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2020.01.16 Bitcoin Halving, Risks and Opportunities - Miami - Sean Walsh
- 1. Bitcoin Halving #3Risks And Opportunities Sean M. Walsh - sean@hyperblock.co - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh TNABC, Miami – January 2020
- 2. @SeanWalshBTC - www.linkedin.com/in/SeanWalsh Will Bitcoin’s 3rd Halving Matter? (Spoiler: I think YES!)
- 3. The Squabbling Brothers Of Bitcoin It’s looking increasingly likely that BTC and BCH will co-exist, however tense their relationship may be on Twitter... Bitcoin BTC Bitcoin Core + @SeanWalshBTC - www.linkedin.com/in/SeanWalsh BCH Bitcoin Cash
- 4. Part 1 of 5: @SeanWalshBTC - www.linkedin.com/in/SeanWalsh What Are Some Halving Details?
- 5. Bitcoin Halving Overview – Block# 630,000 • BCH Date: April 7, 2020 • BTC Date: May 12, 2020 • % of Bitcoin mined – 87% • New % mined per year – under 2% • 2017 % mined = almost 6% • 2017 – triple the coin expansion, and price up 19x (similar increase after 1st halving) sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
- 6. Is The Halving Priced-In? Is That Even Possible?? • BTC Mined Daily: • Before = $14.4M • After = $7.2M • Historically, Bitcoin price exhibits a non-linear response to Supply or Demand changes • New buyers enter the market daily attracted by scarcity. sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh 1800 BTC 900 BTC BTC/Day May 2020 The “Halving”
- 7. Annual Bitcoin Expansion @SeanWalshBTC - www.linkedin.com/in/SeanWalsh 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 2014 2015 2016 2017 2018 2019 2020 2021 Expansion, Ex-Dead BTC
- 8. Part 2 of 5: @SeanWalshBTC - www.linkedin.com/in/SeanWalsh Any Relevant Economic Principles?
- 9. Very Boring: Supply/Demand Equilibrium In General… If Supply decreases, Then, Price increases @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
- 10. Also Boring: Stock To Flow Ratio Valuation SF = Stock / Annual Production BTC SF, before = 23 BTC SF, after = 46 @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
- 11. Still Boring: Stock To Flow Valuation Bottom Line: @100trillionUSD found that SF drives BTC price with a R2 of 95% (ie – basically unquestionable) In other words, BTC price should continue marching upward with SF. @SeanWalshBTC - www.linkedin.com/in/SeanWalsh https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25
- 12. Much Less Boring: SF Model Price Prediction In fact, many experts agree that SF method is a useful post-halving price prediction tool... 2021 Predicted BTC Price = $55k @SeanWalshBTC - www.linkedin.com/in/SeanWalsh https://medium.com/digitalassetresearch/plan-b-is-now-plan-a-ed6277b21760
- 13. 1. Scarcity limited, predictable supply 2. Durability won’t decay 3. Divisibility easy to subdivide 4. Recognizability difficult to counterfeit 5. Fungibility units are exchangeable 6. Transportability easy to move Comparing Different Forms of Money 6 Characteristics @SeanWalshBTC - www.linkedin.com/in/SeanWalsh They all boil down to trustworthiness of the money (faith).
- 14. S Dur. Div. R F T Gold = 18 S Dur. Div. R F T USD = 13 S Dur. Div. R F T Arg Peso = 10 S Dur. Div. R F T Frequent Flier Miles = 5 S Dur. Div. R F T Starbucks Cards = 6 S Dur. Div. R F T Cowrie Shells = 15 @SeanWalshBTC - www.linkedin.com/in/SeanWalsh Scoring “Moneyness”
- 15. 0 1 2 3 4 Scarcity Durability Divisibility Recognizability Fungibility Transportability Bitcoin’s Moneyness Bitcoin Moneyness Score = 22 (out of 24) @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
- 16. 0 5 10 15 20 25 Cowry Shells Gold USD Arg Peso Frequent Flier Miles Starbucks Cards Bitcoin @SeanWalshBTC - www.linkedin.com/in/SeanWalsh Comparing Moneyness It all boils down to faith in the money...
- 17. @SeanWalshBTC - www.linkedin.com/in/SeanWalsh But, What Is Bitcoin Really Backed By?
- 18. Bitcoin Is Backed By Neck Tattoos What is Bitcoin Money backed by? Its users’ faith in its future value… (AKA, neck tattoos) @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
- 19. And, Money Tattoos Are Well Established… Paleolithic ballers must have been covered in Cowrie Shell tattoos… Roman Imperatorial Coinage from 1st Triumvirate circa 59BC @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
- 20. Volatility Explained: Price Elasticity of Supply In General… If a surge in demand increases PRICE, Then, additional SUPPLY enters market (think of things like eggs, bicycles, concert tickets, vitamins, oil, electric cars, etc) @SeanWalshBTC - www.linkedin.com/in/SeanWalsh Price» Qty » $130 1100 $100 1000 Increase of 30% Increase of 10%
- 21. Price Elasticity Of Supply - Bitcoin New Minted Coins (100k / month) + Coins Sold by Holders Bitcoin Supply As price increases, supply declines, leading to acceleration. Bottom Line @SeanWalshBTC - www.linkedin.com/in/SeanWalsh Supply» Price » Current Equilibrium
- 22. Miner Sells 100 BTC — $1 Million The Feeback Loop – Price Decline BTC Price drops to $6,000 for some reason Miner sells 167 BTC — $1 Million 66% Extra BTC Supply causes price to drop further to $3,000 Miner Monthly Operating Expenses — $1 Million BTC Price = $10,000 Miner sells 334 BTC — $1 Million
- 23. Miner Sells 334 BTC — $1 Million The Feeback Loop – Price Increase BTC Price rises to $6,000 for some reason Miner sells 167 BTC — $1 Million 50% Lower BTC Supply causes price to rise further to $10,000 Miner Monthly Operating Expenses — $1 Million BTC Price = $3,000 Miner sells 100 BTC — $1 Million
- 24. All That Is Why Bitcoin Is So Dang Volatile... @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
- 25. Sean M. Walsh - One of largest miners in North America - Related hardware and software products - Initial Public Offering in 2018 (Toronto) CEO, Hyperblock.co Bitcoin/Crypto Investments Founder, Redwood City Ventures Advisor, Science Inc, Los Angeles Advisor, GlobalLive Technology Partners, Toronto $2B+ Silicon Valley Private Equity firm Previously Vice President at Bertram Capital 15+ Years Online Customer Acquisition https://www.slideshare.net/SeanWalsh28 @SeanWalshBTC Linkedin.com/in/SeanWalsh sean@hyperblock.co
- 26. 20 MW Datacenter Overview https://www.youtube.com/watch?v=aZ6mjOWghnc
- 27. Our Strategy HyperBlock operates an efficient, North America-based blockchain database security utility service. 20MW cryptocurrency datacenter in the US Pacific Northwest. Proprietary Mobile, Modular Mining Unit. Hashrate sales to Bitcoin.com Automated trading system to optimize crypto assets. Crypto adoption accelerator & innovator.
- 28. MODULAR MINING UNITS SPEED TO MARKET HyperBox is a self-contained, unit, with a dedicated transformer, racking and cooling features. Units are in development. Targeting deployment in Q3 2019. MULTIPLE REVENUE STREAMS Modular units may be offered to individual clients for sale, or offered through HyperBlock hosting/hashrate sales. ENHANCED ECONOMICS Modular units provide a low cost path for machine deployment. Significantly advantaged cost base versus traditional facilities FLEXIBLE DEPLOYMENT Modular units can be deployed to any power location, including behind-the-fence opportunities. • Compact 20 ft prototype design available in custom sizes, up to 53 ft. • Prototype model includes 230 T17/S17 servers can be configured for 500 Bitmain S9 servers • Available from .5 to 2MW. HyperBox prototype model is .7MW
- 29. 29 PROPRIERTARY TRADING HYPERBLOCK AIMS TO OPTIMIZE ITS CRYPTO ASSETS THROUGH AN AUTOMATED, SPECIALIZED TRADING SYSTEM AUTOMATED SOFTWARE HyperBlock software engineers are developing a proprietary, automated trading system to help the company optimize its crypto holdings. GLOBAL PROP TRADING HyperBlock plans to begin active prop trading in 2020 by dynamically allocating funds to traders based on performance.
- 30. Part 3 of 5: @SeanWalshBTC - www.linkedin.com/in/SeanWalsh What About Bitcoin Miners?
- 31. Mining Revenue Trend Note: many miners survived revenue/TH drop because of 16nm mining servers available at attractive prices. @SeanWalshBTC - www.linkedin.com/in/SeanWalsh 16nm www.BitInfoCharts.com 16nm
- 32. Bitcoin Mining Investment Trend $0 $1 $2 $3 $4 $5 $6 $7 Billions Bitcoin Mining Gross Profit Vs. Capital Investment Cumulative Gross Profit Cumulative Capital Investment $1.2 Billion Deficit @SeanWalshBTC - www.linkedin.com/in/SeanWalsh CONCLUSION: $1.2 Billion over investment may take 2 years to repay.
- 33. @SeanWalshBTC - www.linkedin.com/in/SeanWalsh CONCLUSION: $1.2 Billion over investment still not yet repaid. ($1.5) ($1.0) ($0.5) $0.0 $0.5 $1.0 Billions Bitcoin Mining Net Cash Position Net Cash Position Bitcoin Mining Investment Trend $1.2 Billion Deficit
- 34. Mining Revenue Trend: Recent Note: mining server upgrades are happening more slowly in this halving cycle (more wafer foundry competition, and much smaller batches from Bitmain and others). @SeanWalshBTC - www.linkedin.com/in/SeanWalsh www.BitInfoCharts.com 7nm www.BitInfoCharts.com
- 35. Mining Server Comparisons Most S9s are barely breaking even now. @SeanWalshBTC - www.linkedin.com/in/SeanWalsh Approx 65EH/s, or 4.6 million Bitmain S9 servers, are still mining. Global hashrate will shrink dramatically, if no increase in BTC price.
- 36. Part 4 of 5: @SeanWalshBTC - www.linkedin.com/in/SeanWalsh What Are Miners Doing To Prepare?
- 37. Hybrid Solar Datacenter – 20 Kilowatt Modules • Solar + Battery + Grid Power • Patents Filed in 2018 • 50%+ more efficient than traditional solar power • 24 Hours x 365 Days Operation • Avg Power Cost below $0.015/kWh • Incr Annual EBITDA/MW = $300k • CapEx Break-Even In 2 Years, max • Visit prototype in Denver, CO sean@redwoodcityventures.com - @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
- 38. Part 5 of 5: @SeanWalshBTC - www.linkedin.com/in/SeanWalsh What Are The Conclusions?
- 39. Conclusion 1. Annual Bitcoin expansion will drop to below 2% for first time. 2. Stock-Flow models suggest upward post-halving price trend. 3. Most experts agree that it’s impossible to “price in” the halving. 4. BCH will offer a 3-week sneak-preview of halving results in April. 5. Miners tend to amplify price swings in both directions. 6. Halving might weed out the least efficient cohort of miners. 7. Pay attention to mining profitability over next several months. 8. For mining container, or hybrid solar datacenters, email sean@hyperblock.co @SeanWalshBTC - www.linkedin.com/in/SeanWalsh . .
- 40. Reminder: We’re Building New Money Technology @SeanWalshBTC - www.linkedin.com/in/SeanWalsh
- 41. Sean M. Walsh - One of largest miners in North America - Related hardware and software products - Initial Public Offering in 2018 (Toronto) CEO, Hyperblock.co Bitcoin/Crypto Investments Founder, Redwood City Ventures Advisor, Science Inc, Los Angeles Advisor, GlobalLive Technology Partners, Toronto $2B+ Silicon Valley Private Equity firm Previously Vice President at Bertram Capital 15+ Years Online Customer Acquisition https://www.slideshare.net/SeanWalsh28 @SeanWalshBTC Linkedin.com/in/SeanWalsh sean@hyperblock.co
Editor's Notes
- Note: you can make a white version of this deck for printing by clicking “Theme” in the top ribbon, and then selecting the basic white theme in your PowerPoint, like this… http://d.pr/i/10fsb
- https://www.binance.vision/halving
- Notes: Remember that it’s impossible to predict how sensitive Bitcoin price will be to a 50% reduction in Supply. Also, remember the Price Elasticity of Supply acts as an amplifier.
- US M2 is growing about 8% annually now: https://research.stlouisfed.org/fred2/series/M2 But BTC, an exploding global network phenomenon still in it’s infancy (relative to network size and tx volume), will be ¼ of that by 2020 (at below 2%)
- The idea of this slide is to simply describe the basic concept for typical products (oil, wheat, fidget spinners, coconut water, flatscreen tvs, eggs, etc) https://medium.com/@mohankrishnamurthy/economics-of-ridesharing-simultaneous-shifts-in-demand-and-supply-curves-3a089c67b90c
- https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25 Assume that 3M BTC (and BCH) are permanently lost
- https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25 Notes: 1. BTC SF ratio has exploded over the past decade
- OK. SDDRFT. How to quantify and compare forms of money. [Run through all six, with examples] Essentially, they all boil down to the trustworthiness of the money. People need to develop faith in their money. This is probably why cowrie shells worked so well for so long. People trusted them, and held onto their money habits for a LONG time.
- We decided to try this comparison method out for a few common forms of money. Here are six forms of money. We scored each from 0-4 on SDDRFT and made these radial or polar plots of the results. From top left, in chronological order of development… cowrie shells, gold, US Dollars, Argentinian Pesos, airline frequent flier miles, and Starbucks cards. The larger the colored area for each form of money, the higher it’s quality or “moneyness”. We’ll review the total scores in a minute, but let’s first look at Bitcoin in the same manner…
- Here’s how we scored Bitcoin. Score Meaning… 0 = Non existent 1 = Low 2 = Medium 3 = High 4 = Near-Perfect These scores are obviously subjective, and we assigned them ourselves, but we think they’re defensible, and adequately coarse. Maximum score is 24 points. As you can see, Bitcoin does quite well. Let’s compare all 7 forms of money we analyzed...
- Here’s all 7 forms of money. They’re in chronological order of development from left to right. Now, we doubt many people in the mainstream public sit around contemplating moneyness much right now, but we believe that’s changing quickly especially in places like Venezuela, Argentina, Russia, the Ukraine, etc. Geopolitical events could accelerate this any day, with the way things seem to be going. Note: the USD, and most fiat currencies, are perfectly good at Unit of Account and Means of Exchange. It just seems to us that people have a tendency, right or wrong, to also rely on money also as a Store of Value, and that causes problems for them. I’m not calling for a replacement of fiat currency, or criticizing any government. Fiat currency is excellent for Unit of Account, and Means of Exchange. It just has problems with Store of Value, yet diligent money savers continue to use it.
- https://99bitcoins.com/the-best-7-bitcoin-tattoos/#prettyPhoto People aren’t going to get a neck tattoo of a form of money unless they REALLY have faith it’s going to be around in the future! I imagine it’s very likely that people have always tattooed themselves with money they trust… dollar signs… gold coins/bars… all the way back to cowrie shell tattoos
- I imagine it’s very likely that people have always tattooed themselves with money they trust… dollar signs… gold coins/bars… Roman imperatorial coins from the first triumvarate in 59BC… all the way back to cowrie shell tattoos
- The idea of this slide is to simply describe the basic concept for typical products (oil, wheat, fidget spinners, coconut water, flatscreen tvs, eggs, etc)
- I want to show you a virtuous cycle we believe we can trigger with our Bitcoin customer acquisition campaign. This is the well-established theory of Price Elasticity of Supply It basically states that, as the price for a good increases, suppliers will increase their supply commensurately to attenuate price appreciation. That behavior would lead to an upward slope in the blue line. And we see this in well over 99% of all good and services sold in our society. Oil, food, computers, cars, houses… they all typify this behavior. However, we believe Bitcoin is a rare exception to this rule. We believe Bitcoin’s PES has a negative slope, meaning that as Price increases along the x-axis, Supply paradoxically declines. If true, this effectively means price appreciation would accelerate the higher BTC price moves. Each month there are about 4,300 12.5BTC block rewards produced by the network. There are 3 Billion internet-connected adults on the planet that could purchase those Bitcoins. In other words, each block reward could have 700k people fighting over it. There simply aren’t enough to go around. That leaves marginal supply to pre-existing holders, but human nature typically causes one to hoard more agressively as price increases. Where would you repurchase your sold BTC? Only the increasing market into which you just sold. This is what drives the very unusual reverse slope of the Bitcoin Price Elasticity Curve. Importantly, we believe we can stimulate this behavior by absorbing say 20% of newly produced Bitcoins with our customer acquisition campaign. http://www.economicsonline.co.uk/Competitive_markets/Price_elasticity_of_supply.html (take a quick look at the video, but don’t worry about understanding all of it) http://economics.fundamentalfinance.com/micro_price-elasticity.php
- https://bitinfocharts.com/comparison/bitcoin-mining_profitability.html
- https://bitinfocharts.com/comparison/bitcoin-mining_profitability.html
- https://www.f2pool.com/miners?currency_code=btc#list-head
- I’ll just leave you with this reminder of the varying transportability and scarcity of money. I think it’s Zimbabwe… REMINDER: I’m not calling for a replacement of fiat currency, or criticizing any government. Fiat currency is excellent for Unit of Account, and Means of Exchange. It just has problems with Store of Value, yet diligent money savers continue to use it.