Wednesday June 21, 2023
Another crypto miner announced plans for a high-performance computing (HPC) data center strategy and the market applauded this move by driving the stock price up 21% in yesterday’s trading session. Unhappily, I am not as positive about this move.
This sounds great but it’s a real chicken and egg scenario and the operating requirements in HPC are much higher than crypto mining. Unlike bitcoin self-mining where the objective is attained when new hash-rate capacity comes online, with GPU rendering comes the additional step of identifying and servicing clients and this takes time. Companies have considered temporarily mining ether as they wait to build out their customer base, but in practice this is not a long-term solution.
I expect miners making this move to see a repeat of 2019-20 when they could not source rigs. GPU’s are already experiencing a supply shortage and prices are going up. We have reached out to different miners and they acknowledge this is a considerable issue with supply issues delaying planned growth rates.
Another concern is the cost of high performance compute and the source of funding for these units. In 2020, lending rates were in the low to mid single digits with miners easily obtained financing, but today rates have increased with miners paying considerably more if they are even able to access capital. With bitcoin pricing rising in the high twenty thousand range, some miners are hodl’ing BTC again, but at pricing around and below $25,000 they have been selling to fund operation which leads to what I consider to be a circle of death. How do they expect to pay for all the new GPUs?
As an investor we try to identify companies that can be the best at what they do. I think announcements of bitcoin miners moving to HPC is similar to adding “AI” to your name. Bitcoin miners should focus on what they do best and not pivot or run a parallel strategy. Some companies may succeed in making this transition, but I expect most are simply prolonging their own demise.
◾ President Biden “committed to safeguarding Americans' rights and safety while protecting privacy, to [address] bias and misinformation, [and] to making sure AI systems are safe before they are released.” (Reuters)
◾ The Bank for International Settlements introduced the concept of a unified ledger to capture the full benefits of tokenization by combining central bank money, tokenized deposits and tokenized assets on a programmable platform. (Bis.org)
◾ Homeland Security, the US Attorney, IRS, DEA, and Postal Inspection Service signed a memorandum of understanding memorializing the Darknet Marketplace and Digital Currency Crimes Task Force to target cryptocurrency enabled crimes. (Ice.gov)
Government & NGO Actions
◾ Representatives Ken Buck (R-CO), Ted Lieu (D-CA) and Anna Eshoo (D-CA) introduced the National AI Commission Act to create a national commission to focus on regulating Artificial Intelligence. (House.gov)
◾ The EU backtracked on Monday’s statement and said it is still planning to publish legislation on a digital euro on June 28th. (Coindesk)
◾ The Central Bank of Zimbabwe plans to launch its peer-to-peer gold-backed digital token platform by the end of the month. (News.bitcoin)
◾ The Canadian Securities Administrators issued a warning that crypto service providers are claiming to be authorized or affiliated with fake regulatory or dispute resolution organizations. (Securities-adminstrators.ca)
◾ Consumer groups from 13 European countries called on their national authorities to enforce existing legislation to protect against the risks of generative AI. (Beuc.eu)
Public Company Releases
◾ Iris Energy (IREN) plans to expand its bitcoin hashing rate from 5.6 EH/s to 9.1 EH/s by early 2024 and will revitalize its strategy to bring high performance computing to its data centers. (Sec.gov)
Restructuring, Losses and Legal News
◾ Core Scientific filed its Chapter 11 bankruptcy plan with the Southern District Bankruptcy Court in Texas. (Cases.stretto)
◾ “Retained professionals” billed over $200 million in fees over the first seven months in the FTX bankruptcy case. (Courtlistener)
AI Announcements
◾ Open AI may launch a marketplace for AI software and models. (Theinformation)
◾ Stanford University researchers released an assessment grading different foundational AI models on how they are in compliance with the draft EU AI Act. (Standford.edu)
◾ China’s Ant Group is developing its own large-language called Zhenyi. (Reuters)
◾ Masayoshi Son said Softbank plans to shift to "offence mode" and become active in the AI sector. (Reuters)
Protocols, Applications & Business News
◾ EDX, a digital assets platform backed by Charles Schwab, Citadel, and Fidelity, announced the launch of its digital asset marketplace. (Businesswire)
◾ Both Invesco and Wisdom Tree resubmitted applications for a spot bitcoin ETF to the SEC yesterday. (Watcher.guru)
◾ A report from Moody’s Investor Services warns that “Democrats and Republicans hold different views” on how to “provide clarity for the digital ecosystem" and need to reach a bipartisan agreement or they will make the US less attractive to firms and investors in the sector. (Moodys)
◾ The University of Nicosia in Cyprus is introducing a Masters in the Metaverse to equip students with the knowledge and skills required for careers in metaverse design and management. (Unic.ac.cy)
Metaverse Briefings & Activations
◾ Roblox (RBLX) will allow users to make mature content for verified users who are 17 and older. (Roblox)
Exchange, Custody and Product Updates
◾ Binance plans to integrate the lighting network to support BTC deposits and withdrawals into the exchange’s platform. (Twitter)
◾ Gemini is expanding its services into the APAC region and plans to increase its headcount in Singapore to over 100 associates. (Gemini)