7/15/22 FAL Weekly Digest

The FAL Weekly Digest is a source for this week’s biggest cryptocurrency-related news and updates. This newsletter features excerpts and links to this past week’s biggest news articles written by members of FAL Consulting’s writing team or gathered from other listed sources.

Crypto Mining

Texas Miners Given Incentive to Shut Down Operations

Texas saw triple-digit, record breaking, temperatures last weekend. The state’s grid operator, Electric Reliability Council of Texas (ERCOT), is providing financial incentives by paying companies to decrease operations in peak periods, so that more energy can be delivered to the system.

In February, energy issues arose as temperatures were getting very low. Miners voluntarily shut down or paused operations in Texas to allow residents to receive power for heat.

Bitcoin miners in Texas are required by law to turn off their mining machines when the state faces energy shortages. Core Scientific powered off all mining machines in Texas to provide support for the ERCOT grid. While Riot will also be participating, they have agreed to curtail energy consumption when called on.

Riot is operating North America’s largest Bitcoin mining facility in Whinestone, Texas capable of 750 megawatts and is also developing a gigawatt mining facility in Navarro County, Texas.

Celsius Network

Celsius Network is one of the largest crypto lenders who also dabbles with crypto mining through their subsidiary Celsius Mining. Founded in 2017 by Alex Mashinsky and Daniel Leon, Celsius offered retail investors attractive returns on their crypto holdings under the slogan "unbank yourself." The company, which moved its headquarters from London to New Jersey last year, had grown to manage more than $10 billion in assets and claimed more than 1.7 million users. But this year's crypto market slide left Celsius insolvent, and on June 12 it froze client withdrawals, transfers and swaps.

As The Block reported last month, Celsius's lawyers had been pushing for it to enter Chapter 11 bankruptcy for a while — while the company's executives attempted to avoid it at all costs. The firm had instead sought a show of support from app users to help win the internal argument. Amid the tension, the Wall Street Journal reported this week that Celsius had replaced its legal advisers. Since halting withdrawals in June, Celsius's woes have mounted — with state regulators in the US reportedly lining up to investigate its business practices.

Celsius has fully paid off its debt to MakerDAO, unlocking about $456 million worth of wrapped Bitcoin. It is suffering from a potential $1 billion loss on its MakerDAO lending strategy. Etherscan data shows that a wallet identified as belonging to the struggling crypto lending company fully repaid a $41 million debt in DAI today to free its collateral of 21,962 wBTC (worth around $456 million at press time). The wallet closed the MakerDAO vault shortly after paying off the debt.

Celsius Network has been making payments on its Bitcoin loan since June 14th and immediately after it paused withdrawals on June 13th.

Apart from its main business, Celsius also mines bitcoin through its subsidiary Celsius Mining, which took out up to $750 million in intercompany credit from Celsius. As of May 31, the outstanding balance on that loan was $576 million. According to the document, Celsius believes that the mining operations will generate enough assets to pay off the loan and “provide revenue for the company in the future.” Celsius owns $720 million in “mining assets,” according to the document. That side of the business is producing 14.2 BTC a day, which translates to around $292,520 based on bitcoin’s current price of around $20,600, according to TradingView.

Celsius Network Files for Bankruptcy, Showing Pharos USD Fund as its Biggest Creditor, which Has Links to Alameda Research. Celsius Network filed for bankruptcy, and a Bloomberg report has unveiled that Celsius owes a company known as Pharos USD Fund a total of $81.1 million. Furthermore, Pharos USD Fund is an affiliate of Lantern ventures; a London-based ‘proprietary trading firm focused on cryptocurrencies.’ Lantern has about $400 million under management, with over 50% belonging to investors outside the United States.

SEC Delays Decision on Bitcoin ETF

The SEC has delayed another decision in regards to allowing ARC Invest and crypto investment firm 21Shares Bitcoin ETF to begin trading. An ETF is an investment vehicle that gives investors exposure to an asset without holding it themselves, buying shares from a company that represents the asset. Bitcoin ETFs that track the price of cryptocurrencies became one of the only ways traditional investors could get exposure to Bitcoin in the U.S, due to the SEC slow approval of Bitcoin Spot ETFs.
This past October, the SEC finally approved the first Bitcoin futures ETF.

China’s CBDC Transactions Exceed 83 Billion Yuan

China’s Central Bank Digital Currency is referred to as several names including e-CNY and the digital yuan. The digital yuan has been testing throughout major provinces since April 2020.The trials have been fairly successful, considering that it was the first to test a CBDC on such an economic scale. During the trials, $9.7 billion worth of eCNY transactions were made. It is very much still in a trial phase, but is reaching widespread use in large percentage of China. By April 2022, the trial was expanded to 23 cities.

As of May 31 2022, there has already been 83 billion yuan in payments (around $12.3 billion USD). e-CNY payments totalled 87.5 billion yuan in 2021 (around $13 billion USD).

NFTs

Solana NFT Marketplace to Launch Gaming Venture

The top NFT marketplace within the Solana ecosystem Magic Eden, recently raised around $130 million, instantly making it an NFT unicorn. After the original raise no account of how the funds would be spent was made, but today Magic Eden revealed plans to create a gaming-centric division within the company.

Today the corporation announced Magic Ventures, an investment division focused on Web3 gaming. With this goal in mind, the company hired Tony Zhao, a former Chinese gaming Tencent exec, as the head of gaming investments.

Magic Eden currently makes up 90% of Solana's entire NFT market share, with Zhao stating that the goal is to help game developers become entranced in the Web3 world.

“Developers can focus on one thing that they know how to do, which is to build great games,” he explained. “We’ll help them to take care of all the Web3 elements and to help them onboard into the ecosystem.”

GameStop NFT Platform is Thriving

GameStop's NFT marketplace launched 2 days ago, without any gaming NFTs which the company claims will be its main focus. With that said the new marketplace has already dwarfed Coinbase’s NFT platform, in all-time trading volume. Coinbase NFT has been operating since May.

Since its launch on Monday GameStop NFT has already had at least 3,167 ETH in trading volume, according to data published on the marketplace website. Which equals to around $3.5 million, but still only pertains to the platform's top 50 collections, so the real figure could be significantly higher. Coinbase’s NFT platform shows only 1,704 ETH in trading volume, or roughly $1.8 million.

These numbers still dwarf in comparison to OpenSea, one of the first and still the largest NFT platform. OpenSea saw $16 million in trading volume on Wednesday alone. NFT and gaming has had a battle-hardened relationship with many in the space calling NFTs a scam as well as other fruitful words, but this has not stopped giants from within to take the task of making such a nascent technology accepted by all.

Market

Market Cap: $939.962 B; down from $943.9 B last week
24h Volume: $74.93 B; up from $71.744 B last week
BTC Dominance: 42.6%; down from 43.2 % last week
ETH Dominance: 15.9%; up from 15.5% last week

None of our posts or newsletters are meant to be taken as financial advice.