Blockchain analytics company Arkham Intelligence claims to know the specific wallets holding Tesla’s and SpaceX’s bitcoin. Once thought to simply be held by a corporate custodian with impeccable privacy practices, analysts at Arkham claim that they have now uncovered Tesla’s 68 and SpaceX’s 28 bitcoin wallets.

According to its dashboard, Tesla currently owns 11,509 bitcoin worth $775 million at time of publication while SpaceX’s dashboard shows 8,285 bitcoin worth $558 million. Coinbase’s prime custody controls all of these wallets on behalf of Tesla and SpaceX.

Read more: Elon Musk promised to fund Dogecoin, now the foundation accounts are overdue

Here’s when Elon Musk got too scared to hodl Tesla’s bitcoin

If Arkham has correctly identified the Coinbase custodial wallets, it knows exactly when Musk authorized sales of Tesla’s bitcoin. (Tesla purchased precisely $1.5 billion worth of bitcoin in January 2021. Tesla also accepted bitcoin for vehicle purchases.)

First, on various dates during the first quarter of 2021, Tesla sold $272 million worth of bitcoin and realized a stunning $128 million in gains on those sales. (Bitcoin traded in a wide range during Q1 2021 from a low of $27,734 to a high of $61,782. The height of that range allowed Tesla to earn a 59% return within just a few weeks.)

Secondly, on various dates during the second quarter of 2022, Tesla sold $936 million worth of bitcoin and realized $64 million in gains on those sales.

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The post We now know when Elon Musk got scared and sold Tesla’s bitcoin appeared first on Protos.

In my previous coverage of MicroStrategy’s mega-leveraged all-in bitcoin bet, the main bone of contention was that the firm’s oversized bitcoin wager risks affecting the market significantly if it fails by having MicroStrategy margin called. Such a large concentration of bitcoin owned by one single entity makes the market vulnerable to its whims. 

This concentrated distribution of bitcoin wealth amongst bitcoin holders was most probably not something that Satoshi Nakomoto envisaged. But how exactly did we get from bitcoin being a new form of electronic money to being a form of digital gold?

Bitcoin was created by Satoshi Nakamoto as an autonomous means for the transfer of money. In fact, Satoshi defined bitcoin as “a purely peer-to-peer version of electronic cash.”

His white paper is about creating a money system that can be used independent of intermediaries. 

However, bitcoin’s use case as a method of payment and cash transfer is minimal compared to its massive use simply and purely as a speculative bet. 

In a study by the ECB published in 2014, a very strong correlation between bitcoin’s popularity and its price growth was found. Surprisingly, the study also revealed that bitcoin grew along with the shadow economy but it also came to the conclusion that the currency is more popular as a method of payment in countries with lower GDP per capita.

And according to statistics, as of 2021, the use of crypto is much higher in developing countries than in rich economies. Nigeria tops the list, with 42% of survey respondents having used cryptocurrencies, while in the USA the figure stands at just 13%.

There’s also evidence to suggest that bitcoin’s price may not going up due to mass and organic adoption, but rather by institutional players pushing the price up with speculative bets.

Enter MicroStrategy and Tesla

In September 2020, MicroStrategy made its first bitcoin purchase, immediately becoming the biggest known corporate holder. The company bought 70,469 coins at an aggregate purchase price of approximately $1.125 billion (approximately $15,964 per bitcoin), inclusive of fees and expenses. That’s a big purchase and an interesting price: within touching distance of bitcoin’s 2017 high before it plunged to below $4,000 the following year. A few months after MicroStrategy’s major buy, bitcoin’s price began to skyrocket.

MicroStrategy kept buying bitcoin but was soon joined by a new player: Tesla. In 2021, its SEC filing said it bought a total of $1.5 billion in bitcoin that year and intended to accept the crypto as a form of payment.

Elon Musk pumped the news on Twitter and bitcoin jumped from $38,000 to $46,000 in just 24 hours. In this year’s Q2, Tesla sold 75% of its bags.

Read more: Explained: MicroStrategy’s margin call math

There is also another metric to consider. According to crypto analytics firm Glassnode, by the end of June this year, up to 50% of unique bitcoin wallets were in profit. The number of unique wallets peaked in April 2021 with more than 1.2 million but as of July this year, the figure sat below 900,000. We can’t verify if these unique wallets are all owned by unique persons, however, a paper by Igor Makarov, associate professor from the London School of Economics, includes some very interesting facts.

By 2020, at least 5.5 million bitcoin, a third of all supply available, were held by intermediaries defined as exchanges or financial institutions which hold bitcoin in the name of another party. This would probably be a shocking number to Satoshi considering that he invented bitcoin for the specific purpose of cutting off intermediaries.

Looks like rich folk are stacking bitcoin

By the end of 2020, individual investors owned 8.5 million bitcoin. The top 1,000 holders own 3 million bitcoin, while the top 10,000 investors own 5 million bitcoin. Most importantly, Glassnode’s study found that only 10% of all bitcoin transactions had any actual economic purpose in terms of trade.

Amongst the intermediaries, we also find a large concentration of wealth in a few hands. The biggest intermediary, considered to hold the largest amount of bitcoin, is Grayscale with its Grayscale Bitcoin Trust (GBTC).

GBTC launched in September 2013 with less than $3 million in assets under management, yet today its parent company Grayscale is a leading crypto intermediary with a total of $14.4 billion in bitcoin and up to 700,000 investors with a minimum investment of $50,000.

It also boasts multiple crypto funds, including an Ethereum trust with $4.69 billion in assets, $714 million in various altcoin funds, and a $4 million DEFI trust. Grayscale has also been proposing to turn its bitcoin trust into an ETF, however, this has been refused multiple times by the SEC. 

Read more: Grayscale lawsuit against SEC escalates the GBTC hostage crisis

But why would you hold bitcoin in a trust if the whole point of bitcoin was to be a “pure peer-to-peer cash”? If you own shares of GBTC, you can’t even redeem your bitcoin so it’s reasonable to assume that GBTC’s clients are wealthy entities who are betting on bitcoin’s price going up but would rather have someone else hold it for them.

These include ARK Investments Management LLC, which is the biggest client with 0.84% of all GBTC and more than six million shares, followed by Horizon Kinetics Asset Management which owns 0.34% of the GTBC shares. Morgan Stanley’s institutional funds owned a lot of GBTC as of last year, even exceeding ARK’s holdings at one point with 13 million in total.

Bitcoin’s going cheap through GBTC

But America’s biggest bank isn’t the only one selling GBTC. Grayscale has sold at a discount on its NAV ever since late February this year. This basically means there’s an excess supply of shares outstanding compared to demand. At the time of writing, GBTC’s discount to NAV is a whopping 30% which means that you can buy bitcoin 30% cheaper through a GBTC share.

This discrepancy may be due to the fact that GBTC is not an ETF and therefore its outstanding shares are not equal to the outstanding demand. However, GBTC may also be in some trouble of its own. 

According to a recent analysis by DataFinnovation, it appears that Digital Currency Group (DCG), GBTC’s parent company, has been buying GBTC shares. DCG apparently bought up to 18 million shares of GBTC from March 2021 to March 2022. This purchase coincided with now-bankrupt crypto hedge fund Three Arrows Capital (3AC) selling 15 million of its GBTC shares.

At the same time, bitcoin’s price was increasing and the GBTC sold at a premium. Genesis, which is also owned by DCG, was loaning bitcoin for people to create GBTC. This seems odd, given that the bitcoin holder would lose the premium at which GBTC’s NAV traded when bitcoin’s price was soaring.

Genesis stopped loaning bitcoin to create GBTC shares when the NAV traded at a discount. Bizarrely, 3AC handed the bitcoin — which was loaned by Genesis — back to Genesis to be converted to GBTC shares. Then 3AC used these as collateral to take USD loans from Genesis.

Read more: BlockFi severs ties with GBTC, its most profitable asset ever

At face value, it seems that 3AC was given the funds by DCG to leverage GBTC’s premium hoping it would keep going higher: a circular self-consuming bet. With 3AC now in the process of liquidation, it remains to be seen what the full ramifications for GBTC will be. 

So, is bitcoin becoming a rich man’s casino? Comparing price action with the moves by major players seems to confirm this. And it may also explain why bitcoin is so volatile. Big players and big moves can shift the bitcoin market significantly or rather exacerbate the trend. Having a bear market that could flush out over-leveraged financiers from the market could be in tandem with Satoshi’s principles but it may not be good for the price.

For more informed news, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.

The post Are big players like Grayscale and MicroStrategy moving bitcoin’s price? appeared first on Protos.

Elon Musk’s electric carmaker Tesla posted record earnings last quarter and unlike in Q1 made no changes to its billion-dollar Bitcoin portfolio.

Tesla’s unaudited cashflow statement shows the company generated $11.4 billion revenue last quarter, up 98% year-on-year with $1.1 billion profit.

The Palo Alto giant also stepped up production. Tesla made over 206,000 cars in Q2, doubling its output compared to last year, WSJ reported.

• Tesla’s $1.5 billion Bitcoin disclosed in February remains its only crypto stake.
• In Q1, the company trimmed its BTC stash by 10% “to prove its liquidity,” said Musk.
• Tesla held $1.311 billion worth of Bitcoin as of June 30.

Public stocks that hold Bitcoin (like Tesla) must report impairment losses when their crypto is worth less than when they bought it.

Tesla recorded $23 million in Bitcoin-related impairment losses in Q2 — meaning the company was just in the red on their investment at the end of the quarter.

Tesla is back in the green at press time, according to Bitcoin Treasuries.

For now, buying Bitcoin is only way Tesla can acquire more. The company briefly accepted BTC in March only to rescind the offer two months later citing “rapidly increasing use of fossil fuels for Bitcoin mining.”

Tesla would take Bitcoin once more when miners confirm they consume 50% clean energy to generate new cryptocurrency, Musk claimed.

As for Musk’s other ventures, the maverick billionaire recently claimed SpaceX holds Bitcoin, and that he personally owns Bitcoin, Ether, and Dogecoin.

MicroStrategy is still mostly Bitcoin

Meanwhile, Michael Saylor’s business intelligence unit MicroStrategy pledged to keep buying Bitcoin.

The Virginia-headquartered stock now holds more than 105,000 BTC ($4 billion), said Saylor during its Q2 earnings call last Thursday.

MicroStrategy boasts a market cap of around $6.2 billion, which means Bitcoin makes up nearly two-thirds of the company’s overall value.

According to its Q2 earnings, the company:

• spent $529 million on 13,759 BTC in Q2 (approx. $38,467 each),
• raised $500 million by selling secured notes to fund its Bitcoin purchases,
• recorded $425 million in impairment losses on its Bitcoin last quarter.

Bloomberg noted that if MicroStrategy sold its entire Bitcoin portfolio today, the company would generate $1.4 billion in profit — more than double its cumulative earnings over the past 25 years.

“Going forward, we intend to continue to deploy additional capital into our digital asset strategy,” confirmed Saylor (that strategy is simply: buy and hold Bitcoin).

Bitcoin aside, MicroStrategy’s actual business hit $125.4 million in revenues for Q2, up $13% year-on-year.

Earnings show Square doubled profits

Jack Dorsey’s fintech play Square revealed its peer-to-peer payments platform Cash App raked in over $2.7 million revenue from Bitcoin transactions in Q2 — triple 2020’s equivalent period.

Square posted $4.68 billion in revenue last quarter, up more than 140% year-on-year. Gross profits almost doubled to clear $1.14 billion.

“Bitcoin revenue and gross profit benefited from year-over-year increases in the price of Bitcoin, [active Bitcoin users], and growth in customer demand,” said Square in a letter to shareholders on Sunday.

San Fran-headquartered Square:

• holds 8,027 BTC ($306.7 million),
• spent $220 million on its Bitcoin in total,
• wrote down $45 million in Bitcoin impairment losses last quarter.

MarketWatch highlighted that Cash App generated about half of Square’s Q2 profits ($546 million).

Square however barely takes a cut from Bitcoin-related earnings on Cash App. The company posted $55 million in Bitcoin-related profit, which means Square banked about 2% of its Bitcoin revenue.

Separately, Square announced it agreed to buy Australian payments firm AfterPay for $29 billion, its largest ever acquisition.

[Read more: Bitcoin is still running on Moscow Time — thanks to Dorsey’s Bitcoin clock]

Square’s all-stock AfterPay deal comes amid rising adoption of “buy now, pay later” offers from payment giants PayPal and Visa.

In a press release, Square hinted the buyout would bring AfterPay users the option to spend Bitcoin with merchants.

The post How Bitcoin impacted Tesla, MicroStrategy, and Square’s Q2 earnings appeared first on Protos.

London-based hedge fund Argonaut Capital is up 50% in three months on its MicroStrategy short as it continues to bet against Bitcoin stocks.

Argonaut chief exec Barry Norris told City Wire last week he believes the recent crypto rallies are “unsustainable.”

So, Norris is leveraging Argonaut’s $49 million Absolute Return fund to bet against Bitcoin stocks like MicroStrategy.

Norris then said Argonaut holds short positions in a number of crypto companies including Coinbase — the largest US digital assets exchange.

Coinbase made history in April as the first crypto exchange to list on public markets.

• MicroStrategy currently holds 92,079 BTC ($4 billion).
• MicroStrategy stock is down over 60% from its February peak.
• Coinbase stock has fallen nearly 30% since its April top.

“These are two of the biggest, most liquid plays on crypto in the equity world,” said Norris (via FN).

“[MicroStrategy is] just a very leveraged play on Bitcoin and should trade at a significant discount to its net-asset value.”

Norris unfortunately didn’t specify the dollar value generated by shorting Bitcoin stocks like MicroStrategy.

As for Coinbase: Argonaut’s $COIN short is just a few weeks old but Norris said it’s already “in the money.”

Norris did however note that Argonaut’s shorts — encompassing markets other than crypto — would equal 1.5% of the related fund’s portfolio.

This would make Argonaut’s original short position in MicroStrategy worth around $750,000.

Tesla is a Bitcoin stock but Argonaut won’t short it

Electric vehicle kingpin Tesla added $1.5 billion in Bitcoin to its balance sheet earlier this year.

Argonaut won’t be shorting Tesla anytime soon, even if wields the ‘Bitcoin stock’ moniker.

Norris told reporters Tesla’s short market is “too crowded” for that gamble.

[Read more: Chia crypto triggers HDD stock rally as Western Digital, Seagate surge]

Norris could be alluding to filings on Monday which revealed famed short-seller Michael Burry now holds a $534 million Tesla short.

Burry gained notoriety after spotting the looming financial crisis in 2008, profiting big by betting against shaky sub-prime mortgages.

The post Hedge fund profits by shorting Bitcoin stock MicroStrategy — but not Tesla appeared first on Protos.