Sam Martin

<div id="highlights-block_1de725d7417625c4c6cf81b9be52b950" class="highlights">
        <ul>
                <li>Bitcoin has seen a lot of ups and downs over the course of 2021</li>
                <li>A BTC short squeeze could be brewing</li>
            </ul>
    
</div>



<p>Coin Metrics released a <a href="https://coinmetrics.substack.com/p/state-of-the-network-issue-134" target="_blank" rel="noreferrer noopener">report</a> highlighting some BTC moments from 2021.</p>



<p>BTC wallets holding non-zero balances continue to notch new highs.</p>



<p>Bitcoin could be setting up for a short-squeeze as stablecoin-margined open interest rises.</p>



<p>Tether and USDC grew from a combined market cap in 2020 of $25 billion to a combined market cap of $117 billion in 2021, according to the Coin Metrics <a href="https://coinmetrics.substack.com/p/state-of-the-network-issue-134" target="_blank" rel="noreferrer noopener">report</a>.</p>



<h3 class="wp-block-heading"><strong>Latest in Macro:</strong></h3>



<ul>
<li>S&amp;P 500: 4,649, +1.78%</li>



<li>NASDAQ: 15,341, +2.40%</li>



<li>Gold: $1,789, -0.18%</li>



<li>WTI Crude Oil: $71.47, +4.17%</li>



<li>10-Year Treasury: 1.470%, +0.053%</li>
</ul>



<h3 class="wp-block-heading"><strong>Latest in Crypto:</strong></h3>



<ul>
<li>BTC: $48,667, +2.60%</li>



<li>ETH: $4,017, +1.30%</li>



<li>ETH/BTC: 0.0824, -2.17%</li>



<li>BTC.D: 40.63%, +0.54%</li>
</ul>



<h3 class="wp-block-heading">BTC 2021</h3>



<p>BTC opened the year strong with a Q1 rally up to <a href="https://coinmarketcap.com/currencies/bitcoin/" target="_blank" rel="noreferrer noopener">$57,500</a> ignited by Tesla&#8217;s <a href="https://coinmetrics.substack.com/p/coin-metrics-state-of-the-network-330" target="_blank" rel="noreferrer noopener">announcement</a> on Feb. 8, 2021, that they had added $1.5 billion worth of BTC to their balance sheet. </p>



<p>Tesla&#8217;s announcement coincided with an increase in the number of wallet addresses with a non-zero balance, according to data from <a href="https://studio.glassnode.com/metrics?a=BTC&amp;category=Distribution&amp;m=addresses.NonZeroCount&amp;modal=loginForm&amp;s=1572363587&amp;u=1640044800&amp;zoom=" target="_blank" rel="noreferrer noopener">Glassnode</a>. As seen in the chart below, the number of people who own BTC is at an all-time high.</p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png" alt="" class="wp-image-13002" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=1800 1800w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Source: Glassnode</figcaption></figure></div>


<p>BTC then marched on in Q2 of 2021 as Coinbase, the most widely used exchange in the US to purchase digital assets, <a href="https://news.bitcoin.com/coinbase-ipo-april-14-nasdaq/" target="_blank" rel="noreferrer noopener">went public</a> on April 14. The anticipation of the event led to a rally above $63,000 before breaking trend and retracing below $50,000 in the following weeks.</p>



<p>However, the big decline did not occur until China <a href="https://medium.com/coinmetrics/bitcoin-miners-are-escaping-china-d3937e8f018c" target="_blank" rel="noreferrer noopener">announced</a> it would ban bitcoin mining at the end of May. </p>



<p>&#8220;The Chinese government announced a regulatory crackdown of Bitcoin mining and trading. Although China has &#8216;banned&#8217; Bitcoin several times in the past, this time was different:&nbsp;<a href="https://medium.com/coinmetrics/bitcoin-miners-are-escaping-china-d3937e8f018c" target="_blank" rel="noreferrer noopener">Chinese Bitcoin miners started to shut down</a>&nbsp;and rapidly leave the country in anticipation of regulatory action. The amount of BTC transferred by miners hit a yearly high as some miners moved to sell their holdings and move out of the country.&#8221; reads a <a href="https://coinmetrics.substack.com/p/state-of-the-network-issue-134" target="_blank" rel="noreferrer noopener">Coin Metrics report</a>.</p>


<div class="wp-block-image">
<figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="702" height="407" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png" alt="" class="wp-image-13004" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=702 702w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=450 450w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=378 378w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=80 80w" sizes="(max-width: 702px) 100vw, 702px" /><figcaption class="wp-element-caption">Source: Coin Metrics</figcaption></figure></div>


<p>Between the mining ban and a highly leveraged market structure, a lot of traders were forced to close their long positions which helped push the price below $<a href="https://coinmarketcap.com/currencies/bitcoin/" target="_blank" rel="noreferrer noopener">35,000</a>.</p>



<p>Futures open interest dropped from $20.73 billion on May 10 to $10.93 billion on May 23, according to data from <a href="https://www.coinglass.com/BitcoinOpenInterest" target="_blank" rel="noreferrer noopener">Coinglass</a>.</p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="382" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png" alt="" class="wp-image-13005" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=1340 1340w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Source: Coinglass</figcaption></figure></div>


<p>After a long chop sideways in Q3, the launch of a US-based bitcoin futures backed ETF product in <a href="https://cms.blockworks.co/first-bitcoin-strategy-etf-puts-btc-in-overdrive-price-tops-64k-markets-wrap/" target="_blank" rel="noreferrer noopener">October</a> sparked another rally to fresh all-time highs.</p>



<p>The <a href="https://coinmetrics.substack.com/p/state-of-the-network-issue-134" target="_blank" rel="noreferrer noopener">Coin Metrics report</a> continues: &#8220;By October 19th BTC price topped $64K, surpassing Q2’s top and setting a new all-time high. Q4 also ushered in Bitcoin’s biggest upgrade in four years: Taproot. Taproot introduced new scripting possibilities and laid the foundation for new smart contract functionality, while improving Bitcoin’s security and privacy. So far, about&nbsp;<a href="https://txstats.com/dashboard/db/taproot-statistics?orgId=1&amp;from=now-30d&amp;to=now">1.6K BTC has been stored in Taproot P2TR outputs</a>&#8220;.  </p>



<h3 class="wp-block-heading">Bitcoin today</h3>



<p>BTC was last trading near $48,650, up ~5.20% on the day, according to data from <a href="https://www.coingecko.com/en" target="_blank" rel="noreferrer noopener">Coingecko</a>. Some traders are pointing to the possibility of a short squeeze on the heels of <a href="https://app.laevitas.ch/dashboard" target="_blank" rel="noreferrer noopener">mixed perpetual funding</a> rates and rising stablecoin-margined open interest when compared to flat coin-margined open interest.</p>



<p>@bit_hedge noted on <a href="https://twitter.com/bit_hedge/status/1473268340445618180?s=20" target="_blank" rel="noreferrer noopener">Twitter</a>, &#8220;We&#8217;ve seen this picture before,&#8221; alluding to a similar setup today as the beginning of the end-of-summer rally seen earlier this year. </p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png" alt="" class="wp-image-13008" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=1920 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Source: @bit_hedge</figcaption></figure></div>


<h3 class="wp-block-heading">Other key metrics from 2021</h3>



<p>On-chain highlights for BTC, ETH, Tether and USDC over the course of 2021 can be found in the table below:</p>


<div class="wp-block-image">
<figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="670" height="467" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png" alt="" class="wp-image-13009" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=670 670w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=369 369w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=374 374w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=314 314w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=80 80w" sizes="(max-width: 670px) 100vw, 670px" /><figcaption class="wp-element-caption">Source: Coin Metrics </figcaption></figure></div>


<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



<p>Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found below:</p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="337" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png" alt="" class="wp-image-13014" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=1224 1224w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Top Ethereum Projects</figcaption></figure></div>

<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="280" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png" alt="" class="wp-image-13015" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=1196 1196w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Top Solana Projects </figcaption></figure></div>


<p>If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.</p>



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