Amidst an ongoing legal tussle with the securities and exchange commission, Ripple defendants have fired back with a motion to expose the XRP holdings of SEC employees, a token they have alleged is an unregistered security.
RIpple’s Recent Motion
On August 27th, attorney James Filan unveiled Ripple’s new motion demanding the SEC to produce documents related to its own employees’ XRP holdings. The legal order comes in response to four previous meetings Ripple has had with the SEC related to this issue throughout the summer, which have all been “without progress.”
The motion is filed on behalf of Ripple Labs Inc., Bradley Garlinghouse (Ripple CEO), and Christian A. Larsen (Ripple executive chairman). Specifically, the defendants wish to gather “anonymized documents reflecting [the SEC’s] trading preclearance decisions with regard to XRP, bitcoin, and ether.”
They also seek information specifically related to employee’s XRP holdings to be produced with redacted personal information or in aggregate form.
Within their motion, Ripple demonstrates that the SEC had “not adopted or imposed” any rules restricting their employees from trading in crypto until January 16th, 2018. This would, according to the company, be in line with the commission’s previous views on digital assets not being securities up until that point. Nevertheless, this left SEC employees a massive window of time to have collected XRP.
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“At all times from 2013 until at least January 19, 2018, SEC employees were free to buy, sell and hold XRP without any restriction by the SEC.”
Ripple and the court are wasting no time: the order gives the SEC until Sept 3rd to respond to their motion.
Ripple’s Ongoing Legal Battle
The recent news is just the next step of a continuing legal war between Ripple and the SEC- one which Ripple has been winning as of late. In May, a US court denied the SEC’s attempt to access Ripple’s internal communications about the sale of their token, blocking the road that the commission wanted to use to crack down on them.
Furthermore, Ripple was recently approved on a motion to access information about the company’s XRP sales made on Binance exchange, which RIpple’s legal team claims were “overwhelmingly made on digital asset trading platforms outside of the United States.” This hurts the SEC’s case against Ripple using the securities act, which only applies to domestic offers and sales.
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Payment for order flow is a controversial practice employed by Robinhood.
Gary Gensler thinks it may be inefficient and costly for consumers.
SEC pressure could speed up Robinhood’s continuing expansion into crypto offerings.
Executives at stock and crypto trading app Robinhood have vowed to diversify its revenue sources in the coming months and expand its appeal to cryptocurrency users.
Better get on that.
In an interview withBarron’spublished today, U.S. Securities and Exchange Commission Chairman Gary Gensler said that the agency is considering banning a practice called payment for order flow. Trading in HOOD shares subsequently dropped, as payment for order flow has traditionally been responsible for the bulk of revenue.
Payment for order flow, sometimes shortened to PFOF, entails outsourcing the execution of stock trades to third parties. When someone buys a stock on Robinhood, another company pays Robinhood fractions of a penny per share to match buyers and sellers. (Not bad when you consider Robinhood processes millions of trades in a year.) Using complex price data, these market makers can execute the trade more efficiently than Robinhood could and take a cut of the resultant proceeds.
It’s how Robinhood can advertise trades without taking a commission. And it’s not necessarily bad. The market makers provide liquidity that make reasonably priced trades possible. They can even improve the trading prices for Robinhood customers as they must be able to at least match, if not beat, orders placed directly on a U.S. stock exchange, in line with what’s called National Best Bid and Offer (NBBO).
Yet some say the market makers are actually responsible for raising overall prices by keeping trades off of exchanges and making for larger spreads on trades (bad for traders). “Transparency benefits competition, and efficiency of markets,” Gensler toldBarron’s. “Transparency benefits investors.”
Moreover, others say the data that market makers receive will reduce competition over time as the best firms price other market makers out, leading to larger spreads. Gensler agrees that it might be better if this data were all public.
“They get the data, they get the first look, they get to match off buyers and sellers out of that order flow,” he said. “That may not be the most efficient markets for the 2020s.”
In its Q2 earnings announcement, Robinhood CEO Vlad Tenev remained committed to a slew of new product additions, including a crypto wallet andmore cryptocurrencies for trading. Its seven listed coins are a primary source of non-PFOF revenue for the firm. In the earnings call, its first as a publicly traded company, Robinhood revealed that 60% of accounts with funds in them had begun trading crypto for the first time, enough for crypto revenue to account for41% of total revenue—up from 17% the previous quarter. Of that, however, 62% came solely from Dogecoin.
And if payment for order flow is in a precarious regulatory condition, you probably don’t want to be counting on Dogecoin—created as a joke—to be your only backup plan.
“Bitcoin is a bubble” is something that has been thrown around a lot ever since the last bull run began in 2017. A lot of prominent personalities in the finance industry took this stand when the digital asset hit its then all-time high of $19K. The bear market that followed seemed to validate this for the next few years. Then the bull run of 2020 started and a lot of those sentiments were put on the back burner. But now, John Paulson has come to hit the market with the same thing.
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Over a decade ago, billionaire John Paulson had bet against the housing market. Paulson had reportedly made his fortune from carefully placed bets against the housing market in 2007. The billionaire had used credit default swaps to bet against the housing market, which looked to be in its subprime. By 2010, Paulson himself had made $4.9 billion from his bet. The complete total Paulson made for himself and his clients from shorting the market in 2007 came out to about $20 billion, making it one of the biggest fortunes ever made in the history of Wall Street.
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Bitcoin Has No Intrinsic Value
Paulson was on Bloomberg’s Wealth with David Rubenstein to talk about trading and financial markets. Paulson remained bullish on gold, as he has been for a number of years now, which he believed is coming into its moment. The billionaire although had nothing good to say about cryptocurrencies. Cryptos received harsh criticism from Paulson, where he stated, “I am not a believer in cryptocurrencies.”
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Paulson then went on to call cryptocurrencies a “bubble.” Paulson attributed the value of cryptocurrencies to the high demand for them. One could argue that this is the way economics works. Demand always plays the biggest role in how something is valued. Paulson also explained that there were way too many downsides to bitcoin. He added that the digital asset was just too volatile too short. Hence, the short methods
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“I would describe cryptocurrencies as a limited supply of nothing. There is no intrinsic value to any of the cryptocurrencies.”
Although Paulson spoke critically on other investments like SPACs, he was harshest on bitcoin. The billion said that cryptocurrencies “will eventually prove to be worthless.”
Gold Versus BTC
Paulson’s track record after his famous 2007 short has not been noteworthy. Although his assets under management grew after the notoriety he gained from that trade, it soon dwindled down as investors pulled out their money. In 2019, Paulson went from managing $38 billion to only about $9 billion assets under management, at this point mostly managing his own money. So Paulson turned his hedge fund into a family office.
BTC has surpassed gold year over year | Source: BTCUSD on TradingView.com
Paulson is bullish on gold, despite the fact that bitcoin has outperformed the asset consistently over the past decade. While gold has brought consistently negative results to its investors, bitcoin has returned over 200% year over year in returns.
Featured image from Bitcoinist, chart from TradingView.com
Last Week In Bitcoin is a series discussing the events of the previous week that occurred in the Bitcoin industry, covering all the important news and analysis.
Summary Of The Week
The week started off great with bitcoin breaching $50,000 on Monday, but it seemed to stagnate as the days went on. While many complained, bitcoin was already up 60% over the preceding month and a short cool-off period is nothing new. In the week, MicroStrategy stacked up and continued to HODL, more billionaires joined the bitcoin club, and both Ray Dalio and Facebook made some ill-advised moves. Here’s the last week in bitcoin:
Bullish News
❶ The week started off great as bitcoin surpassed $50,000 for the first time since May, in what seemed to be the start of a bullish week. Sadly, the price struggled to remain above $50,000 and dipped a bit. Many cried foul, but were quick to forget bitcoin surged over 60% over the month leading up to Monday.
❷ On Tuesday, bitcoin infrastructure firm, Blocksteam, raised $210 million in funding at a $3.2 billion valuation as the firm plans to expand its mining initiatives and launch its own ASIC miners. Blockstream is led by Adam Back, founder of Hashcash, used in bitcoin mining, and the fundraising confirms market interest in bitcoin infrastructure investments.
❸ Also on Tuesday, Michael Saylor announced that MicroStrategy purchased an additional 3,907 BTC bringing the company’s total holdings to 108,992 BTC. Saylor reiterated the company’s intent to HODL and confirmed that the company maintains self-custody with no intent on lending it out.
❹ Rounding out news from Tuesday was Mexican billionaire, Ricardo Salinas Pliego, calling fiat currency a fraud and noting that his bank, Banco Azteca, was working on becoming the first in Mexico to accept bitcoin. It also operates in Panama, Guatemala, Honduras, Peru and El Salvador. This is overly bullish considering bitcoin is becoming a big talking point in South America, with El Salvador just over a week away from starting its nationwide bitcoin rollout.
❻ On Wednesday, Holly Kim became the first politician in the U.S. state of Illinois to accept bitcoin donations, saying “It seems to be how people want to give. I feel like it’s a new frontier.” As more and more politicians warm up to the idea of bitcoin and its potential, it’s likely they will be for pro-bitcoin legislation in the future.
❼ Also on Wednesday, NYDIG partnered with SIMON, which serves over 100,000 wealth managers with assets over $5 trillion, to offer bitcoin custody services. SIMON also launched a bitcoin education platform specifically aimed at wealth managers.
❾ By Thursday, Morgan Stanley funds held more than 1 million shares in the Grayscale Bitcoin trust.
❿ Also on Thursday, Bloomberg reported that billionaire, Simon Nixon, was seeking bitcoin exposure, following in the footsteps of Ricardo Salinas Pliego earlier in the week. Nixon is the co-founder of price-comparison website, MoneySuperMarket, founded in 1993.
Other bullish bits of news to round the week off with was Fidelity predicting bitcoin would hit $1 million in 2026, billionaire Samih Sawiris started accepting bitcoin at his luxury hotel in Switzerland, Wyoming Senator, Chris Rothfuss made it clear the state was pro-bitcoin and Venezuelan Turpial airlines plans to accept bitcoin as a hedge against hyperinflation.
Bearish News
❺ On Tuesday Ray Dalio, who just weeks ago claimed to be investing heavily in bitcoin, claimed that gold is still superior. With his stance flopping around like a fish out of water, it can be misconstrued that he’s completely changed it, but that still remains unclear. He is co-CIO at one of the world’s largest hedge funds and so his word carries some weight to no-coiners, for now.
❽ On Wednesday, Facebook reaffirmed its commitment to stablecoins and NFTs, instead of bitcoin. Although it’s entirely their choice, the company that controls the voices of billions through its platforms, is taking a clear stance that it prioritises other crypto assets over bitcoin — slap in the face to bitcoin and bitcoin users worldwide.
Verdict
Over the last week I have noticed the longer you’re active in the bitcoin space, the more desensitized you become to overly bullish news. Billionaires are eager to invest in bitcoin, wealth managers and banks are launching new bitcoin-friendly products almost weekly, and more and more institutions are starting to heavily invest their resources in bitcoin, but the markets don’t seem to react. Then again, as I have stated before, bitcoin’s fiat price should be no indication of its strength.
We are in the early days of an asset that will shift the status quo and put financial control back in the hands of the masses. If you buy bitcoin because some billionaire is doing it, then you clearly don’t comprehend what bitcoin is, how it works or what it stands for. Although, more adopters should always be welcomed and those with a podium to preach from are welcome to join the “diamond hands army.”
Bitcoin breached $50,000 for the first time in several months and that’s a good sign.It’s slowly but surely moving up and if you didn’t stack up at $30,000 in late July, then the second best opportunity to stack is now. In just over a week El Salvador will start rolling out bitcoin as legal tender, millions of citizens will receive $30 in bitcoin each and the country is poised to pave the way for further adoption by countries that have for centuries been described as “third world” but little do they know…
I am confident that bitcoin is still poised to go beyond $100,000 in the months ahead, whether or not there will be a major catalyst that drives this growth, remains to be seen, but then again, isn’t the biggest catalyst for growth the idea that bitcoin will bring financial freedom and more importantly financial security in the decades to come?
This is a guest post by Dion Guillaume. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
Prominent crypto strategist and trader Scott Melker is keeping a close eye on seven altcoins that he says are threatening to take out their immediate resistance levels.
In a new strategy session, Melker tells his 83,000 YouTube subscribers that he’s watching the price action of ETH as it looks to exhaust sellers at $3,330.
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“But ultimately, you want to see [ETH] hold $3,000. That’s the top of this range… And the real trade now is one, two, three, four, five, six touches unable to break $3,330. You want to get above that and then hope that we continue to rise.”
Above $3,330, Melker predicts Ethereum can soar to his target of $4,384.
Looking at Cardano, the crypto trader says that the “sky’s the limit” for ADA after it breached its resistance of $2.47 and then retested it as support.
Another coin on the trader’s radar is Binance Coin (BNB). Melker says the utility token of crypto exchange Binance is facing heavy resistance areas, but he’s bullish on BNB and predicts that it will revisit its all-time high.
“We would expect a lot of resistance here between $570 and $615 but ultimately, this should be returning back up to $691.”
Next up is XRP, which the crypto strategist says is gearing up to ignite a rally as long as it holds a key level.
“If it holds $1.10, we should expect price to be heading up to the $1.50 to the $1.70 region, ultimately, almost $2. After that, we can figure it out.”
Interoperable blockchain Polkadot (DOT) is also on the trader’s list. Melker highlights that DOT could be forming a bottom structure on the daily timeframe.
“Now at this point, we have a very strong resistance between $28 and $31. I would really to get above that area right now. But once again, tweezer bottoms, potentially… That’s when you have these tiny little wicks down there to an equal low and then the price goes up.”
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According to Melker’s chart, a move above $31 could send DOT near its all-time high of $49.
As for decentralized exchange Uniswap, the crypto strategist says that he wants to see UNI take out a diagonal resistance around $27 so it can rally to his targets of $30 and $44.
The last coin on Melker’s radar is Terra (LUNA). Melker says the decentralized finance payment network can surge to as high as $50 after breaking out from a bull flag pattern on the lower timeframe.
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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Very few events can shake the cryptocurrency markets in a sustainable manner that really sends Bitcoin and altcoin prices into a sharp directional move. One example is when Xi Jinping, China’s President, called for the development of blockchain technology throughout the country in October 2019.
The unexpected news caused a 42% pump in Bitcoin (BTC), but the movement completely faded away as investors realized China was not altering its negative stance on cryptocurrencies. As a result, only a handful of tokens focused on China’s FinTech industry, blockchain tracing, and industry automation saw their prices consolidate at higher levels.
Some ‘crypto news’ and regulatory development have a lasting impact on investors’ perceptions and willingness to interact with the crypto market. Not every one of these is positive. Take, for example, the launch of Chicago Mercantile Exchange (CME) Bitcoin futures in Dec. 2017, which experts say popped the ‘bubble’ and led to a nearly 3-year long bear market. Despite this outcome, a positive was institutional investors finally had a regulated instrument for betting against cryptos.
Tesla’s February 2021 announcement that it had invested $1.5 billion in Bitcoin effectively changed the perception of reluctant corporate and institutional investors, and it validated the “digital gold” thesis. Even if the price spiked to a $65,000 all-time-high and retracted all the way to $29,000, it helped to establish a support level price-wise.
Believe it or not, investors have been expecting the United States Securities and Exchange Commission to approve a Bitcoin futures exchange-traded instrument since July 2013, when the Winklevoss brothers filed for their “Bitcoin Trust.”
Grayscale’s Bitcoin Trust (GBTC) was finally able to list it on OTC markets in March 2015, but numerous restrictions are applied to these instruments, limiting investor access.
A potentially positive price trigger is coming up
With that in mind, the effective approval of a U.S. listed ETF from the SEC will likely be one of those events that will alter Bitcoin’s price forever. By expanding the field of potential buyers to the underlying asset, the event could be the trigger that drives BTC to become a multi-billion dollar asset.
Bloomberg ETF analysts Eric Balchunas and James Seyffart issued an investor note on Aug. 24 that suggested that the SEC approval could come as soon as October. Even though one could use futures contracts to leverage their long positions, they would risk being liquidated if a sudden negative price move occurs ahead of the approval.
Consequently, pro traders will likely opt for an options trading strategy like the ‘Long Butterfly.’
By trading multiple call (buy) options for the same expiry date, one can achieve gains that are 3.5 times higher than the potential loss. The ‘long butterfly’ strategy allows a trader to profit from the upside while limiting losses.
It is important to remember that all options have a set expiry date, and as a result, the asset’s price appreciation must happen during the defined period.
Using call options to limit the downside
Below are the expected returns using Bitcoin options for the October 29 expiry, but this methodology can also be applied using different time frames. While the costs will vary, the general efficiency will not be affected.
Profit / Loss estimate. Source: Deribit Position Builder
This call option gives the buyer the right to acquire an asset, but the contract seller receives (potential) negative exposure. The Long Butterfly strategy requires a short position using the $70,000 call option.
To initiate the execution, the investor buys 1.5 Bitcoin call options with a $55,000 strike while simultaneously selling 2.3 contracts of the $70,000 call. To finalize the trade, one should buy 0.87 BTC contracts of the $90,000 call options to avoid losses above such a level.
Derivatives exchanges price contracts in Bitcoin terms, and $48,942 was the price when this strategy was quoted.
The trade ensures limited downside with a possi 0.25 BTC gain
In this situation, any outcome between $57,600 (up 17.7%) and $90,000 (up 83.9%) yields a net profit. For example, a 30% price increase to $63,700 results in a 0.135 BTC gain.
Meanwhile, the maximum loss is 0.07 BTC if the price is below $55,000 on October 29. Thus, the ‘long butterfly’ appeal is a potential gain of 3.5 times larger than the maximum loss.
Overall, the trade yields a better risk-to-reward outcome than leveraged futures trading, especially when considering the limited downside. It certainly looks like an attractive bet for those expecting the ETF approval sometime over the next couple of months. The only upfront fee required is 0.07 Bitcoin, which is enough to cover the maximum loss.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Cryptocurrency hedge fund Three Arrows Capital has launched a fund focused on buying valuable NFT collectibles.
It acquired an Art Blocks NFT for $5.66 million on Friday, a new record for the surging generative artwork collection.
The NFT market hassurged since late July, and the rising prices for top collections likeArt BlocksandCryptoPunks,as well as soaring trading volume across the board, suggests that investors see dollar signs in crypto collectibles. Singapore-based Three Arrows Capital apparently believes so, today revealing plans to invest heavily into premier NFTs.
The cryptocurrency hedge fund today announced Starry Night Capital, a new fund focused on “assembling the world’s finest collection of NFTs,” according to itsTwitter profile. To do so, the firm has partnered with pseudonymous NFT collectorVincent Van Dough, who has a considerable Twitter following and a significantpersonal NFT portfolio.
“Our thesis is simple, we believe the best way to gain exposure to the cultural paradigm shift being ushered in by NFTs is owning the top pieces from the most desired sets,” Vincent Van Doughtweeted today.
AnNFTacts like a deed of ownership to a digital item, including images, video clips, and interactive video game items. The market exploded in popularity earlier this year, generating$2.5 billion worth of trading volumeacross the leading marketplaces. However, a recent resurgence has seen even more towering sums: marketplace OpenSea has processedmore than $3 billion worth of transactionsso far this month.
Starry Night Capital’s first high-profile acquisition is that of an Art Blocks NFT from Dmitri Cherniak’s Ringers collection. The artwork, which was generated on theEthereumblockchain via an algorithm,sold for 1,800 ETH($5.66 million) on Friday. It’s the highest-value secondary market sale to date for an Art Blocks NFT, beating last week’s record of a piece from Tyler Hobbs’ Fidenza project thatsold for $3.3 million worth of ETH.
(1/4) It’s hard to put into words what the Goose Ringer has meant for me in this past 7 months. I remember the first day that images of @dmitricherniak’s Ringers project was shared before launch and feeling something click for me as to what was possible with generative art. pic.twitter.com/YauuI91B29
— pixelpete (@pixelpete) August 27, 2021
The wallet that holds the Ringers NFT also houses numerous other Art Blocks NFTs, including a Fidenza that was purchased for 320 ETH ($1.07 million) on August 20. According to data fromCryptoSlam, Art Blocks has now generated $647 million worth of trading volume, with the vast majority of that ($553 million) taking place in August.Decryptexplored therise and recent success of Art Blocks last week.
According to Van Dough, Starry Night plans to launch NFT-centric educational content, highlight up-and-coming artists, make its artwork accessible via virtual galleries, and launch a physical gallery in a “major city” by the end of this year. Interestingly, Three Arrows CEO/CIO Zhu Sutweeted photos on Fridayof Art Blocks NFT images—including the aforementioned Ringers piece—being displayed on a large screen in Shibuya, Tokyo.
Three Arrows Capital’s website lists investments in a number of cryptocurrencies (such asBitcoin, Ethereum, andDogecoin) and DeFi protocols (includingSushiSwapandAave), as well as crypto lending platformBlockFiand fund Multicoin Capital, among others. The firm alsoreported a large holding in the Grayscale Bitcoin Trustback in January, holding nearly 38.9 million shares or about 6.1% of the total issued shares at the time of disclosure.
PeckShield reported through a tweet of the new hack on Cream Finance. The blockchain security company said a flash loan attack on the decentralized finance lending and borrowing protocol.
#FlashLoanAlert https://t.co/JPW7e368qd
— PeckShield Inc. (@peckshield) August 30, 2021
PeckShield explained that the hacking came through a 500 Ethereum flash loan from the attacker. This was used to infiltrate a reentrancy bug in the smart contract of the Flex Network. Usually, flash loans being undercollateralized can be borrowed and repaid within a single transaction.
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As a DeFi protocol for lending, Cream Finance allows users to earn interest from their deposited assets. Though Cream Finance is a fork of the Compound protocol, its operation is quite different from Compound or Aave. The platform has several more markets for some esoteric digital assets.
1/4 @CreamFinance was exploited in (one hack tx: https://t.co/JPW7e368qd), leading to the gain of ~$18.8M for the hacker.
— PeckShield Inc. (@peckshield) August 30, 2021
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This attack on Cream Finance was exploitation involving 1,308 Ethereum and over 418 million AMP, the native token of Flexa Network. According to PechShield, the Ethereum records reveal that over $6 million were hacked at 5:44 UTC.
Cream Finance Becomes Another DeFi Protocol Hacked In 2021
Furthermore, the Cream Finance team members confirmed the authenticity of the hacking reporting. Then, reporting on Discord Channel, the project’s official channel, the members started working with PeckShield.
The team revealed that the hacking was on the CREAM v1 market on the Ethereum Blockchain. Furthermore, they mentioned that it’s through the reentrancy of the contract on the AMP token.
At the time of writing, AMP’s value has dipped by 15% within few hours to $0.05. Also, the value of Cream Finance’s native token, CREAM, plummeted by about 6%.
However, ETH is at $3, 190.46 showing a slight dipping within the last 24 hours. The total amount of the Crean Finance hacking is more than $25 million. The address of the hackers shows that they presently have about $18.8 million.
Amidst the hack, Cream Finance is down by 6% | Source: CREAMUSD on TradingView.com
The Cream Finance team has put a stop to any further loss. The team said that it now has a pause on AMP’s supply and borrow. It further acknowledged that the hack doesn’t affect any other market. Eason Wu, the protocol’s production Manger, disclosed this information on Discord.
Recall that earlier in the year; Cream Finance had a huge hack. The attack led to the loss of $37.5 million worth of digital assets. According to the report, the earlier hacking had a root cause from the exploitation of Alpha Finance.
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Flash loans have remained one of the controversial features of decentralized finance. This’s because there’s no collateral needed for the loans, and hence, they are susceptible to hacks. This accounts for the recent attacks and hacks of flash loans.
A similar incident is a hack on the Bilaxy crypto exchange on August 28. The exchange had a huge hot wallet hack that compromised about 295 ERC-20 tokens. Also, a hack on Liquid on August 19 resulted in a loss of about $100 million.
Featured image from Pixabay, chart from TradingView.com
There’s been plenty of jibber-jabber about how much the United States stands to benefit from the great hash rate migration from China, but what about the U.S.’s continental cousin, Canada?
A few months ago, a news report surfaced that said Bitfarms, one of Canada’s largest bitcoin miners, was quitting Quebec on account of rising energy prices and stringent regulations. In fact this isn’t true; Bitfarms is expanding in Quebec, but it’s just moving moving part of its fleet to South America in a bid to diversify its operations.
Still, the news peg painted Canada as a poor jurisdiction for miners to set up shop, but lest we paint the entire country with broad strokes, we should take a look at other jurisdictions to get the full picture, as well as examine Quebec’s large hash rate footprint despite the industry being tied up by red tape.
Figures from the University of Cambridge’s latest mining report factor that Canada currently represents 3% of the network’s hash rate. This is skewed due to the fact that the report relied on IP login data to pinpoint mining operations (so if a firm operates machines in Canada but it managed its machines from the U.K., then its hash rate would be registered in the U.K.). Luxor Technologies estimates that a more accurate figure is 7.8%, based on the size of the ASIC fleets of key players in the region and the current network hash rate.
2018 figures from Cambridge pinned Canada’s hashrate share at 13% — why the huge discrepancy between then and now? Could the mining landscape have changed that much?
Canada Is More Than Quebec
When observers compare Canada to other mining hotspots, the country’s ostensibly stringent regulatory environment — particularly in regards to energy regulation — is often one of the primary pain points of their critiques. Even so, the region has the largest concentration of miners in the country, with over 3 exahashes of hash rate currently in operation.
Each Canadian province isn’t the same, though, and they each feature their own regulators and power authorities.
Quebec’s sole public power utility, Hydro-Quebec, for instance, placed a power moratorium on Bitcoin mining in the spring of 2018, and some actors in this province, like Blockstream’s mining arm, have quit the region, citing difficulty with working with the power provider.
After the moratorium, Hydro-Quebec set up a program for miners to apply for up to 50 megawatts (MW) through an RFP. The power provider sectioned off 300 MW of capacity for public tender through this program, but the application process was so lengthy and strenuous that only 20 MW to 30 MW ended up being contracted. In addition to language barriers (the application was in French), Hydro-Quebec requested proof that the miners had procured proper infrastructure (transformers, warehouse space), so miners who had connections in the area and could secure infrastructure ahead of time had a leg up over outsiders. Additionally, the agreements were strict about electrical draw: if you signed up for 5 MW, you had to consume that much or you would have your rates jacked to a level that would make your operation uncompetitive.
Because of this program, those miners who were already operating in the area or knew the landscape secured agreements, while others either didn’t meet requirements or gave in entirely.
Still others, like Bitfarms, have no plans to leave the region anytime soon. The venture operates five facilities in the region and plans to double its capacity in Quebec in the future, according to comments from CEO Ben Gagnon on a recent Compass live stream.
The problem for would-be miners in Quebec, though, is that Hydro-Quebec is limiting the amount of power they are willing to sell to Bitcoin miners. So, incumbents like Bitfarms, which have already established rapports with the energy producer, will have a leg up when trying to secure power purchasing agreements (indeed, Gagnon claimed in the Compass live stream that, during the 2018 bear market, Bitfarms was able to secure 50% of the energy allotted to miners by Hydro-Quebec for a given power purchasing agreement block).
“Quebec’s mining gold rush came and went as soon as the 2018 moratorium was put into effect. However, from this regulatory hurdle came clarity. Hydro-Quebec and the Régie de l’Énergie established a request for proposal process to award power purchase agreements dedicated to cryptocurrency mining,” Mike Cohen, who operates multiple farms in Canada, said in an interview for this article, summing up the situation. “While the energy cost may not be the best in the world at around 0.05 Canadian dollars per kilowatt hour (kWh), it’s still competitive and the security and peace of mind that comes from a five-year fixed rate agreement with a government-run utility company in a jurisdiction where the climate is cold, the courts work and the energy is almost entirely from renewables has great value in our industry.”
Alberta, Other Jurisdictions May Have More Room To Grow
Still, there are other jurisdictions where power isn’t monopolized by the government and Independent Systems Operators (ISOs) operate as private entities. In Alberta, New Brunswick and Ontario, for example, ISOs dominate and provide an abundance of cheap energy. Oil-rich Alberta stands out from the rest here and has been a boon for companies like Upstream Data, which has been capturing flared gas from this region to mine bitcoin since 2017.
Typically, these oil producers (operating as they do in the middle of nowhere) don’t want to transport this natural gas to consumers, as they would lose money with shipping cost, so they flare it instead. Bitcoin miners soak up this otherwise wasted energy and provide the drillers with a payday — a win-win for all involved.
Additionally, Hut 8, one of the largest miners globally, operates in Alberta, with its CEO Jaime Leverton noting in the past that the more-conservative province has been kinder to Bitcoin miners.
Jurisdiction Hopping
It’s also worth noting that some miners operate multiple farms in different provinces.
This jurisdictional arbitrage is crucial considering some provinces (like Alberta and Labrador) are much more favorable to Bitcoin miners than a place like Quebec (which, while still viable for those who know how to navigate the regulatory landscape, is harder to break into).
Additionally, provinces on the East Coast like New Brunswick are ripe for mining and are still largely unexplored compared to Canada’s historical mining epicenters. These coastal states have an abundance of cheap hydro and other renewables, but they lack the population density to soak up what they produce.
Bitcoin miners, then, could provide an economic battery of sorts that provides these power producers with a steady buyer of first and last resorts to balance costs. The mining industry is still in the fledgling stages in these areas, but we expect it to take flight in the coming years as miners make headway with providers and regulators in these areas and the industry is flush with new participants.
Advantages Versus The U.S.
Canada’s Bitcoin mining sector is often compared to the United States’ own, and not without reason: both share the same continent, so both are competing for the same market to an extent.
Most observers frame the United States as a more competitive market, but Canada has its own advantages over the U.S.
Principle among these, Canada’s import taxes are much lower, roughly 5% for general sales tax on imported goods. Trump-era tariffs, along with the usual 2.6% duty levied on imported goods, add a 27.6% tax on the ASICs that U.S. companies purchase from China. That’s a sizable load to add to any operation’s CAPEX.
Additionally, Canadian companies traditionally have had an easier time listing their stocks on Canadian stock exchanges. The Toronto Stock Exchange, for instance, hosted Hut 8, Hive and Bitfarms well before any of those stocks went live on the Nasdaq (which just happened this year).
North America’s only operating ASIC manufacturer, ePIC Blockchain, resides in Toronto, as well. The company only manufactures Siacoin ASICs currently, but its CEO has stated its intentions to eventually break into the Bitcoin ASIC market (Argo, for instance, inked a deal with ePIC to get first dibs on its bitcoin miners when they reach production).
If and when this occurs, it’ll give miners in Canada (and North America more broadly) easier access to machines and repairs. Additionally, British Columbia- and Quebec-based miner Blockstream just announced its intentions to begin manufacturing ASICs, as well.
“Canada has an opportunity in its hands right now to promote itself as a national host for trusted infrastructure providers, like Hut 8,” Hut 8 CEO Jaime Lerverton said in an interview. “The single task they must do to achieve this is to confirm their commitment to our industry and establish clear and favorable policies and programs to support our growth and innovation. There is much to be gained by Canada, and as a proud Canadian company, we hope our government will take the opportunity to lead globally with us.”
Canadian mining will likely grow slower than in the U.S., where gun-hoe states like Texas and Wyoming have fewer red tape restrictions, thus allowing accelerated business operations. But grow it will, and we expect Canada to be a top-three mining hub in the world over the next decade as new entrants search for reliable, abundant power in countries with strong property rights and legal protections.
This is a guest post by Colin Harper. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
There is a before and after in one particular Bitcoin indicator that could be signaling bearish price action in the short term.
BTC picking up movement to the upside in the daily chart Source: BTCUSD Tradingview
As stated by many experts, the current bullish momentum can only be supported by strong demand, otherwise, BTC’s price could move sideways or risk returning to its former range below $40,000.
If anything has me concerned it’s this. Where is the demand? pic.twitter.com/id2a7l6tEf
— Will Clemente (@WClementeIII) August 29, 2021
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The amount of on-chain activity is a useful indicator to measure say demand. As the first cryptocurrency by market cap climbed to its all-time high, above $60,000, the network saw a rise in its number of transactions.
This was probably triggered by a FOMO effect from retail investors jumping into the crypto space for fear of missing out on future gains.
This phenomenon was driven by Elon Musk promoting Dogecoin, the boom in the non-fungible token (NFT) sector, and the yield offered by some DeFi protocols competing with Ethereum.
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Bitcoin benefited from this new wave of investors adopting cryptocurrencies, and digital assets. Thus, a combination of institutional and retail interest and capital allowed BTC’s price to reach a new ATH. Transactions fees at that moment skyrocketed.
This happened right until the moment when BTC collapsed in the first of 3 capitulation events spread out across May, June, and July. On-chain activity dropped with the market and has been unable to recover since.
As seen below, data from explorer Mempool.space shows that fees have gone from 100 sats/vB to around 7 sat/vB for a high-priority transaction. Via Twitter, analyst Mr. Whale said the following on the decline in Bitcoin’s on-chain activity:
Data shows there is virtually no demand for Bitcoin right now. The BTC mempool has been flatlining for weeks, which is even worrying some bulls. We’re in for another big crash, yet most are too greedy to admit that.
Source: Mempool.space
Bitcoin On-Chain Activity At A Low, Whales Take Over The Market?
On the other hand, pseudonym analyst “ChimpZoo” sees the other side of the coin. The analyst believes the lack of on-chain activity could be bullish for BTC’s price based on 2 reasons.
First, this indicates a decline in retail participation or that a low amount of BTC’s supply is being held by “weak hands”. The large inflow of retail investors experience in the first months of 2021, some analysts believe, led to speculation, high funding rates, and a high level of over-leverage trading positions.
All those factors accelerated Bitcoin’s dropped from its ATH and operated as bearish catalyzers. Recent price action to the upside lacks those variables, which could suggest that this rally could be more sustainable.
In addition, ChimpZoo claimed that the lack of on-chain activity and the rally point to an increase in whale activity, and in strong hands coming into the market. This is supported by Jarvis Labs’ Accumulation Trends metric.
As seen in the chart below, in the past 30 days Bitcoin whales have been accumulating more BTC than smaller investors. The more yellow and closer to 1 on this metric, the more whales have been accumulating.
Source: Jarvis Labs
Thus, this could explain the low on-chain activity. Analyst Checkmate acknowledged that the market is at an uncertain point, but tends to incline more to the bullish side:
The divergence between onchain activity and supply dynamics atm is simply insane. Activity looks like a bear. Supply looks like a juiced bull. Truly a challenging structure to assess direction in, but in my view, supply dynamics trump activity. Shows conviction and strength.
