Ep. 14: Can an old dog learn new tricks?
Welcome to the 5x5 Crypto podcast. Each week, we cover the “so what’ of 5 key crypto stories in about 5 minutes. My name is Afo and I’m interested in crypto. I think you’ll enjoy this week’s episode. Like and subscribe on iTunes, Spotify, and Substack. Let’s go!
Ladies and gentleman, it’s finally here. Tomorrow is pi-day. One of my newer traditions is to gorge myself with a variety of pies every 14th of March. I hope you celebrate too. Hopefully we don’t blow up like NFTs have this week. Let’s dive in.
NFTs are blowing up
Christie’s auctioned 5,000 digital art pieces by Beeple for a record $69M, this is the third highest sale by a living artist
You might have only just heard about NFTs but they have been around since 2012. Like many innovations that seem like an overnight success, the current NFT digital art buzz has been years in the making. Beeple, the artist who is now $69M richer, had created one digital art piece everyday for the past 13 years. There are no shortcuts. I’m inspired by his consistency in honing his craft.
The fact that Christie’s, the venerable 255 year old British auction house, hosted the sale speaks to the inroads NFTs have made into high end art scene. NFTs will likely prove to be a key gateway for folks to engage with the crypto universe.
So the big question is what next? I’m not sure. Beeple’s success will draw more creatives into NFTs. Collectors will also pile in. The NFL is not far behind and I bet companies like Disney and Marvel are figuring out how to play in this new world.
Who are the winners? I think the Winklevoss Twins are well positioned to do well. They own Nifty Gateway which is one of the leading marketplaces for NFTs. Some analysts now estimate this company is now valued at $1B.
This is one of the 5,000 digital works of art that sold for $69M
Binance launches app for merchant payments
Binance Pay is an app that enables person-to-person payments along the lines of Venmo for crypto. The news is that, it now enables users to pay merchants using the app.
For some background - Binance is the world’s biggest crypto exchange, yes bigger than Coinbase. It was founded in China and has significant market share in Asia-Pacific. It also has a US subsidiary that is quite popular too.
Although Binance Pay supports 30 currencies including euros, Brazilian Real and Bitcoin, it is NOT available in the US. Boohoo!
McKinsey estimates the global payments revenue in 2020 was $2.1 trillion. Banks account for about 38% of this revenue with the rest accruing to payment providers and FinTechs.
Jeff Bezos famously remarked that “your margin is my opportunity”. Crypto enabled payments are faster and cheaper than traditional payments. This year, PayPal plans to enable its 26 million merchants to accept cryptocurrencies. Binance Pay is positioned to handle both fiat and crypto currencies too.
The race is on to provide the pipelines for the future of payments. Banks beware.
Aker to set up bitcoin company
Aker is a Norwegian conglomerate with over $5B annual revenue from oil & gas, maritime, and other business units
Aker is forming a new company, Seetee, to invest in bitcoin and other blockchain projects
Kjell Rokke, the CEO and majority shareholder of Aker, wrote a 24-page announcement sharing his reasoning and aspirations
Kjell shared that he regrets not being an early investor in internet businesses two decades ago. He expects crypto and blockchain applications are another opportunity to reimagine industries. He wants in.
I was excited by the thoughtfulness and vulnerability of Kjell’s long letter. I think there are great opportunities to build solutions that leverage Aker’s existing expertise. Additionally, I’m inspired by a 62-year old who wants to keep learning and dive deep into a whole new space.
JP Morgan to launch fund with indirect bitcoin exposure
The new fund is a basket of 10 companies stocks with some exposure to cryptocurrency. It includes MicroStrategy which holds about $5.5B of bitcoin and PayPal which is committed to supporting crypto payments
The Winklevoss twins of Facebook infamy were the first to propose a bitcoin ETF in 2013. They were not approved. There have been many applications since which the SEC has similarly not approved. A bitcoin ETF would enable investors to access bitcoin like a stock.
In lieu of a bitcoin ETF, JP Morgan has proposed an investment offering made up of a basket of companies with bitcoin exposure. The idea is that the performance of these companies would move in sync with bitcoin. This could prove attractive to investors curious about bitcoin but unable or unwilling to invest it.
I am not convinced that this basket approach will be as sensitive to the price of bitcoin as some investors may hope. For instance, while NVIDIA produces chips used in bitcoin mining, it is not a big driver of the company’s revenue and share price. The same could be said for many companies on the list. Buyer beware.
[Investors might be better served by going straight to a company with direct exposure. Argo is a bitcoin miner listed on the London Stock Exchange]
Argo acquires 320 acres in West Texas
Argo Blockchain, a publicly traded bitcoin miner, has completed the acquisition of 320 acres in West Texas to build a 200MW mining facility in the next 12 months
Bitcoin miners run computers to rapidly solve difficult math problems. It’s a relatively low margin business, thus, miners aim to minimize their costs. West Texas has some of the most abundant and low-cost supplies of electricity.
Argo is committed to powering its mining operations with sustainable energy. It primarily uses hydroelectric supplies for its mines. In West Texas, Argo aims to use wind energy.
Much has been said about high energy consumption associated with bitcoin mining. Argo’s operations are an example of low carbon bitcoin mining.
Meanwhile, Kentucky, one of the leading coal-producing states in the US, is considering new laws to give bitcoin miners tax breaks
In general, I think miners like other businesses, will seek to minimize costs by using the cheapest energy available. It is up to government and policy makers to put in place carbon taxes or other measures to incentivize the use of low carbon solutions.