 | 6/26/24 |
Some major BTC miners have been renting out their computing power to AI firms.
What’s up? It’s Coinbase Bytes
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
- Bitcoin slipped under $60K to start the week. Plus, BTC ETF outflows intensified, and Ethereum fees saw their lowest levels in years.
- BTC miners are adapting to the post-halving market. Despite lower revenues from mining, some firms are diversifying and reaching record valuations.
- This week in numbers. The value of Mark Cuban’s recently sold NFTs, the massive transaction volume of some Wall Street firms’ private blockchains, and more.
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Price changes are for the past week, ending on Jun 26, 2024 at 11:14 PM UTC
 | MARKET BYTES |
Crypto prices slip in one of 2024’s worst weeks
In crypto’s second-worst week of 2024, prices for a wide range of tokens saw significant dips. Bitcoin fell to around $58,500 on Monday before rebounding; an index made up of the 100 biggest tokens slid 5% for the week ending Sunday; and SOL and ETH entered their longest stretch of down weeks since 2022.
What’s behind the decline? Some of it, reports Bloomberg, is a response to stubbornly high inflation, which has kept interest rates at two-decade highs. At a recent meeting, the Federal Reserve signaled that it planned to cut rates just once this year, down from the multiple cuts it had indicated previously.
Let’s dig into a few more of the major market stories of the week.
BTC ETFs outflows grew and long positions got liquidated
For the second week in a row, crypto investment products (mostly in the form of the major U.S.-based spot BTC ETFs) shed around $600 million. Two-week outflows now total around $1.2 billion, according to CoinShares, the worst stretch since the spot BTC ETFs launched in January.
But ETF outflows weren’t the only story. Over the weekend, falling prices caused $150 billion in long positions (bullish derivative trades) to be liquidated.
- Miner threat?... Some analysts attributed the recent dip and resulting liquidations to a surge in BTC hitting the market from crypto whales including miners, who have needed to raise capital in a post-halving landscape (more on mining below).
“Miners have been under tremendous pressure to sell given higher breakeven prices post-halving,” noted Singapore-based QCP Capital. “Miner BTC holdings have dropped to the lowest level we've seen in the past 14 years.”
Mt. Gox prepares to return $9 billion in crypto
The Tokyo-based exchange, which shuttered a decade ago, has an October deadline to return the crypto it still holds to customers. This week, the court-appointed trustee administering the returns announced that around $9 billion in crypto would begin moving back to customers by early July.
According to the Block, bitcoin fell around 3% following the announcement, adding to pressures related to macroeconomic worries, ETF outflows, and long-position liquidations.
- On the other hand… Some analysts suggest that worries about Mt. Gox’s market impact are overblown. “We think fewer coins will be distributed than people think and that it will cause less bitcoin sell pressure than market expects,” said Alex Thorn, head of research at Galaxy.
ETH fees hit lowest level in years
The news this week isn’t all bad: After hitting an average high north of $30 in March, gas fees on the Ethereum network fell to $1.34 on June 22 — the lowest level since April 2020.
The low fees appear to be the result of Ethereum’s Dencun upgrade, which went live earlier this year, and was designed to help layer 2 blockchains like Optimism, Polygon, Arbitrum, and Base (which was incubated by Coinbase) move and store data more quickly. (Layer 2 blockchains work kind of like HOV lanes on a highway, moving some traffic off of the main blockchain.)
- Why does Dencun get the credit?... Because there hasn’t been a major dip in transaction volume. The combination of high demand and historically low fees show that the efficiencies Dencun promised are working. “Data from Etherscan shows daily transactions dipping from a local high of 1.37 million on March 20 and largely trending between 1.1 million and 1.3 million since,” the Defiant reported.
| MINE GAMES |
Why some major BTC miners are thriving in the post-halving era
In April, BTC’s latest halving slashed the amount of new BTC generated by the network, which significantly impacted miners’ bottom lines — and particularly affected smaller and less efficient operations.
Fast forward two months, and major publicly-traded U.S. miners have seen their collective market cap reach a new all-time high north of $22 billion, up some $4 billion in June alone.
What’s behind this reversal of fortune? The answer may surprise you. Let’s break it all down…
Mining revenue nears record lows
Since April, when the most recent halving took place, bitcoin mining firms have been feeling the hit.
In the weeks leading up to the halving, miners’ daily revenue was generally north of $60 million. Following the halving, daily revenue has gone way down — typically hovering somewhere near the $23 million that miners pocketed on June 23.
Shrinking revenue has driven many mining firms to dip into their bitcoin stockpiles to fund operations, with miners selling at least $200 million in bitcoin since the start of June.
Some miners are diversifying into AI, and investors approve
Despite near-record low revenues, investor interest in bitcoin miners is actually rising, according to a recent report from JPMorgan.
That’s because bitcoin miners have an abundance of a resource that’s in huge demand at the moment: computing power. Bitcoin mining firms are essentially massive data centers, and have much of the infrastructure required to host AI GPUs.
AI firm CoreWeave just signed a 12-year, $3.5 billion agreement with BTC miner Core Scientific to rent about 18% of its infrastructure to run AI GPUs. Last week, mining giant Hut 8 secured $150 million from the investment firm Coatue to help accelerate its growth in the AI infrastructure industry.
JPMorgan’s report also identified the miner IREN, which operates renewable-energy powered facilities, as potentially the best positioned to benefit from AI demand due to its cheap access to energy.
Mining has also become a topic in the presidential race
Ahead of this week’s presidential debate, Republican candidate Donald Trump has taken a pro-bitcoin miner position on the campaign trail.
Following a private event with bitcoin-mining executives this month, the former president posted on the Truth Social platform that he wanted all remaining BTC to be “MADE IN THE USA!!!”
President Biden hasn’t yet commented on bitcoin mining during the campaign, but in a preliminary budget for next fiscal year, his administration called for an eventual 30% tax on the electricity used by miners.
The bottom line…
As declining revenues have forced miners to adapt, renting out computing capacity will likely make up an increasing part of the industry.
According to Matt Brown, the COO at Core Scientific, his firm has been flooded by inquiries from AI firms: “Everyone is just scrambling to figure out in the next 12 months where they can find capacity, and it is getting exponentially more difficult.”
| NUMBERS TO KNOW |
$1.5 trillion
Estimated value of repurchase agreements (and other forms of securities financing) that are executed monthly by finance giants including JPMorgan Chase, UBS, and HSBC using private blockchains and smart contracts. What are repurchase agreements? They’re “the lifeblood of funding in capital markets,” writes CoinDesk, “where cash is borrowed against securities, often highly liquid Treasuries, with an agreed buy-back date and price.”
$14.6 million
Total value locked on Swarm Markets, a Berlin-based tokenization platform that plans to sell NFTs that represent ownership of physical gold. The NFTs will be swappable on a peer-to-peer basis, and the platform is aiming to roll out support for other metals and even markets like carbon credits.
$38,500
Total sales price for 14 NFTs that billionaire Mark Cuban sold this week — including a Pudgy Penguin that went for 9.06 ETH (nearly $30,600 as of Tuesday). The transactions were the first NFT sales from Cuban’s wallet in over two years.
| TOKEN TRIVIA |
How many Americans sent money abroad to family and friends last year?
| A | 1 in 32 Americans |
| B | 1 in 24 Americans |
| C | 1 in 16 Americans |
| D | 1 in 8 Americans |
Find the answer at the end of the email.
| NOW TRADING ON COINBASE |
| CORECHAIN |  |  |
Core Chain is a Bitcoin-powered, EVM-compatible layer one blockchain that combines Delegated Proof of Work (DPoW) and Delegated Proof of Stake (DPoS).
| EURC |  | |
EURC is an ERC-20 stablecoin that is pegged on a 1:1 basis to the euro.
Trivia answer
| D | 1 in 8 Americans |
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