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08.12.2021

 

Scaling Ethereum to Meet Soaring Demand | The HIVE Newsletter

Ethereum Network adoption is soaring. ETH is the platform of choice for the vast majority of non-fungible tokens (NFTs), stablecoins, decentralized autonomous organizations (DAOs), and decentralized finance (DeFi) apps. Innovative uses of smart contracts are exploding, and Ethereum is the trusted “chain of record”.

We’re starting to see what’s possible on Ethereum. But all that usage has caused Ethereum network fees (gas) to soar. Today it costs around $5-8 to simply send ETH, but it costs much more to interact with a smart contract. For example, to purchase an NFT on OpenSea, the world’s largest NFT marketplace, fees can range from $50-300 or more during peaks.

HIVE is a huge stakeholder in the Ethereum Network. In November 2021 we produced 2,334 ETH for $10.4 million USD in ETH mining revenue. Today HIVE runs 4.3 Terahash of ETH mining capacity. Add in $13 million USD of Bitcoin mining revenue in November, and we set a monthly $280 million annual run rate (for more production #s see our Dec 3rd news release).

So high Ethereum gas fees are good for us, revenue-wise. But for ETH to go truly mainstream, it needs lower fees and higher throughput. It needs effective scaling solutions to meet current and future demand.

 

 

Escalar Ethereum para satisfacer la creciente demanda | El boletín de HIVE

La adopción de la red Ethereum está aumentando. ETH es la plataforma elegida para la gran mayoría de tokens no fungibles (NFT), monedas estables, organizaciones autónomas descentralizadas (DAO) y aplicaciones de finanzas descentralizadas (DeFi). Los usos innovadores de los contratos inteligentes están aumentando y Ethereum es la "cadena de registro" confiable.

Estamos empezando a ver lo que es posible en Ethereum. Pero todo ese uso ha provocado que las tarifas de la red Ethereum (gas) se disparen. Hoy cuesta alrededor de $ 5-8 simplemente enviar ETH, pero cuesta mucho más interactuar con un contrato inteligente. Por ejemplo, para comprar un NFT en OpenSea, el mercado de NFT más grande del mundo, las tarifas pueden oscilar entre 50 y 300 dólares o más durante los picos.

HIVE es una gran parte interesada en Ethereum Network. En noviembre de 2021 produjimos 2,334 ETH por $ 10,4 millones de dólares en ingresos por minería de ETH. Hoy, HIVE tiene una capacidad minera de 4,3 Terahash de ETH. Agregue $ 13 millones de dólares de ingresos por minería de Bitcoin en noviembre, y establecemos una tasa de ejecución anual mensual de $ 280 millones (para obtener más números de producción, consulte nuestro comunicado de prensa del 3 de diciembre).

Las altas tarifas de gas de Ethereum son buenas para nosotros, en términos de ingresos. Pero para que ETH se generalice realmente, necesita tarifas más bajas y un mayor rendimiento. Necesita soluciones de escalamiento efectivas para satisfacer la demanda actual y futura.

Afortunadamente, hay un grupo muy prometedor de proyectos de escalado de Ethereum que están haciendo un buen progreso en este objetivo. A menudo se denominan soluciones de escalado de "capa 2", y la idea básica es sacar las transacciones ETH de la cadena de bloques primaria y liquidarlas en lotes más grandes más adelante. Las capas 2 tienen el potencial de reducir drásticamente el costo de realizar transacciones en Ethereum.

Algunos de los principales proyectos de escalado de capa 2 incluyen:

zkSync
StarkNet
Polígono (MATIC)
Arbitrum
X inmutable

Las capas 2 atraen importantes fondos de capital riesgo
Estas capas 2 son proyectos importantes y tienen un talento de software brillante trabajando en estas soluciones. Y están muy bien financiados. Por ejemplo, Starkware, el fabricante de Starknet, acaba de recaudar una ronda de financiación de $ 50 millones de los principales inversores a una valoración de $ 2 mil millones (que se produjo solo unos meses después de una ronda de $ 75 millones). Y el VC líder no era otro que Sequoia Capital, que invirtió temprano en Google y muchos otros.

A principios de noviembre, Andreessen Horowitz (a16z) lideró la ronda de la Serie B de $ 50 millones de Matter Labs, la empresa detrás de zkSync (la división de cifrado de a16z es posiblemente el principal inversor de cifrado del mundo).

Cada capa 2 tiene una estrategia diferente y se encuentra en una etapa diferente de su desarrollo. Polygon está activo y tiene muchos desarrolladores trabajando en él. Starkware acaba de lanzar StarkNet Alpha en mainnet. El intercambio descentralizado dYdX rompió recientemente 45 transacciones por segundo utilizando la tecnología ZK-Rollup basada en Ethereum, según TrustNodes (eso es ~ 10 veces la capacidad de Ethereum).

Eventualmente, ETH2.0 (prueba de participación) puede proporcionar más vías para escalar (si sucede). Y la fragmentación también tiene un gran potencial para aumentar el rendimiento eventualmente (la fragmentación es esencialmente dividir la cadena de bloques en trozos más pequeños y dividirse entre los mineros).

El tremendo potencial de Ethereum y los desafíos que se avecinan
Recién estamos comenzando a ver las posibilidades de la Web 3. Se están realizando importantes innovaciones en los mercados de deuda, préstamos, comercio, monedas estables e inversiones. También lo estamos viendo culturalmente, en arte, membresías y música.

Sin embargo, es importante darse cuenta de que todavía quedan importantes desafíos por delante. Es probable que con tantos equipos trabajando en el escalado, eso se resuelva eventualmente. Pero la regulación gubernamental podría resultar un tema más complicado. Gran parte de DeFi y Web 3 están operando en entornos con incertidumbre regulatoria.

Por ejemplo, muchos proyectos optan por no aceptar inversores estadounidenses debido a incertidumbres legales. Sin embargo, parece probable que los proyectos innovadores tenderán a trasladarse a jurisdicciones más favorables a la regulación. Por lo tanto, los políticos deberían ser prudentes al no actuar demasiado precipitadamente. Los propietarios de criptomonedas ahora constituyen una parte considerable del país, y el potencial de nuevas tecnologías útiles que podrían beneficiar a la economía es alto. Todos queremos que se castigue a los malos actores, pero eso no significa que debamos detener los proyectos innovadores y disruptivos.

Andreessen Horowitz y otros están presionando fuertemente en D.C. para una regulación sensata que permita que esta nueva tecnología florezca. HIVE está haciendo todo lo posible para apoyar estos esfuerzos y se esforzará por hacer más en el futuro.

El potencial de disrupción de la Web 3 es alto y la mayor parte de la innovación se está produciendo en Ethereum. Pero para convertirse realmente en algo convencional, ETH debe ser asequible para todos. Con tantas soluciones de escalado diferentes que se están probando, es probable que algunas resulten revolucionarias.

Por eso, apoyamos las numerosas soluciones de escalado que se están creando. Estos sistemas de "capa 2" tienen el potencial de aumentar drásticamente el rendimiento en la red Ethereum. Suponiendo que funcionen, estamos bastante seguros de que todavía habrá mucha demanda para realizar transacciones en la cadena de bloques principal de ETH.

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20.12.2021

 

How Open Source Crypto is Disrupting Everything


When Satoshi Nakamoto launched Bitcoin in 2009, he made it open source software (OSS). That means anyone can use all of the code that makes BTC work, in any way they want.

Since then, nearly all successful coins, decentralized projects, and tokens  have also made their code open source. Why? It’s really the only way to build in this space. First of all, it creates trust because anyone can examine the code to check for anything suspicious.

But it’s much more than that. Since anyone can use or contribute to an OSS project, it also dramatically accelerates technological breakthroughs. Venture capital firm Andreessen Horowitz did a nice job explaining this in its 2018 piece Crypto and the Evolution of Open Source:

…any smart contract developed on Ethereum becomes a shared service that can interact with any other service… incentivizing developers to improve on existing services, build on top of them, and enable combinatorial innovation at greater scale than ever before.

Once an open source project has reached a critical mass of users and developers, it creates a powerful cycle of innovation. Today we’re going to look at how OSS crypto projects are set to disrupt traditional currencies, finance, and more.
 

Open Source + DeFi: Breaking Traditional Models


“Disruptive” is a word that gets thrown around a lot these days. But what we are seeing happen through the combination of crypto + OSS truly fits the description.

Imagine for a second if Google’s search engine was open source, and anyone could build their own version of it. Think of all the useful and unexpected technologies we’d see blossom if that happened. Or if JP Morgan open sourced all its banking software. This is sort of like that.

Uniswap is a prime example. Uniswap is the world’s largest decentralized crypto exchange (DEX), and it recently surpassed $4.3 billion in daily trading volume(!). That’s more than Coinbase.

DEXs use Ethereum smart contracts to enable trustless, secure trading without a centralized entity making decisions. Everything is executed according to code and math, not human beings pushing buttons to approve transactions.

Uniswap code is open source, and is incredibly powerful. It has been used by hundreds of projects, and is constantly evolving. The most famous example is SushiSwap, a competitor that used Uniswap’s code as its base layer.

Now, you might think that this is a bad thing for Uniswap, since it now had a serious competitor using its own code. But it was actually a great thing for Uniswap because Sushiswap launched a key breakthrough that Uniswap quickly adopted: its own native crypto token.

In order to incentivize users to trade on SushiSwap, the Sushi team created their own token (SUSHI). This token is used as a reward for people who trade and provide liquidity on the platform. SUSHI can be used to reduce trading fees, or as a currency to trade tokens. Token holders also receive .05% of trading fees (Sushiswap as a platform takes .3% fee, .of which 25% goes to liquidity providers and .05% goes to token holders).

Needless to say, it worked and today SushiSwap has attracted over 300,000 users and has daily trade volume of around $240 million (side note: Sushiswap recently experienced a leadership crisis, which is a very interesting story about DEX drama for those who are curious - read more here).

Shortly after SushiSwap launched its token, Uniswap followed suit with the UNI token, and so far the token launch for both platforms has fueled adoption and been a major success. Today Uniswap is still the industry leader, but the fight for users with competitors like Sushi and dYdX continues to drive a ridiculous pace of innovation.

Decentralized exchanges are likely to play a big, big role in the future of finance. They can reduce costs, improve efficiency, and offer unprecedented transparency. Yes, there are still significant risks, and the technology is not yet ready for mainstream users. But we’re starting to see the possibilities with DeFi.

And once the Layer 2 ETH scaling solutions we talked about in the last newsletter are more fully deployed, the possibilities with DEXs, and DeFi in general, get even better.

Another great example of the power of open source crypto is Litecoin. In 2011 the project’s founder, Charlie Lee, took BTC’s source code and launched a competing coin. Litecoin had 4x faster block times, and other optimizations for more speed and lower cost.

Once again, you might think it would be bad for Bitcoin to have more competition. But Litecoin has significantly contributed back to Bitcoin. For example, in 2016-17 there was a huge debate over SegWit, a Bitcoin Improvement Proposal (BIP). Segwit proponents argued it would increase BTC throughput (capacity), allow the Lightning Network to be built on top of BTC, and bring other benefits such as Schnorr Signatures.

But there were many in the Bitcoin community that opposed SegWit for various reasons. Some miners thought the Lightning Network would lower their transaction fee revenue. And there were security concerns around such a major upgrade, as well.

So Litecoin went ahead and activated SegWit in 2017, before Bitcoin. They demonstrated that it was safe, secure, and superior. Shortly after, Bitcoin adopted SegWit. In 2018 the BTC Lightning Network launched on Bitcoin and today SegWit + Lightning allows transactions to be sent quickly and cheaply (we covered the Lightning Network in more detail in Why HIVE is Going Big on BTC).

These are just a tiny peek at the innovations happening in DeFi and crypto. The space is evolving so rapidly it has become impossible to keep track of all the interesting projects.
 

Fundamental Breakthroughs


Marc Andreessen is one of the most influential thinkers and investors in the tech world. In 1991 Marc built Mosaic, the first modern web browser, at the age of 22. He went on to co-found Netscape, and eventually launched VC firm Andreessen Horowitz (a16z) with his co-founder Ben Horowitz. Wired Magazine calls Andreessen The Man Who Makes the Future.

Marc thinks that crypto will end up being just as disruptive as the internet was. And a16z recently raised a massive $2.2 billion dedicated fund to invest in blockchain-based tech.  He calls crypto a fundamental technological breakthrough:

We view it as a technological transformation. There’s a fundamental technological breakthrough that has happened. It’s an area of computer science called distributed consensus… Money is one application… but it’s only one of many.

I think this is the proper way to think about the space. And crypto’s open source nature is what makes these rapid advances possible.

When Satoshi released Bitcoin, he unleashed a genie of sorts. There’s no putting it back in the bottle at this point. The code is out there, it’s free to use, and it is constantly improving, growing, and evolving. In crypto and DeFi, breakthroughs are replicated, tweaked, improved upon, and then the whole cycle is repeated ad infinitum.

HIVE is incredibly excited to see how crypto ecosystems develop over the coming years. We will continue to support these efforts by providing reliable infrastructure, and making strategic investments where we think the risk/reward is attractive, such as our investment in DeFi Technologies (DEFTF).
 
Thanks for reading!

Sincerely,

Adam Sharp
Editor, The HIVE Newsletter

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11.01.2022

 

Since inception, the Ethereum Network has had a long-term goal of switching to a proof-of-stake (PoS) consensus mechanism. If, or when, Ethereum PoS launches, mining ETH would soon become obsolete.

PoS promises a greener footprint than the current proof-of-work (PoW) system, and potentially greater capacity in the long run. And if it works as designed, it could be a fine system one day.

But this is a monumental task, and the PoS “merge” continues to face ongoing delays. Most recently, it was supposed to happen in December of 2021. And many times before that. Just take a look at this 2019 article by Julia Magas in Cointelegraph.

"Initially, the bomb was supposed to explode after Ethereum would be ready to work on the new algorithm called Casper, and provoke the so-called Ice Age — a transitional stage during which mining new coins would become difficult and unprofitable...

However, due to the delay in the development of the PoS mechanism, the transition to Ethereum 2.0 is constantly being adjourned. At the same time, the difficulty bomb has been about to explode several times and the Ethereum team has been constantly delaying it by conducting hard forks, so as not to frighten miners supporting the stability of the network ahead of time."

Keep in mind, that was written over two years ago. I recommend reading that entire article, which gives invaluable insight into how ETH miners have been constantly threatened with “difficulty bombs” that will force a switch to PoS, only to see the PoS merge delayed again and again.

The Ethereum community is now hinting that it could occur in June of 2022. We’ll see if it happens, but the likelihood of further delays seems high. And that’s not to downplay their efforts in any way. The task they have undertaken is massively complex, and a lot of truly brilliant people are working on solving it.

Vitalik Buterin, Ethereum’s primary founder, recently said Ethereum was approximately 50% complete, and that it would be at 60% once the merge happens. He gave a timeline of six years for the overall current roadmap. There’s still a lot of work to be done, including on PoS.

In the meantime, as of 12/22/21 HIVE is mining around 65 ETH per day worth approximately $195,000 at $3,000/ETH. We continue to install new ETH mining capacity from prior orders at our Icelandic and Swedish operations, where we use clean, green hydro and geothermal power. Things are running smoothly in Europe thanks to our excellent team led by Johanna Thornblad.

And of course, HIVE is simultaneously ramping up BTC production in a big way, and expanding our data center campus in New Brunswick to accommodate all the new equipment. On Monday January 10th we released updated production figures for the month of December. A few highlights:

  • 245 BTC Produced
  • 1.7 Exahash of Bitcoin mining capacity
  • 2,178 ETH Produced
  • 4.45 Terahash of Ethereum mining capacity

Mining ETH Built HIVE

HIVE has been mining ETH continually since 2017. It fueled the company’s expansion into the much larger company we are today. For example, that cash flow allowed HIVE to buy GPU ONE and its large Bitcoin mining operation, then dramatically expand the campus.

Here are some recent pictures from our data center campus in New Brunswick.


And some new miners going in.


HIVE is now a much more diversified company with significant value in our data center campus and other assets. In November 2021 we produced BTC valued at $13.2M , and ETH valued at $10.4M.

Possibly due to the uncertainty surrounding the ETH PoS merge, many of our competitors have decided not to mine ETH.

HIVE smartly decided to take a different approach. It’s funny because I remember talking to HIVE Chairman Frank Holmes about this issue in 2019. I asked how worried he was about PoS (which I heard was right around the corner). Frank said something to the effect of “they keep putting it off, and we think that’ll continue”.

Frank was onto something back then, so I asked him for a comment on this newsletter, and here’s what he had to say about the state of the ETH PoS merge today.

“We think there’s still a lot of time left to profitably mine ETH. Ethereum moving to PoS is taking longer than expected, and we have positioned HIVE to be a leading miner since 2017.
 
Mining ETH is highly profitable, and there’s a lot less competition than with BTC. The margins are significant, with a rapid hardware payback period.

Ethereum scaling solutions are maturing, ramping up network throughput, which is critical for further adoption. We believe scaling ETH should be the top priority. That’s what’s going to drive real adoption.”

-Frank Holmes, Chairman of HIVE Blockchain Technologies Ltd

Frank makes a good point about ETH scaling initiatives, which we covered in a previous newsletter, Scaling Ethereum to Meet Soaring Demand. In order to bring on millions of new users, Ethereum needs lower fees and higher throughput capacity. This seems like much more of an immediate concern.

As we pointed out in the previous newsletter, some of the best venture capitalists in the world are lining up to back promising layer 2 scaling solutions such as Matter Labs and StarkWare. Technical talent seems more likely to flow to these exciting scaling solutions as opposed to ETH PoS clients (they need 4-5 unique and secure clients for security reasons). And ultimately, technical talent is what moves any crypto project forward.

My guess is that PoS will happen eventually, but that for now, it will continue to take a backseat to scaling. Time will tell, but we believe HIVE is well positioned for any eventuality. Read more about how HIVE is exploring using our powerful GPU chips to power cloud-hosted High Performance Computing (HPC) here.

-Adam Sharp
Editor, The HIVE Newsletter
Follow HIVE on Twitter

P.S. - You can also view and share this article on the HIVE Blockchain Blog.

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Bitcoin: Echoes of 2013

2013 was a critical year for Bitcoin (BTC) adoption. The nascent cryptocurrency started the year at $13.28, and by April 8th of that year it had reached $230.

Surprisingly, a series of events in the small EU country of Cyprus drove much of this buying. In 2013 Cyprus experienced widespread bank failures. Suddenly, there was a prolonged “bank holiday” and citizens couldn’t withdraw any cash.

What made this crisis unique is that the EU didn’t reflexively bail out the banks. Instead, citizen depositors got a “haircut” which removed up to 47.5% on accounts over €100,000 at the Bank of Cyprus. Those funds were taken and used to help make the bank whole. Depositors in another major bank, Laiki, lost all their funds.

Instead of a bail-out, it was a bail-in.

The Cyprus bank holiday was a monumental moment for Bitcoin. It was as if, overnight, a light bulb went off in the heads of a bunch of people around the world. Oh THIS is why Bitcoin exists.

Here’s a headline from CNET, dated March 28, 2013.

Lessons from The Cyprus Cycle

2013 was the year that Bitcoin became a household name (mostly within the investment community). Millions learned that it’s sovereign money you can hold and use without any third parties involved.

Most dismissed it as a speculative fad. But some saw a decentralized, open, uncensorable, and robust new form of money.

Since then, when people start to be affected by inflation, bank haircuts, and other non-enjoyable monetary experiences, an increasing number of them turn to Bitcoin. Others, who think they could soon be affected by these issues, may decide to buy some BTC as a sort of hedge. Others are just in it for the trade.

You can see the buying pressure clearly in this chart showing the price of BTC throughout 2013, via BBC.

I’m convinced that Cyprus was the primary catalyst of the 2013 move. It set off a chain reaction, the effects of which we are still seeing today.

Shortly after 2013 ended, Bitcoin entered a bear market and would bottom at around $315 in January of 2015. But the important thing is that Bitcoin had gained many new developers and hordes of “HODLers” who would spread the word, even during bear markets.

Gaining new long-term community members is the key to BTC adoption cycles. HOLDers, the ones who refuse to sell, are responsible for creating price bottoms. And developers do the amazing work of maintaining and improving the project.

I believe we’re now experiencing a new 2013-like moment. Realization of why BTC is such an important project is growing. It’s being driven by rising inflation, low interest rates, QE (quantitative easing, AKA money printing), and a growing distrust of some institutions.
 

Money Printer Go Brrr

In March of 2020, when practically every market was crashing, Bitcoin briefly dipped to around $4,000. Then, like in 2013, we had a major moment of realization. It’s as if a light bulb went off for many investors. They’re going to print ridiculous amounts of money again!

And print they did. On March 15, 2020 the Fed dropped interest rates to zero and announced a new $700 billion QE program. In total more than $3.4 trillion was injected into the economy in 2020. The U.S. M2 money supply soared a record 27% in 2020 alone. Many governments and central banks around the globe followed the Fed’s lead.

But we already knew the money printer was warming up well before then. On March 11 2020, the now famous “money printer go brrr” meme was posted to Twitter by user @femalelandlords.

The comedy relief was quite welcome in a stressful situation. “Money printer go brrr” became the most influential meme of the year. Even non-finance-nerds loved it. Thousands of variations popped up.

Here’s one from Argentina, where inflation has raged for more than a decade (note the 7-digit rolling rrrrrrs):

It was a sign that the world was now acutely aware of just how much money central banks and governments were pushing into the global economy. Inflation expectations in the U.S. turned on a dime.

I don’t think it’s a coincidence that Bitcoin bottomed around that time. One year later, in March of 2021, BTC had risen from around $4,000 to over $55,000. As I write this on 1/21/2022 it’s trading around $39,000.

Inflation: A Potent New Catalyst

For most of Bitcoin’s existence, inflation in the U.S. and most of the rest of the world has been quite tame. That’s no longer the case, as even Fed Chair Jerome Powell recently admitted that we shouldn’t call inflation transitory anymore.

U.S. inflation as measured by the BLS’ CPI measure just had a 7% annual print in December. That’s the highest since 1982. And wholesale prices jumped 9.7% in 2021 according to just released numbers.

Over in the EU, official inflation is running at around 5%. In my estimation, it’s likely that both EU and US official inflation numbers understate true living expense increases seen by their citizens. But that is a topic for a separate article.

Regardless of what the real inflation rate is, it’s uncomfortably high and trending higher. At 7% inflation, most bond investors are seeing highly negative real returns. And there is a LOT of institutional money sitting in bonds right now; around $45 trillion overall in the U.S. alone.

If inflation keeps rising, it’s possible that investors will continue to seek out alternative investments such as Bitcoin. We’ve now seen financial giants such as MassMutual, Fidelity, Tesla, Twitter, and JP Morgan jump on board. And we’re only 2 years into this grand new monetary experiment that could go on for some time.

Today Bitcoin has a roughly $900 billion market cap. That’s less than 1/50th of the U.S. bond market, and less than 1/8th the estimated market cap of all the world’s above-ground gold.
 

BTC’s Killer Feature: Self-Sovereignty

It’s important to note here that there simply aren’t many liquid investments you can actually hold yourself. It’s a surprisingly rare trait.

Almost no one actually holds their stock or bond investments themselves. It’s all controlled and kept track of by big centralized organizations. Almost no liquid investments today can be held directly by the owner. Gold and silver can also be self-custodied, but they can’t be transmitted electronically like BTC (they also have a more conservative risk/reward profile).

Bitcoin is internet-native money. It’s scarce, divisible, and secure. More than any other descriptor though,I think of BTC as sovereign. It allows investors to fully control their own money.

And we think that’s going to be an attractive trait over this tumultuous financial period.
 

Cyprus Still Relevant

Let’s go back to Cyprus for a moment. Why is this story relevant to us today, 9 years later? Well, there’s a theory that during the next bank crisis, the U.S. and E.U might use a similar “bail-in” strategy to rescue banks. It’s just a theory, but there was some legislation passed in the wake of the 2008 crisis which suggests it’s now a possibility. For more on that, I recommend reading Investopedia’s Why Bank Bail-Ins Will Be The New Bailouts.

And just recently, the IMF and 11 nations held a large “war game” simulation named “Collective Strength”. It features a cyber attack that disrupts global financial systems. Here are some of the issues discussed, according to an exclusive report by Reuters.

"The participants discussed multilateral policies to respond to the crisis, including a coordinated bank holiday, debt repayment grace periods, SWAP/REPO agreements and coordinated delinking from major currencies."

The cyber attack is definitely a low probability event. But could inflation run hot for years? Certainly.

My guess is that inflation may stick around a while, because in some ways, it is the most politically-viable path. If inflation runs at 10% a year for 5 years, all of a sudden that unpayable pile of debt looks a lot smaller in comparison to the inflated currency.

Of course, that’s just one possibility and we have no way of knowing what will happen going forward. But if we look to the past, we see that central banks such as the Fed have reversed course once their tightening efforts cause a major fall in stocks, or a large rise in bond yields. There seems to be too much debt and leverage in the system to sustain higher rates.

I believe HIVE is well-positioned for an inflationary environment. Over the past 2 years the team has invested more than $160 million in crypto miners, real estate, and new construction. Our high-tech data centers have access to clean, cheap power, in stable jurisdictions. And we’re still building. New machines are being installed en masse weekly as they come in from prior orders. And new buildings are going up.

We think the risk/reward on these investments is quite favorable. To learn more, follow us on Twitter, Youtube, or our website.

-Adam Sharp
Editor, The HIVE Newsletter

Regla nº 1: nunca pierdas dinero. Regla nº 2: nunca olvides la regla nº 1.

AVISO IMPORTANTE: El contenido de este y otros mensajes que puedas leer en este FORO son opiniones para fines informativos y no pretenden ni pueden ser consejos, asesoramiento o recomendaciones de inversión. Ninguno de los autores es economista ni experto financiero. Busca asesoramiento profesional si quieres recomendaciones de inversión.

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The Fed vs. Bitcoin | The HIVE Newsletter


By: Adam Sharp
Editor, The HIVE Newsletter
Nasdaq: HIVE | TSX: HIVE

In our last newsletter we touched on a topic that deserves a more thorough examination.

That topic is the difficult situation the Federal Reserve is in today. I don’t envy their job. They should almost certainly be raising interest rates to combat inflation, but can they do so without "popping the bubble"? That is the question we will explore today.

Before your eyes glaze over, give it a chance. These “boring” monetary topics are crucial considerations for investors. In essence, the Fed is stuck with two bad choices: let inflation run hot for a while, or tighten policy and slam the brakes on our debt-based economy.

The outcomes here will likely have a strong impact on prices of Bitcoin and Ethereum (along with everything else). If inflation continues running hot, it’s possible that demand for scarce monetary assets such as Bitcoin, gold, and silver will continue rising.

This excerpt from Bitcoin: Echoes of 2013 outlines the basic theory.

“My guess is that inflation may stick around a while, because in some ways, it is the most politically-viable path. If inflation runs at 10% a year for 5 years, all of a sudden that unpayable pile of debt looks a lot smaller in comparison to the inflated currency.

Of course, that’s just one possibility and we have no way of knowing what will happen going forward. But if we look to the past, we see that central banks such as the Fed have reversed course once their tightening efforts cause a major fall in stocks, or a large rise in bond yields. There seems to be too much debt and leverage in the system to sustain higher rates.”
 

Officially, Tighter Monetary Policy is on the Way


At a recent press conference, Federal Reserve Chairman Jerome Powell said it will soon be "appropriate" to begin raising interest rates, probably in March of this year. But as always, there’s an important caveat which doesn’t make the headline, “assuming that conditions are appropriate for doing so.”

Despite his disclaimer, Powell’s “hawkish” talk seems to have spooked investors. I’ve seen a lot of discussions around Bitcoin being challenged in a raising rate environment. The question is, if stocks and home prices are falling, will the Fed still tighten? Hmmm. Let’s see what we can learn from recent history.

Truthfully, raising rates and tightening monetary policy has probably been appropriate for the past 10 years. But nobody wants a good party to end.

The Fed tried to “normalize” policy gradually from 2016 to mid-2019. They briefly raised the fed funds rate to near 2.5% in early 2019. But by November 2019, they had already dropped the rate to 1.55%, and then slashed to 0% by May of 2020, after the pandemic effects set in. This chart runs from 1/1/2015 to 12/1/2021.



The pandemic has certainly played a major role, and acted as a monetary accelerant. But as you can see from the chart above, the Fed was already lowering interest rates in late summer 2019, before it began.

The U.S. economy (and the S&P 500) seemed to sort of “stall out” at 2.5% rates. U.S. GDP growth slowed from 2.9% in 2018 to 2.2% in 2019. I believe rates were already on their way back to zero, but it would have taken a lot longer without COVID.

Today there’s more debt and deficit than ever. Will the Fed begin to normalize now, in this current state?

Maybe. But higher interest rates would mean more expensive mortgages, loans, and refinancings. That would mean lower home prices, which depresses spending. Less spending leads to lower stock prices, which lead to even less spending. There would be more bankruptcies, which may be good long-term, but are rough on employees and investors in the short run.

This is what a Fed economist would refer to as a deflationary spiral. And something along these lines seems likely to happen if the Fed truly does normalize monetary policy, bringing interest rates back to the ~5% historical average.

If we see anything that looks like the start of a deflationary spiral, I believe the Fed will act forcefully. If markets crash, investors will scream and beg for more QE, even if it probably means higher inflation (remember Jim Cramer’s famous 2007 “They Know Nothing!” rant directed at the Federal Reserve?).
 

Bernanke’s 2014 Hint on Rates


Writing this piece reminded me of a wild story about former Federal Reserve Chairman Ben Bernanke, which not many people know about. According to Reuters, in 2014 Bernanke shocked guests at an event where wealthy investors paid $250,000 to have dinner with the former Fed Chair. He apparently told them he would never see 4% interest rates in his lifetime(!).

"At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed’s main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke’s lifetime, one source who had spoken to the guest said."

So if this report was real, what would the implications be? It would mean that at least some Federal Reserve board members likely suspect that true monetary policy normalization isn’t on the table anytime soon. That it’s just not realistic to normalize for the next decade-plus. Of course, the story could be false. But Reuters likely wouldn’t make such a claim without pretty good evidence. And it does match with what we’ve seen in the 7+ years since it was reported...

One of the most original financial thinkers that I know of, Luke Gromen, has a knack for summing up the current situation. Luke is the founder of Forest for the Trees and posts a lot of interesting takes on Twitter.



It sounds sort of crazy, but is it really? We’re in new territory here. We need to deal with the debt, and inflation offers a (crude) way to do that.

Just take a look at the Fed’s balance sheet trend, which reflects the impact of QE programs.



The Fed is providing a ton of liquidity to markets. Withdrawing it completely within the next 5 years seems unrealistic. In fact, I would argue that over the next few years the Fed will have to ramp up QE further. Eventually some version of Modern Monetary Theory (MMT), which advocates for openly printing money directly to pay for government spending, seems nearly inevitable.

What would MMT look like? Big infrastructure projects and other spending paid for with newly printed money, basically. In economics this is referred to as debt or deficit monetization. If the money is wisely spent, this could deliver some real long-term value. Infrastructure isn’t the worst way to spend freshly printed money.

And tangentially, Universal Basic Income (UBI), which guarantees citizens a certain level of income, may also come into play at some point.

By the way, in this article I focused on the Federal Reserve, because it’s my country’s central bank. But similar situations are playing out throughout much of the world.
 

Making The Case for Bitcoin


Our situation today is exactly why Bitcoin was created. It has grown from a tiny project into a ~$730 billion global asset class in 13 years. Today BTC is a popular inflation hedge for a growing list of savvy institutional investors like Paul Tudor Jones and Bill Miller. It’s a speculative store-of-value with significant upside (and downside) potential.

For now, volatility in BTC is still relatively high, but it has decreased significantly over time. In Bitcoin’s early days, the volatility index peaked at over 15% daily standard deviation. Today it’s around 3.5%.

Volatility may continue to decrease as the market grows in size and liquidity. Over time it also seems probable that more people will adopt a long-term holding strategy, as many of those who try to time the market eventually run out of luck. Bitcoin tends to be transferred from traders to holders in the long run.

Bitcoin is a truly unique asset. One we think is well suited for a unique period in monetary history. If the “inflation runs hot for a while” scenario plays out, BTC could be a prime beneficiary (read more on why in Echoes). And Ethereum is increasingly monetarily sound since it implemented EIP-1559 which automatically burns a significant portion of supply over time. So there’s a possibility ETH also becomes a “digital gold” play.

I closed our last newsletter with why I think HIVE is well positioned today. After writing this piece, I feel reinforced in that belief. Here’s the snippet.

"I believe HIVE is well-positioned for an inflationary environment. Over the past 2 years the team has invested more than $160 million in crypto miners, real estate, and new construction. Our high-tech data centers have access to clean, cheap power, and stable governments. And we’re still building. New machines are being installed en masse weekly as they come in from prior orders. And new buildings are going up.

We think the risk/reward on these investments is quite favorable."

Cheers to that,

Adam Sharp
Editor, The HIVE Newsletter

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How HIVE Stacks Up vs The Competition


By: Adam Sharp
Editor, The HIVE Newsletter
Nasdaq: HIVE | TSX: HIVE

When HIVE went public in September of 2017 on the Toronto Venture Exchange, it was an outlier. A publicly traded crypto miner?!

To me, the concept of a crypto mining stock seemed unlikely, mostly for regulatory reasons.

We have to remember that Bitcoin and Ethereum were still dirty words on Wall Street in 2017. Regulatorily, it was a giant gray area. And there were no big publicly-traded miners. I recall being impressed that HIVE pulled it off.

Nobody was sure how accounting should be handled. And analysts had no idea how to value such a stock (many still don’t even try).

So HIVE led the way, and today the company is a leading miner of Ethereum and Bitcoin.

In this article we’re going to take a look at how HIVE stacks up against our competition, both in terms of valuation, and strategy.
 

The Landscape Today


Since 2017 the industry has grown and evolved quickly. There are now dozens of public crypto miners. They trade on the NYSE, Nasdaq, and many other global markets. The market cap in the US of the top 10 companies now exceeds $10 billion. 

And in the US, the SEC recently approved the first crypto miner ETF. It’s called the Valkyrie Bitcoin Miner ETF, and the ticker is WGMI (which in crypto slang is short for “we’re all gonna make it”). 

HIVE makes up approximately 9% of the new miner ETF, according to a fact sheet dated January 2022. What we find interesting is that the fund seems to place high importance on environmental sustainability. On the ETF’s official page, Valkyrie proudly displays that the fund’s portfolio utilizes 77% renewable energy. 

Why is the first US Bitcoin miner ETF focused on sustainability? My guess is because it is an increasingly important consideration for institutional investors. We’ll dig into power a bit more below, and in the next newsletter, but for now let’s get back to the topic at hand – how HIVE stacks up against the competition in terms of valuation.
 

HIVE’s Compelling Valuation


In the traditional investment analysis world, there are established models that are used to value certain sectors. There’s nothing like that for crypto companies, at least not yet. Everyone, from individual investors to professionals, is figuring it out along the way.

Even institutional analysts don’t really know how to value us. However, there are a small but growing number of firms covering crypto stocks.

One example is H.C. Wainwright’s Kevin Dede, Managing Director and Senior Technology Analyst, who is doing notable research in the mining space. Kevin covers HIVE and a number of our competitors. On January 22, 2022 he reaffirmed his firm’s buy rating on HIVE and maintained his $5 price target. Kevin is a seasoned analyst and has a 4-star rating on TipRanks, with an average 10.7% annual return.

But what’s really interesting is that some of the best work on miners is being done by individual investors.

Here are two of our favorite independent mining sleuths.
 

Blonity’s Research

Independent analyst Blonity does some of the most in-depth research in the mining industry. His Youtube channel is one of the most valuable resources in the crypto mining space.

In a February 4th video, Blonity posted the following charts of his own valuation methodology. The chart on the left shows hashrate growth during the month of January 2022. And the right-hand chart shows Bitcoin mined per installed Exahash of hashrate.



According to this research, HIVE stacks up well against the competition in terms of productivity and hashrate growth. We rank #1 for productivity as measured by Bitcoin mined per installed Exahash per day.

You can find more of Blonity’s work on Twitter, Patreon, and Youtube.
 

Anthony Power’s research


Anthony Power is an independent crypto mining analyst from the UK. Anthony is a retired accountant who spent 24 years in the army, followed by some time in the private sector.

He recently posted his miner analysis on Twitter, and HIVE received the top ranking among eight leading miners.



One of the more important stats in this chart is Bitcoin mined per 1 EH (exahash). This metric measures operational efficiency, and HIVE received top ranking.

I asked HIVE President Aydin Kilic what explains our advantage here, and he replied, “This is attributable to our high uptime, and dedicated team of technicians, network and systems operators and analysts. They work around the clock ensuring optimal hashrate.”

In a recent YouTube interview with Blonity, Anthony was asked which miner produces the lowest cost Bitcoin between HIVE, HUT 8, and Bitfarms. He responded that HIVE produces the cheapest Bitcoin as of the last quarterly report.

If you’re interested in mining economics, I do recommend checking out the interview. Blonity and Anthony go deep into the topic, discussing underappreciated metrics such as total cost per coin produced, depreciation, and much more. They’re two of the most knowledgeable crypto analysts around.
 

Back to Basics


During volatile times, some investors look to the basics of a business. Profitability, cash flow, and growth.

Return on equity (ROE) is a classic metric where HIVE compares well with the competition. According to Investopedia, ROE is “considered a gauge of a corporation's profitability and how efficient it is in generating profits.“

Return on Equity (trailing twelve months, as of 2/17/2022)

  • HIVE: 62%
  • RIOT: 3.2%
  • MARA: -15%
  • HUT: 19%

Another classic way to analyze a stock is using its price/earnings (P/E) ratio. This is a simple metric that looks at how expensive, or cheap a company is.

HIVE’s P/E stacks up well here against our competitors.

Price/Earnings ratio (as of 2/17/22, based on Yahoo finance data)

  • HIVE: 5.4x
  • HUT 8: 15.9x
  • RIOT: 94x
  • MARA: N/A

Another classic valuation factor is price/sales. The lower the ratio, the higher the revenue in comparison to market cap.

Price/Sales Ratio (as of 2/17/22, based on Yahoo finance data)

  • HIVE: 4.16x
  • MARA: 38.79x
  • HUT 8: 8.7x
  • RIOT: 11.57x

397% YoY Growth


HIVE just reported a record $68 million in revenue for the quarter ended December 31st 2021. That’s up 397% from the previous year.

Net income for the quarter was $64.2 million due to higher crypto prices, increased capacity, and gains on sales of digital currencies.

Our combined liquid ETH and BTC holdings reached $168 million, up 11x from the same quarter last year.

In our view, HIVE is attractively valued today. We are focused on creating long-term value with strategic investments in data centers, mining equipment, and building out our team with world-class talent.

For much more information on HIVE’s recent performance, check out our latest webcast. In it, we cover results for the quarter ended 12/31/2021, and provide corporate updates on construction, deliveries, capacity, and much more.

Here are a few highlights.



Not Settling on Power


Besides financial fundamentals, one of the things that we feel sets HIVE apart is how we have managed to achieve both a low environmental footprint, and a very low cost of power.

There seems to be a false perception out there that miners have to choose between cheap power, and clean power. HIVE found both. We acquired and built facilities that have access to cheap renewable hydroelectric and geothermal power.

As a result, the rate we pay for electricity is among the lowest in the world. And our footprint is pretty darn green. Institutional investors are increasingly concerned about the environmental impact of their portfolios, and we don’t think this trend is going away anytime soon. HIVE is well-positioned in this regard. We think it’s the responsible thing to do from both a moral standpoint, and an economic one.

Take a look at the Grand Falls generating station, which is near our Bitcoin mining campus in New Brunswick, Canada.



There’s an incredible amount of clean, cheap hydro out there. So why wouldn’t we base our operations nearby? This is just one of the key ways HIVE’s strategy differs from other miners. But we think it’s an important one.

In the next newsletter, we’re going to do a deep dive on “The Great Crypto Energy Debate”. The issue is far more complex than it seems at first glance, and we hope to shed some light on common misconceptions. Look for that in about a week.

More reading:

Cheers,

Adam Sharp
Editor, The HIVE Newsletter
View this post on our blog

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The Great Bitcoin Energy Debate

By: Adam Sharp
Editor, The HIVE Newsletter
Nasdaq: HIVE | TSX: HIVE

In early February 2022, a major winter storm was headed towards Texas. Many feared a repeat of 2021, when the power grid failed and left four million people without electricity in freezing temperatures. 

There were new concerns this year that the large increase in Bitcoin mining operations would contribute to the next emergency. Since China banned Bitcoin mining in mid-2021, a big chunk of the industry has migrated to Texas. 

But Texas crypto miners voluntarily shut down operations ahead of the storm, cutting their power consumption 98-99%. Vice reported on the story in an article titled “Texas Bitcoin Miners Shutting Down to Help Power Grid Survive Winter Storm”. 

Lee Bratcher, president of the Texas Blockchain Council, told Vice that all industrial-scale miners in the state shut down ahead of the storm. And Bloomberg reported that Texas governor Greg Abbott is relying on Bitcoin miners to get through the winter storm season.

This is one aspect of the crypto energy debate that critics don’t seem to understand yet. Miners don’t want to operate during peak power demand. For one thing, it’s very expensive. Spikes in electricity prices can easily make mining uneconomical.

But more importantly it’s not very popular with the locals to mine full-steam ahead during rolling blackouts.

To address these concerns, many miners, including HIVE, have agreements with their utilities to curtail power consumption during emergencies. These are known as curtailment agreements, and they are rapidly becoming a standard in the industry. Miners get a better electricity rate, and utilities get better load balancing.

And in many cases, these curtailment agreements aren't even necessary. As we saw in Texas, miners are more than willing to do their part to prevent the power grid failing. 

Power demand is elastic. Responsible crypto miners help balance load during peaks, and encourage investment in clean energy.
 

Bitcoin’s Energy-Intensity is a Feature, Not a Bug

In 2021 the New Yorker published an article titled “Why Bitcoin is Bad for the Environment”.

“At a time when the world desperately needs to cut carbon emissions, does it make sense to be devoting a Sweden’s worth of electricity to a virtual currency? The answer would seem, pretty clearly, to be no.”

The piece makes a decent argument, but it makes a big assumption: that there’s no value in BTC. They completely miss the fact that Bitcoin is decentralized global money. That’s a very ambitious goal, which requires robust security.

Bitcoin’s proof-of-work system provides that security. It protects the network by making it very expensive to attack. 

Yes, that consumes a fair amount of energy, but all monetary assets have costs. Gold has to be mined and stored. Fiat currencies have all sorts of costs, including printing, central bank overhead, and regulation. 

In the U.S., our financial sector is tremendously large. It makes up 22% of all corporate profits in the country. Here’s a chart from Statista showing the 2020 breakdown.

Did you notice that Federal Reserve banks are the #6 “industry” by profit? Yup, printing money and holding trillions of dollars in bonds pays quite well. All profit is returned to the Treasury Department, but it’s interesting to see how the Fed accounts for such a big chunk of overall corporate income. 

Bitcoin and the broader crypto world have the potential to dramatically streamline financial transactions. One of the best crypto investors on the planet, Marc Andreessen of a16z, has a nice way of summing up the ambition and importance. This is from a 2014 Bloomberg Magazine interview about Bitcoin.

“We have a chance to rebuild the system. Financial transactions are just numbers; it’s just information. You shouldn’t need 100,000 people and prime Manhattan real estate and giant data centers full of mainframe computers from the 1970s to give you the ability to do an online payment.

You would not today, starting from scratch, invent any of these financial businesses in the same way. To me, it’s all about unbundling the banks.”

This is no toy or science project. Bitcoin is an emerging alternative financial system. Naturally, there will be costs associated with building and operating it.
 

HIVE Leads on Efficiency

From the start HIVE has taken a deliberate approach to power. We build in cold regions with cheap, clean power. Today we operate highly efficient data centers in Canada, Sweden, and Iceland.

HIVE is a founding member of the Bitcoin Mining Council (BMC). The purpose of the organization is to encourage transparency around energy and share best practices. BMC recently reported that a survey of miners shows a 66.1% sustainable power mix in the industry in Q4 2021. 

As the importance of Bitcoin grows in coming years, we believe it will become clear that the energy it uses is anything but a waste. And we’ll keep working to make our footprint as small as possible.

Have a great weekend everyone!

-Adam Sharp
Editor, The HIVE Newsletter
View this post on our blog.
We invite investors to follow us on Twitter, Youtube, our website, and blog.

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Bitcoin, Inflation, Ukraine, and the Big Macro Picture

By: Adam Sharp
Editor, The HIVE Newsletter
Nasdaq: HIVE | TSX: HIVE

The global macro situation is more dynamic than I’ve ever seen it. 

Russia’s invasion of Ukraine is clearly a humanitarian disaster. We hope for the best for Ukraine, but as investors we must explore the potentially massive financial implications.

There are a huge number of factors at play, so let’s focus on a few key ones.

First, it is critical to recognize that Ukraine and Russia combine to account for 25% of global grain exports. That’s 102 million tons per year. Chart via Bloomberg:

Ukraine alone accounts for roughly 50% of global sunflower oil exports. Unsurprisingly, since Russia invaded grain and cooking oil prices have spiked higher. Wheat prices rose to a 14-year high, and hit the daily up limit 3 days in a row.

The fertilizer situation is of particular concern. Russia is the world’s largest exporter of fertilizer products with a 12.7% share, and it suspended exports of most fertilizers for two months in early February. 

China makes up another 12% of fertilizer exports, and has also put severe export restrictions in place until June 2022. 

Modern agriculture relies heavily on phosphate, potash, and nitrogen fertilizers. Supply may be about to drop precipitously. The fertilizer must find a way to keep flowing.
 

Weaponized Energy

The energy picture is potentially most concerning. Russia only accounts for a tiny sliver of US energy imports, but Europe is heavily reliant on cheap Russian gas and oil. 

On March 3 2022, Reuters reported that roughly 40% of EU gas imports come from Russia. In that article Reuters reported some potentially disruptive news: the Yamal natural gas pipeline has apparently stopped. Yamal accounts for roughly 15% of supply to Turkey and Europe.

The flow of energy to Europe is one of Russia’s most powerful levers, and they seem likely to weaponize it.

Russia shut off its airspace to US, EU, and allied jets early during the invasion. The Western allies replied in kind. 

One result is that a flight from London to Tokyo, which used to take 11 hours, now takes 17 hours in the air, plus an additional stop in Anchorage. The amount of airspace we’re talking about here is large. Here’s a graphic from The Independent.

Unfortunately, inflation seems almost certain to worsen over the short-term.

And dismally, we must consider the possibility that inflation is just getting started. If central banks are forced to crank up the printers to deal with financial fallout, that may fuel the flames.

There is hope that diplomatic agreements can be made to avoid the potentially crippling effects of these measures. It is worth noting that US and EU sanctions targeting Russian banksexcluded the ones that Europe uses to pay for energy. So, it’s possible that energy and commodities continue flowing out of Russia. 

However, we must also take into account that at the moment, Yamal pipeline gas is not flowing, or was not for at least some time on both Thursday March 3, and Friday March 4 2022. This is a potentially worrying sign. Russia seems likely to continue using ts energy as a weapon, and any analysis needs to take this possibility into account.
 

Powerful Western Financial Levers

The U.S. and allies are using incredibly powerful financial levers to punish Russia’s aggression. I highly recommend reading this piece in Fortune to understand the magnitude of what is occurring.

“On Monday, the U.S., Japan, and the European Union barred Russia’s central bank from tapping into the billions of foreign reserves Moscow had been saving up in their banks. “

Cutting off a central bank from a portion of its reserves is somewhat of an extreme move. And it appears to be having the desired effect, with the Russian Ruble collapsing 30% since the beginning of the conflict.

The largest Russian ETF, RSX, is down from a 52 week high of $32 to less than $6 as I write this on March 3, 2022. Most U.S. brokerages appear to have cut off buying and selling of Russian equities. For its part, Russia has banned selling by foreign investors, and also restricted short-selling domestically, in attempts to stem the collapse. 
 

Financial Chaos Likely

There’s no other way to put it. Russia and the U.S. are engaged in a direct financial war, and real combat by proxy.

These events have the potential to rattle global financial markets beyond Russia.

For example, weeks ago, I was pretty sure the Fed wasn’t going to normalize interest rates. I feel stronger about that opinion now (read more in The Fed vs. Bitcoin). I find it hard to imagine the Fed withdrawing support during this potentially chaotic time. They may attempt to raise rates, but I don’t expect markets would like it much.

In fact, central banks all over the world may be forced to fire up new QE operations to stave off a debt spiral. And that would be despite spiking inflationary risk.

China is a very important wildcard to monitor. I don’t have the expertise to guess what they’ll do, but I am learning as much as I can about their options. If this financial war drags on, it seems likely that they may purchase Russian commodities at a discount, where possible.

One big question is, what would China buy those Russian assets with? Dollar? Yuan? Ruble? Gold? A new central bank digital currency (CBDC)? We don’t know, but the implications could be significant. 

Since the 1970s the vast majority of oil and commodity sales in the world have been conducted in dollars. Over the longer-term, this situation has the potential to reshape a sizable chunk of the global financial system. 

One thing that's clear to me is that Bitcoin could play an increasingly important role going forward. 
 

Did BTC Get a “Safe Haven Bid”?

On February 28 2022, Bitcoin suddenly spiked from around $39,000 to $43,500 in an 11-hour period. At that time the market was beginning to digest potential implications of war in Ukraine. 

Was this the long-awaited “safe haven bid”? Perhaps. But with more turmoil likely in the coming months, we can’t assume the low is in. Bitcoin has since backed off to around $40,000 as I prepare to send this newsletter on Friday March 4 at around 12:40PM EST.

This period continues to remind me of 2013 when banks in Cyprus used customer deposits to bail themselves out (much more on this in our previous newsletter Bitcoin: Echoes of 2013). 

Eight years ago the Cyprus situation awoke a small number of people to the importance of a decentralized currency. 

There’s a possibility that if global inflation and financial chaos continue, we’re about to see something much larger occur. Bitcoin adoption on an unprecedented scale seems increasingly possible. 

I asked HIVE Executive Chairman Frank Holmes for his read on the situation, and he told me the following:

“The world is beginning to understand why Bitcoin matters. It’s not a toy, it’s a tool for financial freedom.

In Ukraine, per capita use of Bitcoin is among the highest in the world. And because of BTC, some Ukrainians were surely able to escape with at least some of their wealth on a flash drive, or stored securely in their mind as a seed phrase.

Over coming years, we think the role of Bitcoin as decentralized money will continue to grow. And we may see the same dynamic play out with ETH.”

-Frank Holmes, HIVE Blockchain Technologies Executive Chairman

Frank also mentioned the fact that more than $42 million in Bitcoin and Ethereum donations has been raised to support Ukraine so far. Funds came from more than 46,000 addresses according to the Washington Post. 

Crypto is putting its utility and importance on display to the world. Situations like this show why decentralized, apolitical money matters.

In many ways, the future seems bright for Bitcoin. But of course, over the longer term we must also consider the ever-present regulatory risk to Bitcoin and the larger crypto world. It is possible that regulatory risk may rise along with price. As the perceived threat grows, so may the regulatory pressure. 

But for the near future, it seems like there are far more pressing matters to attend to.

I’m going to end with a quote from Galaxy Digital’s Mike Novogratz, via Bloomberg. It sums up the size of the stakes here. 

“That’s why Bitcoin was created, because people don’t trust governments. This is a big deal -- in a lot of ways, this is starting the acceleration of de-dollarization of the world.”

I wouldn't go so far as to say this is the beginning of de-dollarization. It's too early for that. But it’s the beginning of something.

We will continue to monitor this situation closely and keep everyone updated as it evolves. Expect a lot of macro analysis in the coming weeks and months.

In closing, we wish the people of Ukraine the best, and hope for a positive outcome.

Sincerely,

Adam Sharp
Editor, The HIVE Newsletter
View and share this post on our blog

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Hey Mr. Wonderful, A Word Please

By: Adam Sharp
Editor, The HIVE Newsletter
Nasdaq: HIVE  |  TSX.V: HIVE

Ah-hem. Excuse us, Kevin O’Leary, AKA Mr. Wonderful? We noticed that you say you sold HIVE shares, along with other miners, because you say we use carbon credits and “this won’t survive audit”. Here’s the tweet.

No offense but we think Kevin is a little out of his area of expertise here. Kevin is brilliant and hilarious but he’s also fairly new to crypto. He was a long-time skeptic until recently. 

Here’s the problem. HIVE doesn’t use any carbon credits. Our footprint is low and uses some of the cleanest, cheapest energy on the planet. There’s a reason HIVE makes up such a significant chunk of the new Bitcoin miner ETF, which prioritizes sustainability.

HIVE is proud to have in place a committed ESG strategy since its inception. HIVE also likely has the greenest footprint of all its peers. Our facilities in Sweden, Iceland and Canada use green and clean hydro and geothermal power.

And as we explained in The Great Bitcoin Energy Debate, crypto miners are flexible. If power demand is peaking and the grid is at risk, we as miners can shut down for a while, as the Texan industry admirably did back in February. 

Further, we were not aware that Mr. O’Leary was a HIVE shareholder. He has never reached out to us to have a discussion. He should really do more research before making such claims. 
 

Focused on Building

During volatile times like these, HIVE believes it’s best to simply keep one’s head down and focus on the mission at hand.

That mission is to produce as many BTC and ETH as possible, at the lowest possible cost, with the smallest footprint. As we pointed out in a previous newsletter, the next 7 years are absolutely critical for miners who are looking to acquire a stack of BTC. 

In 3 years the Bitcoin miner reward will be cut in half, and then in half again in another 4 years. These next few years are important, and we plan to make the most of them.

So far we’ve come a long way towards our goals. But we’re still building at our New Brunswick data campus. Here are two recent pictures.

These buildings are designed with efficiency in mind. Note the height. And the cold local temps can significantly lower cooling costs, which is a key consideration for Bitcoin mining.

As you can see each building is at a different stage. These pictures are from March 9 2022. All are from our data center in New Brunswick, Canada.

Inflation is likely to pick up near-term but we believe we are well prepared for such an environment. We have the machines, land, and buildings to become a leader in the space. It seems likely that Bitcoin, and likely Ethereum too, may take on a larger role in the investment world. 

We think our long-term strategy of building our own data centers in strategic locations will be a key factor going forward. It took a little bit longer than leasing the space, but we think the effort will prove worth it in the years to come. And these buildings’ staggered projected completion dates tie in nicely with ongoing miner deliveries. 

For one thing, we won’t need to worry about the landlord raising the rent in this inflationary environment.  

Have a good week everyone. Look for more macro and economic war analysis next week.

We invite investors to follow us on Twitter, Youtube, our website, and blog.

Adam Sharp
Editor, The HIVE Newsletter

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https://blog.hiveblockchain.com/hey-mr-wonderful-a-word-please/

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Has De-Dollarization Begun?

“The more stable things become and the longer things are stable, the more unstable they will be when the crisis hits."

-Hyman Minsky

It looks like major changes are coming to the international financial system. The US dollar may be at a crossroads, and its status as undisputed world reserve currency could be in play.

Credit Suisse analyst Zoltan Pozsar summed it up well in a recent note to clients titled Bretton Woods III.

Pozsar explains how this crisis has the potential to be far more potent than the 1973 oil embargo. He says the factors at play are much larger in scale, and the commodity system is far more financialized and leveraged than it was in ‘73. This simply multiplies systemic risk. 
 

Commodity Markets Crack

We have already seen these disruptions break markets. The London Metal Exchange (LME) recently shut down trading in nickel as the price tripled (Russia is the largest nickel exporter). 

It turns out a very large nickel trader was caught short massive amounts of contracts, and allegedly JP Morgan was the most exposed counterparty. 

The LME went so far as to cancel $4 billion worth of trades, and has since had to shut down trading multiple times and limit price movements. The LME is a dominant player in commodity trading, but this may shake traders’ confidence in the system.

More systemic disruptions are possible if this economic war continues.

We did get one piece of good news on Thursday March 3. The US Treasury Department announced that it wouldn’t stop Russia from making a $117 million bond payment through Citigroup. That means Russia may not default on its debt, which could set off a cascade of financial chaos in Europe and the US.

Most importantly, this shows that economic diplomacy is still happening. A fresh global financial crisis isn’t in anyone’s best interest.
 

De-Dollarization in Play?

In his report, Credit Suisse analyst Pozsar also explains how the US/EU seizure of Russian central bank assets could lead other countries to start shifting away from the dollar/eurodollar system to a new one.

Central bankers don’t like the idea of someone else controlling their financial resources. So, there has long been a theory that countries would start to de-dollarize. Countries such as China and Russia are already moving away from US reserves, and towards gold and other currencies.

What would de-dollarization look like? On March 15 we may have gotten a hint when The Wall Street Journal reported that Saudi Arabia was in talks with China to sell oil in yuan (China’s currency). Here’s an excerpt.

"The talks with China over yuan-priced oil contracts have been off and on for six years but have accelerated this year as the Saudis have grown increasingly unhappy with decades-old U.S. security commitments to defend the kingdom, the people said…

China buys more than 25% of the oil that Saudi Arabia exports. If priced in yuan, those sales would boost the standing of China’s currency. The Saudis are also considering including yuan-denominated futures contracts, known as the petroyuan, in the pricing model of Saudi Arabian Oil Co. , known as Aramco."

Saudi Arabia has only priced its oil in dollars since 1974. It would be a major shift if they began selling 25% in China’s currency, the yuan or RMB. (note: we talked more about this issue in Bitcoin, Inflation and the Big Macro Picture two weeks ago.)

According to the Global Times, a China state-affiliated media outlet, India is also exploring the yuan for oil purchases from Russia.

"India is reportedly planning to buy Russian oil at discounted prices and even considering the Chinese yuan as a reference currency in an India-Russia payment settlement mechanism, a move that Chinese analysts say represents the growing frustration among world economies over the US-led sanctions against Russia that have rattled global markets."

Together, India and China make up about 36% of the global population and 22% of global GDP. If these countries do follow through with their de-dollarization plans, it would have major effects on the dollar long-term. To be clear, these countries may just be bluffing, or strengthening their negotiating position. But they may be quite serious.

The US is currently highly dependent on cheap imports, largely from India and China. Those imports are inexpensive due to the dollar’s overwhelming strength versus foreign currencies.

If the dollar falls significantly versus China’s yuan, for example, that has the potential to further fuel price spikes for Americans. However, this would also cause China’s exports to fall as they became more expensive for the world to buy. So there are some incentives to keep the current system in place on all sides.

If foreign investors continue decreasing purchases of US government bonds, it could also mean that the Fed needs to step in as the primary buyer of Treasury bonds, which may compound inflationary pressures, as the money to buy our debt issuance is freshly printed.

It’s not all negatives, however. If the dollar does fall over coming years, the US would be in a position to rebuild its manufacturing base and become an industrial powerhouse once again. America has the energy, resources, skills, and entrepreneurial culture required to eventually retake its place as a great industrial nation.

And don’t get me wrong, the US and its allies still have plenty of powerful levers that can be utilized in negotiations. Nobody knows how this is going to play out. But if this financial battle drags on, there will be plenty of pain to go around.
 

Crypto’s Role

Crypto certainly has a role to play in the coming turmoil.

If the financial war continues it seems probable that investors will continue to adopt apolitical cryptocurrencies such as Bitcoin and Ethereum. Scarce, decentralized, self-custodied digital money has natural attractions in such a situation.

If inflation is as problematic as many of us expect it to be over the next few years, sovereign assets like BTC have the potential to do quite well.

Considering what we are seeing occur today, it could be a matter of time until we see another country announces it is adding BTC to its reserves, as El Salvador did. If multiple countries jump on that bandwagon, things could get very interesting. 

Central banks adopting Bitcoin in larger numbers may still be a ways off, mostly because there are many other things for central bankers to worry about at the moment. For now I suspect institutional US buyers have the highest potential to move markets.

Then again, all the things those central bankers are worrying about may lead them to ponder the utility of digital gold.

Cheers,

-Adam Sharp
Editor, The HIVE Newsletter
P.S. We invite investors to follow us on Twitter, Youtube, our website, and blog.

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HIVE: 397% Growth at 6x Earnings

Nasdaq: HIVE  |  TSX.V: HIVE

By: Adam Sharp, 
Editor, The HIVE Newsletter

Over the past year HIVE has put up some noteworthy financial numbers:

  • Quarterly revenue growth: 397% (YoY)
  • Return on assets: 37% (ttm)
  • Return on equity: 62% (ttm) 
  • 2,374 Bitcoin HODL reserves

HIVE shares currently trade at $2.25 on the Nasdaq. That gives the company a P/E ratio of approximately 5.8 (as of 5/28/2022, Yahoo Finance). 

A case can be made that HIVE shares are attractively priced at these levels. So in today’s newsletter, we’re going to dig into HIVE’s valuation and strategy.

Let’s start by examining new investment bank coverage of HIVE.
 

Wall St. Notices HIVE

Investment banks and Wall Street analysts are finally starting to notice HIVE. Stifel GMPrecently initiated coverage on HIVE and we believe the analysis is worth reviewing.

Here are some of the highlights from the Stifel report by analysts Suthan Sukumar and Daniel Tran, CFA.

  • Speculative buy rating with $3.75 price target
  • “We view HIVE as a leader in the industrial-scale cryptocurrency mining space”
  • “Unique combination of established scale, next generation hardware, and low-cost, 100% renewable power”
  • “...building on its ethereum mining roots with a rapidly expanding bitcoin mining footprint through strategic expansions, which is driving an outlook for strong revenue growth and profitability”
  • “Healthy balance sheet from recent capital raises, we see potential for the company to continue to scale aggressively yet responsibly as it prioritizes its peer-leading operational efficiency.”

Here are two screenshots from the report.

Stifel notes that in 2021 HIVE delivered a “peer-leading gross mining margin profile in the 75% range”.  

And Cantor Fitzgerald recently highlighted HIVE’s cash flow as highest among crypto miners, as of Dec 2021.

H.C. Wainwright was one of the original investment banks to cover miners. Senior Analyst Kevin Dede has a buy rating on HIVE shares with a $5 target.

Of course, we can’t forget the independent analysts who led the way on crypto stocks. One of the emerging experts is Anthony Power, a former military accountant in the UK . 

Anthony regularly posts some of the best crypto mining analysis in the world on Twitter, for free.

And HIVE stacks up well against the competition, as you can see in Anthony’s latest table from March 10 2022. Note the innovative use of metrics such as HODL/market cap, which shows the percentage of a miner’s market cap that is covered by crypto holdings.

Another independent analyst, Matt Kacur, built his own quant model which says HIVE shares’ intrinsic value may be higher than $13.

In previous newsletter How HIVE Stacks Up we mentioned Blonity, who runs a widely followed YouTube channel that covers crypto mining stocks. He also provides excellent analysis of HIVE and other miners, and we are fortunate to count him as a shareholder.
 

The Ethereum Angle

While HIVE has been focused on building out our Bitcoin operations in a big way, we haven’t forgotten about Ethereum. 

For many years ETH was our primary business. And it still accounts for a decent chunk of our revenue (approximately 1/3rd).

Most other miners have ignored ETH for the past 4 years, because it was always supposedly on the verge of switching to proof-of-stake (PoS). 

HIVE leadership correctly predicted that there was still plenty of time left to mine ETH. We went big into ETH when few other miners did, and the company continues to benefit from those investments.

Today we gross $.70 cents a kw/h in revenue mining ETH, with an all-in-cost of $.05 a kw/h, says Frank Holmes, HIVE Executive Chairman. 

Hardware payback times are incredibly short when mining is this profitable. We will continue to squeeze profit out of ETH until it’s no longer an option. And if history is any guide, we suspect further delays in implementing Ethereum’s PoS system are likely.

HIVE invested heavily in the Ethereum network over the last 5 years, and it has already paid off. That cash flow allowed us to:

  • Raise and invest $250M+
  • Buy and expand the New Brunswick BTC mining campus
  • Buy and upgrade the Lachute BTC mining campus
  • Ramp up ETH mining in Europe
  • Buy top mining equipment
  • HODL our BTC since Jan 1 2021

ETH trading over $3,000 gives a substantial boost to our crypto mining revenue, and margins. We will HODL a significant portion of ETH, but may sell some if we think the price is right, and if that capital can be invested more efficiently elsewhere.

Read more about Ethereum this in Profiting From ETH2 Delays.
 

Data Centers: Appreciating Assets

We’re glad that investment banks are starting to notice HIVE’s long-term performance and growth. 

Over the past 5 years we have invested hundreds of millions of dollars into data centers and mining equipment.

The fruits of these investments are beginning to show. For example, on November 23 2020, HIVE announced an agreement to purchase GPU One, a leading Canadian Bitcoin miner. At the time, the price of Bitcoin was around $19,000.

In that transaction, HIVE acquired a large Bitcoin mining data campus for approximately $350,000 per MW. We estimate the current market price of comparable data centers today to be $2,000,000 per MW. 

The value of data centers is rising for a few different reasons. Number one, in the summer of 2021, China banned Bitcoin mining. Before the ban, China made up around 50% of all Bitcoin hashing power. This led to a monumental shift in mining from East to West. 

Data center demand was already exploding before China’s ban, which only fueled the fire. 

The GPU One purchase also allowed HIVE to incorporate invaluable technical team members into the company. And despite all the growth, HIVE runs a lean operation with only 20 full-time employees.

HIVE believes these data centers will be key long-term assets that help differentiate us from the competition. Many of our peers chose the quicker route, which is to lease space in someone else’s data center. We chose a different path. 

Since we purchased the New Brunswick property, new construction has been a constant. We’ve put up new buildings and added more than $100 million worth of new, top-notch Bitcoin miners at this location alone. Every month we receive and install thousands of new high-efficiency ASIC BTC machines. 

Here’s a picture from late last year:

Flash-forward to March of 2022, and you can see the new buildings are coming along nicely.

Our cutting-edge facilities are located in areas that are ideal for mining crypto.

For example, the New Brunswick campus is cool year-round, eliminating the need for costly AC units. Nearby hydroelectric and geothermal power plants provide reliable, plentiful, and cheap energy.

In Sweden and Iceland, where our ETH mining operations are located, the climate is also cool, and the local power supply is largely hydroelectric and geothermal. HIVE has managed to avoid settling for either clean or cheap power. We got both.

As of 3/21/2022 HIVE produces about $650,000 worth of cryptocurrency per day, putting the company on a $237 million revenue run rate.

In February we produced 244.4 BTC, and ETH equivalent to another 132.6 BTC.

In early March we announced a groundbreaking deal with Intel Corporation (Nasdaq: INTC)  to purchase 100MW worth of their new, cutting-edge Bitcoin chips. See the full story in our press release dated March 7 2022.
 

HIVE Is Building

HIVE has shown that it is possible to mine crypto at industrial scale with a minimal environmental footprint. We are a long-term oriented company, built to be durable and sustainable in every way. 

HIVE’s leadership has deep capital markets experience which may be necessary to navigate any future financial turmoil. We have the land, resources, and talent to become a world-leading crypto miner. We will continue to make strategic investments as the industry grows and evolves. 

HIVE was the first crypto miner to go public in 2017, and it plans to continue leading the industry during this critical time.

We believe the importance of apolitical currencies such as Bitcoin is about to become abundantly clear to the world. 

Contact us with any questions or comments. For investor inquiries, please email info {@} hiveblockchain.com

Sincerely,

Adam Sharp
Editor, The HIVE Newsletter
Read/share this article on our blog
P.S. We invite investors to follow us on Twitter, Youtube, and the HIVE website.

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In Ukraine ‘Crypto is King’


By: Adam Sharp
Editor, The HIVE Newsletter
Nasdaq: HIVE | TSX: HIVE

The good news is that real-world adoption of Bitcoin and Ethereum appears to be advancing by leaps and bounds.

The bad news is... crypto seems to be getting more popular due to widespread:

  • Inflation
  • Warfare (economic and kinetic)
  • Distrust of institutions

It is during times like these when we see the true utility of cryptocurrencies. They are scarce, divisible, and liquid. Importantly, they are also apolitical and largely uncensorable.

To understand further, let’s look at the role crypto is playing in Ukraine.

Even before the war, Ukraine was rated as the #1 country for crypto adoption, according to a 2020 report by Chainalysis. That analysis factored in on-chain transaction volume, peer to peer trading, and deposits.

Russia’s invasion seems to have catalyzed a further spike in usage. 
 

‘Crypto is King’ In Ukraine


Last week Bloomberg’s Alastair Marsh released a fascinating interview with Ukrainian crypto entrepreneur Michael Chobanian. 



We’ll review key snippets from the interview shortly, but first, a little background.

Mr. Chobanian, 38, founded Ukraine’s largest crypto exchange, Kuna

According to stats from Kuna.io, in a recent 24 hour period, Bitcoin had the most volume by far with over $2.6M in USD trades. ETH is second with $1.1M in volume, and nothing else is close.



On March 1 Reuters reported that volume on Kuna has tripled since before the invasion, reaching over $5 million a day. 

It's not a ton of volume, but Kuna is just one local exchange. Major international players such as Binance also operate in Ukraine. Additionally, the vast majority of transactions are likely P2P and B2B.

It’s worth noting that the most popular trading pair on this Ukrainian exchange is BTC/USDT. This pair allows trading between Bitcoin and Tether stablecoins, which are pegged to the US dollar. Clearly, the greenback is still playing a role here, but it may be declining, as we’ll see below.

Another takeaway is that Bitcoin appears to be the frontrunner. It has a number of attractive qualities for such a situation.

  • Best global liquidity and cash-out options
  • Stellar security record
  • Fast with $1.87 avg transaction fee
  • Inflation hedging aspects

But Ethereum also puts up an impressive showing at #2 in terms of volume on Kuna. This may further the idea that ETH is becoming a monetary asset. I doubt too many people in Ukraine are buying NFTs with their Ether today.
 

Real World Adoption in Ukraine


Today Mr. Chobanian is also in charge of the Ukrainian government’s crypto reserves. Ukraine has collected more than $60 million in BTC and ETH that was donated from around the globe. 

Let’s take a look at some excerpts from Bloomberg’s interview with this founder.

"My role is to supply my people with all the necessities that they require and make sure that we can pay as fast as possible. It takes 10 minutes for a Bitcoin block to close [average confirmation time for a Bitcoin payment]. 

And it takes about three days to do the same thing through the banking system…

So three days vs. 10 minutes—therefore, we prefer crypto."

Chobanian goes on to explain how the war has accelerated adoption of crypto.

"You could say that I was preparing for this. I knew that there would be a time in the future when crypto would play a vital role. I never imagined it would be because of a war, that was definitely not my plan.

I had hoped there would be a more peaceful way."

"I had hoped there would be a more peaceful way." Indeed.

Michael Chobanian then shines a light on the falling role of cash and US dollars in Ukraine.

"Cash, U.S. dollars, in Ukraine are pretty much useless. No one wants them. Prior to that, dollars were the main payment method for the OTC market. Now considering that you can’t really move cash outside of the country and you cannot store it securely, no one really wants it."

Of course, Mr. Chobanian is deeply embedded in the crypto world, so his view may be a bit biased. But it’s interesting nonetheless.

The crypto entrepreneur then expounds on how quickly crypto has become Ukraine’s preferred method of payment.

"Now the most valuable form of money in Ukraine is crypto. Everyone wants crypto because this is the fastest, the most flexible, easiest, and least bureaucratic way to store and spend your money.

Crypto is the new king of money in Ukraine."

Towards the end of the interview, Chobanian gives insight into how views on crypto have shifted amongst banks and government.

"The fundamental change is that, before the war, there were a lot of skeptics, especially in the government, in the banks, and in the military. Now there is no skepticism because they understand that we save lives every single minute with crypto."

It sounds like the Ukrainian financial establishment became crypto believers overnight. Now they understand the utility. 

This is another light bulb moment of realization, as we discussed in Bitcoin: Echoes of Cyprus and 2013. I suspect there may be a series of these realizations over the coming years, all over the globe.

Let’s also consider all the people who were able to escape Ukraine with their Bitcoin stored on a hard drive, or in their mind as a seed phrase. The fate of their equities and fiat currency may be uncertain, but BTC is sovereign and traded globally.

Outside Ukraine, crypto adoption seems to be growing due to widespread inflation and distrust in institutions. Unfortunately these issues may persist for a while.

But it is encouraging to see these nascent decentralized financial systems begin to fulfill their potential. They may have a big role to play over the next few years.

HIVE will be there, providing reliable infrastructure for these new decentralized financial networks.

Sincerely,

Adam Sharp
Editor, The HIVE Newsletter
Read/share this article on our blog

P.S. Be sure to check out our March production update, where we announce HIVE reaching 2 Exahash of Bitcoin mining and 6 Terahash of ETH mining. We invite investors to follow us onTwitter, Youtube, our website, and blog.

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Bitcoin's Role as Inflation Hedge Grows

A hugely important global crypto survey came out recently. 

Global exchange Gemini has released its 2022 Global State of Crypto Report

Gemini surveyed 29,293 adults across 20 countries. Ages ranged from 18-75, and it was restricted to those who make more than $14,000 per year. 

This may be the best survey yet for understanding global crypto adoption among retail investors.

The results are stunning. They show that globally, more than 41% of all crypto investors started in 2021. That means the total number of investors increased by roughly 70% in 2021 alone. 
 

Key Excerpts:

  • More than half of crypto owners in Brazil (51%), Hong Kong (51%), and India (54%) got started in 2021
  • Among high-income respondents in developed nations crypto ownership trended higher, with 40% or more in the UK, Germany, and France reporting owning crypto.
  • Regulation is a concern globally. Among non-owners, 39% in Asia Pacific, 37% in Latin America, and 36% in Europe say there is legal uncertainty around cryptocurrency.

Another big finding is that inflation appears to be a key driver of new adoption.
 

Inflation Driving Adoption

One of the reasons I like Gemini’s survey is that they asked compelling questions. For example, the data on inflation is fascinating.

The report highlights the fact that countries which have recently experienced hyperinflation tend to agree with the statement “Crypto is the future of money”. 

Clearly, those who have firsthand experience with high inflation are much more likely to adopt crypto. 

More analysis from Gemini's report:

"Respondents in countries that have experienced 50% or more devaluation of their currency against the USD over the last 10 years were more than 5 times as likely to say they plan to purchase crypto in the coming year than those in countries that have experienced less than 50% currency devaluation, including South Africa (32%), Mexico (32%), India (40%), and Brazil (45%). 

In Brazil, where the local currency has been devalued by more than 200% against the USD, 41% of respondents own crypto.

In the US, two in five (40%) crypto owners see crypto as a hedge against inflation."

This matches what I’m seeing: Generally, the higher the inflation rate in a country is, the higher the crypto adoption rate is. If inflation continues to be problematic around the world, it seems likely this trend will continue to grow.

There are all sorts of other interesting nuggets to be found in this report. For example, in Nigeria, Israel, and Indonesia, more than half of crypto investors are women. 

In the U.S. and Europe, the gender gap is narrowing, but still lopsided with 32% and 33% female crypto ownership, respectively.

It’s an excellent report which makes me more optimistic on the future of crypto. Read the whole thing on Gemini.com (PDF).
 

HIVE In The News

Also, be sure to check out the P.S. for an update on the Ethereum delaying the PoS merge again.

Cheers,

Adam Sharp
Editor, The HIVE Newsletter
Share this article on our blog

P.S. Ethereum’s move to proof of stake is going to be delayed, again. Core developer Tim Beiko confirmed that it won’t happen in June, “but likely in the few months after”. We shall see if that happens. It’s a monumental task, as we pointed out in January 2022 newsletter Profiting From ETH PoS Delays.

Meanwhile HIVE just announced a 33% monthly increase in Ethereum mining hash power on April 6 2022. We also announced an average of 9 Bitcoin produced per day in March, and much more.

We invite investors to follow us on Twitter, Youtube, our website, and blog.

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ETH PoS Delay Implications + HIVE Updates

By: Adam Sharp
Editor, The HIVE Newsletter
Nasdaq: HIVE  |  TSX.V: HIVE

Well, it’s official. A prominent Ethereum Foundation member announced they would delay the proof-of-stake “merge” once again.

Thus, mining ETH will remain highly profitable for a while longer. And it doesn’t seem to have hurt the price, with Ether still trading at around $2,900 as of 4/25/2022. 

Those who read our January 11, 2022 newsletter Profiting From The ETH2 Delays may not be surprised by this news. At the time we noted that “the likelihood of further delays seems high”.

I quoted HIVE Executive Chairman Frank Holmes on the matter:“We think there’s still a lot of time left to profitably mine ETH. Ethereum moving to PoS is taking longer than expected, and we have positioned HIVE to be a leading miner since 2017.

Mining ETH is highly profitable, and there’s a lot less competition than with BTC. The margins are significant, with a rapid payback period.”In Europe (where our Ethereum mining operations are) HIVE recently announced a 33% jump in ETH hash power in the month of March. That’s 6.1 Terahash of ETH miners now in production.

For a while, it must have seemed crazy that HIVE was investing in Ethereum mining, when the merge was surely going to happen in June. But now these machines will be mining in a limited competition environment, contributing to our high gross margins and net profits

The merge is now rumored to happen in September. But are further, further delays likely? I would say so. From what I have been hearing, there still hasn’t been enough progress made on an important topic called ETH2 “client diversity”. Essentially, it means they need multiple independent clients to run the network, in order to reduce security risks.

As we have pointed out previously, switching a massive living blockchain to a completely new consensus mechanism is no small task. 
 

HIVE's Bitcoin Expansion Continues

Construction crews at our New Brunswick, Canada Bitcoin mining campus kept busy during the cold months.

In the picture below, you can see new miner racks going up in one of our new buildings.

Soon the air will be filled with the buzzing of highly efficient new mining equipment. 

It takes a big transformer to handle that much power. Here’s the scale of one of our 50MW transformers in New Brunswick.

In the picture below, you can see how the air circulation system is designed to take advantage of the cool local climate. 

With plentiful and cheap local hydro and geothermal power, we think New Brunswick is an ideal Bitcoin mining location.

Since we purchased the New Brunswick and Lachute BTC mining campuses, we’ve produced 2,568 Bitcoin worth approximately $100 million at $39,000. We still hold all of them, and plan to continue doing so.

And as you can see, we’re rapidly expanding capacity. HIVE regularly receives shipments of new top-quality mining equipment from prior orders and installs them ASAP.

No matter what’s happening in markets, HIVE will remain focused on our mission. Building and operating the best crypto mining operations in the world. And doing it in a financially, and environmentally sustainable way.

Cheers,

Adam Sharp
Editor, The HIVE Newsletter
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