Q9 Weekly | The Miner Blues
7 October 2022
Q9 Capital: www.q9capital.com
· Risk appetite turning positive following US labour market data
· Uniswap rallies, eyes fresh funding round
· Bitcoin hashrate and perp open interest reach record highs
October gains in Bitcoin have now erased all of Septembers losses. BTC rallied above $20k and the total market cap of crypto regained $1tn as risk appetite appears to improve. The rally was led by positive sentiments in traditional markets which picked up on Tuesday following the release of weaker-than-expected US labour market numbers. The data points to central banks having to slow their pace of monetary tightening.
Dogecoin gained +4.5% as Tesla CEO and DOGE proponent Elon Musk said he will buy Twitter for the price originally agreed to. Twitter’s shares surged +22% on the news. DeFi tokens also rallied with SushiSwap (+19.7%) and Uniswap (+7.8%) the top performers in the decentralised sector.
Source: TradingView
Solana, however, suffered another major outage caused by a misconfigured node. This is the 13th outage for the Solana Mainnet so far in 2022.
Meanwhile, venture funding for blockchain and crypto projects in Q3 was down 35% in dollar terms from Q2, although still up 8x from two years ago.
Source: The Block
UNIque Investment Opportunity
Uniswap Labs is eyeing over $100mn in new funding. The decentralised startup (UNI) is engaging with a number of investors, including Polychain and one of Singapore’s sovereign funds, to raise an equity round between $100- $200mn at a valuation of about $1bn. Uniswap already has A16Z and Paradigm as big backers.
The new funding is indicative of Uniswap’s ambitious plans to expand its offerings. The decentralized exchange commands 61% of all DEX volumes and currently generates over $1mn in daily revenues.
In recent months, Uniswap Labs has shared plans to add “several new products.” One of the new offerings will allow customers to trade NFTs on Uniswap from a number of marketplaces.
DeFi Venues by Volumes
Source: Defi Llama
DEX Daily Revenues
Source: Cryptofees.info
Put Your Records On
Two new records were broken for Bitcoin this week. Whilst spot trading volumes remain low (78% of all Bitcoin has not moved in the past 6 months), a new record has been reached in BTC perps as the open interest has spiked to another all-time high of 450,000 BTC, according to Arcane Research.
The Bitcoin-denominated open interest in perpetuals (futures with no expiry) since Oct 1st across all platforms increased by the equivalent of more than 60,000 BTC. This shows more positioning and engagement from investors — although it doesn’t provide directional indications or bullish/bearish sentiment.
BTC Perps Open Interest
Source: Arcane Research
The second BTC record broken this week. Bitcoin’s hashrate reached a new all-time high despite the market downturn, thanks to the new generation of mining machines coming into production. For the first time in history, Bitcoin’s hashrate exceeded 250 Ehash/s.
Since Bitcoin’s hashrate dropped to 200 EH/s on Aug 4th, the data has steadily grown as more machines come back online after the hot summer. Several miners have also upgraded their equipment to ensure better efficiency.
BTC Mean Hashrate (7d Moving Average), 2 Years
Source: Glassnode
Margin Squeeze for Miners
However, reports reveal Bitcoin miners’ revenues have dropped 72% in the last year. According to Blockchain.com data, revenue from Bitcoin mining dropped to less than $20mn a day compared to the previous year, when miners were making around $62mn daily.
Bitcoin Miner Revenues (USD), 1 Year
Source: Blockchain.com
Miners have been considerably hit by the bear market and the global energy crisis that has led to a surge in electricity costs. The financial health of BTC miners is a significant factor in the price of the asset — should they become forced sellers or the price of BTC drops further and they have to dump their inventory on the market to meet their OpEx then we can expect a price decline in BTC.
The difficulty of mining a Bitcoin is also about to see another large increase early next week, weighing further on profit margins. The metric adjusts automatically to keep the time required to mine a bitcoin block to roughly around 10 minutes, depending on the network hashrate, that is, amount of computing power committed to mine and secure the Bitcoin blockchain. The higher the hashrate, the higher the difficulty, which lowers miners’ profitability. The difficulty is expected to rise more than 10%.
Miners with higher cost and large debt load will likely be weeded out by this crypto winter.
In the News…
· Celsius’ top execs cashed out $17mn in crypto before bankruptcy
· Hamilton Lane preps tokenized funds to draw individual investors
· ‘It’s too compelling not to try again’: Crypto keeps the faith at Singapore shindig
· After 2 years of debate, Europe finalizes landmark crypto rules
· Jack Dorsey’s TBD teams up with Circle to take USDC savings and remittances global
· Cathie Wood’s ARK Invest to offer crypto strategies to investment advisors
· Kim Kardashian pays $1.26m over crypto ‘pump and dump’
· Bitcoin payments company Strike raises $80mn in Series B round
· Climate start-up partners with Ripple to launch marketplace for carbon credits
· Custodian Anchorage adds to Asia push with batch of institutional crypto partners
· SWIFT shows CBDCs, tokenized assets can be integrated into global financial system
· Fidelity adds to crypto offerings with Ethereum index fund
· Near Protocol partners with Google Cloud to support Web3 devs
