Traders Prep For Bitcoin Rally | Dorsey Tries To Break Bitcoin Miner Duopoly

The asset manager’s new short-term credit fund is hosted on the Ethereum blockchain.

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Mitchell Martin Senior Editor, Forbes Money & Markets
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Steven Ehrlich Director, Forbes Digital Assets
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Bitcoin Bounces On Inflation Data

With bitcoin’s price stalled around $57,000 after billions of dollars in selling pressure came from the liquidating of funds seized by the German government and long-awaited Mt. Gox creditor disbursements, crypto watchers breathed a sigh of relief when June’s inflation reading showed that prices across the U.S. economy fell for the first time since the beginning of the pandemic in 2020.

This encouraging inflation reading (in the sense that Fed watchers want to see annualized inflation fall closer to its target of 2% to begin reducing the Federal Funds rate from 5.25% to 5.50%) raised expectations that the U.S. central bank will initiate its first rate cut at the Federal Reserve’s Open Market Committee meeting in September. According to the closely monitored Chicago Mercantile Exchange FedWatch tool, options traders are placing an 88% probability on a 25 bps rate cut, which would lower the targeted rate to 5.0% to 5.25%.

However, it might take more than one encouraging inflation print to arrest crypto’s stall. Immediately after the inflation reading on Thursday morning, bitcoin and ether surged between 2% and 2.5% before quickly giving up those gains and falling by another 2% in the afternoon. By Friday morning, both assets returned to where they were before the reported inflation numbers.

JACK DORSEY TRIES TO BREAK THE BITCOIN MINER DUOPOLY

Bitcoin mining is a multibillion-dollar industry, in no small part due to the massive expenditures needed to procure specialized hardware, known as ASICs (application specific integrated circuits), to process new transactions and mint new bitcoins. While the number of miners has exploded in recent years, a Chinese duopoly (Bitmain and MicroBT) has had a stranglehold on the production of these expensive devices. However, that may be changing.

On July 10, 2024, Block and Core Scientific agreed to deploy Block’s new 3-nanometer ASIC mining chips. This deal will add approximately 15 EH/s (exahashes per second) of hashrate, a computing or processing power measure on the bitcoin network, suitable for approximately 2% of the total Bitcoin hashrate of 646 EH/s. For Core Scientific, this deal is another in a line of positive developments for the mining firm, which recently emerged from Chapter 11 bankruptcy proceedings and returned to trading on Nasdaq. The firm has made significant inroads into leveraging its infrastructure to support artificial intelligence and high-performance computing initiatives into multi-billion dollar partnerships with companies such as Coreweave.

Core Scientific jumped 2.6% on the news, while Block’s price barely moved. However, by Friday, Block was up 3.9% while Core was down 2.1%.

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CURRENT PRICE OF TOP 5 COINS (7-Day % Change)

Coin

Price

Percent Change

Bitcoin (BTC)

$58,177

2.6%

Ether (ETH)

$3,142

3.8%

Tether (USDT)

$0.999

0.0%

Binance Coin (BNB)

$534

2.9%

Solana (SOL)

$139

0.7%

Sources: Forbes Digital Assets, CoinGecko. Prices as of 2:00 p.m. on July 12, 2024.

BANKS CAN HOLD CRYPTO AFTER ALL?

For all the crypto activity on Capitol Hill these days, only one piece of legislation ever passed both chambers of Congress, a repeal of the Security and Exchange Commission’s controversial accounting bulletin SAB 121. Initially published in April 2022, the document made it economically untenable for banks to hold crypto on their balance sheets. Congress repealed the bulletin in May, but President Biden used his veto power to keep it in place. An attempt to override the veto with a ⅔ majority in the House failed by a vote of 228-184.

But there could still be hope. According to a July 11 report from Bloomberg, the SEC has been engaging with banks to offer exemptions from SAB 121. Few details are available at this point, but as institutions continue to become more comfortable following the approval of both spot bitcoin and ether ETFs from the SEC, it appears that the regulator is looking for practical ways to safely assimilate digital assets into the financial system without compromising consumer safety.

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