CoinDesk Crypto

Bitcoin was lower, pausing a powerful rally that has seen the largest cryptocurrency jump 25% in October to the highest levels since June 2019. Traditional financial-media outlets like Bloomberg News were writing about it. 

Prices appeared to hit resistance just below $13,900, close to last year’s high. But analysts said that if the level is breached, there appear to be few brake points before the 11-year-old cryptocurrency ascends to $14,000 or beyond. 

“Between the levels of $14,000 and $20,000, there is insufficient price data to single out any specific points of resistance,” Mati Greenspan, founder of the foreign-exchange and cryptocurrency research firm Quantum Economics, told subscribers in a newsletter. 

Related: Putting Pressure on Bitcoin’s Lightning Network Vulnerabilities Will Strengthen It

In traditional markets, European stocks dropped to a five-month low and U.S. equity futures were declining, amid investor concerns about rising coronavirus case loads. Gold weakened 0.4% to $1,900 an ounce. 

Market Moves

Bitcoin‘s recent rally as U.S. stocks floundered has simply widened the cryptocurrency’s outperformance compared with traditional markets. As more investors tune in, the expanding gap could become a self-reinforcing trend. 

Following Tuesday’s price surge to a new 2020 high around $13,700, bitcoin is now up 90% year-to-date. That puts the cryptocurrency well on pace to exceed last year’s 94% gain.

It’s also far ahead of the Standard & Poor’s 500 Index of large U.S. stocks, where a recent slide has trimmed the year-to-date gains to just 5%, after a 27% rise in 2019. 

Related: Blockchain Bites: Bitcoin Miners’ Slim Margins, ConsenSys’ Latest CBDC Pilot, a16z’ Power Hire

Many big institutional investors, such as pension funds, are under pressure to hit annual return targets of 7%, and with stocks now faltering and bond yields close to historic lows, they’re casting about for alternatives. Bitcoin’s track record alone might be enough of a sell, but the 11-year-old cryptocurrency also represents what could be the beachhead of a brand new, state-of-the-art financial system – the digital rails, as the crypto-market ecosystem is described by some industry executives.

Then there’s the theory among many investors that bitcoin’s fixed supply makes it a useful hedge against central-bank money printing – yet another compelling narrative at a time when top authorities from the Federal Reserve to the European Central Bank and International Monetary Fund say massive stimulus is needed to keep the global economy from faltering. As highlighted in this column earlier this week, even analysts for the once-naysaying JPMorgan Chase, the biggest U.S. bank, are now opening discussing bitcoin’s potential upside.  

“Every major institution is re-looking at it right now,” Matt Hougan, chief investment officer of the cryptocurrency-focused money management firm Bitwise, told CoinDesk in a phone interview. “There’s lots of pings in my LinkedIn inbox.” The San Francisco-based firm announced Wednesday that its assets under management recently crossed above $100 million for the first time.

According to Hougan, there are a few key differences now from prior bull runs in bitcoin, such as in 2017 when the cryptocurrency’s price shot to up to about $20,000. 

There’s been a rapid explosion in the industry’s support infrastructure, from the development of regulated asset custodians to more reliable pricing feeds and more recently U.S. officials’ move to explicitly authorize banks to provide services to cryptocurrency companies. Last week’s move by PayPal to let users buy bitcoinoffers a new seal of approval from an established company along with an incentive for other big financial firms to follow suit, in order to avoid getting left behind. 

Notably, Bitwise has repeatedly failed in its years-long efforts to win approval for a bitcoin exchange-traded fund. But Hougan said his firm has found a growing and welcoming cadre of financial advisors looking to steer money into its cryptocurrency investment funds, since they’re among the few assets having any major positive impact in 2020 on clients’ portfolios.

“We’re reaping the harvest of two years of building infrastructure in this space,” Hougan said. “It’s no surprise that we’re hitting multiyear highs.” 

Digital-asset traders are so familiar with bitcoin’s infamous price swings that such bullishness can sometimes sound fawning, breathless, credulous. But right now it’s not just crypto money managers selling the story; bitcoin is getting a shot of credibility from its own market performance.

Bitcoin Watch

Bitcoin has decoupled from stocks this week. Prices narrowly missed the June 20019 high of $13,880 early Wednesday and were last seen at $13,550.

The minor pullback could be attributed to the overbought conditions signaled by the above-70 reading on the 14-day relative strength index (RSI). The 14-week RSI has also crossed above 70.

An overbought reading does not imply a bearish reversal. That said, it often yields a temporary consolidation or pullback similar to the one seen in May and July.

Dips, however, could end up recharging bulls’ engine for a stronger rally, as fundamental indicators such as market value to realized value (MVRV) Z-score, which measures market value’s deviation from realized value to assess undervalued and overvalued conditions. Right now the indicator suggests that bitcoin is far from overvalued and has plenty of room to extend the sharp rally from $3,867 to $13,800 seen over the past 7.5 months.

The MVRV Z-score, currently at 2.12, is hovering at two-year highs, according to data source Glassnode. That’s still well below the 7.0 score at which an asset is considered near a top.

All things considered, the path of least resistance for bitcoin remains to the higher side and bigger gains look likely albeit after minor consolidation.

– Omkar Godbole 

Read More: Is Bitcoin’s Rally Overstretched? This Key Indicator Says No

What’s Hot

JPMorgan invites banks and financial technology companies to build on revamped blockchain network (CoinDesk)  

Ethereum developer ConsenSys to assist French bank Societe Generale with research on central bank digital currency pilot (CoinDesk) 

MicroStrategy’s bitcoin stash now at $521M, executives planning to buy more (CoinDesk)

Proliferation of financing options for bitcoin miners drives down profit margins in increasingly crowded space (CoinDesk)  

Crypto lender BlockFi takes 5% stake in Grayscale’s $4.8B bitcoin trust (CoinDesk) (EDITOR’S NOTE: Grayscale is owned by Digital Currency Group, the parent of CoinDesk) 

Startup Yield Protocol aims to create DeFi money market (CoinDesk) 

Bitcoin’s Lightning network vulnerable to attacks via multiple routes (CoinDesk)  

Analogs The latest on the economy and traditional finance

Consumer confidence declines in three U.S. states vital for Trump re-election as economic worries increase (Reuters)

Australia’s two biggest IPOs of 2020 highlight “barbelled” global economy – coal terminal paying high dividends and high-tech software maker offering fast growth (Reuters)

Singapore central bank sees economic recovery “gradual and uneven” (Bloomberg)

Pro-democracy protests in Thailand fail to rattle country’s IPO boom (Nikkei Asian Review)

Tweet of the Day Related Stories

• Bitwise Tops $100M in Assets Under Management
• Bitcoin Price Slips Below $13K as Stocks Slide

Bitcoin’s hashrate is soaring. Ethereum incubator ConsenSys has signed on to another CBDC pilot. JPMorgan unveiled a revamped interbank transfer blockchain network that could challenge SWIFT.

Top shelf

Lower profits
Bitcoin mining profitability is at all-time lows in 2020, spurred in part by new ASIC mining machinery driving up the network’s hashrate. While bitcoin‘s hashrate has taken a dip as China’s wet season comes to an end, mining professionals predict this will only be temporary, and it has only improved profit margins so much, CoinDesk’s Colin Harper reports. According to North American Bitcoin mining company Luxor’s hashprice index, miners are extracting $0.096 for every terahash they produce, down from the roughly $1.40 miners could expect to make three years ago. 

ConsenSys CBDCs
ConsenSys will work with Societe Generale – Forge, the bank’s digital assets arm, in a central bank digital currency (CBDC) pilot. The Ethereum incubator will explore the limits of CBDC issuance and management, delivery versus payment and cross-chain interoperability, CoinDesk’s Daniel Palmer reports. Societe Generale – Forge has previously issued bonds worth millions of euros over a blockchain, with one of the initiatives being in collaboration with France’s central bank. ConsenSys was chosen in September to work with the Hong Kong Monetary Authority on a different CBDC pilot.

Related: First Mover: Bitcoin’s Latest Rally Proving Irresistible as Bitwise Assets Top $100M

GBTC whales
BlockFi has taken a 5% share of Grayscale’s $4.8 billion bitcoin trust. According to Tuesday Securities and Exchange Commission (SEC) filings, reviewed by CoinDesk’s Danny Nelson, the crypto lender now holds 24,235,578 GBTC shares. CEO Zac Prince said in a press statement BlockFi’s “significant” GBTC position will “add value” to the “marketplace for liquid and illiquid” shares. Crypto fund manager Three Arrows Capital is the only other entity with comparable GBTC holdings, having amassed over 21 million shares – some 6.26% of GBTC at the time – by June. (Grayscale and CoinDesk are both wholly owned by Digital Currency Group.)

Banking blockchain
JPMorgan is inviting 400-plus financial institutions (including 25 of the largest 50 banks) to start building on top its revamped blockchain network, Liink. Designed to connect banks in a peer-to-peer fashion and help them remove the pain points from cross-border payments, the closed source Liink is more of a “decentralized network” and less like a “central command product,” Christine Moy, head of Liink, told CoinDesk’s Ian Allison. “Think of it as the foundation of an enterprise mainnet.” The interbank transfer system is aimed as a complement of – but could be a killer to – SWIFT. 

Power hire
The one-time New York State finance regulator who shepherded the state’s BitLicense through its early days will join tech ventures fund Andreessen Horowitz (a16z) to focus on cryptocurrency companies. An a16z blog post said the fund’s new chief regulatory officer, Anthony Albanese, will focus on crypto portfolio companies in “gaming, digital storage, payment systems, social media, creative marketplaces and more.” “We’re seeing so much happening in the frontier areas like DeFi and stablecoins but also among the legacy financial services institutions from PayPal to JPMorgan,” said Katie Haun, an a16z general partner. “He’s really the perfect addition at the perfect time.”

Quick bites

• MicroStrategy is looking to add to its $521 million stash of bitcoin, the company’s president said Tuesday. The company has already seen a 22% return on its initial BTC buy. (CoinDesk)
• Australia’s largest stock exchange operator, ASX Ltd., has delayed the rollout of its blockchain-based trading platform until April 2023. Surging pandemic-led trading volumes would strain the in-development platform, it said. (CoinDesk)
• U.S. President Donald Trump’s campaign website was briefly compromised on Tuesday, as hackers looked to fleece cryptocurrency from unsuspecting supporters in the final days before the 2020 election. (CoinDesk)
• Malta, once a hub for crypto company registrations, has approved its first regulated crypto public offering: VAIOT, a blockchain and AI-powered services business. Decrypt asks whether Malta’s Initial Virtual Financial Assets Offering (IVFAO) is the new ICO.
• Messari explores how “DeFi Citadels” create and capture value. “The core of this business model is a protocol’s balance sheet, which can be defined as [total value locked]…” (paywalled)

At stake

Personhood proof
Yesterday, Paula Berman, a co-founder of Democracy Earth, and Divya Siddarth, a researcher at Microsoft’s Office of the CTO, published an essay in CoinDesk detailing an answer to a long-standing question in internet development: How do you know you’re not talking to a dog on the internet? 

Related: Blockchain Bites: JPM Coin Goes Live, Bitcoin Rallies, Stocks Falter

Explaining the concept of “proof-of-personhood,” the authors aim to outline a new model of consensus that authenticate digital identities, using actual human traits. 

Currently, authentication systems rely on algorithms or third party credentials – often provided by centralized firms like Facebook or Twitter – to provide a layer of trust. As we’ve seen by the rise of disinformation and scams, it’s shaky at best.

Further, because the current systems of identity rely on the disclosure of personal and private information to an identifier, it opens our lives to a degree of surveillance never before possible. 

“Identity is one of our most fundamental human rights. Yet, in the age of surveillance, commodification and centralization it is under threat,” they write.

Their solution, proof-of-personhood, explained for the first time as part of CoinDesk’s Internet 2030 series, outlines ways to form identities around subjective, rather than objective, metrics. “Instead of being generated and solved by computation, they are created and unlocked exclusively by the distinctive cognitive abilities of human brains,” they write.

In turn, rather than having the web as a field of exploitation, by matching real-world identities to digital ones, in ways that preserves privacy and human dignity, will “foster prosocial, community-oriented behavior, where both users and applications are significantly limited in their ability to exploit and attack each other.”

The authors also go into the areas where blockchains and other decentralized tools, as well as AI, have already failed to meet this need. If you’re interested in the idea of digital utopias, I suggest you read the entire article. 

Market intel

Overbought bitcoin?
A key indicator shows bitcoin’s recent rally is not overstretched. The “market value to realized value” (MVRV) Z-score – a measure used to assess undervalued and overvalued conditions – is showing bitcoin at lower levels than one would expect, if this were a market top, CoinDesk’s Omkar Godbole reports. Hovering at two-year highs at 2.12, bitcoin is still well below the 7.0 score at which an asset is considered overbought. “Put simply, the cryptocurrency is slightly overvalued but still has plenty of room to extend the run of gains from the low of $3,867 seen since mid-March,” Godbole writes.

Who won #CryptoTwitter? Related Stories

• First Mover: Bitcoin Surges to New 2020 High as Harvest Debacle Provides Costly DeFi Lesson
• Blockchain Bites: DeFi’s Harvest Hit, IRS’ Crypto Clarification, JPMorgan’s Buoyant Bitcoin Note

Bitcoin’s hashrate is soaring. Ethereum incubator ConsenSys has signed on to another CBDC pilot. JPMorgan unveiled a revamped interbank transfer blockchain network that could challenge SWIFT.

Top shelf

Lower profits
Bitcoin mining profitability is at all-time lows in 2020, spurred in part by new ASIC mining machinery driving up the network’s hashrate. While bitcoin‘s hashrate has taken a dip as China’s wet season comes to an end, mining professionals predict this will only be temporary, and it has only improved profit margins so much, CoinDesk’s Colin Harper reports. According to North American Bitcoin mining company Luxor’s hashprice index, miners are extracting $0.096 for every terahash they produce, down from the roughly $1.40 miners could expect to make three years ago. 

ConsenSys CBDCs
ConsenSys will work with Societe Generale – Forge, the bank’s digital assets arm, in a central bank digital currency (CBDC) pilot. The Ethereum incubator will explore the limits of CBDC issuance and management, delivery versus payment and cross-chain interoperability, CoinDesk’s Daniel Palmer reports. Societe Generale – Forge has previously issued bonds worth millions of euros over a blockchain, with one of the initiatives being in collaboration with France’s central bank. ConsenSys was chosen in September to work with the Hong Kong Monetary Authority on a different CBDC pilot.

Related: First Mover: Bitcoin’s Latest Rally Proving Irresistible as Bitwise Assets Top $100M

GBTC whales
BlockFi has taken a 5% share of Grayscale’s $4.8 billion bitcoin trust. According to Tuesday Securities and Exchange Commission (SEC) filings, reviewed by CoinDesk’s Danny Nelson, the crypto lender now holds 24,235,578 GBTC shares. CEO Zac Prince said in a press statement BlockFi’s “significant” GBTC position will “add value” to the “marketplace for liquid and illiquid” shares. Crypto fund manager Three Arrows Capital is the only other entity with comparable GBTC holdings, having amassed over 21 million shares – some 6.26% of GBTC at the time – by June. (Grayscale and CoinDesk are both wholly owned by Digital Currency Group.)

Banking blockchain
JPMorgan is inviting 400-plus financial institutions (including 25 of the largest 50 banks) to start building on top its revamped blockchain network, Liink. Designed to connect banks in a peer-to-peer fashion and help them remove the pain points from cross-border payments, the closed source Liink is more of a “decentralized network” and less like a “central command product,” Christine Moy, head of Liink, told CoinDesk’s Ian Allison. “Think of it as the foundation of an enterprise mainnet.” The interbank transfer system is aimed as a complement of – but could be a killer to – SWIFT. 

Power hire
The one-time New York State finance regulator who shepherded the state’s BitLicense through its early days will join tech ventures fund Andreessen Horowitz (a16z) to focus on cryptocurrency companies. An a16z blog post said the fund’s new chief regulatory officer, Anthony Albanese, will focus on crypto portfolio companies in “gaming, digital storage, payment systems, social media, creative marketplaces and more.” “We’re seeing so much happening in the frontier areas like DeFi and stablecoins but also among the legacy financial services institutions from PayPal to JPMorgan,” said Katie Haun, an a16z general partner. “He’s really the perfect addition at the perfect time.”

Quick bites

• MicroStrategy is looking to add to its $521 million stash of bitcoin, the company’s president said Tuesday. The company has already seen a 22% return on its initial BTC buy. (CoinDesk)
• Australia’s largest stock exchange operator, ASX Ltd., has delayed the rollout of its blockchain-based trading platform until April 2023. Surging pandemic-led trading volumes would strain the in-development platform, it said. (CoinDesk)
• U.S. President Donald Trump’s campaign website was briefly compromised on Tuesday, as hackers looked to fleece cryptocurrency from unsuspecting supporters in the final days before the 2020 election. (CoinDesk)
• Malta, once a hub for crypto company registrations, has approved its first regulated crypto public offering: VAIOT, a blockchain and AI-powered services business. Decrypt asks whether Malta’s Initial Virtual Financial Assets Offering (IVFAO) is the new ICO.
• Messari explores how “DeFi Citadels” create and capture value. “The core of this business model is a protocol’s balance sheet, which can be defined as [total value locked]…” (paywalled)

At stake

Personhood proof
Yesterday, Paula Berman, a co-founder of Democracy Earth, and Divya Siddarth, a researcher at Microsoft’s Office of the CTO, published an essay in CoinDesk detailing an answer to a long-standing question in internet development: How do you know you’re not talking to a dog on the internet? 

Related: Blockchain Bites: JPM Coin Goes Live, Bitcoin Rallies, Stocks Falter

Explaining the concept of “proof-of-personhood,” the authors aim to outline a new model of consensus that authenticate digital identities, using actual human traits. 

Currently, authentication systems rely on algorithms or third party credentials – often provided by centralized firms like Facebook or Twitter – to provide a layer of trust. As we’ve seen by the rise of disinformation and scams, it’s shaky at best.

Further, because the current systems of identity rely on the disclosure of personal and private information to an identifier, it opens our lives to a degree of surveillance never before possible. 

“Identity is one of our most fundamental human rights. Yet, in the age of surveillance, commodification and centralization it is under threat,” they write.

Their solution, proof-of-personhood, explained for the first time as part of CoinDesk’s Internet 2030 series, outlines ways to form identities around subjective, rather than objective, metrics. “Instead of being generated and solved by computation, they are created and unlocked exclusively by the distinctive cognitive abilities of human brains,” they write.

In turn, rather than having the web as a field of exploitation, by matching real-world identities to digital ones, in ways that preserves privacy and human dignity, will “foster prosocial, community-oriented behavior, where both users and applications are significantly limited in their ability to exploit and attack each other.”

The authors also go into the areas where blockchains and other decentralized tools, as well as AI, have already failed to meet this need. If you’re interested in the idea of digital utopias, I suggest you read the entire article. 

Market intel

Overbought bitcoin?
A key indicator shows bitcoin’s recent rally is not overstretched. The “market value to realized value” (MVRV) Z-score – a measure used to assess undervalued and overvalued conditions – is showing bitcoin at lower levels than one would expect, if this were a market top, CoinDesk’s Omkar Godbole reports. Hovering at two-year highs at 2.12, bitcoin is still well below the 7.0 score at which an asset is considered overbought. “Put simply, the cryptocurrency is slightly overvalued but still has plenty of room to extend the run of gains from the low of $3,867 seen since mid-March,” Godbole writes.

Who won #CryptoTwitter? Related Stories

• First Mover: Bitcoin Surges to New 2020 High as Harvest Debacle Provides Costly DeFi Lesson
• Blockchain Bites: DeFi’s Harvest Hit, IRS’ Crypto Clarification, JPMorgan’s Buoyant Bitcoin Note

Coinbase is launching its Visa debit card in the U.S. early next year.

The card will be available in all states except Hawaii and comes with a new rewards feature – 4% back in stellar or 1% back in bitcoin.

Coinbase Card has been active in the U.K. and European Union since April 2019 and currently operates in 30 countries. The card’s planned U.S. rollout comes on the heels of PayPal’s entry to the cryptocurrency sector, with the fintech giant opening bitcoin payments to its network of 26 million merchants.

Related: Coinbase Goes Down as Bitcoin Approaches 2019 Highs

American customers will be able to manage their cards directly through their Coinbase accounts. Any cryptocurrencies that Coinbase supports in the U.S. (and that a user holds in their account) can be spent through the debit card. 

“Industry trends illustrate increased consumer activity,” Coinbase spokesperson Crystal Yang said in an emailed statement. “Now Coinbase is taking mainstream adoption of crypto one step further by introducing Coinbase Card in the U.S.”

The card is issued by South Dakota-based MetaBank and powered by payments platform Marqeta. 

Stepping back, cryptocurrencies in the U.S. are treated like property, and the Internal Revenue Service (IRS) taxes their capital gains whenever they’re bought and sold. Coinbase did not respond to questions about how the company would account for U.S. tax laws with the new product.

Related Stories

• Ex-Coinbase, BitFlyer Lawyer Joins Anderson Kill
• Coinbase Received Over 1,800 Law Enforcement Information Requests in the First Half of 2020
• Coinbase’s Global Marketing Head Latest to Join Mass Exit

Gemini, the cryptocurrency exchange founded by the Winklevoss brothers, has launched trading denominated in the euro.

• In an announcement Wednesday, the company said all listed cryptocurrencies could be purchased and traded with euros.
• Euro deposits can be made via both SWIFT or SEPA transfers.
• The exchange’s pro-level platform ActiveTrader has also listed pairs for the euro against bitcoin and ethereum (as well as GBP against the same two crypto assets).
• Roughly a month ago, Gemini also added pounds sterling for the U.K. market, having recently been granted an electric money institution license.
• Over in the U.S., Gemini also recently added “shielded” zcash withdrawals, allowing users to use the privacy-enhancing cryptocurrency without disclosing their identities or the size of their transactions.

Also read: Bitstamp Names Gemini Alum Julian Sawyer as CEO

Related Stories

• Former BitLicense Chief to Manage Andreessen Horowitz’s Cryptocurrency Efforts
• Overstock’s Medici Ventures Invests $8M in Blockchain Firm Bitt
• Ethereum Developer ConsenSys to Assist French Bank With CBDC Pilot
• ASX Delays Launch of DLT System Over Coronavirus Trading Volatility

Bitwise Asset Management, a provider of cryptocurrency index funds to professional investors, now manages over $100 million in assets.

• The level is a record for the company and comes amid rising demand from hedge funds, financial advisors and multifamily offices, according to a press release.
• The major recipient of the increased inflows has been the diversified Bitwise 10 Crypto Index Fund, which tracks bitcoin, ethereum, litecoin and other top-10 cryptocurrencies by market value.
• “We’re reaping the harvest of two years of building infrastructure in this space,” Bitwise Chief Investment Officer Matt Hougan, told CoinDesk in a phone interview. “It’s no surprise that we’re hitting multiyear highs.” 
• The surge in Bitwise’s assets under management has happened alongside an increase in institutional participation in the top cryptocurrency.
• Several public companies, including the likes of MicroStrategy and Square, have recently disclosed their bitcoin investments, providing a vote of confidence in bitcoin’s long-term value as an inflation hedge.
• “That has convinced many who were previously cautious that it’s time to reevaluate,” Bitwise Chief Executive Officer Hunter Horsley said in the press release.
• Bitwise has failed in its attempts to win approval from the U.S. Securities and Exchange Commission for a bitcoin-focused exchange-traded fund.

Read more: Bitwise Bitcoin Fund Doubles to $9M as Investor Fears Grow Over Runaway Inflation

Related Stories

• Bitcoin Price Slips Below $13K as Stocks Slide
• Is Bitcoin’s Rally Overstretched? This Key Indicator Says No
• Coinbase Goes Down as Bitcoin Approaches 2019 Highs
• ‘A Race Toward Zero’: With Hashrate in the Clouds, Bitcoin Mining Is Less Profitable Than Ever

Bitcoin has pulled back sharply from 16-month highs reached early Wednesday alongside heightened coronavirus-induced risk aversion in global stock markets.

• At the current price of $12,980, the top cryptocurrency by market value is down over 5% on the day and 7% from the Asian session high of $13,857. That was the highest level since June 2019, according to CoinDesk’s Bitcoin Price Index.
• The cryptocurrency looked overbought and vulnerable to minor pullback early today, having rallied by over 20% this month alone.
• However, the pullback’s magnitude is likely being amplified by the losses in the global stock markets.
• Wall Street’s benchmark equity index S&P 500 is down over 2% at press time, and the pan-European Euro Stoxx 50 index has shed 4%. Meanwhile, the anti-risk sentiment is boding well for haven assets like the U.S. dollar, Japanese yen, and U.S. Treasury bonds.
• The dollar index, which tracks the greenback’s value against major currencies, is up over 0.5% at 93.50, while the U.S. 10-year yield is down nearly three basis points.
• However, gold, also a haven asset, is struggling to draw bids and is trading at $1,876, down 1.7% on the day.
• Risk appetite has weakened as the second wave of the coronavirus is accelerating across Europe and in the U.S. and threatening to derail the fragile global economic recovery.
• According to Reuters, France and Germany are preparing to reimpose economically painful lockdown restrictions.
• While the possibility of bitcoin extending losses on continued risk aversion cannot be ruled out, fundamental metrics like the market value to realized value Z-score indicate the broader trend for the cryptocurrency is bullish.

Related Stories

• Bitwise Tops $100M in Assets Under Management
• Is Bitcoin’s Rally Overstretched? This Key Indicator Says No
• Coinbase Goes Down as Bitcoin Approaches 2019 Highs
• ‘A Race Toward Zero’: With Hashrate in the Clouds, Bitcoin Mining Is Less Profitable Than Ever

The one-time New York State finance regulator who shepherded the state’s BitLicense through its early days will join tech ventures fund Andreessen Horowitz (a16z) to focus on cryptocurrency companies.

• An a16z blog post said the fund’s new chief regulatory officer, Anthony Albanese, will focus on crypto portfolio companies in “gaming, digital storage, payment systems, social media, creative marketplaces and more.”
• Albanese most recently led the New York Stock Exchange’s regulatory division. He had previously served as acting superintendent for the New York State Department of Financial Services during the BitLicense’s 2015 launch.
• “We’re seeing so much happening in the frontier areas like DeFi and stablecoins but also among the legacy financial services institutions from PayPal to JPMorgan,” said Katie Haun, an a16z general partner. “He’s really the perfect addition at the perfect time.”
• The Wall Street Journal reports Albanese will start at a16z in November.

See also: PayPal’s Move Is Good for Crypto Adoption but Not So Much for Profits: Morgan Stanley

Related Stories

• Gemini Exchange Launches Crypto Trading Against the Euro
• Overstock’s Medici Ventures Invests $8M in Blockchain Firm Bitt
• Ethereum Developer ConsenSys to Assist French Bank With CBDC Pilot
• ASX Delays Launch of DLT System Over Coronavirus Trading Volatility

Medici Ventures has completed an $8 million equity purchase in Barbados-based Bitt, bringing it a controlling interest in the blockchain firm.

Medici’s latest investment will help it chase market opportunities around the adoption of digital currencies in developing countries, the Overstock subsidiary said in an announcement Wednesday.

“Bitt’s pioneering work in the central bank digital currency space promotes social inclusion, financial empowerment and economic growth,” said Overstock CEO and Medici Ventures President Jonathan Johnson. “It is the perfect use case for blockchain technology.”

Related: Gemini Exchange Launches Crypto Trading Against the Euro

With its controlling interest in Bitt, Medici indicated it aims to help support Bitt’s bid to accelerate central bank digital currency growth.

The equity investment follows a $4 million purchase in 2016 and another in 2018 for $3 million.

Bitt was founded in 2013 and sets out to provide the infrastructure to “support a digital financial ecosystem throughout the Caribbean.”

Last March, Bitt inked a deal with the Eastern Caribbean Central Bank to pilot a “securely minted” and issued digital version of the Eastern Caribbean dollar designed to be distributed across the region.

Related: Former BitLicense Chief to Manage Andreessen Horowitz’s Cryptocurrency Efforts

The Caribbean dollar is being designed to facilitate peer-to-peer transactions between merchants and consumers using smartphones.

Bitt will remain in Barbados following the deal, while its president, Brian Popelka, will also become the blockchain firm’s new CEO.

See also: Central Bank of Bahamas Launches Landmark ‘Sand Dollar’ Digital Currency

Related Stories

• Ethereum Developer ConsenSys to Assist French Bank With CBDC Pilot
• ASX Delays Launch of DLT System Over Coronavirus Trading Volatility

A new trading product from Hxro (pronounced “hero”) and leading derivatives exchange FTX bets that retail cryptocurrency traders would play the options markets if only trading options were a simpler ordeal.

In partnership with FTX, Hxro built its product TixWix to target a “global retail audience” of would-be crypto options traders by distilling complex market data in a format familiar to anyone who uses other prediction and betting platforms for sports, politics, etc., CEO Dan Gunsberg told CoinDesk.

Hxro entered the cryptocurrency trading market in March 2019 with its gamified binary futures product MoonRekt, as CoinDesk reported, which launched to a waiting list of more than 100,000 users. Since starting the company, Hxro’s co-founders Gunsberg and Rob Levy have relied on their prior careers as traders in traditional markets to design novel products for crypto traders.

Related: Market Wrap: Bitcoin Has Light Response to OKEx While Ether Options Traders Make Beacon Bets

Their new product, announced Wednesday, leverages FTX’s back end to support an options trading interface that abstracts away the “complexities of non-linear risk factors” and “complexity around the Greeks,” Gunsberg said, referring to common measures of risk – delta, theta, gamma and rho – used by options traders.

Instead of an otherwise complicated options contract with a 5% chance of expiring at a given price, for example, TixWix serves the same trade as a simple bet with 20-to-1 odds, Levy explained.

At launch, the new product supports bitcoin and ether markets with two types of bets: Tix, a bet that the market will close above a certain price by a given date, and Wix, a bet that the price will touch a certain price at some point before a given date.

TixWix is the first instance of FTX serving as a back-end provider, CEO Sam Bankman-Fried told CoinDesk. His exchange already has experience offering with betting and prediction markets, however, with its increasingly popular U.S. presidential election markets that have seen record volumes ahead of the Nov. 3 event.

Related: Crypto Traders Bet on US Election as FTX Prediction Markets Hit Record Volumes

More broadly, TixWix is a bet by both teams on the future growth of the general cryptocurrency options market, Levy told CoinDesk. “There’s enormous upside for options trading products in crypto. Options are an extremely powerful, useful tool.”

The size of options trading in traditional markets is one reason Levy expects significant growth in crypto options. “The explosion of stock options that we’ve seen in legacy markets is about to be seen in crypto,” Levy said. “You need liquidity for that to happen, and we’re starting to see real liquidity come into crypto.”

With the crypto options market set to balloon, Hxro and FTX plan to make it easily playable even by amateur traders through “livestreaming simplified market odds” on TixWix.

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ConsenSys, a company that develops for Ethereum and funds ecosystem startups, is to help French bank Societe Generale carry out research on a central bank digital currency (CBDC).

• Announced in a blog post on Wednesday, ConsenSys will work with Societe Generale – Forge, the bank’s digital assets arm, providing technology and expertise as part of ongoing CBDC pilot efforts.
• ConsenSys will be involved in work looking at CBDC issuance and management, delivery versus payment and cross-chain interoperability.
• Societe Generale – Forge has previously issued bonds worth millions of euros over a blockchain, with one of the initiatives being in collaboration with France’s central bank.
• According to a report in September, ConsenSys was chosen to work with the Hong Kong Monetary Authority on a different CBDC pilot, looking at how blockchain might facilitate cross-border payments between commercial banks.
• The developer also acquired JPMorgan’s blockchain platform Quorum this summer – that’s the platform on which the investment bank’s JPM Coin cryptocurrency was built.
• The first commercial use of JPM Coin is expected within the week, JPMorgan executives said Tuesday.

Also read: Digital Euro Within Decade ‘Very Likely,’ Says Finland’s Chief Central Banker

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• Coinbase Goes Down as Bitcoin Approaches 2019 Highs

A historically reliable fundamental analysis indicator suggests bitcoin’s rally has scope to continue after its rapid rise to new 2020 highs, contradicting signals on the technical charts.

• While bitcoin’s “market value to realized value” (MVRV) Z-score is hovering at two-year highs at 2.12, according to data source Glassnode, that’s still well below the 7.0 score at which an asset is considered near a top.
• The MVRV Z-score measures the deviation of market value from realized value, and is used to assess undervalued and overvalued conditions.
• Put simply, the cryptocurrency is slightly overvalued but still has plenty of room to extend the run of gains from the low of $3,867 seen since mid-March.
• The indicator backs up billionaire hedge fund manager and philanthropist Paul Tudor Jones’ recent comments that bitcoin’s rally has just begun.

• Historically, an MVRV Z-score below zero has marked bear market lows, while a reading above 7 has marked major bull market tops.
• The Z-score fell below zero, indicating undervalued conditions following the March 12-13 crash, which saw prices fall as low as $3,867.
• Since then, the cryptocurrency has largely stayed on an uptrend.

Conflicting signals

• Bitcoin’s 14-week relative strength index (RSI), a popular gauge of price momentum, has crossed above 70.00 on the charts.
• According to the technical analysis (TA) theory, an above-70 figure is a sign an asset is overbought.
• The 14-day RSI, too, is flashing a similar signal.
• TA studies, however, are lagging indicators as they are based on price and relatively less reliable.
• “In a trending market, indicators such as the RSI can remain in an ‘overbought’ or ‘oversold’ state for extended periods of time,” trader and analyst Nick Cote told CoinDesk.
• Bitcoin’s current uptrend looks strong because it’s backed by increased institutional participation and expectations for mainstream adoption.
• Online payments giant PayPal recently announced support for bitcoin and other cryptocurrencies.

• The overbought signal does not imply a bearish reversal, but may yield a minor pullback or consolidation similar to those seen in May and August.
• “For bitcoin, institutionalization is the primary driver for growth in this next bull market. As such, it’s better to observe on-chain metrics,” Cote said.
• At press time, bitcoin is trading lower near $13,520, having narrowly missed breaching the June 2019 high of $13,880 during the Asian trading hours.
• Disclosure: The author holds small positions in bitcoin and litecoin.

Also read: Bitcoin Hits 16-Month High Despite Sell-Off in Global Stocks

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• 4 Bitcoin Lightning Network Vulnerabilities That Haven’t Been Exploited (Yet)

Australia’s largest stock exchange operator, ASX Ltd., has once more opted to delay the rollout of its in-development blockchain-based trading platform.

• As reported by Reuters on Wednesday, the operator of the Australian Securities Exchange said it was eyeing a new date of April 2023 due to higher levels of demand than expected.
• “The industry … requested substantially more post-trade processing capacity than what had been contemplated pre-COVID-19,” the operator said in Reuters’ report.
• ASX said there had been “extreme increases” in trading volumes on stock exchange during the “most volatile period of the pandemic in March.”
• The distributed ledger technology (DLT)-based system is intended to replace the ageing Clearing House Electronic Subregister System (CHESS), and is intended to provide a range of benefits including making settlements on the exchange much faster.
• ASX Ltd has pushed back the release of its new systems on multiple occasions including in September 2018 and this year where it again cited the COVID-19 crisis.
• At the start of October, Australia’s central bank and securities regulator had called on ASX to launch the DLT system as soon as safely possible.

See also: Australia’s Central Bank Tells ASX to Push On With Delayed DLT Trading Platform

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U.S. President Donald Trump’s campaign website was briefly compromised on Tuesday, as hackers looked to fleece cryptocurrency from unsuspecting supporters in the final days before the 2020 election.

• The attack, which lasted less than 30 minutes, saw the website defaced with messages claiming the hackers had compromising information on Trump and his family.
• As reported by The New York Times, the hackers were soliciting donations in the monero cryptocurrency due to privacy enhancing properties that make it hard to trace.
• The cybercriminals said they had compromised “multiple devices” giving them access to the “most internal and secret conversations” of the president and his inner circle.
• Onlookers were given a choice: they could either donate Monero to a wallet that prompted the hackers to “share the data” or another wallet asking them to keep it private.
• Trump’s administration was accused without evidence of participating in the spread of COVID-19 and collaborating with “foreign actors manipulating the 2020 elections.”
• The New York Times also reported the website takeover and subsequent solicitation of crypto donations appeared to be a variation on the common crypto “giveaway” scam.
• Such scams ask people to send money to a particular address with the false promise of doubling or returning a victim’s funds.
• Similar attacks hit major accounts on Twitter back in July, including that of Joe Biden.
• The source of the attack is unclear, but an investigation is currently underway by U.S. law enforcement.
• The incident comes as the U.S. presidential election campaign between incumbent Donald Trump and former Vice President Joe Biden enters its last week.
• Biden is far ahead of Trump when it comes to donations, according to another NYT article.

See also: Election 2020: What’s at Stake for the Crypto Industry

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“Think of it as the foundation of an enterprise mainnet.” 

That’s how Christine Moy, head of JPMorgan’s newly rebranded Liink banking network, described its aspirations towards decentralization in the realm of big business.

The revamped Liink, which is based on a fork of Ethereum, is more of a “decentralized network,” said Moy, and less like a “central command product.” As such, Liink now invites its 400-plus financial institutions (including 25 of the largest 50 banks) to start building on top of the platform. 

Related: JPMorgan Launches JPM Coin: Welcome to the Private Currency Era

“Liink participants have the ability to build applications on the network, and in doing so are able to spotlight their local expertise with global reach,” said Moy. “If a Liink participant has specific expertise around payments in a particular region or currency, for example, it has the opportunity to build an application and deploy it on Liink to make it available to the network.”

Read more: JPMorgan’s ‘JPM Coin’ Is Live, Execs Say

Formerly known as the drably named Interbank Information Network, Liink was designed to connect banks in a peer-to-peer fashion and help them remove the pain points from cross-border payments and other functions.

While Liink is not open-source like Quorum or, say, R3’s Corda network, JPMorgan is encouraging collaboration within the network and also expanding it beyond banks. 

Related: JPMorgan’s ‘JPM Coin’ Is Live, Execs Say

“The focus has been on building a peer-to-peer network for cross-border payments, thus the original name, Interbank Information Network, but we are now also incorporating corporates and fintechs into the Liink ecosystem as well,” said Moy.

JPM’s next step?

JPMorgan, which is famous in the blockchain world for creating the Ethereum-based Quorum network, released a flurry of news Tuesday, the headline being that its wholesale banking digital currency JPM Coin is now live. But also that all Quorum-based services now fall under the new Onyx brand. 

“Liink as a new brand comes at a pivotal time, as we look to re-architect how money, information and assets move across the globe,” Umar Farooq, CEO of Onyx, said in a statement.

On the subject of JPM Coin complementing the Liink network, Moy said: 

“The Liink network is live for peer-to-peer information transfer. JPM Coin is obviously value transfer. As part of the broader Onyx organization, we are focused on a coherent client product experience.” 

It’s a lingering question: How might JPMorgan’s various blockchain services be combined into a greater sum than their parts? JPMorgan declined to comment further. 

As well as rebranding, Liink introduces a couple of new features: Confirm, which allows for the validation of account information prior to initiating a payment, and Format, which helps ensure a payment message accurately conforms to country- and currency-specific requirements.

The Confirm application matches data requesters, looking to validate account owners and FX particulars, with data responders, who are incentivized to help because they can earn a cut of fees for validating that information.

“This is a blockchain-based, multi-party network so you have the ability to get a response from multiple different banks on the network, or for that matter tech companies,” said Moy. “Enabling our Liink participants to potentially create new revenue streams, we think, is a differentiator from other offerings where a central party controls the flow.”

All told, it looks like JPM’s Liink is shaping up to be a potential SWIFT killer.

“Liink’s original use cases were modeled by JPMorgan for banks,” said Moy. “We’ve paid special attention to some of the specific mechanisms of how we would design this application as a result,” she said, adding:

“The aim is not to replace SWIFT but rather to complement it.”

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Decentralized lending platform Cred says it has experienced “irregularities” in the handling of “specific” corporate funds by a “perpetrator of fraudulent activity” and is cooperating with law enforcement in relation to the matter.

• CoinDesk learned via an email tipoff that Cred’s balance sheet has been “negatively impacted,” prompting an investigation into “the loss of these funds.”
• Upon being contacted, the platform confirmed the “irregularities” and said it is carrying out “internal accounting” of its assets to determine the impact of “the incident.”
• Cred has been advised by legal counsel to temporarily suspend inflows and outflows of funds relating to its CredEarn program, according to the company email.
• An update will be provided within “the next [two] weeks,” the company said.
• In a separate email shared to CoinDesk by the same source, trading platform Uphold told its customers that it had “decided to discontinue its relationship with Cred.”
• The move means customers of both Cred and Uphold would now be affected as they would no longer be able to move funds into Cred from their Uphold wallet nor view their Cred balance on Uphold’s platform.
• Cred can still pay any redemptions due to clients straight into their Uphold wallet, according to Uphold’s email.
• CoinDesk reached out to Uphold for further comment but did not receive a reply by press time.

See also: Visa Adds Crypto Lender Cred to Fast Track Payments Program

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U.S. cryptocurrency exchange Coinbase has disabled trading due to feed issues amid bitcoin’s ascension towards 2019 highs near $13,880.

• According to a company update on Wednesday, Coinbase said they were “currently investigating the issue,” while no further comment was provided.
• Coinbase has suffered a number of outages during busy trading periods this year including on Sept. 4 – the last time an outage caused trading to halt, according to the company’s status page.
• The outage comes at a time when bitcoin has been fast approaching new highs not seen since June 26, 2019.
• “All updates will be posted in the link,” Coinbase’s Senior Manager of Communications Crystal Yang told CoinDesk via email.

See also: Coinbase Received Over 1,800 Law Enforcement Information Requests in the First Half of 2020

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• Bitcoin mining profitability is in the basement, seeing all-time lows in 2020.
• Conversely, Bitcoin’s hashrate has surged throughout 2020, propelled in part by mining farms financing new hardware to boost their operations.
• Bitcoin’s hashrate has taken a dip as China’s wet season comes to an end, but mining professionals predict this will only be temporary, and it has only improved profit margins so much.

Bitcoin mining profits have been rock bottom in 2020.

For much of the year, the cryptocurrency has been less profitable to mine than ever. And that’s because Bitcoin’s collective hashrate – or how much computing power is pulsing through the network – has surged to consecutive all-time highs this year. 

Read more: How Bitcoin Mining Works

Related: Coinbase Goes Down as Bitcoin Approaches 2019 Highs

According to North American Bitcoin mining company Luxor’s hashprice index, miners are extracting $0.096 for every terahash they produce (before the recent price spike, it was lower still at roughly $0.08). This time three years ago, miners could expect to make roughly $1.40. Their revenue in October of 2019, though several magnitudes less than what they were raking in during 2017’s market mania, was still double today’s cash flows at $0.16.

Coming into 2020, miners were producing approximately 90 exahashes a second (or 83,000,000,000,000,000,000 cryptographic numbers a second in an effort to generate new blocks). Now, they are producing roughly 124 EH/s, after hitting an all time high of 157 EH/s in mid-October.

Bitcoin mining is a resource war of attrition, so naturally, revenue margins are dwindling in a year when Bitcoin’s hashrate is exploding. And ASIC financing could largely be to blame. 

The practice, whereby big operations can take out loans to bulk-order newer generation hardware, floods the network with fresh hashrate. The surge in hashrate has meant more competition than ever for the digital gold rush –  and with fewer bits to go around, small-time miners are having trouble keeping up.

Bitcoin’s hashrate and mining revenue are inversely proportional

Related: Market Wrap: Bitcoin Jumps to $13.7K, Nearing 2019’s High; Ether Volatility Reverses Course

Luxor Mining pool operator Ethan Vera told CoinDesk that the anemic miner revenue is a direct result of Bitcoin’s growing hashrate, its relatively stagnant price and lower-than-usual transaction fees.

According to Luxor’s index, the 7-day hashrate average is currently resting at 124 exahashes a second, and Vera said this “is largely due to Bitmain S19s and Whatsminer M30s being delivered to the market in large quantities.”

Read more: Bitcoin Miner Revenue Saw 11% Drop in September

It’s not unusual, of course, for miner revenue to decline when hashrate is going vertical. But Bitcoin’s stellar increase in hashrate in 2020, a nearly 30% increase this year, is the result of accelerated investment in the industry. Much of this growth comes from ASIC financing, wherein miners take out loans to buy the best new-generation mining equipment.

Luxor Mining’s Hashprice Index: Source

The mining finance industry, populated by key players like Blockfills, Arctos, BlockFi, SBI, DCG and Galaxy Digital, continues to grow. Increased competition has led to lower rates, Vera said, with some miners being able to secure sub 10% interest loans. Just a year or so ago, the common rate was 20%.

“A number of North American companies have been in the news recently for large hardware purchases, particularly RIOT Blockchain and Bitfarms. Foundry has also popped up recently and offering financing options for ASIC miners,” Thomas Heller, the COO of mining media firm HASHR8, told CoinDesk.

Most recently, CoinDesk reported on Marathon Patent Group’s purchase of 10,000 Antminer s-19s, which could pump an estimated 1.1 exhashes into the mining company’s operation. This is Marathon’s second bulk purchase from Bitmain this year after it scooped up 10,500 ASICs for $23 million in a deal with Bitmain this August. 

Stephen Barbour, whose company Upstream Data provides mining rigs to oil drillers which run on vented natural gas, sees this as detrimental to Bitcoin mining’s short-to-near-term health. In some cases, he told CoinDesk, the big players aren’t always optimized for profitability because they have financial cushions. 

“These guys can rent out an old mine, operate at a loss and then recapitalize,” he told CoinDesk, referring to these firms’ abilities to take out new loans or woo new investors when they need to shore up finances.

A look at one such firm, RIOT Blockchain, makes Barbour’s point. The publicly traded company purchased thousands of ASICs this year in a herculean (if quixotic) effort to quadruple its hashrate by 2021. As of June 2020, RIOT had net operating losses of nearly $15 million, according to SEC filings. RIOT clocked a similar loss in the first half of 2019, and Marathon posted $3.2 million in losses for the first half of 2020.

Northern AG, another publicly traded mining operation, had a net income of -$8.7 million in 2019 and -$5.6 million in 2018. Even the profitable ones, like the likewise public industrial miner Hut 8, barely eked out a profit in 2019: after generating $83 million in revenue, Hut 8 pocketed just $2.1 million after debt obligations and other expenses.

Disregarding profit, these miners continue to expand in hopes of future spoils, but this very activity is sending Bitcoin’s hashrate skyward, Barbour argues.

“These guys can get these big loans and they are effectively operating at a loss, and it’s propping up the hashrate.”

Retail miners feeling the heat

As these big Bitcoin mining farms scale irrespective of profit, Bitcoin’s hashrate pumps, and smaller players are having a hard time keeping up with the suped-up competition. 

“It’s becoming increasingly challenging for small miners to compete for both hosting and hardware purchases, because lower prices are available for those orders with larger volume,” Heller said.

Vera said, “There is still a large retail market in China that can access sub $0.04 cent power during the rainy season in the Sichuan province. But outside of China, retail mining has declined significantly.” 

That rainy season, which provides gushes of cheap power to Chinese miners, is coming to an end, and with it, Bitcoin’s hashrate has taken a 12% hit to 124 exahashes. Heller said this dip, which happens annually, will “only be temporary” as the older machines migrate to areas like South America, Kazakhstan, Russia and Iran. 

Read more: Iran Is Ripe for Bitcoin Adoption, Even as Government Clamps Down on Mining

The miners buying these rigs aren’t concerned with profit, Vera says. “They have other reasons for it,” he said, “such as to avoid capital controls or avoid sanctions.”

For others who are trying to turn a profit, bitcoin’s recent price bump to $13.6K will help a bit, and further upward price action would widen these miners’ revenue margins. 

Price may only be part of the solution, though; addressing the competitive discrepancy may also require new market tools to shift hashrate distribution. At least, that’s the idea behind Compass, a service by HASHR8 that matches retail miners with mining farms to host their equipment. Compass wants to make it easier for these miners to find a facility, thereby lowering the barrier of entry to the process and (hopefully) finding the most economical setups for individual miners.

A problem for the Bitcoin mining market (and time)

Something like Compass may help smaller miners break into the game. Or maybe the problem will resolve itself when the market does its thing.

“I think in the long term you’ll see more of these massive operations fail,” Barbour told CoinDesk.

A pumping hashrate is always “a terrible thing for miners,” Barbour said, and it may be a degree worse for the little guys, considering “they don’t have the advantage of economies of scale like the bigger guys,” Barbour continued. 

But that doesn’t mean it’s easy on the big players, either. After all, more hardware means more operational overhead, as well as a mountain of debt to pay off for the financed ASICs.

To sum up the situation with an idiom, the bigger they are, the harder they fall. And Barbour thinks the mining giants’ time is coming.

“I think all of these financed operations are a part of what I call the ‘discovery phase’ for this industry. I think we’ll see more of them in the near term but they’ll struggle longterm, and I think their operations will fracture and splinter.”

He continued to say that, unlike smaller mining operators like himself who have their own “skin in the game,” these financed operations were launched on the back of someone else’s buck. While this does not guarantee that these businesses will be run in spite of profit, it does mean that the operators have less at stake than their small business counterparts.

Read more: Marathon Brings New Bitcoin Mining Rigs Online, Sees Itself Becoming Cash-Flow Positive

Still, Vera pointed out that not all of these operations are the same and that these operation’s likelihood for success “depends on the interest rate and the operating cost of the borrow.” He added that interest rates around 10% are probably favorable for some of these miners, while any borrowing above that could be unsustainable.

“A race toward zero”

For those firms that aren’t profitable, though, you may be asking why they are operating at all. Barbour told CoinDesk that they’re essentially “speculating on [the price ripping upward]”; they’ve ordered all this new-gen hardware to frontrun the bull run and are gambling that this run will come sooner rather than later.

Yet again, though, it could all come down to a waiting game of attrition, Barbour says, and the price might not matter that much in the long run. Per Moore’s Law, which stipulates that computer processing improves exponentially, ASIC mining hardware will continue to improve towards maximum efficiency.

Eventually, Barbour argues, the new gen stuff won’t be much more efficient than the old gen, so miners who can mass order machines won’t have an advantage. As miners continue to search for the cheapest, near-free electricity, Barbour believes the mega-operations will eventually be priced out because the upside won’t be there to justify the use of capital.

“They’d be better off just buying bitcoin … Any time there’s a drive for cheap power, it drives down the profitability for everyone. It’s a race toward zero,” Barbour said.

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MicroStrategy is looking to add to its $521 million stash of bitcoin, the company’s president said Tuesday during the business intelligence firm’s earnings conference call.

MicroStrategy bought $250 million in bitcoin (BTC) on Aug. 11. It purchased an additional $175 million in bitcoin one month after that. Bitcointreasuries.org says the business intelligence firm now holds 38,250 BTC .182% of bitcoin’s total supply. With the recent rise in BTC’s price, it’s holdings are now worth $521 million, a 22% premium over the $425 million investment. 

Now it wants more.

“You should expect that we will purchase additional bitcoin as we generate cash beyond what we need to run the business on a day to day basis,” MicroStrategy President Phong Li said.

Li made the comments shortly after the company reported Q3 revenue rose 6.4% year-over-year and notched a net loss of $14.2 million. On a non-GAAP basis, the company posted a profit of $19.8 million, or $2.06 per share, up from $11.6 million, or $1.13 a year ago.

Besides the 22% return on its BTC investment, the company has seen another benefit from its foray into cryptocurrency – increased visibility.

“We’ve seen a notable and unexpected benefit from our investment in bitcoin in elevating the profile of the company in the broader market, Li said. “This is benefitting our reputation overall, raising our mindshare among prospective customers.”

CEO Michael Saylor, who has vocally championed BTC since early September, further explained during the earnings call that MicroStrategy’s bitcoin reserves are paying dividends across recruiting, marketing and the MicroStrategy brand. He also compared the bitcoin network to “a digital monetary network that doesn’t bleed monetary energy.”

Related: ‘Garbage’ Market Data Is Holding Bitcoin Back: MicroStrategy CEO

“As more entities start to understand that idea, which is pretty compelling, the adoption of bitcoin increases,” he said.

The executive’s statement caps a wild three months at the business intelligence firm, executives first hinted at a bitcoin future in their Q2 call. MicroStrategy’s share has risen over 40% since Saylor’s first bitcoin disclosure on Aug. 11.

Share price aside, the bitcoin storyline has definitely boosted the company’s profile. The shift began on July 28, when during the Q2 earnings call executives mulled allocating $250 million into “alternative assets” over the next 12 months as a hedge against the weakening dollar. 

Bitcoin, they said, was one of the possible “alternatives.” It turned out to be the only alternative. 

Related: JPMorgan Calls Square’s $50M Bitcoin Investment ‘Strong Vote of Confidence’ for the Cryptocurrency

All this from a company whose business model has nothing to do with crypto. Before bitcoin, MicroStrategy’s only interaction with the blockchain space was its $30 million sale of the Voice.com domain name to EOS in 2019. 

Saylor nevertheless framed the bitcoin holdings as an “example of MicroStrategy’s embrace of virtual technologies” in his Q3 earnings call preview.

With BTC now recognized as MicroStrategy’s “primary treasury reserve asset,” the firm said in its statement that it could raise or lower its total holdings as necessary.

But from Li’s comments and from what BTC has done for the company’s visibility and its finances, it looks like the firm’s preference right now is to boost its holdings and soon.

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MicroStrategy executives said Tuesday its 38,250 bitcoin treasury is boosting the business intelligence company’s market visibility in Q3 as its revenue rose 6.4% year-over-year and notched a net loss of $14.2 million. On a non-GAAP basis, the company posted a profit of $19.8 million, or $2.06 per share, up from $11.6 million, or $1.13 a year ago.

“We’ve seen a notable and unexpected benefit from our investment in bitcoin in elevating the profile of the company in the broader market, said MicroStrategy President Phong Li. “This is benefitting our reputation overall, raising our mindshare among prospective customers.”

He also said more buying is on the way.

Related: ‘Garbage’ Market Data Is Holding Bitcoin Back: MicroStrategy CEO

“You should expect that we will purchase additional bitcoin as we generate cash beyond what we need to run the business on a day to day basis,” Li said.

CEO Michael Saylor, who has vocally championed bitcoin since early September, further explained during the earnings call that MicroStrategy’s bitcoin reserves are paying dividends across recruiting, marketing and the MicroStrategy brand. He also compared the bitcoin network to “a digital monetary network that doesn’t bleed monetary energy.”

“As more entities start to understand that idea, which is pretty compelling, the adoption of bitcoin increases,” he said.

The executive’s statement caps a wild three months at the business intelligence firm, executives first hinted at a bitcoin future in their Q2 call. MSTR’s share has risen over 40% since Saylor’s first bitcoin disclosure on August 11. Its BTC is now worth $521 million, a 22% premium over the $425 million investment. 

Related: JPMorgan Calls Square’s $50M Bitcoin Investment ‘Strong Vote of Confidence’ for the Cryptocurrency

For its part, MicroStrategy quoted its 38,250 bitcoins at $13,023 apiece at market close Monday afternoon. That would put the total trove around $498 million.

Price aside, the bitcoin storyline has definitely boosted the company’s profile. The shift began on July 28, when during the Q2 earnings call executives mulled allocating $250 million into “alternative assets” over the next 12 months as a hedge against the weakening dollar. 

Bitcoin, they said, was one of the possible “alternatives.” It turned out to be the only alternative. 

MicroStrategy bought $250 million in bitcoin on Aug. 11. It purchased an additional $175 million in bitcoin one month after that. Bitcointreasuries.org says the business intelligence firm now holds 38,250 BTC .182% of bitcoin’s total supply. 

All this from a company whose business model has nothing to do with crypto. Before bitcoin, MicroStrategy’s only interaction with the blockchain space was its $30 million sale of the Voice.com domain name to EOS in 2019. 

Saylor nevertheless framed the bitcoin holdings as an “example of MicroStrategy’s embrace of virtual technologies” in his Q3 earnings call preview.

With bitcoin now recognized as MicroStrategy’s “primary treasury reserve asset,” the firm said in its statement that it could raise or lower its total holdings as necessary.

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• The MicroStrategy Effect? This Firm Is Helping Businesses Save in Bitcoin
• ‘I Didn’t Buy It to Sell It. Ever.’ MicroStrategy’s Michael Saylor on His $425M Bitcoin Bet