The Safer Option for Investors: Bitcoin Mining Stocks
This week, I had the opportunity to speak with Greg Beard, the chief executive at Stronghold Digital Mining, to gain insights into the current state of crypto miners. In the face of increasing regulatory pressure, Beard suggests that bitcoin mining stocks could be a safer choice for investors seeking exposure to digital assets, compared to many cryptocurrencies and other crypto-related equities such as Coinbase.
Regulatory Challenges in the Crypto Space
Recently, the U.S. Securities and Exchange Commission (SEC) took actions against Coinbase and Binance Holdings Ltd., highlighting the challenges faced by crypto companies. Coinbase was charged with operating an unregistered national securities exchange, brokerage, and clearing agency while Binance and its founder were charged with multiple securities law violations.
Furthermore, lending services provided by certain crypto companies may also become targets for the SEC. According to Beard, companies that try to attract a large number of retail users through banking-like activities in the crypto space, arguing that they are not subject to regulations because they don’t deal with traditional currencies or securities, are likely to face difficulties defending their position.
The Advantage for Bitcoin Miners
Unlike these crypto companies, bitcoin miners do not interact with retail investors or offer services to them. This distinction gives bitcoin miners an advantage when it comes to regulatory concerns. Chair of the SEC, Gary Gensler, has consistently stated that bitcoin should be classified as a commodity rather than a security, which further supports the argument made by Beard.
Regulatory Scrutiny on Bitcoin Mining
However, it is important to note that the bitcoin mining industry is not entirely immune to regulatory scrutiny. As the industry’s energy consumption becomes a topic of concern, it is increasingly facing regulatory attention. For example, New York implemented a temporary ban on new crypto mining permits at fossil fuel plants in November.
In conclusion, while bitcoin mining stocks are not exempt from regulatory challenges, they are considered a relatively safer option for investors looking for exposure to digital assets compared to other crypto-related equities. As the crypto landscape continues to evolve, monitoring regulatory developments remains crucial for all stakeholders.
The Pressure of Bitcoin Halving on Crypto Miners
Crypto miners are getting ready for the upcoming bitcoin halving, which is a process where rewards paid to miners are cut in half. This event, expected to happen in April or May next year, could potentially impact the profitability of miners.
To navigate this challenging landscape, investors should carefully assess miners’ financial conditions before and after the halving. One crucial aspect to consider is the miners’ real cost of power and whether they can sustain their debt obligations. Miners with low power costs and sufficient cash flow to service their debt even after the halving are likely to be the winners, according to industry expert Beard.
Coinbase Secures Approval for Crypto Futures Trading
In an exciting development, Coinbase has received approval from the National Futures Association to offer crypto futures trading to its customers. This makes Coinbase the first crypto-native entity to provide traditional spot crypto trading directly alongside exchange-traded crypto futures.
Coinbase views this as a significant milestone that allows them to bring regulated crypto products to U.S. customers. The approval holds particular significance as approximately 75% of global crypto trading volume stems from the derivatives market.
Crypto Market Snapshot
According to CoinDesk data, Bitcoin (BTCUSD) experienced a 3.3% decline in the past week, with its trading value standing at around $27,831 as of Thursday. Similarly, Ether (ETHUSD) also saw a 3.3% drop during the same period, reaching approximately $1,737.
