Bear markets are for building

Bitcoin turned 14 years old last month. Catch up on the January bitcoin news here.

Top Events

• Bitcoin ‘Ordinals’ gained traction and caused controversy. Put simply, every satoshi can now have an ordinal number between 0 and 2,100,000,000,000,000 (hence the term “ordinals”) assigned to them. [Note: A satoshi is the smallest denomination of bitcoin, equivalent to 100 millionth of a bitcoin.] This Ordinal can then be linked to some other information, like digital artefacts and NFTs. There have already been over 200,000 Ordinal inscriptions to date. Does this matter? There’s a good explainer here.

• US regulators have launched a number of actions against the bitcoin and crypto sectors, in what has been called Operation Choke Point 2.0. They can’t kill bitcoin, but could do damage to the listed companies in the space. Coinbase Global (NASDAQ: COIN) was -1% and Silvergate Capital (NYSE: SI) -5% for the month.

• Nostr is a new, rapidly growing social network protocol. At the moment, it’s mainly used by early adopters like tech and bitcoin enthusiasts. However, with the uprising against censorship on centralised social platforms, we think Nostr and clients like Damus will get a whole lot more attention.

Lightning Network Updates

Institutional capital may have cooled on our sector and the naysayers are certainly emboldened after the recent market calamity. But the breadth of development around the Lightning Network in particular is truly staggering. Bitcoiners are building products with actual utility that are creating a natural funnel for adoption. Below are just a few highlights:

• Bitcoin’s mempool is now consistently full, and transaction fees are beginning to rise. This pressure on block space can be attributed to Ordinals mentioned above. If fees were to remain consistently elevated on Bitcoin’s base layer, we think it’s likely that the Lightning Network will see accelerated uptake from Bitcoin businesses and users as a preferred payment method.

• Stacker News, the Hacker News alternative where you get paid bitcoin for contributing, is on track to crush their all-time high user registration numbers in February.

• Public capacity on the Lightning Network is sitting at a new all-time high, and is up over 60% in the last year.

• One of the biggest custodial Lightning wallet providers, Wallet of Satoshi, continues to see growth in signups and payments.

Bitcoin Mining

• Iris Energy (NASDAQ: IREN) announced it is increasing self-mining capacity from 2.0 EH/s to 5.5 EH/s over the coming months. US$67 million of remaining Bitmain prepayments were utilised to acquire 4.4 EH/s of new miners without any additional cash outlay. Watch CEO Dan Roberts discussing the increased capacity and Q2 FY23 results. Shares were up 29% in February.

• Bitcoin mining infrastructure startup Giga Energy raised US$10 million in Series A funding round. Giga focuses on bitcoin mining on flared gas sites.

• Hut 8 (TSE: HUT) and US Bitcoin Corp announced a merger to create a bitcoin mining giant in North America. With an implied market cap of US$990 million, this merger is the largest M&A deal in the history of bitcoin mining. It will boast an installed self-mining capacity of 5.6 EH/s, 220 MW of hosting, and 680 MW of managed infrastructure across six sites in the United States and Canada. The merged entity, to be called Hut 8 Corp, will be listed on both the Toronto Stock Exchange and the Nasdaq after the all-stock deal.

Best Articles and Podcasts

• A short video for anyone that still thinks bitcoin mining is a net negative for the environment.

• Information should be free, but your time should not. An interesting discussion about the issues with online reviews and yet another example of the Lightning Network’s suitability for micropayments and how it can help create a trusted review platform:

Macro and Politics

• “By the end of this decade, I have considerable concerns regarding a fiscal spiral occurring in the United States and other developed countries…” – Lyn Alden breaks down the Fed’s balance sheet and how they came to be operating at a loss.

• A projection from the non-partisan Government Accountability Office (GAO) lays out projected increases in the major spending categories and interest expenses. All while revenues remain flat at best (all key projections shown as a percentage of GDP):

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