As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
GRAYSCALE FILES SUIT OVER BITCOIN ETF DENIAL: Grayscale Investments announced on Wednesday that its Senior Legal Strategist, former U.S. Solicitor General, and partner at Munger, Tolles & Olson, Donald Verrilli, Jr., filed a petition for review with the United States Court of Appeals for the District of Columbia Circuit on behalf of Grayscale. The suit challenges the decision by the Securities and Exchange Commission to deny conversion of Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin ETF. "Grayscale supports and believes in the SEC's mandate to protect investors, maintain fair, orderly, and efficient markets and facilitate capital formation -- and we are deeply disappointed by and vehemently disagree with the SEC's decision to continue to deny spot Bitcoin ETFs from coming to the U.S. market. Through the ETF application review process, we believe American investors overwhelmingly voiced a desire to see GBTC convert to a spot Bitcoin ETF, which would unlock billions of dollars of investor capital while bringing the world's largest Bitcoin fund further into the U.S. regulatory perimeter. We will continue to leverage the full resources of the firm to advocate for our investors and the equitable regulatory treatment of Bitcoin investment vehicles," said Michael Sonnenshein, Grayscale's CEO.
MICROSTRATEGY ACQUIRES 480 BITCOIN: In a Wednesday regulatory filing, MicroStrategy (MSTR) disclosed that during the period between May 3 and June 28, MicroStrategy acquired approximately 480 bitcoins for approximately $10M in cash, at an average price of approximately $20,817 per bitcoin, inclusive of fees and expenses. As of June 28, MicroStrategy, together with its subsidiaries, held an aggregate of approximately 129,699 bitcoins, which were acquired at an aggregate purchase price of approximately $3.98B and an average purchase price of approximately $30,664 per bitcoin, inclusive of fees and expenses.
MARATHON’S MONTANA MINERS LOSE POWER: Marathon Digital (MARA) disclosed Tuesday that, as a result of a storm that passed through Hardin, MT earlier this month, the company's mining operations in the region are currently without power and likely to remain offline until the damaged power generating facility can be repaired. Based on the latest inspection reports, Marathon's miners in Montana may have sufficient power to come back online in a reduced capacity as early as the first week of July. On Saturday, June 11, a severe storm passed through the town of Hardin, damaging several structures, including the power generating facility that supplies Marathon's bitcoin mining operations with power. In the past few days, Marathon received a damage assessment. According to the findings, the plant's cooling towers are in need of repair. Initial electrical tests on Marathon's miners have been positive, indicating that the majority of the company's miners were not materially damaged by the storm. While repairs are ongoing in Montana, Marathon has pointed its remaining active miners, representing approximately 0.6 EH/s, away from the company's mining pool, MaraPool, and towards a third-party mining pool in order to increase the probability of earning bitcoin. Prior to the storm, the 30,000 miners Marathon had deployed in Montana represented over 75% of the Company's active fleet. With these miners offline, Marathon's bitcoin production is expected to be significantly reduced until repairs to the power generating facility in Montana can be completed or until the miners can be relocated to new facilities.
Meanwhile on Tuesday, Compass Point analyst Chase White lowered the firm's price target on Marathon Digital to $20 from $54 and kept a Buy rating on the shares after updating his estimates for the crypto miners in his coverage based on his revised bitcoin price and global hash rate forecasts. After averaging about $37,000 so far in the first half, he now expects bitcoin prices to average about $21,500 in the second half for a full-year 2022 average of about $29,000, down from a prior view of $37,000. However, if Bitcoin prices recover in 2023 as he expects, he believes those miners who can stay afloat will have the opportunity to grow at a lower cost and White noted that none of the miners in his coverage are seen as likely to go bankrupt at his bitcoin price forecast.
COINBASE DOWNGRADE: Goldman Sachs analyst Will Nance downgraded Coinbase to Sell from Neutral on Monday with a price target of $45, down from $70. The analyst believes current crypto asset levels and trading volumes imply "further degradation" in Coinbase's revenue base, which he sees falling 61% year-over-year in 2022 and 73% in the back half of the year. While Coinbase recently announced a significant restructuring, further cuts are needed, as the announced cost reduction effort merely brings headcount back to end of Q1 levels and resulted in the company moving to the low end of its previous expense guidance, Nance said. The analyst believes Coinbase will need to make "substantial reductions" in its cost base in order to stem the resulting cash burn as retail trading activity dries up. Given the "continued downdraft" in crypto prices and the resulting fall in industry activity levels, he downgrades the shares to Sell.
Additionally on Thursday, CNBC’s Ryan Browne reported that Coinbase is seeking licenses in Spain, Italy, France, the Netherlands and Switzerland amid a plan to aggressively expand in Europe. The exchange, which already has operations in the UK, Ireland and Germany, recently hired its first employee in Switzerland and is looking to international markets for growth amid concerns of a "crypto winter."
VOYAGER ISSUES NOTICE OF DEFAULT: Voyager Digital (VYGVF) announced Monday that its operating subsidiary, Voyager Digital LLC, has issued a notice of default to Three Arrows Capital for failure to make the required payments on its previously disclosed loan of 15,250 BTC and $350M USDC. Voyager intends to pursue recovery from 3AC and is in discussions with the company's advisors as to legal remedies available. The platform continues to operate and fulfill customer orders and withdrawals. As of June 24, 2022, Voyager had approximately $137M cash and owned crypto assets on hand. The company also has access to the previously announced $200M cash and USDC revolver and a 15,000 BTC revolver from Alameda Ventures. The company has accessed $75M of the line of credit made available by Alameda and may continue to make use of the Alameda facilities to facilitate customer orders and withdrawals, as needed. The default of 3AC does not cause a default in the agreement with Alameda.
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Ideanomics (IDEX), Riot Blockchain (RIOT), Overstock (OSTK), Pareteum (TEUM) and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin dropped about 8% this week to $19,381 in U.S. dollars, according to TradeBlock.
