Crypto Newsletter April '24
Bitcoin mining rewards cut in half and education on Ordinals & Runes - plus a hybrid event on May 9th to fix your crypto "blind spots" and a chance to learn Bitcoin options trading!
This newsletter covers current headlines within the crypto space, my opinion on them and projects & people I find interesting. Also included is information about important crypto community events both locally & globally. Opinions shared within the newsletter are my own and do not constitute investment advice.
Howdy crypto-heads! The Bitcoin halvening is upon us and we’ve seen a consolidation out of altcoins and into the “bluest chip” crypto, BTC, possibly in anticipation of the rally that usually follows each 4 year Bitcoin halving.
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For this edition of the newsletter, here’s what I’ll be covering for April:
Bitcoin Approaches Halving as Alts Puke
Explained: Ordinals and Runes on Bitcoin
Hybrid In-person/Zoom Event for May 9th
~ Extra: Learn Bitcoin Options Trading ~
1. Bitcoin reduces Miner’s reward as dominance increases
So what is this “halvening” that’s dominating the crypto news cycles and what does it have to do with Bitcoin? Well, roughly every 10 minutes Bitcoin produces a new “block” of transactions, moving BTC from address to address, and each time a halvening occurs, the Bitcoin reward paid to the miner of each new block is reduced by half.
This time around the 10 minute reward is going from 6.5 BTC down to 3.125 BTC, hence the moniker “halving”. The current halving is only the 4th ever and occurred on April 19th for us mountain time folks.
Historically when Bitcoin halves the miner’s block reward, the price rally’s for nearly a year or more! This is most likely due to the supply of new Bitcoin entering circulation being cut in half, but as time goes on the psychological expectation that halving = number-go-up is likely effecting things as well.
Basic economics tells us that if the supply of a good is reduced, but the demand is stable, the price will increase until demand falls. This logic is what drives the narrative that the halving is a positive fundamental event for Bitcoin.
Bitcoin Price is a coin toss
As altcoins continue to lose marketcap into Bitcoin though, we have two competing narratives vying for dominance and impacting “Bitcoin’s next big move”.
On the negative side there is Iran and Israel rattling their sabers (and actually making taking some small swings at each other too) which many see as generally bad for Bitcoin. Whenever we get global uncertainty, like the escalation of a regional conflict in a notorious hot spot, the large market players often de-risk their holdings in anticipation of the global economy becoming disrupted. With cryptocurrency still firmly considered a “risk-on” investment, the big, old money folks are usually quick to close their positions for more traditionally stable stores of value.
Additionally, Iran is rumoured to have significant Bitcoin mining operations and if it they need some funding for, say, a drone attack or paying some proxy orgs to do their dirty work, I’d expect they’ll need to sell some of that BTC they’ve stashed away for a rainy day.
On a more positive note though - My dear brother’s and sister’s, have you heard the good news about the halvening?!
Seriously though, the psychology behind this once-every-4-years macro event is not to be trifled with. Even NPR (which I’ve never seen publish anything positive about crypto) ran a front page story on the significance of Bitcoin’s inflation rate reducing.
So where might the price go based on these competing narratives? Unfortunately I’m not sure, and I figure there’s only a 33% we head up from here, at least for the next month or so.
In addition to the Iran/Israel conflict, helping shape my primarily negative sentiment is the fact that Binance’s founder and former CEO, Changpeng Zhao, or CZ as you likely know him, is facing a 36 month prison sentence if the DOJ has it’s way, along with a $50M fine for his actions at the helm of Binance. And, El Salvador has seen it’s state-blessed Bitcoin wallet, Chivo, have it’s source code exposed on a black-hat hacking forum after recently allowing other hackers to steal personal, identifying data on 5.1M El Salvadorian’s.
Resistance and Support
If you read the last newsletter you’ll see that my trading price levels haven’t changed, and I’m still watching for $87k (1.618 fib extension based on the previous ATH’s in 2021 and 2017) if we head up, and then $100k after if we continue.
For retracements, I still believe we’ve got strong support at $57k, $50k and under that $42k for potential bouncing or reversal levels assuming we keep heading down. Good luck!
2. Bitcoin Ordinals & Runes - Wut?
If you’ve been paying any attention to the discourse happening within the Bitcoin community you’re probably confused, or at least aware that some new things are happening.
OP_CAT, Ordinals, BIP420, Runes, BRC-20’s and other buzzy words have been making the rounds and I’d like to educate you about, in my opinion, two of the most interesting developments - Ordinals and Runes.
Both native to the Bitcoin blockchain, these two new protocols have been gaining attention and may present opportunities to grow your crypto portfolio.
Before I dive into what each of these protocols are, let’s start by highlighting the similarities they share:
Same Creator: Casey Rodarmor is behind both Ordinals and Runes, cementing him as an ongoing contributor to Bitcoin innovation.
Native to Bitcoin: Ordinals and Runes are built directly on Bitcoin’s base layer, leveraging its existing infrastructure without the need for additional layers or significant modifications to the core protocol.
Adoption by Community & Devs: Each protocol has generated significant interest within the Bitcoin community, attracting developers and users alike to explore new use cases for Bitcoin.
Opening up New Markets: Both protocols open up new possibilities for Bitcoin, with Ordinals facilitating the NFT market and Runes expanding the utility of Bitcoin through fungible tokens. This diversification can attract different segments of the crypto community to Bitcoin as they are BTC versions of Eth’s ERC-20 tokens and native NFT’s, two very successful facets of the Ethereum (and other blockchain’s) ecosystem.
Ordinals Explained
While the protocol was developed by Rodarmor, the community champions of Ordinals have definitely been Eric Wall and Udi Wertheimer, the co-founders of Taproot Wizards who are “focused on leveraging the Bitcoin network for innovative projects, particularly through the use of Ordinals.”
In terms of what the Ordinal protocol actually does, the below is a (hopefully) simple explanation:
The Ordinal protocol allows for the inscription of data such as images, videos, and other digital content onto individual satoshis, aka the smallest unit of Bitcoin. These inscribed satoshis can function similarly to non-fungible tokens (NFTs), making each inscribed satoshi unique and collectible.
If you want to be all technical about it you could say that Ordinals: “Utilize a numbering system that assigns a unique identifier to each satoshi based on the order it was mined. This identifier is used to track and inscribe data onto the satoshis.”
And while bringing NFT’s to Bitcoin sounds awesome, there is a downside due to the fact that the inscription of data can increase the size of transactions, which potentially leads to higher transaction fees and greater network congestion for the foreseeable future (just ask Ethereum). This fact has led some Bitcoin heavyweights to come out against Ordinals and even caused the Jack Dorsey-backed mining pool, Ocean, to specifically offer users the ability to not mine transactions related to the Ordinals protocol.
If you’re interested in getting into Ordinals I recommend the Sparrow Bitcoin wallet and utilizing these helpful resources - https://www.reddit.com/r/BitcoinOrdinals/wiki/index/resources/
If you still need help you can always reach out to me via email matt@denvercryptogroup.com to make sure your Ordinals experience is accomplishing your goals.
Runes on Bitcoin
Runes are a newer development than Ordinals, and just recently grabbed the spotlight as the protocol timed their mainnet launch with the Bitcoin halving that occurred on April 19th.
The result was a spike in Bitcoin transaction fees that saw people paying over $100 in BTC just to move some Bitcoin around. While things have calmed down a bit since then, transaction fees on Bitcoin remain elevated as the appetite for Runes seems to only be slightly slowing down.
Simply put, Runes are designed to facilitate the creation and management of fungible tokens on the Bitcoin blockchain. This protocol aims to streamline the issuance of fungible tokens, which are interchangeable and not unique like the inscribed satoshis in Ordinals.
For the technical folks out there, Runes also: “Operate within Bitcoin’s unspent transaction output (UTXO) model. They use a special transaction type called OP_RETURN to encode data about token balances, which is intended to allow for the efficient transfer and management of fungible tokens.”
And, while Runes are designed to minimize their impact to Bitcoin network congestion, we can see that with enough demand both Runes and Ordinals can have a significant impact on the price everyone pays to transact on Bitcoin.
With Runes being a more recent development, I found some decent resources for getting involved with them. However, I haven’t personally used each of these resources yet so please be careful if you end up using them for managing large amounts.
I’ll be up to speed soon though and am happy to help if you’re interested in learning more or creating/purchasing them! matt@denvercryptogroup.com
Wallet - https://www.xverse.app
Marketplace - https://magiceden.io/runes
Etch, mint & transfer Runes - https://runealpha.xyz
3. See Past Your Crypto Blind Spots
If you’ve been feeling anxious about making the most of the recent crypto bull market, then you will definitely need to attend the next Denver Crypto Group meetup. On May 9th (Thurs) I’ll be hosting a hybrid in-person and zoom community meeting to cover the Crypto Blind Spots that are holding people back from realizing their portfolio’s full potential.
Over the years I’ve realized how valuable it is to know when to sell (or hold), the proper way to hold, how to pick the right opportunities to pursue and understanding what unseen risks are and how to mitigate them. With this in mind I’ll be hosting an educational event where you’ll be able to learn something valuable and ask questions at the conclusion of the presentation.
In-Person: Eloise May Library, 1471 S Parker Rd, Denver, CO 80231
Online Zoom: https://us02web.zoom.us/j/85881997520?pwd=S2c5azF0dXJhUTA4bzRWYXZnQU44dz09
Hope to see you there!
Bonus - Learn Bitcoin Options Trading
For any of you who are interested in learning to trade Bitcoin options I’ve recently had some interest from a few Denver Crypto Group members and decided to open up the upcoming training class for everyone.
This will be a 3 week course and you’ll need to have a Fidelity or Schwab brokerage account with access to Bitcoin Options.
The course will cover teaching you technical (charts) and fundamental (news/psychology) analysis of Bitcoin for predicting price movements and then training on the different “options” available for trading Bitcoin options and picking which product works best based on your price movement prediction.
Email me matt@denvercryptogroup.com or call 303-558-6436 if you’re interested in learning how to successfully trade Bitcoin options, the price will be based on how many seats we fill and run through late May/early June, 2024.
That’s it for this edition, stay happy and healthy and I’ll catch you soon!
Much Love,
~Matt