Ep 10. Big week! Bitcoin Bank DeFi ETF

Each week, I cover the “so what?” of 5 crypto news stories in about 5 minutes.

What a week! In the past 5 days, crypto news has been on freaking overdrive. But I’ve filtered and done some research so let’s go.

1. What do Tesla, BNY Mellon, and MasterCard have in common?

   • This week, they all made major commitments to digital currency

   • The big news this week was Tesla invested $1.5B into bitcoin; the car company is open to selling cars for bitcoin

   • BNY Mellon, one of the oldest banks in the US; random fact it was founded by Alexander Hamilton and Aaron Burr, is going to custody cryptocurrency later this year

   • MasterCard is going to support digital currency payments, likely via stablecoins

     So what?

   • So you are gonna buy a Tesla with 2 bitcoin? I don’t think so. Maybe if you are a bitcoin OG with tons of coins just lying around. But if you a mere mortal with more humble assets, you are probably better off #HODLing

   • Much of the Twitter hype focused on Tesla but lets be real, Tesla is a disruptor, are we really surprised? Now BNY Mellon is said to be a very conservative bank. They also do business with a lot of traditional banks who will be watching and learning from their experience.

   • I think stablecoins are poised to play a bigger role as a medium of exchange. Gaming, trade and remittances are key use cases. I think MasterCard is taking a path that makes sense for their business and frankly more palatable to risk averse banks.

2. First bitcoin ETF in North America is approved

   • Canadian regulators approved the first exchange traded fund (ETF) that will track the price of bitcoin

   • Remember that, ETFs can be bought and sold like stocks on apps like Robinhood and Fidelity

     So what?

   • This is important because ETFs would give retail investors an easy path to bitcoin exposure without having to create new crypto exchange accounts

   • ETFs tend to be winner take all. For example, there are 31 gold ETFs, however, the top 2 account for 75% of the $130B market cap. The race is on to become the dominant bitcoin ETFs.

   • This move could increase the likelihood that the SEC would approve a US-based bitcoin ETF. Stay tuned!

3. Fed paper says DeFi is a paradigm shift

   • The Federal Reserve (read: US central bank if you are not a yank) shared a paper concluding that decentralized finance (DeFi) could be “a paradigm shift” and contribute to a more robust, open, and transparent financial infrastructure.

     So what?

   • DeFi has been having a moment lately with high praise from the Fed and the likes of Mark Cuban. Expect interest to grow as new crypto converts seek to go beyond bitcoin to check out DeFi projects like Aave

   • Nonetheless, it is not all sunshine, rainbows and unicorns. The paper also outlines three risks to DeFi

     (i) Smart contract risk: Last year, over $100M was lost to DeFi hacks. Hacks mostly happened due to coding errors when writing smart contracts.

     (ii) Operational security risk: DeFi staff could be bribed into letting bad actors gain access to project admin keys and compromise smart contracts; this could be mitigated by multi-signature controls by a large group

     (iii) Interdependencies: Many blockchains and projects interact with each other. This means that a failure in one area could have a ripple effect.

4. JayZ & Jack Dorsey launch bitcoin non-profit

   • Donating 500 Bitcoins - currently valued at $23M - to establish ₿trust endowment to fund bitcoin development in Africa and India

     So what?

   • Africa and India have over for 2 billion people with more than 50% of them under the age of 25. This young and increasingly internet savvy population could propel cryptocurrency usage if adopted en masse

   • One challenge is that there is rising government opposition with Nigeria and India banning or considering banning banks from engaging with cryptocurrency.

   • ₿trust aims to advance the development of bitcoin as internet’s money by giving grants to local developers and projects advancing bitcoin. Stay tuned!

5. More Bitcoin mining headed to Texas!

   • Argo is buying 320 acres in West Texas to build a 200MW data center for bitcoin mining in the next 12 months. The land was acquired for $17.5M and mining facility to be built with an investment of $100M. There is room to expand up to 800MW.

     So what?

   • There is an ongoing debate about bitcoin mining’s energy consumption and environmental impact. West Texas is a hot destination for bitcoin mining because it has some of the world’s cheapest and most abundant supplies of wind, solar, natural gas and oil.

   • Argo’s project could leverage the region’s cheap wind energy and deregulated power market to achieve lower costs and higher profits

   • But there is a catch. Bitcoin mining produces a lot of heat and in this case, it will be compounded by the steamy desert heat of West Texas. Argo may need to develop innovative cooling technology to sustain operations.