Category: Cryptocurrency

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The Bitcoin network witnessed a steep 99% drop in daily Rune etchings, plummeting to just 157 Runes on Monday from a high of 14,700 in late April, as reported by Dune Analytics. This significant decline in the activity of the Rune etchings, which are part of a fungible token protocol, has dramatically decreased transaction fee income for Bitcoin miners.

On April 26, the network recorded a peak of 23,061 Rune etchings, but the recent slump has resulted in transaction fees from these etchings dropping to a mere US$3,835 on Monday. Despite this downturn, Rune transactions have remained a dominant force in Bitcoin network activity to date, with over 91,200 Runes etched on the Bitcoin blockchain.

The Runes protocol was launched on April 20, initially providing a substantial boost to miners’ earnings by generating significant transaction fees. This was particularly beneficial following the fourth Bitcoin halving event, which reduced the block subsidy to 3.125 BTC but was offset by increased transaction volumes from Rune etchings.

Developed by Ordinals creator Casey Rodarmor, the Runes protocol aims to efficiently utilize block space for creating fungible tokens, adhering to Bitcoin’s unspent transaction output (UTXO) model, offering a more streamlined approach compared to BRC-20s. However, some Bitcoin core developers have expressed concerns, criticizing the Runes protocol for potentially exploiting vulnerabilities within the Bitcoin network.

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The latest report from Bernstein reveals a notable 6% decline in Bitcoin (BTC) mining difficulty last week, marking the most substantial drop since the crypto winter of December 2022. This downturn is seen as a beneficial shift for miners, particularly those with lower operational costs.

According to analysts Gautam Chhugani and Mahika Sapra, this adjustment in mining difficulty reflects broader market dynamics post-Bitcoin halving, with higher-cost mining rigs being phased out due to escalating costs and lower Bitcoin prices. This has led to a decrease in the overall hashrate—the total computational power used in mining and processing transactions on Bitcoin’s proof-of-work blockchain.

The report highlights that the reduction in hashrate has allowed lower-cost miners to increase their market share by approximately 20 basis points since the halving. Companies like Riot Platforms (NASDAQ:RIOT) and CleanSpark (NASDAQ:CLSK), known for their low production costs and robust financial positions, are particularly well-placed to benefit. These companies are expected to continue consolidating their market share through both organic growth and mergers and acquisitions.

Bernstein also points out that a temporary stabilization in Bitcoin prices could advantage these efficient miners, allowing them to capitalize on their expansion strategies without the pressure of a rising hashrate. Furthermore, when Bitcoin prices eventually regain momentum, these miners are positioned to generate increased revenue due to higher production capabilities.

Despite the current fluctuations, Bernstein does not foresee a significant downturn in Bitcoin prices. They predict that the cryptocurrency will remain range-bound in the short term, with the potential for an upward breakout as spot exchange-traded funds (ETFs) begin to receive allocations from registered investment advisors (RIAs), wealth platforms, and other institutional investors.

Bernstein maintains an ‘outperform’ rating for CleanSpark and Riot Platforms, indicating a favorable outlook for these firms, while Marathon Digital (NASDAQ:MARA) holds a ‘market-perform’ rating, suggesting a more neutral expectation.

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Keith Gill, known as @TheRoaringKitty on X (formerly Twitter), recently sparked a significant rally in both meme coins and stocks, notably GameStop (NYSE:GME), after making his first post since late 2021. The post, a meme suggestive of an intense focus period, inspired users to surge into trading, propelling GameStop shares up by 44% in pre-market trading and even doubling during market hours before a trading halt. Similarly, AMC Entertainment Holdings (NYSE:AMC) saw its shares jump as much as 30% after the market opened.

This activity extended into the cryptocurrency sector, particularly on the Solana blockchain where a GameStop-themed meme coin surged over 550%. Other meme tokens like AMC rose by 1200%, and smaller cat-themed coins like kitty (KITTY) saw increases in the thousands of percent. Larger-cap meme coins like Dogecoin (DOGE) and Shiba Inu (SHIB) also enjoyed gains.

Gill, whose bullish stance on GameStop started gaining serious attention on Reddit in 2019, became a key figure in the January 2021 short squeeze that saw the stock skyrocket from $4 to over $120 in just one month, making his initial $53,000 investment worth nearly $50 million at its peak. This dramatic event impacted major hedge funds, notably Melvin Capital, which suffered significant losses due to its short positions in meme stocks.

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Bitcoin mining companies are reducing their operational scale as revenues have significantly decreased, following a recent industry adjustment known as the “halving,” according to a May 13 Coinshares report. The Bitcoin network’s seven-day rolling average hash rate, which measures the computing power used to mine Bitcoin, showed a sharp decline from an all-time high of approximately 650 exahashes per second (EH/s) on April 19 to 586 EH/s by May 11.

The halving event, which occurred on April 19, cut the reward for mining a block of Bitcoin from 6.25 BTC to 3.125 BTC, effectively slashing the miners’ revenue by nearly half. This reduction has forced miners to adopt cost-cutting measures such as optimizing energy expenditures, enhancing mining efficiency, and securing better terms for hardware procurement.

Despite these challenges, CoinShares’ analysis based on Q4 2023 figures suggests that publicly listed Bitcoin mining firms, like Marathon Digital Holdings Inc. (NASDAQ:MARA) and Riot Platforms Inc. (NASDAQ:RIOT), are still profitable, with the average production cost per Bitcoin estimated at $53,000, while Bitcoin traded at $63,000 on Monday. However, profitability has diminished compared to pre-halving levels.

Additionally, new Bitcoin applications such as Ordinals and Runes have increased on-chain activity and network transaction fees, offering another revenue stream for miners. According to Ki Young Ju, CEO of CryptoQuant, transaction fees now constitute 7% of miner revenue, a significant increase from 1% two years ago. This change reflects the evolving landscape and adaptation strategies within the Bitcoin mining industry.

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Marathon Digital Holdings, Inc. (NASDAQ:MARA), one of the leading bitcoin mining companies, experienced a slight downturn in its stock price, dropping about 1.5% in after-hours trading on Thursday. This decline came in response to the company’s failure to meet revenue expectations for the first quarter, primarily due to several operational challenges.

During the first three months of the year, Marathon Digital mined a total of 2,811 bitcoins, marking a significant 34% decrease from the previous quarter. The reduction in bitcoin production and subsequent revenues were attributed to a series of unforeseen issues, including equipment failures, maintenance of transmission lines, and higher-than-expected weather-related curtailments at its Garden City location and other sites, as stated in the company’s recent announcement.

Despite these setbacks, Marathon Digital reported earnings per share of $1.26 for the quarter, which at first glance appears to surpass the Wall Street expectations of just $0.02 per share. However, this figure is not directly comparable to analyst forecasts due to the company’s adoption of the newly approved Financial Accounting Standards Board (FASB) fair value accounting rules, which included a beneficial mark-to-market adjustment prompted by the recent surge in bitcoin prices.

Looking forward, Marathon remains committed to its 2024 operational goals, aiming to increase its mining capacity to 50 exahash per second (EH/s) and anticipating further growth into 2025.

Despite these optimistic projections, Marathon’s stock has seen a 26% decline this year, in contrast to a steeper 40% drop in shares of its peer, Riot Platforms (NASDAQ:RIOT). This performance reflects the volatile nature of the cryptocurrency mining sector, influenced heavily by fluctuating bitcoin prices and operational challenges.

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Dogecoin (DOGE), the leading meme cryptocurrency by market capitalization, is showing signs of entering another bullish phase reminiscent of its spectacular rise in early 2021. According to CoinDesk, Dogecoin’s market cap currently stands at approximately $22 billion, with a remarkable year-to-date price increase of over 70%, significantly outstripping Bitcoin’s (BTC) near 50% gain.

A critical technical indicator, the ‘golden cross’, is nearing confirmation for Dogecoin. This occurs when the 50-week simple moving average (SMA) crosses above the 200-week SMA, signaling potential long-term upward momentum. Such crossovers are often used by momentum traders to pinpoint optimal market entry and exit points.

Historically, Dogecoin experienced a golden cross in early January 2021, which preceded a four-month rally leading to an unprecedented 8,000% increase in its price, peaking at 76 cents on Binance. However, it’s crucial to approach such indicators with caution as past performance is not always indicative of future results, and moving average crossovers can sometimes lag behind actual market movements.

Moreover, the dynamics around meme cryptocurrencies like Dogecoin differ significantly from more traditional investments. Lacking substantial real-world applications, their market movements are largely driven by speculative trading. This makes them particularly vulnerable to shifts in global financial conditions such as liquidity and interest rate changes.

During Dogecoin’s 2021 rally, global interest rates were at or near zero, fostering an environment ripe for high-risk investments. Currently, however, with U.S. interest rates exceeding 5%, the economic backdrop is considerably different, potentially influencing the trajectory of speculative assets like Dogecoin.

Investors should remain vigilant, considering both the technical setup and broader economic factors when evaluating the potential for another major rally in Dogecoin’s price.

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Binance, the world’s largest cryptocurrency exchange, has taken significant steps toward resuming its operations in India by registering with the country’s Financial Intelligence Unit, as confirmed by a senior FIU official. The registration comes after Binance was suspended from operating in India this past December due to non-compliance with local regulations, amid a broader crackdown by the financial watchdog on offshore crypto exchanges operating without proper registration.

To operate legally, virtual digital asset service providers, such as cryptocurrency exchanges, are required to register with the FIU and adhere to the country’s anti-money laundering regulations. Although Binance has now registered, it must still resolve pending penalties for its prior non-compliance before it can restart operations, with the exact fines yet to be finalized, according to Vivek Aggarwal, director of the FIU.

In addition to Binance, the FIU issued show cause notices to nine other offshore cryptocurrency exchanges in December 2023 for similar compliance failures. Moreover, the FIU had requested the Ministry of Electronics and Information Technology to block online access to these platforms.

Another crypto exchange, KuCoin, has successfully navigated this process, having registered with the FIU and resumed operations after settling a fine of 3.45 million rupees (approximately $41,313). KuCoin made its registration public in March but had initially withheld details regarding the penalty.

As of now, representatives from Binance and KuCoin have not provided any comments regarding these developments.

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Elon Musk has been a vocal advocate of Dogecoin since his initial tweet in 2019, and his recent actions suggest he’s gearing up to expand DOGE’s utility further into his business ventures. Notably, Tesla, Inc. (NASDAQ:TSLA) has started accepting DOGE as payment for its merchandise, a move following Musk’s visit to the Berlin gigafactory where the idea gained traction. This quiet rollout on Tesla’s website saw the DOGE price surge over 20% shortly after enthusiasts noticed the update.

In parallel, Musk’s social media platform, X, previously known as Twitter, is also setting the stage for broader cryptocurrency use. X has been actively acquiring payment licenses across the U.S., now holding 25, with more expected. This development is crucial for facilitating peer-to-peer  transactions akin to those on Venmo or Cash App, paving the way for potential DOGE integration.

Musk’s interest in integrating DOGE into X was hinted at in a retweet he made, featuring a comparison of the old and current X.com logos and the caption “The Everything App.” This retweet, originally posted by a user associated with DOGE’s UX/UI design, suggests a full-circle vision for Musk’s involvement in online payments, tracing back to his early career at X.com, which later evolved into PayPal(NASDAQ:PYPL).

While the roadmap towards DOGE integration on X appears promising, it faces regulatory challenges. Despite these hurdles, Musk’s efforts to acquire the necessary licenses indicate a strong commitment to transforming X into an ‘everything app’ and possibly making DOGE a key element of this transformation.

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The landscape of cryptocurrency investment is witnessing a shift with the rise of Key Opinion Leaders, who are not only investing in crypto startups but also promoting them, often with advantageous conditions. Recently, major social media figures have transformed into influencer-investors, receiving perks such as discounted valuations and early selling options, a trend becoming increasingly common in crypto’s evolving ‘KOL’ economy.

KOL rounds have emerged as a cost-effective strategy for crypto startups to market their projects. This method contrasts sharply with traditional paid promotions, offering a way to leverage the KOLs’ extensive social media reach to attract investors and users. Platforms like YouTube and X (formerly Twitter) are popular stages for these promotions, influencing retail traders’ decisions.

However, the transparency of these financial arrangements often remains murky. Several insiders, preferring to remain anonymous, have raised concerns about the disclosure of these agreements to the public, potentially breaching U.S. consumer protection laws. According to Ariel Givner, a lawyer specializing in crypto law, the failure to disclose these financial ties could mislead the audience, many of whom rely on such endorsements for investment decisions.

Moreover, the structure of these deals frequently allows KOLs to sell their stakes soon after a token launches, potentially undermining the long-term stability of the project in favor of immediate gains. This practice, while lucrative for KOLs and beneficial for the initial marketing push of a project, might result in significant losses for retail investors who remain unaware of the behind-the-scenes arrangements.

As the creator economy continues to reshape online interactions, crypto startups are increasingly opting for influencer-led funding rounds, which promise wider exposure and potentially higher initial buy-in rates without the upfront costs of traditional marketing campaigns.

While this model offers a modern twist on raising capital, it also introduces complexities and ethical considerations regarding investor protection and market transparency. The debate continues on the need for clearer regulations and disclosures to safeguard the interests of all parties involved in such transactions.

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