Bitcoin: What's Happening Post Halving

New Money: Issue #8

NEW MONEY is a recap of the week in Bitcoin. Everything you need to know, right to the point. New Money, is published by Adam Pokornicky of DAIM Digital, a Registered Investment Advisor for Bitcoin and Digital Assets. Twitter: @callmethebear

As we move beyond the 3rd Bitcoin halving and the two year+ bear market we’ve been in since crashing from the 2017 all time highs, it offers us an opportunity to take a look at what’s really happening with Bitcoin. Incredible progress and things have been built and developed to improve Bitcoin and its overall network while the underlying fundamentals of the network continue to demonstrate how strong and healthy Bitcoin is as we enter what is likely its next bull market cycle. I’d like to offer a big h/t to Delphi Digital (give them a follow on twitter) for providing most of the data and analytics in the back half of this post from their most recent “State of Bitcoin 2020” report.

For those new to Bitcoin or curiously following along, today’s issue will offer a beginners guide on what is happening with Bitcoin beyond the headlines, buzzwords and confusing explanations that never seem to capture what is truly happening beyond the price volatility. From features and hardware to infrastructure and investing upgrades to fundamental data, it’s amazing to consider all of it together as Bitcoin emerges as a form of New Money and its network lays the groundwork for an alternative financial system. While it can be overwhelming and a bit confusing to read about tech, systems and data that falls outside your immediate comfort zone, I’ll do my best to keep you engaged and limit the nerd speak to a minimum. Let’s jump in.

Network Features

  • The Lightning Network: Probably the most well-known feature upgrade being developed is the Lightning Network, a layer 2 solution which will grant Bitcoiner’s the ability to send instant transactions of very small value without worrying about block confirmation times. As you hopefully know by now, transactions are updated on the blockchain every 10 minutes. This creates a problem if for example you want to buy a cup of coffee or a slice of pizza with Bitcoin and the seller needs to wait for your transaction to be confirmed. With the Lightning Network, security is enforced by blockchain smart-contracts without creating a on-blockchain transaction for individual payments. Payment speed measured in milliseconds to seconds. Much of the work on the Lightning Network is being developed by Lightning Labs and Jack Mallers.

  • BTCPay Server: An open sourced software that allows users to create a self-sovereign bitcoin-enabled business stack. The software makes it easy for anyone who wants to accept bitcoin as payment in a self-sovereign way to do so. You can create a Point-of-Sale app for your store, easily embed a tipping button on your website, send a payment link to a client across the globe, or launch a crowdfunding campaign to raise funds for your cause

  • Privacy software: Bitcoin is often promoted as a tool for privacy but the only privacy that exists in Bitcoin comes from pseudonymous addresses which are fragile and easily compromised (e.g. through wallet mapping, reuse, "taint" analysis, tracking payments, IP address monitoring nodes, web-spidering, and many other mechanisms). The reality is, once your wallets have been mapped, privacy is difficult and often costly to recover, especially with chain surveillance companies working hard to help governments know your bitcoin transaction history. Luckily, teams like SamouraiJoinMarket and Wasabi have been working hard to provide and improve software that coordinates coinjoins.  A coinjoin is a method for combining multiple Bitcoin payments from multiple spenders into a single transaction. This makes it more difficult for outside parties to determine which spender paid which recipient/s. 

  • Nodes and Miners: Running a full node is an act of support for Bitcoin. Full nodes are the backbone of Bitcoin — they help keep the network decentralized and protect the protocol's consensus rules. As long as enough full nodes are up and running, miners (as well as everyone else) are forced to follow Bitcoin's rules. Projects like NodlmyNode, and RaspiBlitz have created high quality hardware to make it easier and easier for individuals to run their own full nodes so they can verify the bitcoin they are receiving. In terms of mining equipment, companies like CoinMine are making it easier for individuals to mine crypto from home or wherever you can place that smooth piece of equipment and “borrow” electricity.


Several advancements have been made to improve the on-boarding, investing and security of your Bitcoin and Digital Assets. Bitcoin was conceived to ensure the financial independence of people. Thereby self-sovereignty one of the most important aspects of Bitcoin. However, while a significant number of Bitcoin users/Hodlers/investors will desire to be their own bank and maintain self custody, there are many who do not care about self custody or just aren’t interested in going through the process of learning how to do it right. This makes a custody model something that is always going to be used by a section of the Bitcoin community, especially Funds, Investment Managers and Institutional clients, who require established custodians to secure crypto-assets, reduce risk, and provide regulatory compliance. Some considerations for self and third party custody:

  • Self Custody: Most retail investors store their Bitcoin on exchanges or hot wallets that have a history of being hacked. I lost Bitcoin when Mt.Gox was hacked back in 2014 and was personally hacked in June of 2017 (when a hacker was able to port my cell phone # to a new device and then gain access to my accounts through password resets). You can read more on it here and here. Many smart retail investors use hardware wallets that enable users’ Bitcoin private keys to be stored offline, which is significantly safer than leaving your coins on an exchange. Self custody or non-custodial options follow the Bitcoin mantra “not your keys, not your coins”. I’ve listed some of the best hardware and software custodial options below.

    Being in control of your Bitcoin is the ideal scenario but it comes with great personal responsibility. Cryptocurrencies are bearer assets, meaning that whoever has control of the asset, owns the asset. In other words, if you lose your Bitcoin or someone steals it, there are no options to get the money back.

  • Institutional/ThirdParty Custody: While some smarter retail investors will use the hardware/software wallets mentioned above, from an institutional investor perspective, a single USB hardware device is way too risky for managing client funds. What if an employee walks off with the hardware wallet and all the funds? Professional investors, funds, Financial advisors and retirement accounts need compliant cold storage and insurance from brand-name companies with a strong reputation. While there are many native crypto solutions, they simply don’t satisfy the biggest financial players. At DAiM, Digital Asset Investment Management, the Financial Advisor for Bitcoin and Digital Assets I’m building with my partner Bryan Courchesne, we’ve partnered with Gemini Custody to build a custody model for client assets that provides a secure environment, preventing assets from ever leaving personal accounts. This gives clients peace of mind that their assets can never be moved by us for any reason. Below, are several of the institutional custody options that have been successful so far in establishing a major role in the Institutional Custody space.

As a cryptocurrency investor, it’s important to identify your own security needs and pick the solution that best meets them.

Investing Onramps

Onramps for investing in Bitcoin continue to proliferate, offering investors convenience, choice and access that did not exist several years ago. While exchanges continue to dominate new user capital flows, Wealth Management and brokerage platforms are bursting on to the scene, giving individuals the opportunity to invest in Bitcoin directly in their retirement accounts, get the help of a financial advisor and auto-buy Bitcoin on a set cadence.

The top 3 U.S. exchanges, Coinbase, Kraken and Gemini are by far the most popular ways to invest in Bitcoin and Digital Assets but truth be told, while exchanges are excellent aggregators of liquidity, their business models are based on you trading and transacting especially convincing you to part ways with your precious Bitcoin. Their high all-in fees per trade 2.1% (1.49% + .60% ) are quite punitive and they promote and encourage users to transact in alternative coins, aka “shitcoins”, that that most have no business even considering.

Take for example the CEO of Coinbase, Brian Armstrong who has turned Coinbase, one of the earliest and best exchanges for on-boarding new users to buy Bitcoin, into a shitcoin casino that shills worthless coins that have destroyed users over the past 2.5 years. While Brian is certainly a pioneer in the space, he is no friend of Bitcoin or his users, devolving their product into the equivalent of a penny stock boiler room, suckering unsuspecting investors and pushing them into huge tax liabilities for every single time they trade. As recent as a few days ago, when J.K. Rowling, the famous author of Harry Potter books, was asking to explain Bitcoin, the CEO of Coinbase, is caught responding to a fake JK Rowling tweet(he has since deleted it) with a blatantly obvious pitch for her to buy shitcoins on Coinbase:

This is the type of behavior that has opened up opportunities for Financial advisors, Bitcoin-only institutions and new brokerage platforms to provide a similar on-boarding experience that provides an easy way for people to buy and sell Bitcoin with their local currency. These include:

All of the above offer different features, options and security that provide new users with excellent ways to gain exposure to Bitcoin. It’s important to note that many of these businesses operate as transaction/fee based businesses, so it is your responsibility to evaluate the relative costs of using each service. At DAiM, it is our belief that the most cost efficient way to gain long term exposure to Bitcoin is through tax-advantage retirement accounts. Being able to grow Bitcoin tax-free or tax deferred while shielding yourself from taxes on transactions will provide you with a leg up, especially if you decided to diversify your digital asset portfolio over years to come.

Network Stats - The Underlying Fundamentals

Network fundamentals paint a promising picture for the progress to data and long term value proposition of Bitcoin. While the value of Bitcoin varies from person to person, we see Bitcoin’s value as being driven by the demand for a non-sovereign, censorship resistant, hard-capped fixed supply, digitally native asset. Never has that need been apparent then the global response to COVID-19 that forced policy makes to do whatever it takes to avoid economic disaster, unleashing multi-trillion dollar relief packages and monetary stimulus that are unprecedented in nature. With fiat currencies being printed infinitely and available in abundance, the narrative around scarcity and Store-of-Value will only become louder and louder with the public perception of money and the nation-state coming into focus.

Adoption and Distribution

Supply Distribution by Wallet Size allows us to measure the continued new user growth that that is naturally seen in smaller wallet sizes. As you can see by the data in the bottom section, we continue to see the amount of supply held by smaller wallets increase over time which is a strong sign of new user growth and adoption. Analysis: Bullish 📈

Source: Delphi Digital

Retail Buyers are stepping in

Reviewing data from the CashApp, reported quarterly as a subsidiary of Square, shows that Cashapp users continue to steadily ramp up purchasing of Bitcoin. The line graph below shows the impact of CashApp users purchases as a percentage of total Bitcoin issuance at 21% in the last quarter. With the halving in the past, expect CashApp users to represent an even larges share of total Bitcoin issuance moving forward all else equal. As more buyers enter the ecosystem, where will all the supply come from??!!? Analysis: Bullish 📈

Source: Delphi Digital

Institutional Lending Continues to set Records

With Bitcoin serving as a bearer asset, Institutional and Decentralized lending continues to be one of the largest growth areas in the Digital Asset ecosystem. Analysis: Bullish 📈

Source: Delphi Digital

UTXO Analysis

UTXO analysis visualized the composition of the existing Bitcoin holder base using unspent transactions. Unspent transactions illustrate the last time Bitcoins were moved. The longer time has passed since the UTXO moved, the likelier that Bitcoin has been moved into “strong hands”. Conversely, due to Bitcoin’s intense volatility, weak hands have either walked away or exited. As you can see from the chart below, over 59% of Bitcoin hasn’t moved in over 1 year. The larger the percentage of Bitcoin locked up in longer term UTXO buckets, the less amount of supply likely available for new demand. Analysis: Bullish 📈

Market Value to Realized Value (MVRV)

Realized value represents the sum of all coins based on the last time they were moved. It’s an alternative measure to market cap that provides a unique perspective on the aggregate price entry of current holders. The blue line below represents the aggregate entry with the black line equaling current price. The difference being the in-the-moneyness. Dividing the market value by the realized value creates the ratio represented by the orange line in the bottom graph. As the market price increases, so does the ratio. When the ratio compresses below 1 it usually notes a bottoming scenario and when it rises above 4 it usually indicates a topping scenario. With Bitcoin dipping briefly below 1 this past March, it’s set up to move higher with a new holder base establishing itself. Analysis: Bullish 📈

Source: Delphi Digital

Bitcoin Hashrate

Bitcoin hashrate is a measurement of Bitcoin miners contributing resources and hashing power to earn block rewards and update the blockchain while securing Bitcoin’s network. As illustrated below, the Bitcoin hashrate continuously rises over time with only a few periods of drawdowns. As the network hashrate increases from competing miners, mining breakeven costs rise. For the average commercial miner to remain profitable and stay in business, a continuously rising Bitcoin price is needed alongside a continuously rising hashrate. Analysis: Bullish 📈

Source: Delphi Digital

Breakeven Mining Costs

Now that the halving is in the past and block rewards have been reduced to 6.25 Bitcoins every block, assuming the hashrate remains constant, the breakeven cost to mine Bitcoins will rise to around $15,000. Analysis: Bullish 📈

Source: Delphi Digital


With Bitcoin, there’s no head of marketing or head of sales crafting a perfect message with emotional music playing in the background. You will hear a lot of noise at first because Bitcoin means different things to different people. Sometimes this can be in the form of bad takes, memes, childish tweets, scams and cringeworthy messages. Remember the JK Rowling tweet I mentioned above?

This is the CEO of another Bitcoin exchange trying to explain Bitcoin to JK Rowling as well last week.

If you want to see how just how bad Bitcoin marketing is and how different people explain it, step into the responses in the JK Rowling thread. Then just imagine how every newcomer to Bitcoin feels when they hear about it or try to understand it from a Bitcoiner. I made a little video below that illustrates what it’s like to be a normie looking to understand Bitcoin.

In truth, it takes a lot of time for normal people/precoiners/non bitcoiners to hear through the noise. But with every bad take and cringeworthy tweet also comes genius explanations, valuable tweets and access to information and education that you won’t find in a classroom or working on wall street. One of the greatest things about Bitcoin is that it forces all of us to question everything and look past motivations and really buckle in and learn before making decisions. When you can’t trust anyone but yourself, you have no option but to dive into the rabbit hole and learn. Because most people are lazy and unmotivated to learn, it will leave many behind. Don’t be one of them. Analysis: Neutral/negative 🥴

Parting thoughts

Looking at all of these improvements and underlying fundamentals it’s hard not be bullish about the future of Bitcoin. 11 years after the issuance of the genesis block, Bitcoin is working exactly like it was intended, worth billions of dollars, and is on its way to establishing itself as a new form of money that is independent of governments while quietly building an alternative financial system. Wen you combine all the above along with the macro landscape unfolding, it feels irresponsible at this point to not Get Off Zero and have some skin in the game.

As I sign off, I’ll leave you with this quote from the great philosopher and economist FA Hayek, who was awarded the Nobel Prize for his book “The Denationalization of Money” which argued for the end of the government's monopoly on currency and offered some truly groundbreaking ideas that set the stage for our current day digital asset ecosystem.

See ya next week!

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