeted for a one percent upwards difficulty adjustment targeted for December 29th. And, um, 3:40 then as far as like pools share of the overall network, Foundry's at 33%, Antpool's at 17%, via BTC, um, F2 are, uh, kind of roughly neck and neck. The one thing that is really interesting is Marathon. 3:55 Marathon, if you're not aware, is a public miner where they have a pool that all of their public-- that all their hash rate points to. 4:03 They're the only public miner who does this currently where they both got the data centers and the pools. 4:10 And Marathon has been adding hash rate like crazy, causing them over the past year, um, to go from roughly like 3% of the overall, uh, uh, blocks produced on Bitcoin to now 7%. 4:26 That goes from about 18 exahash to roughly like 30 to 40 exahash depending on, uh, how you measure it. Their public statements I think come in around 40 exahash. So they've been gaining ground like crazy. 4:38 Very interesting to watch. Um, do a little bit of Ordinals data. Um, not a whole lot going on here. 4:45 We saw a lot of on-chain, um, cumulative inscription activity over the past month with, um, a BRC-20 run and, uh, mainly driven by Asia. So the past couple weeks, we saw 100 to 250,000 inscriptions per day. 4:58 And then, um, we saw, uh, the secondary markets for Ordinals assets decline across most blue chip collections. But you see a couple ones are up this week. Quantum Cats up 10%. 5:12 Pizza Pets is the hot new Tamagotchi-like game on Bitcoin. I'll probably be tweeting about this. 5:18 This is a fun one to watch where you basically get a pet and you have to feed it or give it drugs or give it pizza, and then you have to take care of it just like a Tamagotchi on-chain. 5:28 But overall, the other, um, like assets, Bitcoin Pup is down 20%, uh, NodeMonkes down 15%. Fucohedrons, which is like the hot new, are they gonna displace NodeMonkes is down 33%. So most of your big collections are down. 5:44 That said, let's get into kind of what I wanna talk about today. Have-- It's a race between the layers versus the Saylors. And I'm gonna lean heavily on a, 5:53 um, a newsletter that c- that we published this morning written by Yannis, um, founder of the Bitcoin Layers project. 6:03 If you're not aware, bitcoinlayers.org, they, uh- Keep track of all of, uh, like a lot of metrics, like things happening off of, on and off Bitcoin. 6:14 And they, they do like security analysis for how secure these other chains are and the bridges are, and they kind of try to standardize like how you talk about them, and it's a really interesting, uh, project with a lot of interesting data and dashboards. 6:28 But what I'm doing is I'm going to, um, 6:32 uh, be using this website, Bitcoin Layers, to look at kind of like the cumulative, the aggregate amount of Bitcoin that may be wrapped or that may be staked or that may be bridged, uh, off chain in some way because I think it's a really good like thing to compare against the Michael Saylor approach of we're going to buy a bud-- b-buy a bunch of Bitcoin and put it in our corporate treasury. 6:58 So this past week you may saw, you may have seen, I think in the past... I think this morning it was news, Michael Saylor under MicroStrategy added about five thousand more Bitcoin. 7:08 They top blasted at a average price of like a hundred and six thousand dollars. 7:13 Um, they added, you know, five thousand more Bitcoin to their balance sheet for, um, to bring their total holdings in, um, I believe this chart is updated, to about four hundred and forty-four thousand Bitcoin. 7:28 Um, there's only twenty-one million Bitcoin, and Michael Saylor has four hundred and forty-four thousand of it. This is very significant. 7:36 And I have this chart here which shows the growth in strategic treasury reserve of Mark with MicroStrategy, which they began adding to in Q3 of twenty-twenty. So basically exactly four years ago or, as I say, one cycle. 7:50 So MicroStrategy has twenty-seven point six billion, um, dollars in Bitcoin. That's four hundred and forty-four thousand. 7:59 And, um, you can see here that if we look at this chart, like they start accumulating, um, in twenty-twenty and, uh, they buy, you know, a bit for about a year, 8:09 and then they are kind of flat for the majority of twenty-twenty two. That was a bear market, if you don't remember. 8:14 They start buying again, uh, early, uh, late q-late twenty-twenty three, early Q twenty-twenty four, and then this past quarter, Q4 of twenty-twenty four, they have, um, increased their Bitcoin basis by like forty percent, going from two hundred and fifty-two thousand Bitcoin to forty-four, four hundred and forty-four thousand Bitcoin. 8:35 This is massive. This, this, uh, chart courtesy of sailorcharts.com. He's so iconic now that he has websites named after him, including the MSTR Tracker, which I'll pull up here too. 8:49 So Michael, uh, Michael Saylor is buying a shit ton of Bitcoin, and there are people copying him. We talk about this on the Mining Pod, our sister podcast over under Blockspace Media. Go check it out. 9:00 Of the publicly traded Bitcoin miners who are buying Bitcoin similar to MicroStrategy for their treasury, and you see some other companies doing this. 9:08 You see MetaPlanet over in Japan, um, that, uh, that is d-doing a similar MicroStrategy play in Japan but on a smaller scale. Um, you see, uh, some sovereigns like, uh, I believe, uh, 9:25 um, Oman and, uh, the sovereign wealth fund of the UAE, uh, have some Bitcoin. So, uh, like this is a trend, but I look at this and I say, this is, um, 9:39 this is what happens in like the we're gonna buy Bitcoin for our treasury world. But over in the on-chain economy, we have a different narrative. 9:48 We have a similar narrative going on, but it's just I've, I see it like-- I see it kind of in, being in, in contrast to corporate treasury, which is, [clears throat] 9:56 um, in the broader crypto economy, which is now r-you know, a little over three trillion dollars, I think. Um, Bitcoin is being used as like the asset of the broader of a-of the crypto ecosystem. 10:11 And so people are taking Bitcoin and they're bridging it to Ethereum or they're bridging it to Solana, and they are using it on these other chains to do whatever. Sometimes they're gonna participate in DeFi activities. 10:24 Sometimes they're going to, um, like through Babylon, use it as a like staking mechanism to stake proof of, stake chains. You know, there's a... I did an episode with David Tsay last summer on Babylon, how that works. 10:38 But like, you know, you can stake it, uh, and, and use it to secure other blockchains. I'm using hand... I'm waving my hands here. 10:47 And, um, what we're seeing here is, uh, a similar ramp-up in the, in the broader crypto economy. We're seeing a similar ramp-up in demand for Bitcoin in, in these types of structures. 11:00 Um, and I'll, I'll dive into a little bit of what they are. But basically, we saw, um, this past spring, 11:07 um, there would be a total of about, uh, two hundred and thirty thousand Bitcoin, which are kinda off-chain being staked or wrapped. 11:16 And since then, we've seen, um, about a hundred thousand, uh, Bitcoin, uh, be added to this cumulative number. 11:25 Um, and it's interesting to see this because, uh, I feel that it mirrors the MicroStrategy trend pretty closely in that people want and demand Bitcoin. 11:37 And I think it's a, uh, I think it might be interesting to look at these two trends in contrast to one another. MicroStrategy is pretty straightforward. 11:44 Um, I'm gonna pull up Micro MSTR Tracker where, um, every, you know, all the TradFi analysts are losing their minds over like 11:52 the speculative attack against fiat and like how good of a value MicroStrategy might be and, and they're like, "Oh, well, uh, you know, MicroStrategy, uh, can be this reflexive asse- you know, reflexive stock upwards and, you know, it's the only way for some of these companies to still get their hands on Bitcoin. 12:10 They're still locked out of owning Bitcoin directly," whatever. Um, so obviously there's a demand for MicroStrategy. 12:17 But over in Bitcoin Layers land, the thing that I think is much more interesting is, uh, this, uh, where else is Bitcoin being demanded? 12:29 Um, as a, as more of kind of an on-chain maxi myself, I think it's cool to see where Bitcoin is being demanded, um, uh, in the new crypto economy. So let's take a look. Um, we have three classifications here. 12:42 We have wrapped tokens, we have staked tokens, and we have liquid staking tokens. Let's take a look at wrapped first. Wrapped is a... 12:51 Which basically means, um, deposit Bitcoin into an address, and then entity will-- an entity or so will coordinate, uh, uh, the issuing of, uh, a Bitcoin-pegged asset, which is backed by the Bitcoin in their treasury. 13:05 And they're gonna issue a similar Bitcoin, which is "wrapped" on another chain. The most famous of these is wrapped Bitcoin on Ethereum, which trades roughly one-to-one with Bitcoin. 13:17 But there's-- Nas is now more of a popular type of product. Coinbase has launched one. Um, I did a, a, a, a podcast with Matt long ago, a thesis for, for TBTC on, uh, other chains. So it's wrapped Bitcoin. 13:31 We see the majority of it, um, is under WBTC, which is custodian and operated by BitGo. Hundred and thirty-five thousand BTC under BitGo, which has declined from its peak of, like, a hundred and fifty-five. 13:46 We see the next is, uh, on Binance Smart Chain, uh, custodian by Binance and wrapped and put on BNB Chain. We see Coinbase launching CBBTC for mainly use on their base, base chain, which is a, 14:04 uh, based roll-up on Ethereum. They have about twenty thousand Bitcoin. We also see Lombard, Solve, Pump, and kinda, like, other well-known, like, staked providers. 14:13 Liquid, uh, Liquid, which is the Bitcoin side chain, has about thirty-eight hundred Bitcoin. Rootstock with twenty-eight hundred. 14:20 Um, so but the aggregate amount in all wrapped tokens goes from about two hundred and twenty-five thousand to two hundred and eighty thousand or so over the past, um, six months. 14:34 So that's a, you know, that's ten percent, fifteen percent growth. Uh, and, and it's also becoming a more competitive category. You can see here on my screen, I have, um, it used to be pretty much just BitGo and Binance. 14:46 It used to be just Wrapped Bitcoin and Binance Wrapped Bitcoin. But now we see a bunch of new entrants. We see Coinbase jumping in. We see Lombard taking significant market share and as well Solve. 14:57 So interesting trend to watch. Then we have the, the second category, staking, which according to Bitcoin Layers here, they're just tracking Babylon. 15:06 There's-- I think there's, there might be some other type of Bitcoin staking, but this pretty much captures the, the lion's share of it, which is Babylon Staking, which, uh, launched this past summer on Mainnet with about a thousand Bitcoin staked. 15:20 Did another round in October, added another twenty-two thousand for a total of twenty-three point eight thousand Bitcoin staked. 15:27 And now they have fifty-seven thousand for a total of five point four two billion dollars USD, fifty-seven thousand, uh, BTC, uh, now using, uh, securing proof-of-stake, uh, chains through Babylon. 15:42 Then we have a third, um, category, which is liquid staking Bitcoin tokens. If you're not familiar with, with liquid staking, it's basically, um, 15:51 in, you know, when you stake a token for a proof-of-stake system, uh, there will be people who basically say, "We think your staked tokens are secure. We're going to issue another asset, 16:05 uh, that unlocks your staked tokens," so they can go use that asset, um, out throughout the crypto ecosystem. And so it's, it's, uh, it's funny because it basically, 16:18 it means that your staked, your staked assets aren't really, like, locked up, uh, calling into question a bit of the whole purpose of, like, staking. 16:26 But you can issue the com-- you know, the, you know, tokens for the, the tokens which are staked, and you can-- and you never really, like, lose, uh, all of your working capital. 16:36 But liquid staking tokens, similar story here to staking, which is, um, 16:43 uh, Solve, Lorenzo, and UniRouter are, uh, the larger, uh, liquid staking providers, and they will issue a Bitcoin, a liquid staked Bitcoin asset on their comparable chains. 16:59 Um, and, uh, they started with only, you know, twenty Bitcoin last spring, ramping up over the summer to ten thousand Bitcoin, um, continued growth through the fall. 17:13 And now they're at a total of about thirty to four-- no, about forty thousand liquid staked Bitcoin to date. Um, zooming out. 17:25 This means that there's roughly three hundred thousand Bitcoin across all networks which are wrapped, staked, or liquid staked. 17:37 Let's compare that to MicroStrategy's four hundred and forty-four thousand Bitcoin, which is locked just in their corporate treasury. 17:46 And w- so that means, uh, right now, MicroStrategy is single-handedly beating all of the other crypto economies combined for, like, demand for Bitcoin the asset. 17:58 If I were to compare trajectory and growth rate though, um, up until Q4 of twenty twenty-four, they were growing at roughly the same rate. 18:09 Q4 twenty-three to Q3 twenty twenty-four, both MicroStrategy and the on-chain crypto economy were growing at roughly a rate of ten to fifteen percent per quarter in- demand for Bitcoin the asset. 18:25 Um, what, what, what, what really happened is, uh, Q4 MicroStrategy leapt ahead by leveraging public markets like crazy and doing this whole debt swap, uh, thing for, you know, whatever. 18:40 You can listen to every MicroStrategy podcast ever about that. But MicroStrategy added 40%, roughly, additional Bitcoin to their treasury. And so this paints a really interesting story, I think. 18:54 And I think we'll probably start to see, um, these economies and incentives diverge a lot over the next few years, um, where the corporations want Bitcoin, they want to do nothing with it, they want to have it in a wallet, and they want to sit on it and watch the number go up. 19:16 Whereas, um, Bitcoin being a more productive, actively used asset in the on-chain economy, um, needs to do a few more things. And Bitcoin's base layer being, um, 19:31 uh, limited, um, both a strength and a weakness, uh, allows, uh, we'll, we'll see like tho- those actors and those behaviors become, uh, we'll just, we'll just have to see how, how they grow over the next several years. 19:46 Um, I think there's also one other X factor here, which is not appreciated or maybe not on most people's radar, and that is what I call the lava.xyz effect, um, which is this, uh, Bitcoin lending market. 20:02 And I would put this in its own fourth category. You know, I saw it on bitcoinlayers.org. You've got wrapped, staked, and liquid staked. 20:08 I think there might be an interesting fourth category, which is Bitcoin, which is being used to lend against, which fits in a little bit of both the treasury and the, like, productive on-chain economy asset. 20:23 If you're not familiar with what Lava is, um, this is a little bit of a Lava shill because I like them and I use them. 20:29 But you basically lock Bitcoin up and, uh, someone will lend you dollars against it, and you can go use those dollars in the real world. 20:37 Um, while I don't think this, you know, accounts for much more than a few million dollars US, yet as a trend, I think, um, 20:48 this is a very pop-- this is going to be a very popular type of product and mechanism to take Bitcoin that people have stacked for a long time and, uh, avoid a taxable event in the US and, uh, start, uh, pulling dollars out of it. 21:05 So, um, I think this could be a trend, uh, that we should watch for and try to monitor as well. But again, similar story here, which is, um, we're seeing 21:16 in the, in the grand narrative of Bitcoin being used as a pristine asset, as the, like, 21:25 most in-demand new type of asset, uh, going into the second half of this decade, uh, we will see multiple different types of actors and categories emerge for use of this asset. 21:37 So I will try to monitor this as best I can. I'm not a financial analyst. I am barely a normal analyst [chuckles] or self-appointed. 21:48 Um, so, but I'll be leaning on, uh, public information, uh, and particularly the Bitcoin Layers guys, Yannis and Red over at Bitcoin Layers. 21:57 I recommend you go to bitcoinlayers.org and read the newsletter we just published on behalf of Bitcoin Layers. You can find that on our website, blockspace.media. 22:07 Um, yeah, really, really good, uh, piece on that this morning. 22:11 Um, especially during the holiday season, you might have some time, you might be able to finish a whole thought for once, and, uh, you can read through this, uh, at your leisure. 22:22 Well, without any further ado, thank you very much for listening to Bitcoin Season Two. Make sure to like and subscribe. 22:27 If you are listening to this, you've made it to the end, make sure you like this on Spotify or Apple Podcasts, and make sure you subscribe and hit the notification bell on YouTube. You will be happier because of it. 22:41 I'll be happier because of it. I would really appreciate that. So thank you so much, and I will see you all next week. [outro music]
