1. Crypto Long & Short: No, Bitcoin Is Not in a Bubble
To think that such a festive concept, one that evokes both sophistication and childlike wonder, could become so financially charged …
Last week, Bank of America Securities chief investment strategist Michael Hartnett said in a note that bitcoin (BTC, +6.17%) looks like “the mother of all bubbles.”
Harnett seems to be using the strength and speed of bitcoin’s price rise as the base for his diagnosis, as if that is the main feature of a financial bubble. It isn’t.
2. Iran Reportedly Seizes 45K Bitcoin Mining Machines After Closure of Illegal Operations
Authorities in Iran have seized tens of thousands of bitcoin mining machines claimed to have been using illegally subsidized electricity from state-run energy provider Tavanir.
According to a report by local media outlet Tasmin News Agency on Sunday, 45,000 mostly powerful application-specific integrated circuit (ASIC) machines were confiscated.
The machines had purportedly been consuming 95 megawatts per hour of electricity at a reduced rate, according to Tavanir’s head Mohammad Hassan Motavalizadeh.
Earlier this month, Iranian authorities shut down 1,620 illegal cryptocurrency mining farms said to have collectively used 250 megawatts of electricity over the past 18 months, per a different news source.
The country’s recent blackouts across major cities have been in part blamed on cryptocurrency mining, drawing the ire of officials who have sought a temporary stay on bitcoin (BTC, +5.91%) mining until further notice.
Cryptocurrency researcher Ziya Sadr told the Washington Post on Sunday miners had “nothing to do with the blackouts” claiming they only made up a “very small” percentage of overall electricity capacity in the country.
In July of last year, Iran penned a registration directive forcing miners to disclose their identities. It also forced them to disclose the size of their mining farms and their mining equipment type with the Ministry of Industry, Mines and Trade.
3. Bitcoin’s Massive Swings Give Pause to CFOs Mulling Reserve Investment: Bloomberg
Wall Street chief financial officers (CFO) are more wary of putting company funds into bitcoin after last week’s 30% price plunge, Bloomberg reports.
Publicly traded companies such as MicroStrategy and Square Inc. have invested millions of dollars of company cash reserves in bitcoin (BTC, +5.85%) during 2020. Other firms followed suit including insurance giants Ruffers and MassMutual.
But given the return of bitcoin’s infamous price volatility — which saw the largest cryptocurrency’s price drop thousands below its peak of $41,900 set on Jan. — the attraction of that strategy may have lessened, according to company executives Bloomberg spoke with. Bitcoin has since recovered some of those losses and is now trading hands at $35,700, according to the CoinDesk 20.
4. Coinbase Redoing Infrastructure to Prevent Outages During Peak Times
Coinbase will break apart certain parts of its Coinbase.com and app infrastructure in a bid to keep the cryptocurrency exchange from going down during periods of high volume.
During the recent bitcoin bull run, Coinbase has struggled to keep itself up during stretches of heavy volume, leading to snarky comments on Twitter and Reddit that it’s only news when the exchange doesn’t go down during peak periods. Given the exchange has filed preliminary documents for a public listing of the company’s shares, fixing its infrastructure has undoubtedly taken on an even greater urgency.
According to an updated Jan. 8 post mortem on the Jan. 6–7 outages, Coinbase said it will break its “monolithic” backend into “discrete” parts in order to limit individual parts breaking and taking down the whole system.
5. Grayscale Raises $700M+ in a Day, Its Largest Daily Asset Raise Ever
Michael Sonnenshein, CEO of digital asset manager Grayscale Investments, tweeted the firm raised more than $700 million on Jan. 15, seeing increased momentum from Q4.
In Q4 2020, the company raised $3.3 billion across its cryptocurrency investment vehicles, a record for the digital asset manager and further evidence of this rally’s institutional base.
The Grayscale Bitcoin Trust, which is the company’s most popular product, led the pack in Q4 with an average of $217 million raised every week.
The latest data from Grayscale shows on Jan. 15 the firm has a record $27.1 billion under management; it entered 2020 with just $2 billion.
Eric Balchunas, senior ETF analyst at Bloomberg, compared Grayscale as the “ARK” of crypto via Twitter explaining that there are a number of similarities with both defying trends and seeing increased interest.
“The similarities are pretty amazing. I think both hung in relative oblivion for 3–4 yrs, had like $2b 12mo ago ago and then boom, 10x increase. Both defy trends: ARK w stock picking and grayscale w very high fees and 20%+ premiums,” said Balchunas.
ARK Investment Management, an asset-management firm led by Cathie Wood, has a flagship ARK Innovation ETF (ARKK) which over the course of a year has returned more than 171%, seeing its assets under management grow by more than tenfold, to $21.8 billion.
New York-based, SEC-regulated Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.
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January 18, 2021