Transaction fees on the Bitcoin network are trending upward. With the recent spike in cryptocurrency volatility and subsequent trading activity, more fees are a good thing for miners.
Increases in transaction fees during times like these are a given for cryptocurrency miners. Just look at the spikes at the end of 2017 and into 2018.
The problem is, fees increasing may be the only positive aspect of being a miner in crazy bitcoin markets like these.
Since mid-2019, mining pools have consistently sent more bitcoin to exchanges each month than they actually generate, according to data from Chainalysis. There could be a number of reasons for this, many speculative at best, but none of them good.
Why? Because if pools are sending more bitcoin to exchanges instead of holding them like they did in 2017 to mid-2019, that likely means miners need as much of that bitcoin as possible converted into fiat cash to finance operations.
Some miners are probably underwater. Consider publicly traded firm Hut 8 Mining Corporation. In a CoinDesk article regarding cryptocurrency lender BlockFi raising its rates, CEO Zac Prince noted his firm did not lend to miners. However, he did mention a margin call Hut 8 was dealing with:
"We have no loans with bitcoin miners at BlockFi. … Hut 8 was a public mining operation company that was talking about their margin call with Genesis.”
Genesis is another cryptocurrency lending firm in the space, part of Digital Currency Group, the parent company of CoinDesk. This past Friday, CoinDesk reported Genesis alone had called in $100 million in additional crypto from about 40 clients.
Bitcoin network hash rate has been dropping with recent volatility in the market, which suggests miners are shutting off machines that are unprofitable.
All of this information – combined with a decrease in the amount of bitcoin generated coming in 50 days with the reward halving – raises concerns over the prospects of miner profitability.
Fortunately for traders, there is a smattering of publicly traded cryptocurrency mining stocks in Canada, including Hut 8, on the Toronto Stock Exchange (HUT:CA). In fact, Hut 8's stock, while volatile itself, was up yesterday, just as the price of bitcoin was booming.
There are other Canadian cryptocurrency mining stocks – these firms do reverse mergers there to raise capital for their operations. In return for being on these public markets, however, they must publish quarterly reports on company operations. This includes Hut 8, with their most recent reports located here.
Hut 8 hasn't released its Q4 2019 report yet. When they do, however, it will be interesting to read how high its recent costs for mining bitcoin were, how much debt the company was taking on and other financial details.
Traders Finding More Arbitrage Opportunities in Bitcoin
Amid increases in volatility, cryptocurrency traders are seeing arbitrage opportunities. Traders can buy bitcoin on an exchange where prices are cheaper and simultaneously sell where prices are higher in an arbitrage, an almost risk-free profit. “We are seeing most of our selling flow from basis trades, not liquidating trades,” said David Vizsolyi, Head of Trading at Chicago-based DV Chain.
Bitcoin Sees Gains as Turmoil Hits the Forex Markets
Most fiat currencies are currently trading in the red. For example, the British pound-to-dollar exchange rate is hovering near 1.1555, the lowest level since 1980. The currency pair has dropped by nearly 8 percent this week. The Australian dollar fell to a 20-year low of 55 U.S. cents early on Thursday and is currently reporting a 0.6 percent drop on the day.
CME, Bakkt Bitcoin Options Volume Dries Up
Heightened volatility typically fuels demand for hedging instruments like options, but not in crypto. Volumes on CME rose to a record high of $5.4 million on Jan. 17, but have been declining ever since. As of Tuesday, trading volumes were down 96 percent from the minor spike of $2.1 million seen March 9. Meanwhile, Bakkt has seen no options trading activity since Feb. 27.
LISTEN: Bitcoin Bouncing Back
Host John Biggs talks about bitcoin gaining in the face of fiat currency markets getting roiled, Hawaii's digital currency sandbox initiative and coronavirus highlighting the overlap of the surveillance state and the cryptocurrency industry.
VC Deals in Crypto Steady but Amount Invested Fell in 2019
While 2019 only saw 15 fewer deals than 2018 for a total of 807 deals, deal volume dropped by 34 percent, from around $4.2 billion to nearly $2.8 billion. This is because of the absence of a few large late-stage deals in 2018: Bitmain’s $400 million in equity financing, Coinbase’s $300 million Series E and Hyperchain’s $234 million Series B.
Swiss Exchange SDX Hires ConsenSys Startup Boss
SDX is a digital asset trading venue being built from the ground up by Swiss stock exchange operator SIX Group. As the new head of business, former Consensys executive Tim Grant fills a role the exchange had been searching for, taking over from interim CEO Thomas Kindler. Grant previously was CEO of Consensys-backed DrumG, a blockchain interoperability startup.
Tweet of the Day
Ether's price drop on March 12 caused all sorts of problems for DeFi, including one clever trader exploiting the clogged Ethereum network. More details about what happened are laid out here, but the most important takeaway is that decentralized finance doesn't move anywhere near as fast as centralized finance. And that's not going to change anytime soon.
Trend: Bitcoin jumped above $6,700 on Thursday, clawing back nearly 45 percent of the recent decline from $10,500 to $3,850. That also confirmed a bullish ascending triangle breakout on a short duration technical chart.
Other indicators are teasing bullish reversal. For instance, the daily MACD histogram looks set to cross above zero and the 5- and 10-day averages are about to produce a bull cross.
More importantly, the mood in traditional markets has improved with major equity indices across Asia and Europe putting in a positive performance and oil extending Thursday's double-digit rally.
As a result, further gains toward resistance at $6,850 and possibly to $7,000 cannot be ruled out. However, if the cryptocurrency fails to hold above $6,425 (December low), the immediate bull case would weaken, allowing for a drop to $6,000.
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
Public Cryptocurrency Mining Stocks