Bitcoin backed loans | BetaShares

Bitcoin backed loans

BY Justin Arzadon | 3 May 2022
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The price of bitcoin and the rest of the crypto market was range bound for most of the past week and finished the week lower. At the time of writing, bitcoin was trading at $38,036.

Ether traded similarly, and was down -5.94% vs bitcoin’s -4.37% over the last seven days.

Bitcoin’s market cap fell to $723.7B, while the total crypto market dropped to $1.72T. However, Bitcoin’s market dominance rose to 42.17%

Price High Low Change from previous week
BTC (in US$) $38,036 $40,713 $37,585 -4.37%
ETH (in US$) $2,775 $3,026 $2,727 -5.94%

Source: CoinMarketCap. As at 1 May, 2022. Past performance is not indicative of future performance. Performance is shown in U.S. dollars and does not take into account any USD/AUD currency movements.

Source: Glassnode. Past performance is not indicative of future performance.

News we are keeping an eye on

Goldman Sachs (GS) has continued to explore new offerings around bitcoin and extended its first bitcoin-backed loan. Goldman’s secured lending facility allowed a borrower to use bitcoin as collateral for a cash loan. Exchanges such as Coinbase already offer this service, however this is a significant step for a major U.S. bank and should accelerate acceptance amongst other major banks. GS traded its first over-the-counter bitcoin options back in March, and this step illustrates GS’ desire to expand its crypto business line. A spokeswoman for the bank said in an email “the deal was interesting to Goldman because of its structure and 24-hour risk management.”1

A recent research report conducted by Cryptomonday.de found that $1.3B in digital currencies have been stolen this year, which is already 40% of last year’s $3.2B. Most of the stolen funds derived from decentralized finance (defi) protocol exploits which accounted for 97%. This is significantly higher than previous years where defi hacks accounted for 72% in the first quarter of 2021 and only 30% in the year prior. The exploits are a result of faulty code within defi protocols, where smart contract errors have been used to siphon stolen money. The author of the report explains that ‘because the defi environment is open source, anyone can search for vulnerabilities and errors within a defi project’s codebase.’ This could be considered as one of the biggest drawbacks to the defi sector. In the past, hacks to centralised exchanges were a popular target for hackers, but this has been in steady decline and now only accounts for less than 15% of the stolen crypto.2

The latest report released by the Bitcoin Mining Council (BMC) for Q1 2022 shows that the bitcoin mining industry has continued to improve its sustainable energy use and technological efficiency. BMC is a group of 44 Bitcoin mining companies claiming to represent 50% of the global Bitcoin network. Three metrics that are looked at specifically include electricity consumption, technological efficiency, and sustainable power mix. BMC researchers managed to survey roughly 50% of the network’s hashpower, which represented 100.9 exahash per second (EH/s) on March 31, 2022. The voluntary survey indicated that 64.6% of all the participants leveraged electricity with a sustainable power mix. The BMC report highlights “based on this data it is estimated that the global bitcoin mining industry’s sustainable electricity mix is now 58.4% or had increased approximately 59% year-on-year, from Q1 2021 to Q1 2022, making it one of the most sustainable industries globally,”3

On-chain metrics

Bitcoin (BTC): Number of Addresses with Balance ≥ 0.01 shows the number of unique addresses holding at least 0.01 BTC or US$390 at current prices. The indicator reflects take-up of bitcoin on a retail level.

Looking at data from on-chain analytics company Glassnode, retail adoption has continued to move higher and there are now over 9.9mm addresses with at least .o1 BTC or more which is an all-time high. These retail investors continued to accumulate regardless of the current macro environment.

Source: Glassnode.

Bitcoin (BTC): Percent of Supply Last Active 1+ Years Ago shows the percent of circulating supply that has not moved in at least 1 year. Bitcoin that has not moved in 1+ years could be considered ‘illiquid’ even though it would still be considered as part of the circulating supply. Limited supply and illiquidity encourages institutional or whale purchasing, which ultimately could result in a supply crunch and, therefore, higher prices.

Based on the chart, the percentage of bitcoin circulating supply that has not moved in at least 1 year has continued to climb and sits at 64.8%, a new all-time high. With this number at all-time highs, the recent pullback and weakness in price over the last few months has not discouraged current holders and more bitcoin has continued to remain in wallets untouched, making less bitcoin available on the open market.

Source: Glassnode

Altcoin news

Whilst bitcoin and other layer-1 protocol performance continued to be subdued, the non-fungible token (NFT) and Metaverse sectors continued to shine. APE token hit a new all-time high at $22.60 on April 28. APE, the 22nd largest token at the time of writing, is the native cryptocurrency for the ecosystem of the extremely popular and successful NFT project, Bored Ape Yacht Club (BAYC). It’s designed to be the decentralized protocol layer for various initiatives that are supposed to be led by the community. The APE coin was airdropped to BAYC holders in March. The pump comes off the launch of the upcoming “Otherside”, its metaverse project where an auction for 100,000 land parcels have been announced. All sales will need to be paid for using APE, which clearly drove demand for the token in anticipation of the sale.4

Investing in crypto assets or companies servicing crypto-asset markets should be considered very high risk. Exposure to crypto assets involves substantially higher risk when compared to traditional investments due to their speculative nature and the very high volatility of crypto-asset markets.

Investing in crypto assets or crypto-focused companies is not suitable for all investors and should only be considered by investors who (i) fully understand their features and risks or after consulting a professional financial adviser, and (ii) who have a very high tolerance for risk and the capacity to absorb a rapid loss of some or all of their investment.

Any investment in crypto assets or crypto- focused companies should only be considered as a very small component of an investor’s overall portfolio.


1. https://www.bloomberg.com/news/articles/2022-04-28/goldman-offers-its-first-bitcoin-backed-loan-in-crypto-push?sref=6EQWk76O

2. https://cryptomonday.de/news/2022/04/27/97percent-of-cryptocurrency-stolen-in-q1-2022-came-from-defi-protocols/

3. https://bitcoinminingcouncil.com/bitcoin-mining-council-survey-confirms-year-on-year-improvements-in-sustainable-power-mix-and-technological-efficiency/

4. https://cointelegraph.com/news/apecoin-ape-hits-a-new-all-time-high-ahead-of-this-week-s-otherside-land-auction


Off the Chain will be published every Tuesday, and provide the latest news on bitcoin and the rest of the crypto market along with analysis and insights into the world of crypto.

It provides general information only and is not a recommendation to invest in any crypto asset, crypto-focused company or investment product.

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