October 9, 2022

Insights and analysis for the professional investor

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Bitcoin (BTC) - $19,559.57

Ether (ETH) - $1,332.25

Prices as of 10/7/22 @ 9:17 p.m. UTC

Welcome to Crypto Long & Short!

I wrote about some of the downsides of going public earlier this year (spoiler: I think it's dumb) complete with a stock price chart showing how public crypto mining stocks had performed in 2022 (namely HIVE, RIOT, HUT, MARA and CORZ). Of that cohort, the best performing stock was HIVE, which had only lost 77.2%.

I know what you're thinking: "Well that's absolutely terrible!" And you're right. It has been a torrid year for a lot of crypto companies and miners are certainly no exception. Miners and mining companies have had their fair share of bankruptcies, rushed capital raises and regulatory scrutiny since the price of bitcoin started its downward trend in late 2021.

That said, amid all the difficulties facing mining companies, I think mining is primed for a recovery.

– George Kaloudis

With an extensive library of resources, from trading, DeFi, NFT to trending Web3 concepts, crypto.com/university takes you further. Visit now.

The Briefing

Bitcoin Mining Is Cool Again; We Can Thank Africa, Prudence and Growing Hashrate for That

Antminers displayed at Consensus 2021 (Christie Harkin/CoinDesk)

Crypto mining companies have struggled mightily in 2022. But over the last week or so the tide may be turning. One shred of evidence came from Barclays, which initiated equity research coverage on Core Scientific (CORZ) earlier last week, issuing an "overweight" rating.

Now, an "overweight" rating isn't a "Buy this now, oh my goodness, what a steal! This stock is liable to rip your face off" rating; instead it's more of a "Hey, this thing will perform well compared with its peers." Basically, "If mining stocks don't all go up, at least CORZ won't go down as much as the others."

Not exactly a strong suggestion that mining is back, but it's objectively better than, "Everything is going to zero and our best days are behind us." But beyond this one stock rating and otherwise positive stock performance the last two weeks (see below), the tide against mining is turning. Mining is cool again.

Banks' equity research teams spend time writing about companies because a) the banks think the companies operate in an important industry and b) the covered companies might need to raise capital some day, and they just might choose that bank to raise capital on their behalf if they get a nice writeup.

Barclays initiating coverage on Core Scientific itself isn't too far out of bounds. But what was a bit surprising (at least to me) was the report mentioning that "we remain positive on the long-term viability of bitcoin" and "We view CORZ positively in light of … our long-term bullish view on BTC …"

Barclays isn't some nobody bank pandering for clout, so if the idea that bitcoin has long-term viability penetrates more and more banks, the financiers at these banks will be excited about the opportunity of servicing the mining businesses that secure the Bitcoin network.

But for now, let's put Wall Street aside and shift our focus to Africa.

Read the full article here.

Takeaways

The BNB Chain temporarily shut down after an attacker drained $100 million in crypto from the platform.

TAKEAWAY: On Thursday, the BNB Chain, which is closely tied to the world's largest crypto exchange by volume, suffered a "potential exploit." Initial token movements suggested that up to 2 million BSC tokens, worth roughly $570 million, were targeted by an attacker. But Binance CEO Changpeng Zhao suggested in a tweet the attacker was able to get away with $100 million worth of tokens. The BNB Chain shutdown temporarily, but has since come back online. Read more here.

The difficulty of mining a bitcoin block is set to increase on Monday.

TAKEAWAY: Miners are faced with another tough challenge in an already depressed market when the difficulty increases. On Monday, the difficulty is expected to rise more than 10%, potentially reaching an all-time high. Ethan Vera, chief operating officer at mining services firm Luxor Technologies, said, "If hashprice continues to decline, either through difficulty increases or falling bitcoin price, we will likely see some more distressed situations come to market in Q4." Read more here.

MakerDAO to invest $500 million in U.S. Treasurys and corporate bonds.

TAKEAWAY: The community governing MakerDAO, the decentralized autonomous organization behind the DAI stablecoin, made the move to diversify its balance sheet and make the backing of DAI more stable. The funds will come from its over-collateralized stablecoin, with 80% going toward U.S. short-term Treasurys and 20% to investment-grade corporate bonds. Read more here.

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