Week of 4.26.20 - Issue #25
Welcome to the 25th edition of the â¿it Economy! Each week, I break down the top stories in Bitcoin in a simple in clear format.
Topics: Recurring Buys & LND Update
The Brief:
This weeks issue covers Square's Cash App dipping its toes into the Dollar-Cost Averaging market and a new LND update from Lightning Labs. Be sure to check out the jam packed content session this week with pieces from Parker Lewis, PlanB and much more. And for those interested in the geopolitical impact of COVID-19, oil prices and the looming economic recession, be sure to give Anthony Pompliano's podcast with Peter Ziehan, author of The Accident Superpower.
S1:Â CashApp Adds Recurring Payments
What is it? - Square's Cash App began offering Bitcoin in 2018, and has seen steady growth in its numbers since then, with $37 million of Bitcoin being purchased in Q2 2018 increasing to $148 million in Q3 2019. The peer-to-peer payment app lets you instantly buy, sell, store, withdraw and deposit Bitcoin. Thus, Square's Cash App doubles as a simple Bitcoin exchange and custodial wallet. But as of a couple days ago, you can now set up auto-buy or recurring payments. Payments like these allow one to dollar cost average (DCA) into a digital asset like Bitcoin. What is DCA?
âDollar-Cost Averaging is a strategy that allows an investor to buy the same dollar amount of an investment on regular intervals. The purchases occur regardless of the assetâs price.â â Investopedia
To be more specific, DCA is where one purchases the same dollar amount of an asset in regular intervals. The purchase of the asset occurs regardless of the price. That means that sometimes your money will buy more shares or fewer shares, depending on the cost that day.
With dollar cost averaging, you can define how regularly you'd like to buy Bitcoin, generally using the same amount of money. For example,if you have $1000 that you would like to spend on Bitcoin, you can allocate it towards ten $100 purchases per week rather than one purchase.
Why it Matters? - There are countless investment strategies an investor may choose to gain exposure to Bitcoin, depending on one's risk appetite. DCA is a strategy used by investors to that are looking to purchase Bitcoin for the long-term, since it shields them from potentially distributing all their capital at a price peak. Using dcaBTC.com we can calculate and compare a weekly biweekly $10 purchase of Bitcoin vs. the Dow Jones Industrial Average (DJIA):
Cash App joins a few companies in the space that focus on bitcoin-only products such as River Financial and Swan Bitcoin. All link to your bank account and automatically purchase and store bitcoin for you, allowing you to invest small amounts in bitcoin over time.
Another reason that recurring buys might be appealing is if you are not deeply invested in the following the bitcoin market closely. You may understand the importance of investing in a scarce digital asset, but do not really want to put in a great deal of time into watching the markets for lows and highs. If this is the case, then you might be one who is better off with a recurring buy.
S2: lnd v0.10.0 beta release
What is it? - Lightning Labs, a San Francisco-based software firm announced the release of the Lightning Network Daemon (lnd) v0.10 beta. The update centers on making routing efficiency improvements, channel management and database architecture. These additions aim to improve routing efficiency as well as strengthen channel infrastructure. Below are a few improvements to note:
Multi-Path Payments (MPP)
Partially-Signed Bitcoin Transactions (PSBT)
Increased max payment size of 16.7 million satoshis (~0.167 BTC)
Anchor Commitment Format
Why it Matters? - So what does this all mean? Let's break down each component.
Multi-Path Payments
MPP allow a user to spend or receive money using more than one of their channels at a time. This development eliminates the need for spenders to worry about the balances of specific channels. They allow for multiple channels to be used together in concert which in turn, means that large amounts of bitcoin can be sent both quickly and cheaply.
Partially-Signed Bitcoin Transactions (PSBT)
Introduced by Andrew Chow (BIP-174) in 2017, PSBT aims to create a standard extensible format that different clients can put in place to make it easier for users to sign and combine their signatures. For those who need a quick refresher on multi-signature setups refer to Issue #10, but is is where two or more people must sign a transaction for it to be valid. But, they have one limitation: the act of signing must be simultaneous. Thus, before a transaction is broadcast to the network everyone who agrees with it must sign. For Lightning users, PSBT support allows users to open new lightning channels directly from their hardware wallets.
Increase Max Payment Size
Before the update, the largest invoice size was 4.2 million satoshis (0.042 BTC) or approximately $373 USD. Now, the number has almost quadrupled to 16.7 million satoshis (0.167 BTC) or almost $1500 USD. The limit is there due to the network still being in the development phase. Overtime, the limit will increase as the system proves stable enough.
Anchor Commitment Format
The software was originally designed in a way that users had to agree on a fee beforehand. Thus, the new anchor outputs make it possible for fees to be specified after a channel close transaction has been broadcast. This eliminates the need to negotiate fees for force closing a channel ahead of time.
Per Clark Moody's Bitcoin Dashboard, there are ~946 BTC are locked in Lightning Network Channels. This figure accounts only for public nodes. Will be keeping a close eye on these metrics as developers continue to push the bounds of the budding technology.
Final Thought - Not a week goes by without a new development on the Lightning Network.
Market Watch
- Total Market Capitalization: 244.07 Billion
- Bitcoin Market Cap: 162.47 Billion
- BTC Dominance: 66.50%
- High: $8,976.83
- Low: $7,551.05
- ATTOW: $8,857.88
Bitcoin's rally on Wednesday allowed it to erase all the losses that resulted from the infamous "Black Thursday" crash which saw the price drop as low as $3,800. Over the weekend the digital asset appear to enter another consolidation period as it looks to breakout and close above $9,000 for the first time since late February.
However, there is a diagonal trendline dating back to late 2017 that has proved difficult to breakthrough over the last 24 months. If the price were to breakout, an increase in volume and open interest is needed.
Speaking of open interest, the price explosion liquidated many millions worth of futures on popular derivative exchange BitMEX. As the price of Bitcoin rose, the OI fell to all-time low levels near 50,000 BTC. This indicates that the recent rally was an influx of buying activity on spot exchanges rather such as Coinbase and Gemini.
Bitcoin's Fear & Greed Index recently exited its lowest possible reading â Extreme Fear. Though the indicator remains near all-time lows, it is a sign that market sentiment is beginning to reverse. The digital asset market behavior is very emotional where investors often get greedy in times of price increase, thus resulting in FOMO. On the other hand, investors succumb to panic selling when seeing red numbers.
The Bitcoin hash rate continues to grow despite the upcoming halving event. This can indicate two possibilities â miners are not worried about losing half of their rewards in 10 days or they are scrambling to mine as much BTC as possible to cover their fixed costs post-halving. The higher the price of Bitcoin the more profitable miners become. At the time of writing, Bitcoin hashrate is at 112 EH/s.
Announcements
-Coldcard Kitchen Multisig Vault - Link
-BTCPay Server v1.0.4.2 Released - Link
-CardCoins to Sponsor Bitcoin Core Developer - Link
-c-lightning v0.8.2 Released - Link
-ColdCard v3.1.3 Released - Link
Interesting Reads
- Bitcoin Optech Newsletter #95 - Link
- Dressing For the Surveillance Age - Link
- Samouri OXT Research: Stolen BTC - Link
- Will Argentina Be The Next Venezuela - Link
- Bitcoin Stock to Flow Cross Asset Model - Link
- Bitcoin is Common Sense - Link
- India Orders Coronavirus Tracing App for All Workers - Link
- The Markets Compass March - Link
- Bitcoin and the Theory of Money - Link
- The Cat is Out of the Bag - Link
Great Listens
- Tales from the Crypt #156: Matt Ahlborg
- Tales from the Crypt #154: Amiti Uttawar
- Citizen Bitcoin: Bitcoin Symbiosis - Link
- Stephan Livera Podcast #169: Bitcoin & Acting Locally - Link
- The Pomp Podcast #284: The Geopolitical Landscape - Link
- What the Narrow Waist of the Internet Means for Innovation Today - Link
- Tim Ferris Show #427: Crafts of Writing, Friendship, Coaching, Happiness & More - Link
- Tim Ferris Show #419: How to Use Stoicism to Choose Alive Time Over Dead Time - Link
Final Quote
Have a great week! See you next Sunday.
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