Macro - Crossing the Rubicon

Donald J. Trump and the point of no return. 3 words, “Strategic Bitcoin Stockpile”. It was theorized by many Bitcoiners for years

Bitcoin 2024 was an event that brought together thousands of people from all over the world. It was a celebration of Bitcoin and all the possibilities that it offers. The energy in the room was palpable, and everyone was excited to be a part of something truly special.

From the moment Donald J. Trump announced that the US would be accumulating Bitcoin as a strategic asset, everything changed. This move not only put Bitcoin on the map for good, but it also made it clear that there was no turning back. The world had finally woken up to the potential of Bitcoin, and there was nothing that could stop it now.

But what does this mean for the future of Bitcoin? And how will it impact the world as we know it?

Here are a few key takeaways from Bitcoin 2024:

Institutions are here. The same game theoretics apply for institutions. If nation-states are accumulating Bitcoin, corporations must do the same. Nation-state accumulation basically guarantees price go up over the long term, which means dollar-denominated corporate treasuries will suffer in relative terms. It becomes a bright line denominating winners and losers. Moving part of the treasury into BTC won't even necessarily make you a winner, it'll be the baseline requirement to compete. Anyone who doesn't do it will just be left behind. “It might make sense just to get some in case it catches on"

Retail is still largely absent. As the chart below describes, retail flow measured by the 30-day change in total transfer volume for transactions under $10K, is at a 3-year low. Despite BTC being less than 10% away from ATH.

While the conference was an inevitable success in terms of retail participation, it would appear that retail buyers are either exhausted, already all-in or not willing to buy additional BTC at those prices. Another possible explanation for this was the overall feeling throughout the conference of “waiting for the next catalyst”.

UTXO Alpha Day - The first of many for Venture Capitalists

We are blessed to support the best people. UTXO Management was hosting its inaugural investor day, UTXO Alpha Day, at the Bitcoin 2024 conference. We assembled hundreds of capital allocators, entrepreneurs, institutional investors, and angels for the event, where we explored yield-bearing assets in Bitcoin, the landscape of new Bitcoin layers, and the emergence of Bitcoin as the ultimate treasury asset. The event was a success and a great reminder that Venture Capital is first and foremost about exceptional individuals all competing to bring new utility to Bitcoin. BTC Startup Lab also hosted an incredible mixer event on Friday where we had the pleasure of meeting many different investors and founders. I left the event with the feeling that Bitcoin founders are a rare breed that must be welcomed by the US with open arms. Their focus is very much on building and gearing up for a Bull market - expect everything to happen all at once when Bitcoin decisively breaks its previous ATH.

One of the main takeaways from the conference was that investor appetite for Yield strategies native to Bitcoin is growing beyond what we initially anticipated. When we talk about idle capital, most people tend to think about the millions of BTC sitting in wallets, however, last week it became clear that the opportunity is equally attractive to crypto investors currently allocated on different blockchains. TVL is mercenary in the current environment and many discussions we’ve had came from investors either looking to switch from Bridged BTC (WBTC for example) on other blockchains to Bitcoin L2’s, or from investors looking for more attractive opportunities than Ethereum or Solana-based coins as the incentive campaigns of bitcoin projects often yield attractive current returns and asymmetric upside.

Venture Capital knowledge about Bitcoin remains limited. As it was highlighted in the most recent Galaxy report on Blockchain Venture Capital, the appetite for crypto investment has steadily increased YTD but remains nowhere near the top of Q1 2022. From the report: “In Q2 2024, venture capitalists invested $3.194bn (+28% QoQ) into crypto and blockchain-focused companies across 577 deals (-4% QoQ).”

While this is a good sign for the space, Bitcoin investments only represented 3.1% of total deal flow or $96.4M in Q2 2024 while Bitcoin market capitalization constitutes above 55% of the whole crypto market.

We believe that this trend will quickly reverse as the nature of the asymmetric opportunity that Bitcoin Defi / Infrastructure represents becomes impossible to overlook. One possible explanation for the current lag in Bitcoin VC funding is that technical knowledge of Bitcoin mechanics is not as equally distributed among VCs as it is for the rest of crypto. Bitcoin analysts are few in number and the Bitcoin space has been historically closed to VCs as the lack of programmability of Bitcoin hindered its attractiveness. We also expect this to change soon as the incentive to understand the ins and outs

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