👉 140,000 BTC worth of Grayscale shares unlock this month... What it means for Bitcoin

Monday, July 12th, 2021

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TL;DR

Expiring Grayscale GBTC Contracts May Lead To Bitcoin Surge
BTC Mining: Miner Revenue Surges +50% Since Record Difficulty Drop
DeFi Aggregator Zerion Raises $8.2M in Series A to
Bitcoin Continues Its Struggle to Break Free of Descending Triangle
Altcoin Dominance Falls While Select Coins Turn Bullish
Event Spotlight: Blockchain Start-up Competition & Hackathon

MACRO NEWS

Expiring Grayscale GBTC Contracts May Lead To Bitcoin Surge

This July promises to bring an exciting and potentially volatile period for Bitcoin. Late this month, over 140,000 BTC worth of Grayscale GBTC shares will be unlocked and available to the open market. Grayscale is a Bitcoin Trust and has been the largest buyer of Bitcoin in the world over the past two years.

Grayscale is like a black hole for Bitcoin. Once Bitcoin enters the Trust, it does not leave the Trust (aside from the 2% management fee taken by the management company). Here’s how it works: Accredited investors deposit BTC or USD into the fund in exchange for GBTC shares in proportion to the fund's net asset value (NAV). GBTC shares usually trade at a premium to NAV (sometimes as high as 100% higher than NAV. For a long time, GBTC shares traded at a premium of 40% or more to the spot bitcoin price.

When GBTC shares are minted, they have a 6-month lock-up period before they can be sold to retail investors on the open market. This seemed like a sure-fire way for institutions to turn a quick profit. Which incentivized institutions to borrowed Bitcoin to lock in the fund in return for GBTC shares that traded at a premium. However, as the Bitcoin price tanked in April, the GBTC price fell to a discount of NAV and the trade fell apart for those institutions who borrowed BTC and received GBTC in return.

It is important to realize that when GBTC shares are traded, no "physical" bitcoin is actually trading hands, only shares of the Trust. There has been much speculation that this GBTC unlock could be a major bearish catalyst for Bitcoin as the GBTC discount will entice buyers to buy GBTC as opposed to BTC on the spot market. However, the actual underlying market dynamics may paint a very different picture.

Investors who entered the trade by locking in borrowed coins might now need to repurchase those to repay the loan. Similarly, those who deposit their bitcoin holdings need to buy back coins to return to their base portfolio. So assuming supply-side factors remain constant, the repurchases associated with Grayscale unlockings could end up putting upward pressure on bitcoin prices.

The debate is far from over and only time will tell what type of influence this unlocking of shares will actually have on the market. But if there is one thing we can count on in late July and August, it's volatility!

BTC Mining: Miner Revenue Surges +50% Since Record Difficulty Drop

There are big gains for some in the China Bitcoin miner shakedown on a few fronts. Amidst the China Bitcoin miner shutdown, resulting in massive Bitcoin hash rate drops; decreased competition and network difficulty drops have made mining much more profitable for miners outside of China, still hashing. Hash decrease is affecting other POW cryptos as well, and further hashing miner gains can be found in cheap equipment hitting the market. Historical changes in hashpower have an impact on Bitcoin's efficiency. Bitcoin's fundamental programming and economic strengths are now in the spotlight.

What is bad for some is great for others. Bitcoin miners outside of China and still hashing on the network have seen mining revenues jump by over 50% recently, due to Chinese miners going offline, massive reductions in overall Bitcoin hashrate, and an amplifying Bitcoin difficulty drop. With 50% of Bitcoin hash power going dark, half the miners will make zero, and the other half make double. The Bitcoin issuance remains constant and those still mining simply make a greater share of it.

It is not all good news though as the reduction in hashpower is having its effect on the network. Bitcoin block interval times have increased this week and reached shocking highs, as you might expect with a massive reduction in network processing power. The time required to process a block reached a level that had not been seen since early in Bitcoin's life in 2009 before it even had a price. It will take some time for difficulty and block interval timing to reach a new equilibrium, based on the new level of network hashrate. Further Chinese miner migration and even lower overall hashrates will prolong the time it takes to reach this equilibrium. The gold rush for hashing miners will continue, at least for a little while. Bitcoin is programmed to deal with this sort of thing in time though, and its fundamental programming strengths will restore the equilibrium.

Bitcoin is not the only POW crypto being affected by the Chinese miners going dark, competition on the Ethereum network has also decreased. As an Ethereum miner, I can tell you first hand that the amount of Ethereum produced by my miners has increased about 25%, in direct relation to the timing surrounding this Chinese miner crackdown.

The miner crackdown could have the positive collateral effect of relieving demand and price inflation for mining equipment, as miners sell equipment in China. Chinese markets are seeing a flood of mining equipment for sale, at bulk pricing that is much lower than what we are seeing in the resale markets lately.

At the end of the day, it is unfortunate the Chinese authorities feel it necessary to take these actions, instead of continuing to lead the world in Crypto. I have trouble seeing the logic in it. We wish our migrating miners the best of luck and hope they find new homes that will support their righteous work. Mining crypto is a rollercoaster of profit and investment, belief in crypto being an essential component. Witness Bitcoin reach a new equilibrium and mitigate this massive hashrate decrease while incentivizing new miners to join. Draw strength in your conviction from Bitcoin's perfect economic fundamentals.

ACQUISITIONS & FUNDING

Zerion Raises $8.2 in Series A led by Mosaic Ventures

Zerion, a non-custodial Ethereum-based DeFi aggregator, has raised $8.2 million in a Series A funding round announced last Wednesday. The round was led by Mosaic Ventures and saw participation from Placeholder, DCG, Blockchain.com Ventures and others. The raise brings Zerion's total funding to $10.2 million after it's 2019 seed round. The capital will be used to help Zerion grow its user base and expand it's offering to other chains and layer 2 solutions.

The San Francisco-based company was founded in 2016 to become an all-in-one interface that enables both technical & non-technical users to acquire, track and manage their DeFi assets on one clean interface. Zerion currently offers its users access to over 60 Ethereum-based protocols, like Aave, Yearn.finance and Curve. Since the start of 2021, Zerion has handled more than $600 million in volume.

The fresh capital will help the Ethereum-based DeFi machine expand to other chains. "We already partially support Optimisim, Polygon and Binance Smart Chain" says Vadim Koleoshkin, COO of Zerion. "In Q3 we will have full support for rollups that have meaningful amount of users and Ethereum Virtual Machine chains like Polygon, BSC and others." To do so, the company plans to grow its team of 18 to 25.

Expanding it's offering isn't the only thing Zerion plans to do. The co-founder of Mosaic, Toby Coppel, and partner at Placeholder, Brad Burnham, will join Zerion's board of directors. Additional, the company will look to revamp it's trading interface and portfolio tracking features.