1. Market Wrap: Bitcoin Drops as Traders Await June CPI Inflation Report
Analysts described the muted activity in spot, derivative and on-chain metrics as “calm before the storm.”
Bitcoin was lower Monday, falling along with most digital assets, as traders awaited a key U.S. inflation report due out early Tuesday.
The largest cryptocurrency by market capitalization was holding above price support at $32,000, with $36,400 seen as the upside target. For the past seven weeks bitcoin has mostly stayed in a range between $30,000 and $40,000.
Bitcoin (BTC) $32779.6, -3.23%
Ether (ETH) $2014.93, -5.4%
S&P 500: 4384.6, +0.34%
Gold: $1806.2, -0.25%
10-year Treasury yield closed at 1.369%, compared with 1.36% on Friday
“It is starting to feel like the calm before the storm as muted and quiet activity appears across spot, derivative and on-chain metrics,” the blockchain analysis firm Glassnode wrote Monday in a report.
U.S. CPI report for June could rekindle inflation fears
Many cryptocurrency investors see bitcoin as a potential hedge against inflation, so the release Tuesday of the June consumer price index reading by the U.S. Labor Department’s Bureau of Labor Statistics should provide a key data point.
2. Goldman Sachs Calls Coinbase a ‘Tactical Trade,’ Predicts Q2 Earnings Beat
The investment bank said in a client note that crypto price volatility could pay off for the exchange.
Coinbase is positioned to beat the street’s Q2 estimates, according to a new Goldman Sachs memo that labels the crypto exchange a top 25 tactical trade.
Citing its brokerage analyst’s “buy” rating for COIN, researchers on the investment bank’s derivatives team said in the client note that the recent parade of negative crypto headlines could — paradoxically — help lead to an earnings beat for Coinbase.
That’s because “significantly elevated crypto asset volatility” led to a boom in trading volume that Coinbase can capture through fees, the note said, pointing to a July 8 note by Will Nance. Even if bitcoin (BTC, -3.37%) stays low, skittish users paying high rents to trade is a lucrative position for the exchange.
3. Why Crypto Miners Are Leaving Quebec
Two large bitcoin miners are leaving Quebec because of restrictions on the use of power to run their operations.
With abundant sources of clean, renewable energy, for years Quebec was an ideal place to mine bitcoin (BTC, -3.43%). But leading miners there don’t see it that way now.
With the Canadian province implementing stricter regulation out of concern for bitcoin’s energy impact, miners are getting ready to leave the country for other sources of power.
Bitfarms, a Nasdaq and TSX-listed company, is one of Canada’s largest bitcoin miners. Currently, all its operations are in Quebec, but not for much longer.
“Because of the rules and the restrictions that they put in place, it’s very limited growth opportunities in Quebec, at least as the policies currently are,” said Bitfarms Chief Mining Officer Ben Gagnon.
Bitfarms, which currently has a market cap of $700 million, saw its revenue increase 200% in the first quarter of 2021 compared to the same period a year earlier. With growth there comes the need for expansion, but for Bitfarms that won’t take place in Quebec.
Back in 2017, as bitcoin’s price peaked near $20,000, Quebec was the subject of an increasing amount of interest from Chinese miners. China had cracked down heavily on coal-powered mining, closing down over 100 coal plants in China. The Canadian province has many hydroelectric dams, which makes electricity in the area not just cheap but suitable for a greener future.
“It scared the province and the utilities,” Gagnon said. In 2018, Quebec had to temporarily stop selling power to miners because the province needed to save the electricity for its residents.
Demand hasn’t slowed since then. Earlier this year, the province asked its crypto customers to lower their energy consumption by 95% for up to 300 hours in the winter. Quebec said it needed the power for the heating needs of its residents.
“The measures put in place were aimed at controlling their impact on local demand in Quebec,” a spokesperson for HydroQuebec, the utility, told us. “[We] must look at the overall picture and manage its surpluses responsibly in order to align with the aspirations of Quebec society.”
Bitfarms reacted with its feet, seeking alternative locations for its specialist machinery. Expansions to other regions are set to begin this year, Bitfarms confirmed to us.
In October, the company signed a deal for a new mining plant in Argentina, CEO Emiliano Grodzki’s home country; the plant will start operating in 2022. It will allow Bitfarms to draw up to 210 megawatts of electricity at its own discretion and at a rate of only $0.02 per kWh. For new cryptocurrency miners in Quebec the equivalent rate is as high as $0.15 now. That’s more than enough reason to see the South American country as a future mining haven.
4. US Financial Giant Capital Group Buys 12% Stake in Bitcoin-Exposed MicroStrategy
The purchase provides the firm with indirect exposure to Microstrategy’s more than 105,000 bitcoin reserves.
A division of major U.S. asset management firm Capital Group has conducted a 12.2% purchase of business-intelligence software company MicroStrategy’s (MSTR) common stock.
According to a filing to the Securities and Exchange Commission on June 30, Capital International Investors (CII) bought 953,242 shares of 7,782,568 outstanding.
While the filing was made two weeks ago, Senior Vice President Walter Burkley only signed off on Monday, according to the document.
CII is a private equity firm and forms part of Capital Group, an asset manager with $7.6 billion in annual revenue and $2.3 trillion in assets under its management.
The purchase by CII provides the firm with indirect exposure to Microstrategy’s more than 105,000 bitcoin reserves.
According to data from the Nasdaq exchange, MSTR’s share price is down 6.3% over a 24-hour period on a closing price of $588 and down roughly 55% from its peak of $1,315, witnessed Feb. 9.
5. The Lightning Network Is Going to Change How You Think About Bitcoin
The vote wasn’t close. In early June, 62 of the 84 members of El Salvador’s Legislative Assembly — a whopping 74% — voted to make bitcoin (BTC, -3.54%) official legal tender. “History!” tweeted Nayib Bukele, the bitcoin-happy president of El Salvador. He’s not wrong. The nation’s stunning embrace of crypto, regardless of what happens next, is arguably the most influential event in bitcoin’s history.
Look closer. This didn’t happen because El Salvador farmers are hoping their Blockfolio balances will go “to the moon.” This wasn’t fueled by dreams of a BTC index fund. This wasn’t about price speculation. In a nation with a 70% cash economy, villagers and farmers are actually using bitcoin, sending small amounts of satoshis (or “sats”) to buy fruits and vegetables, embracing the original peer-to-peer vision of bitcoin that would make the actual Satoshi smile.
For this, we can thank the Strike app, from Jack Mallers, which makes it fast and cheap and easy to send and receive tiny amounts of bitcoin. Now look even closer. Strike, in turn, is powered by the Lightning Network, which crypto-geeks know as the “layer 2” protocol that basically settles transactions “off-chain,” through a growing network of user-hosted channels and nodes, that exponentially cuts down the time and fees to send bitcoin.
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July 13, 2021