Friday February 18, 2022
◾ Top digital assets down over night but total market cap is flat during same period. (Coinmarketcap)
◾ JPMorgan Chase (JPM), Toshiba and Ciena (CIEN) have jointly demonstrated a first-of-its-kind blockchain-based Quantum Key Distribution (QKD) network that is resistant to quantum computing. (Businesswire)
◾ SEC Chair Gary Gensler wrote to Senator Tom Emmer (R-MN) on bitcoin’s spot ETF debate, explaining that agency is looking “to prevent fraudulent and manipulative acts and practices.” (Twitter)
This is the first week of Weekly Musings a Friday update of different ideas and issues we have been looking at over the past seven days.
Publicly traded North American crypto miners have a market cap of ≈$20 billion, but looking at their recent monthly production we have been trying to determine what their real impact is to the market. Along these lines, we have been questioning what their newer practice of holding bitcoin on their balances sheets means to market dynamics.
Although mining has moved to the US in recent months with Foundry’s USA mining pool becoming the top bitcoin mining pool over the past three months with a 16.69% hash rate share, this is a relatively new situation and the amount of bitcoin held by North American miners is low. A Jefferies mining study just reported these miners currently hold 0.19% of all bitcoin in circulation. This number is up an astonishing 16621% year-over-year, but the total number of bitcoins held by this group is less than 40,000 BTC.
Following MicroStrategy’s (MSTR) ‘hodl’ strategy, miners are trying to gain investor interest as a value play and bitcoin proxy. This has driven them to turn to outside capital to raise funds rather than selling their BTC.
Viewing the top 5 miners by marketcap, only Core Scientific (CORZ) is mining more than one day’s awards and this group equates to 50% of the total market cap for these companies.
(We believe that miners are still not fully understood by Wall Street, best exemplified by Terawulf (WULF) who is still not reporting BTC production and supporting their $1.2 billion marketcap from their scheduled H2’22 rig deliveries and 2025 hash rate expectations.)
The total number of new bitcoins produced by the publicly traded North American miners is less than 15% of new monthly production, but given this ratio compared to the 3-4 million float of liquid coins, this number is negligible.
The North American miners are not driving the market. The cohort responsible for the current draw-down is the weak-handed, short-term investors which account for most capitulation during times of consolidation.
Caveat emptor! A couple weeks ago, I raised questions about Sphere 3D’s (ANY) purchase of new mining rigs from NuMiner Global with an astonishing hash rate of 440 TH/s. Coindesk has published a great investigative piece on this announcement showing the potential public market fraud hitting the mining space.
BitDigest will next be published on Wednesday February 23rd. Have a good President’s DayWeekend.
Government & NGO Actions
◾ Ukraine’s Parliament has formally passed the bill confirming the right to hold and use digital assets, and defining the requirements for local services and market participants. (Cryptobriefiing)
◾ The Monetary Authority of Singapore has no plans to regulate NFT activities. (Fintechnews)
◾ Yahoo Finance reports that the upcoming White House executive order on digital assets will be released next week and initiate a study on the future of money and payment system. (Yahoo)
◾ The Republic of the Marshall Island’s is allowing decentralized autonomous organizations (DAOs) to register as legal entities on the Pacific Island’s atolls. (News.bitcoin)
◾ Israel’s Capital Markets Authority is investigating Binance’s activities in the country, causing the leading digital currency exchange to halt operations in the country. (FXstreet)
◾ The Justice Department named Eun Young Choi to serve as the first Director of the newly-formed National Cryptocurrency Enforcement Team (NCET). (Justice.gov)
◾ Russia’s Ministry of Finance has officially launched a consultation period on the rules covering digital asset transactions. (Cointelegraph)
Public Company Releases
◾ Circle terminated its existing business combination and agreed to new transaction terms with Concord Acquisition Corp (CND), a special purpose acquisition company, raising its valuation from $4.5 billion to $9 billion. (Cision)
◾ Bakkt (BAKKT) reported 867,000 year-end active accounts and $39.5 million in 2021 revenue guiding to a 1.5 – 2x top line increase in 2022. (Bakkt)
Protocols, Applications & Business News
◾ Starting March21st, crypto transactions on PayPal (PYPL) and Venmo under $200 in value will be changed a minimum flat fee between $0.49 and $2.49. (Barrons)
◾ Spanish crypto exchange Bit2Me has received the first digital asset services and custody license from the Bank of Spain. (Coindesk)
◾ Dapper Labs announced the launch of the NBA All-Star VIP Pass NFT giving the winner of an upcoming auction one of 30 NFTs that grant the owner a unique VIP pass for the ultimate fan experience at the next five NBA All-Stars. (NBA)
◾ Universal Music Group is developing an NFT collection for its artists and record labels. (Reuters)
Metaverse Briefings & Activations
◾ China’s Banking and Insurance Regulatory Commission issued a public notice warning against fraudulent projects in the metaverse. (Cointelegraph)
Thoughts on the Ecosystem
◾ Responding to Charlie Munger’s crypto is a venereal disease comments, Elon Musk tweeted that he “was at a lunch with Munger in 2009 where [Munger] told the whole table all the ways Tesla would fail. Made me quite sad, but I told him I agreed with all those reasons & that we would probably die, but it was worth trying anyway.” (Twitter)