M6 Labs Bitcoin Weekly

US Debt Spirals, BlackRock BTC Holdings Soar, Miner Profits At Risk

GM, Anon! The market remains in a state of consolidation, and analysts hold differing views on whether it will experience significant downward movement or if the bottom has already been reached, with expectations of further upward movement. Time will ultimately provide clarity, but in the interim, the market's consolidation phase hasn't hindered the continuous stream of developments across various fronts.

Bitcoin Updates & Metrics

The crypto market witnessed a significant drop in BTC prices, falling below the 40K mark. Many analysts anticipate further declines into the lower 30s before witnessing a price reversal and achieving new all-time highs, though the BTC price has since rebounded. 

  • It's important to consider the global liquidity landscape, as the world is currently in a cycle of liquidity stimulus which is a positive for crypto in the medium and long term. One example is how China has injected substantial funds into commercial banks to bolster medium-term liquidity, surpassing market expectations as a measure to support its struggling economy. 

  • Meanwhile, Grayscale continues to sell Bitcoin as investors exit the GBTC ETF, with FTX making a notable sale of approximately 22 million shares valued at nearly $1B. 

  • In contrast, ETFs offered by BlackRock and Fidelity are attracting users and performing well, despite fluctuations in the BTC market.

  •  Additionally, Hong Kong is planning to introduce its spot ETF by mid-year.

Source: CryptoCrunchApp

Examining key on-chain metrics indicates that the market has remained relatively stable with no significant downward fluctuations. The total market capitalization of stablecoins has seen a slight increase, with USDT maintaining its dominance in the stablecoin supply.

In January, the Bitcoin hash rate experienced a significant dip of 6% due to adverse weather conditions in Texas. 

  • However, this decline was short-lived, as evidenced by a remarkable rebound on January 25, where it reached an all-time high of 638eh/s, marking an impressive 24% increase in a single day.

Spot Bitcoin ETFs in the US have experienced net outflows over the past four days, with a total reduction of approximately $420M.

  • This is in line with short-term projections, according to VanEck's crypto research head, Matthew Sigel.

  • The combined net inflow for spot Bitcoin ETFs since their launch on January 11 exceeds $5.5B, excluding the substantial outflows seen by Grayscale Investments' Bitcoin Trust ETF (GBTC), which lost nearly $4.8B following its conversion to an ETF. 

  • GBTC's outflows can be attributed to its higher fees compared to rival funds. Experts believe that future flows into new products will depend on Bitcoin's performance.

A recent analysis by Cantor Fitzgerald, a financial services firm, suggests that 11 of the largest publicly traded Bitcoin miners may struggle to remain profitable after the upcoming halving event, given the current Bitcoin price of $40K and more.

  • The report highlights that miners like Argo Blockchain and Hut 8 Mining may face profitability issues after the halving, as their cost-per-coin rates exceed the current Bitcoin price.

  • The Bitcoin halving, set for April, involves a 50% reduction in block rewards, impacting miners whose operational costs may not be covered if Bitcoin's price does not rise significantly.

Bitcoin Monthly Analysis

Historical patterns tend to repeat themselves, and the years 2016, 2020, and 2024 exhibit intriguing similarities. Throughout each cycle's re-accumulation phase, Bitcoin adheres to a set of rules:

  • Following the cycle's bottom, BTC experiences a significant surge, surpassing the 0.5 Fibonacci retracement level.

  • The price then typically hovers in the range between 0.5 and 0.618 Fibonacci levels, marking the local top, after which a corrective phase begins.

  • The crucial indicator arrives when monthly candles close below the 0.5 Fibonacci level.

However, there are additional potential scenarios to consider, as Bitcoin's behavior is not entirely deterministic:

  • Bitcoin may undergo a correction that extends below the 0.382 Fibonacci level, often displaying wicks to the previous market structure.

  • In some instances, Bitcoin's trajectory may lead it to the mythical realm known as VALHALLA.

Considering these factors, the current BTC correction targets are set at:

  • T1: 36k (0.382 Fibonacci level)

  • T2: 33.5k

  • T3: 31.8k (aligning with previous market structure).

It's worth noting that these insights also reinforce the belief that BTC will ultimately reach a remarkable milestone of $1M during this particular cycle.

Guest Post from Kairos Trading. Join their Telegram & follow their Twitter.

Bitcoin Ecosystem Update

Despite a decrease in the number of active traders on most major NFT marketplaces, Blur remains a leader in the space, as volumes have experienced a slight increase. The OKX NFT Marketplace, in particular, has witnessed a significant rise in trading volume due to its focus on the sale of Bitcoin-related Ordinals and BRC-20 tokens, a move that seems to have paid off for the exchange. 

Magic Eden is undergoing a transformation by open-sourcing its minting and trading protocols in collaboration with a new DAO. 

  • This move aims to decentralize the platform and empower the NFT community. Additionally, Magic Eden plans to launch an NFT token to reward users who actively participate in its ecosystem. 

  • The NFT token will be distributed by the Non-Fungible DAO to users engaging with Magic Eden's protocols, although specific details about the token are yet to be disclosed. 

  • Magic Eden is also expanding its Diamonds rewards program to all four supported blockchains, providing rewards for marketplace engagement.

  • If you've been buying and selling ordinals on the platform, it's possible that you qualify for this airdrop in the future. Keep a lookout for updates.

Users who wish to participate in Saturn's upcoming airdrop season still have an opportunity to get involved.

  • To take part, they need to follow a few simple steps. First, they should establish a Saturn trading account and fund it with 100,000 Satoshis. 

  • Additionally, users can maximize their airdrop rewards by engaging in more transactions on the Saturn platform. It's essential to act promptly, as time is limited for setting up and participating in this airdrop season.

Sovryn introduce BitcoinOS which aims to "Build a World on Bitcoin" by addressing Bitcoin's limitations in smart contract functionality and scalability. 

  • They plan to evolve Bitcoin into a scalable, programmable platform using Rollups, which will add new functionality to Bitcoin without changing its mainchain. 

  • However, two challenges need to be overcome: creating trustless BTC rails and ensuring interoperability among rollups. 

  • Sovryn's BitcoinOS introduces a fraud system for trustless BTC rails and a shared layer for interoperability. 

  • This innovation enhances scalability, empowers developers, promotes decentralization, and promises a dynamic future for Bitcoin as a programmable platform.

Taproot Wizards, a project that secured $7.5M in funding by utilizing the Bitcoin Ordinals protocol, has unveiled its highly anticipated NFT collection called "Quantum Cats." 

  • The sale of these NFTs is scheduled for January 29th, starting with whitelisted users, followed by a public sale. 

  • If you're interested in this collection, you can join their Discord community and register your interest to participate in the sale at 3:00pm ET.

  • This collection features 3,333 cat-themed NFTs, created to pay homage to a Bitcoin improvement proposal named OP_CAT.

  • Taproot Wizards, founded by Udi Wertheimer and Eric Wall, is making its first collection sale with "Quantum Cats." Although the project initially minted Taproot Wizards, those have not yet been offered for sale.

Recapping some of the most exciting Ordinals collections. 

  • Ordinal Punks: This collection holds the distinction of being the first PFP (Profile Picture) collection on Bitcoin, boasting early inscription numbers. Limited to just 100 punks, it has attained legendary status within the Bitcoin NFT community.

  • Inscribed Pepes: Immortalizing the iconic internet meme Pepe the Frog, this collection comprises 69 unique 1/1 pieces. It gained immediate attention and later expanded with the introduction of Lil Peepos.

  • Bitcoin Bandits: Featuring 512 distinctive bandits, this collection has garnered a devoted following. It employed a unique rollout strategy and played a pivotal role in the Bitcoin NFT space.

  • Fomojis: A vibrant collection of 100 emoji-inspired characters injected fresh creativity into the Bitcoin NFT realm. It later expanded to Fomoji's 2.0 with 2,000 pieces.

  • Unordinals: This collection, characterized by black and white undead pixel art, gained popularity around the 44,000 inscription mark. Recently, it launched an extension collection named Unordinals: Rebirth.

  • Megapunks: Originally initiated on Stacks, the Megapont team shifted their focus to Ordinals, inscribing a 10,000-piece collection known as Megapunks.

  • Bitcoin Bears: Similar to Ordinal Penguins, Bitcoin Bears cultivated a dedicated following and offered unique pixel art featuring Bitcoin-specific attributes.

  • MNCHRMS (Monochromes): Taking a fresh approach to PFP collections, MNCHRMS features unique black-and-white comic-style art and was introduced by Beyond Rockets.

Spend time surveying these marketplaces to look for new and old collections

Trac has introduced "Trac Core for TAP Protocol," a significant advancement in Bitcoin data indexing. 

  • This development simplifies data indexing on the Bitcoin network and incorporates key protocols like TAP and PIPE. 

  • Its user-friendly setup is expected to attract a wider range of developers to the Bitcoin ecosystem. 

  • Trac Core's focus on sustainability makes it environmentally responsible, with multiple protocol instances on compact devices. Trac Core has an ambitious roadmap, including additional tools, apps, and indexer packages in 2024.

In recent developments, there has been an interesting airdrop event orchestrated by @rune_coin. This airdrop introduced the RSIC Metaprotocol. 

  • Those who were fortunate enough to receive this airdrop have found themselves rewarded handsomely

  • Remarkably, this event might signify the start of a new trend, with the potential for fresh protocols and innovative distribution methods to emerge in the aftermath of this successful airdrop. 

  • The beneficiaries of the RSIC Metaprotocol airdrop mainly consisted of holders of Bitcoin Puppets, Bitcoin Frogs, Node Monkes, or OMB

  • These fortunate recipients now possess RSIC inscriptions, each currently valued at a floor price of nearly 0.06 BTC. 

  • However, there is still some ambiguity and uncertainty regarding the precise purpose of these inscriptions.

  • Recipients must transfer the RSIC inscriptions to activate them for mining rune coins. This activation is tied to the recipient's wallet, offering flexibility in terms of when and how they opt to utilize their inscriptions.

  • Additionally, the community is eagerly anticipating the announcement of an upcoming boost feature, which is expected to be shared through this inscription.

Diving Into Recursive Bitcoin Inscriptions

These inscriptions represent a significant advancement within the realm of Bitcoin-based NFTs. Unlike Ethereum NFTs, which rely on smart contracts to achieve composability and dynamism, Ordinals do not possess native smart contract functionality. However, the concept of recursive inscriptions has enabled Bitcoin NFT projects to introduce their own versions of composability and dynamism.

  • In the context of Ordinals, recursion refers to the ability of one inscription to access and utilize the content of other inscriptions. 

  • This is made possible through specific "recursive endpoints," such as r/sat, which can retrieve the initial 100 inscription IDs on a particular satoshi. 

  • By leveraging recursive inscriptions, Bitcoin NFT projects have effectively overcome Bitcoin's inherent 4 MB block size limit, allowing for the creation of more extensive and intricate digital artworks on the Bitcoin blockchain.

  • One of the early adopters of recursion was the OnChainMonkey (OCM) project, which used recursive inscriptions to develop its OCM Dimensions collection. 

  • The widespread adoption of recursion led to the official integration of recursive inscriptions into the ord protocol, the underlying system of Ordinals, through updates like ord 0.11.0. 

  • As a result, numerous projects have embraced recursive inscriptions to explore new creative possibilities.

  • Notable projects that are currently pushing the boundaries of recursive inscriptions include Bitcoin Pizza Ninjas, which utilizes them for art generation and upgradeable traits. 

  • The project even deployed a Super Nintendo emulator on the Bitcoin blockchain, enabling its ninja characters to interact with it through recursive inscriptions.

  • Another intriguing project is Quantum Cats, created by the Taproots Wizard team, which employs recursive inscriptions and other innovative techniques to construct the project openly without revealing the completed artwork prior to its official release.

  • Checkout the collection here on Magic Eden:https://magiceden.io/ordinals/marketplace/rsic 

Enjoyed this article?

  1. Subscribe to Crypto Pragmatist by M6 Labs newsletter for crypto-native industry insights and research read by 30k+ subscribers

  2. Follow us on Twitter for Tweets providing top-notch insights and bridging the gap between users, builders, and leaders in the crypto space

Join the conversation

or to participate.