Apr 18, 2021 • 8M

Ep 19. Big sell off!

Coinbase is public, Bitcoin mining blackouts in China & more

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Some say Crypto is a scam. Others swear it's a breakthrough technology. But which is it? Join us, as we explore Crypto in real life (IRL).
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Mid April usually means one thing tax day. This year, the IRS has postponed the deadline by a month. Get on it if you are running behind!

This year, mid April is all about COVID vaccines. Good news is that I’ve now received my second dose of the COVID vaccine. Bad news is that I’m feeling a bit under the weather. Instead of preparing a separate issue for the “Explore” section, this week, I touch on two topics that have been on my mind. Let me know which one you think I should do a deep dive on next. As always, I welcome your feedback. Thanks y’all!


News

  1. Coinbase goes public

    • Coinbase shares ended their first trading day priced at $328 implying a valuation of $68B. That puts them in between UBS and Goldman Sachs. 

    • Unlike during an IPO, Coinbase did not issue additional shares for its direct listing. The only shares available were sold by employees and investors. 

    • Notably, the CEO sold 1.5% of his shares for $290M. A few eyebrows were raised when the CFO sold all of her shares for about $100M. 

  2. Blackouts in China slows bitcoin mining

    • Xinjiang and Sichuan provinces of China account for more than 50% of global bitcoin mining activity 

    • A series of accidents at coal-powered plants in Xinjiang led to government mandated power outages 

    • These outages led to ~20% drop in bitcoin mining i.e. computing power to secure the network. This underlines the risks of concentration and need for greater distribution of bitcoin mining capacity around the world.

  3. US minority speaker says bitcoin is geopolitically strategic

    • Kevin McCarthy, the Republican minority speaker of the US House of Representatives, stated that bitcoin and other digital currencies are geopolitically strategic. 

    • I see 2 strands to pull here:

      a) China could drive adoption of its new digital currency by strong-arming aid-receiving countries and business partners. This could challenge the US dollar status as the global reserve currency.

      b) As more US investors embrace bitcoin, the risk rises of contagion spreading if a catastrophic event impacted bitcoin.

  4. Citigroup’s former chairman joins crypto payments firm 

    • Dick Parsons became the first member of Celo’s external board. This is a significant vote of confidence in this 4-year old organization. 

    • Celo aims to empower anyone with a smartphone anywhere in the world to access financial services, send money to phone numbers, and pay merchants 

    • Celo’s ecosystem includes a variety of applications including stablecoins. Stablecoins are pegged to the value of another commodity like the US dollar. They improve on the existing system by enabling near real-time

  5. Canada approves 2 ethereum ETFs in one day

    • Two months after Canadian regulators approved Bitcoin ETFs, they have now approved 2 ethereum ETFs

    • A crypto ETF mimics the price of the cryptocurrency. This gives investors exposure to the cryptocurrency without buying the asset class. 

    • Additionally, in South Africa, there are plans to launch a bitcoin ETF. Closer to home, the US SEC still has not approved a bitcoin ETF. Dozens have been proposed over the past 8 years, there a couple under review.


Explore

  1. Future of faster payments: Who will win?

    • The Federal Reserve Bank and US banks are investing millions (probably billions) in implementing a faster payments network. This new system will provide near instant final settlement within the US.

    • Unbeknown to most, when you swipe your card at your favorite grocery store, the money does not instantly get delivered to the merchant. This process can take a couple days to several weeks! The new solution will shrink that to seconds.

    • In parallel, crypto enthusiasts are building out the lightning network on top of bitcoin blockchain. One start-up, Strike, is working to build a global payments network that would enable low-cost, final settlement of domestic and cross-border payments without using the likes of Visa or banks.

    • Will these two systems co-exist? Will regulators or merchants prefer one to the other? What is going to happen to traditional cross-border heavyweights like Western Union? I’ve got so many questions. I might do a longer study into this.

  2. Bitcoin mining - a driver for sustainable development?

    • It’s been argued that bitcoin mining is the most profitable use for stranded energy that is otherwise not economically feasible to develop or export.

    • Oil and gas companies in the US and Canada are using gas that would have been flared to power bitcoin mines

    • Could this be extended to lower carbon energy? Could bitcoin mining subsidize the development of hydroelectric dams or solar farms in Africa? So many questions here! I might do a longer study into this too.

    Let me know what you think and if you have a preference for which area I should dig in next. Until next time, I hope you stay safe and healthy. Have a great week!