Empire Newsletter: Bitcoin is halving a moment

Four more years!

Bitcoin Halving Day is here (at least, that’s what some countdowns are projecting, sometime before midnight ET).

Finally!

By now, you’ve slogged through waves of halving takes from a bevy of venture capitalists, influencers, founders, proponents and, increasingly, Wall Street analysts. Even the Guardian put out an article this morning discussing what the halving could do to bitcoin’s price.

The halving is, after all, a spectacle that only comes round once every four years, as the good folks at Resistance Money pointed out this week.

So, like we would cheer for Olympic trampoliners or canoeists, we might rally behind bitcoin miners who have to actually grapple with the consequences of the halving. But when Bitcoin adds its 840,000th block sometime tonight or early tomorrow, nothing will really change for those of us watching the countdown on Twitter from our couches.

Prepare to be underwhelmed in the moment, outside of some price volatility.

The big secret is that the whole thing just gives us all something to chat about for a while, resulting in a million different ways to say:

“The price has gone up before after halvings but who knows what might happen this time. And if the price of bitcoin drops too far, some miners may switch off their rigs until it’s profitable again. Traders might ‘buy the rumor’ and ‘sell the news.’ Bitcoin will be okay in any case.”

The actual halving itself may not exactly be thrilling. But it does close the chapter on four years of Bitcoin and crypto history.

Seven fun facts and stats from this cycle:

F2Pool mined the last block before our current halving cycle began (block 629,999) and included a message: “NYTimes 09/Apr/2020 With $2.3T Injection, Fed’s Plan Far Exceeds 2008 Rescue.” It was a nod to Satoshi Nakamoto’s genesis block note.
Antpool mined the following block, the first to include a 6.25 BTC reward (block 630,000). There was no additional message attached.
Bitcoin’s price was $8,730 when the 2020 halving hit ($10,635 adjusted for inflation). It’s up more than 600% since then.
Bitcoin’s hash rate was 137.5713 exahashes per second at the start of the cycle, now 625.05 EH/s (up 350%).
12,634 addresses contained $1 million or more bitcoin when Bitcoin last halved. Now there are more than 111,000 — nine times more.
Addresses with more than $1 in bitcoin rose from 22.12 million to 46.54 million.
Active addresses are practically the same today as they were four years ago, around 878,000 per day. One point in February 2021 saw 1.15 million per day, the highest on record.

One more for the haters — some say this halving is more bullish than the others, as bitcoin for the first time hit an all-time high before issuance was cut. But that’s not completely true.

Bitcoin nearly hit $69,000 in November 2021, setting an all-time high that would stand for years. The US dollar is, however, an imperfect benchmark for bitcoin’s value: The total inflation rate from then until now is 12.37%. Bitcoin’s high was really $77,533 in today’s dollars and that hasn’t been broken.

Bitcoin only reached $73,757 last month — almost 5% short of the inflation-adjusted record.

Here’s to better luck after the halving.

— David Canellis

Data Center

When this newsletter hit your inbox, there were fewer than 80 blocks to be mined before the halving.
The block reward will drop from about $1.76 billion BTC per month to $882.8 million after the halving, at current prices.
Bitcoin miners on average earned $91.6 million per month in fees over the past year.
Bitcoin DeFi has more total value locked than Avalanche, Polygon and Optimism heading into the next halving cycle, with $1.21 billion.
Foundry and Antpool are most likely to mine the halving block, with 29% and 27% odds, followed by F2Pool with 9.7%.

Try again next year

Senators Cynthia Lummis and Kristen Gillibrand dropped yet another crypto bill this week. The industry reviews are in: not good.

Critics say the bill is fundamentally flawed — allowing payment stablecoins issuers to bypass paying deposit insurance premiums, for example, would rob the FDIC of essential funding, opposers argue.

Newsletter

Subscribe to Blockworks Daily

The bipartisan bill proposes banning algorithmic stablecoins (thanks, TerraUSD), mandates one-to-one reserves and brings issuers under existing KYC and anti-money laundering regulations.

At risk of sounding terribly cynical, it doesn’t matter what you think of this bill because it’s not going to pass. It’s probably not even going to make it to committee for markup.

For a bill to move, the chair and the ranking member of the relevant House and/or Senate committee have to sign off.

For crypto, that means getting the greenlight from Reps. Patrick McHenry (who is favorable toward crypto, but on the way out) and Maxine Waters (who is decidedly not favorable toward crypto) of the House Financial Services Committee.

Over in the Senate Banking Committee, Sens. Sherrod Brown (also a vocal critic of crypto and up for reelection in a thus-far narrow race) and Tim Scott (who has been supportive of the industry in the past) will have to get on board.

For this latest Lummis and Gillibrand bill, Sen. Brown is really who they need in their corner.

So far, he’s just not there. Brown this week even mused about looping in stablecoin regulation into a bigger legislative package, one that would focus on allowing marijuana companies access to the banking system and clawback executive salaries from failed lenders.

Either way, Brown has an election to win, so it’s doubtful anything else is taking priority.

— Casey Wagner

Who needs institutions anyway?

Let’s do a little vibe check.

One of the biggest narratives this year has been that the institutions are finally here, thanks, in part, to spot bitcoin ETFs. And there’s no doubt that the institutions have shown interest — but they’re waiting on the sidelines still.

Retail is still the “best thing at this party,” as Taylor Swift would say.

BitGo CEO Mike Belshe told Blockworks that the demand for the bitcoin ETFs is “mostly retail.” It’s a statement backed up by the slew of 13Fs that have been filed so far by institutional managers, which showed small holdings.

Goldman Sachs digital assets head Mathew McDermott, at the Digital Assets Summit in March, said the crypto price rally has been driven in part by retail. McDermott also noted that institutions “have started to come in.”

No one is saying that the institutions aren’t interested — just that it takes time.

Institutional involvement is going to be a “slow burn,” S&P’s Global Digital Assets Research Lab managing director Andrew O’Neill told Blockworks.

“Because we’re so early in the adoption curve in general, we’re naturally also early to institutional adoption,” Thomas Perfumo, Kraken’s head of strategy, said.

O’Neill believes the momentum has shifted. Teams will start to take notice and will research into the potential innovations and look to get “their various investment committees over the line as well.”

The retail demand, however, “has been growing,” Belshe told Blockworks. In the context of the bitcoin ETFs, some of the retail folks are finally getting access to an asset class that might have been too difficult to “touch” before, he added.

If the performance we’ve seen — not only in the price action but also in the ferocious appetite for a new type of product — has been any indication, then the institutions are more than welcome, though retail’s ready to rock and roll.

We’re not going to be having the same conversation four years down the line, so soak up what will probably be the last retail-focused halving.

— Katherine Ross

The Works

The New York Times explained what led to the detention of Binance compliance exec Tigran Gambaryan in Nigeria.
Meta released a new AI assistant on Facebook, Instagram and other social media apps.
Crypto trader Avraham Eisenberg was convicted yesterday in a landmark crypto trial after a day of jury deliberations.
A recent Federal Reserve paper explored the financial stability implications of different CBDC designs.
JPMorgan and Deutsche Bank believe the Bitcoin halving is “mostly” priced in, according to Bloomberg.

The Morning Riff

Question: Is the halving still exciting? Or is it old hat at this point?

David: The mystique around halvings is way more interesting than the halvings themselves.

A 50% reduction in issuance sounds like a lot, but it’s all relative: The difference between 900 BTC ($58.4 million) per day and 450 BTC ($29.2 million) is minimal for the overall market, which sees more than $52 billion in reported BTC trading volume per day right now.

What a few mining outfits with tight operating margins do with less bitcoin doesn’t really matter to anyone.

Still, fewer coins on the market sounds bullish, and that’s really the most interesting thing about halvings: how markets will react to the narrative.

Katherine: The halving’s still exciting, it’s only the fourth one! We can’t be jaded about it yet.

Bitcoin’s only just hit its stride when it comes to mass adoption and, if we’re being honest, mass understanding. There’s also the fact that we’ve seen bitcoin notch new headlines, and the bitcoin ETFs are still fresh out the gate.

In 2020, the halving wasn’t something a lot of people really paid attention to, but the proof is in the pudding: People are intrigued and invested in the halving and what it means not only for the price but for the ETFs and the miners.

Don’t believe me? Just look at the Google Trends data.

— Katherine Ross, David Canellis

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.