2024-07-05 15:38

Private equity firms are seeing value in partnering with bitcoin miners to help with AI computing after Core Scientific signed a 200MW deal with CoreWeave in June, the company’s CEO said in an exclusive interview with CoinDesk. Core Scientific's CEO, Adam Sullivan, said that since announcing the CoreWeave AI infrastructure deal, the company has received several approaches from top-tier private equity firms for financing and partnerships. PE firms are chasing data center business for AI-related computing power and looking at bitcoin miners' existing infrastructure as attractive options. Sullivan said the miner isn’t focusing on CoreWeave's recent acquisition offer but expects M&A to accelerate in the mining sector in general. Private equity (PE) firms are finally seeing value in bitcoin (BTC) miners, thanks to the rising demand for data centers that can power artificial intelligence-related (AI) machines. The bitcoin miners' need for enormous amounts of energy isn't a secret - in fact, it's a hotly debated topic. With the rapid rise of the AI sector, the thirst for power by AI-related firms isn't far off either. There are reports of the industry already using as much energy as a small country and could ramp up even more. This surge is creating a problem for the AI industry: investors are pouring money into the sector, but firms don't have immediate access to infrastructure to feed the ever-growing computing needs. This is where bitcoin miners and their data centers are becoming a lucrative option for investors, said Adam Sullivan, the CEO of one of the largest mining firms, Core Scientific (CORZ), in an exclusive interview with CoinDesk. "Private equity is obviously chasing the data center space right now; even private equity firms that haven't necessarily done data centers before are evaluating the space," Sullivan said. These PE firms finally see value in bitcoin miners as they can help the AI-related firms house their machines in already-built mining infrastructure or partner with miners to build out data centers faster than building from scratch. "One of the biggest constraints [for data centers] right now is finding sites that have over 100 megawatts of power and have the high voltage substation's transformer in place. Those are difficult sites to find, and it just so happens that's been the criteria for locating bitcoin mining sites for the past four years," Sullivan said. Core Scientific recently inked a 12-year, 200 megawatt (MW) deal with cloud computing firm CoreWeave for AI-related computing needs, with options to expand the capacity further. Sullivan noted that since the news broke about the deal, Core Scientific has received several approaches from tier-one private equity firms offering financing for further AI-related partnerships. In fact, the deal has triggered a re-rating of the bitcoin mining sector as it renewed investors' interest in the sector. JPMorgan even went one step further and said that the deal validates the mining sector’s involvement in high-performance computing (HPC) and may usher in a new age of mergers and acquisitions for the miners. Post-Halving struggle One of the main reasons private equity is interested in the mining sector now is the recent bitcoin halving, which cut the bitcoin rewards in half, making it more competitive for the miners. Many miners are struggling to keep their businesses profitable, and some are looking to either sell the company or diversify their revenue sources by repurposing their data centers to host HCP and AI-related computing machines. “The halving has also caught the attention of private equity firms, which see this event as an opportunity to consolidate smaller firms and fold their existing infrastructure into their own," the firm said in a note dated July 2, adding that some mining stocks, including Hut 8 (HUT) and Bitfarms (BITF) have done "exceptionally well" since the halving. However, the amount of capital needed to build or repurpose data center clusters to accommodate AI computing isn't cheap. In such a competitive market, it is becoming prohibitively more expensive for some miners to do so and private equity is now seeing an opportunity to help these miners offer financing and other expertise, Core Scientific’s CEO said. "Many of these Bitcoin mining companies are struggling right now to build their bitcoin mining facilities, and these private equity firms are looking at potential returns, looking at ways that they can grab economic value out of some of these potential conversions [from mining to HCP]," noted Sullivan. In many cases these PE firms can provide a significant amount of assistance to some of the more "under-qualified" miners, including bringing in a new partner or introductions to new potential customers, he added. Another reason PE firms are circling the mining sector now, after ignoring it for several years, is that previously, “value was too volatile for their return profile." Longer-duration HPC deals, such as the 12-year contract Core Scientific signed, are “much more viable and investable for private equity firms,” Sullivan added. Existential threat? The business model for private equity is own-to-sell: buy a business or asset, tweak or completely change the business model and then sell the company to maximize return. Will this mean the end of the bitcoin miners? The answer is not that simple, according to Sullivan. First, this would be part of a broader shift for some sections of the mining business. Future halving will continue to make the industry more competitive, pushing for lower-cost mining sites, which will likely see the most interest from HCP and PE firms. Secondly, not all mining sites used today can be converted into data centers. A number of variables can make some sites unsuitable for HPC conversion, and he added that these will remain mining sites as long as it's economically viable for them to stay in the mining business. However, before miners can make it to the next halving, they must survive the one that just happened this year. The overcrowded mining space is now feeling pressure from the margin squeeze, resulting in a flurry of acquisitions and renewed deal-making talks among the miners. In fact, Core Scientific rejected a $5.75 per share takeover offer from CoreWeave the same day it signed the 200MW deal, saying it significantly undervalued the firm. When asked about the deal's status, Sullivan said both companies are now focused on organic growth opportunities. At the same time, Core Scientific is aggressively pursuing new sites and is talking to new potential clients. Still, unsurprisingly, the CEO of the public mining company said that if a potential suitor is willing to pay what shareholders and the board considered to be full value for the company, the firm will have to consider the offer. Despite the outright rejection of the offer, Sullivan thinks that M&A is just starting in the mining space. The recent wave of M&A activity also saw a hostile takeover battle between Riot Platforms (RIOT) and Bitfarms, CleanSpark (CLSK) buying GRIID (GRDI) and Hut 8 getting AI-related financing, and this is just the beginning. "I think we're still in the early innings of the M&A that's going to occur over the course of the next 12 months," said Sullivan. "I think many companies are much more incentivized to sell their businesses to other larger companies, given the infrastructure constraints or look to convert more of their facilities to HPC," he noted, adding that most of the "mid-market" miners are likely to put themselves up for sale. https://www.coindesk.com/business/2024/07/05/private-equity-giants-are-circling-bitcoin-miners-on-ai-allure/

2024-07-05 15:35

The widely-followed sentiment metric hit extreme greed levels earlier in March near the local top of the crypto market, but now is pushing its limits in the opposite direction. The Crypto Fear & Greed Index is a popular contrarian indicator to buy and sell, but there could be further downside for bitcoin's price, analysts warned. Seized BTC sales by the German and U.S. governments, and sell pressure from Mt. Gox user refunds create multibillion-dollar overhang, SynFutures' Rachel Lin said. Bitcoin could sink to $50,000 during historically weak months ahead but a Fed interest rate cut in September could ignite a rally, 10x Research's Markus Thieled said. Crypto investor sentiment cratered to the most negative levels since the tail-end of the 2022 crypto winter as bitcoin's (BTC) plunge below $54,000 pulled down digital asset markets. The widely-followed Crypto Fear & Greed Index, created by data source Alternative.me, shows market enthusiasm towards bitcoin and other large cryptocurrencies, with 0 being extreme fear and 100 translating to extreme greed. The gauge dropped to 29 on Friday, its deepest dive into the fear zone since early January 2023 when bitcoin was trading around $17,000 after 2022's crushing bear market. The metric notably sent out a contrarian sell signal this past March when it reached the 90 level at near what turned out to be (so far) the 2024 top of the broader crypto market and bitcoin's all-time high of about $73,500. Since then, BTC and ether (ETH) are 25%-30% lower, while altcoin majors plunged around 50% and smaller tokens lost even more. Is the bottom in? Extreme levels of fear may present buying opportunities, but the reality is more nuanced with several factors to be considered. The key catalysts behind the downturn was the unloading of seized bitcoin by German and U.S. governments, along with "preemptively selling" as the estate of defunct Japanese exchange Mt. Gox started to refund investors this month, Rachel Lin, CEO and co-founder of derivatives trading venue SynFutures, said in a market update. The selling pressure is unlikely to abate in the short-term, she said. The German government still holds some $2.2 billion worth of BTC, the U.S. government has over $12 billion and the Mt. Gox estate has more than $8 billion of assets, data by blockchain tracing platform Arkham Intelligence shows. "The direction of bitcoin in the coming days will be determined by the selling pressure from Mt. Gox users," Lin added. "The market expects most Mt. Gox users dump their tokens, but we might see a bounce back if the selling is lower than anticipated, she said. "On the other hand, if there is enough selling to push the price lower, we might be looking at the $50,000 level soon." Markus Thielen, founder of 10x Research trimmed his $55,000 price target to $50,000. "This situation may compel ETF holders and miners to liquidate more positions," he said in an emailed note, adding that August and September are historically "challenging months" for bitcoin. However, he added, "if the Federal Reserve cuts interest rates in September, bitcoin could see another rally attempt." https://www.coindesk.com/markets/2024/07/05/crypto-crash-pushes-fear-greed-index-to-lowest-since-bitcoin-traded-at-17k-in-early-2023/

2024-07-05 14:43

The investment firm is eager to flip the Senate for Republicans. Multicoin Capital, one of the largest U.S. investment firms focused on cryptocurrency, is pledging up to $1 million to support Senate candidates with favorable views of the industry. The investment manager plans to financially support four Republican candidates – Sam Brown in Nevada, David McCormick in Pennsylvania, Bernie Moreno in Ohio and Tim Sheehy in Montana – through donations to the conservative super political action committee (PAC) Sentinel Action Fund. How much Multicoin gives depends on the outcome of Sentinel's crypto donation drive. According to the group's website, Multicoin will match 100% of (SOL) token donations sent to Sentinel by July 14. Gemini is hosting the group's crypto donations portal and appears to be accepting a variety of tokens, including SOL. "We’re doing this because we realize that political engagement matters, and it starts with supporting the candidates who believe America needs to remain free for innovation," said Multicoin Managing Partner Kyle Samani in a statement. Multicoin – as well as its leaders Samani and Tushar Jain – have previously supported pro-crypto candidates on a bipartisan basis. That isn't changing with the donation to Sentinel, despite its status as a decidedly conservative group, a person familiar with the firm's thinking said. That said, Multicoin identified Sentinel as being aligned with its crypto interests by way of the specific candidates it is backing this cycle, the person said. These four republicans Sentinel is supporting all receive "A" ratings from the Coinbase-led crypto advocacy group Stand With Crypto. These candidates' opponents aren't uniformly critical of cryptocurrency on the level of Elizabeth Warren, the Massachusetts senator despised by the crypto industry for her rhetoric of hosting an "anti-crypto army." Three of the four are rated as "neutral" or better by Stand With Crypto, though Ohio Senator Sherrod Brown touts an "F." Still, Multicoin's decision-makers are eager to invest in races that could flip the Senate to Republican control, the person said. Doing so would shift the balance of power in agency appointments and other key areas where crypto companies intersect with the federal government, such as the courts. Tech rollout The matching pledge marks a high-profile test of Dialects' recently debuted "Blink" technology, through which users of X can execute on-chain Solana transactions with their social media posts. In this case, Blink will allow Solana users to donate to Sentinel through X (formerly Twitter). It will prompt donors to fill out required Federal Election Commission documentation, too, people familiar with the matter said. https://www.coindesk.com/policy/2024/07/05/multicoin-pledges-up-to-1m-for-pro-crypto-senate-candidates/

2024-07-05 11:21

“The German government still has over $2.3 billion worth of bitcoin, Mt. Gox has more than $8 billion, and the US government has over $12 billion,” one trader pointed out. The largest cryptocurrency could drop to as low as $50,000 in coming weeks as billions of dollars of supply may be released to the market. The prospect of bitcoins from defunct crypto exchange Mt. Gox and the German government hitting exchanges has sent the price plunging 10% in the past seven days. Bitcoin (BTC) traders expect prices to drop to as low as $50,000, a level not seen since mid-February, in the coming weeks, as the largest cryptocurrency by market cap could face billions of dollars worth of selling pressure. BTC prices have nosedived more than 10% in the past seven days, CoinGecko data shows, falling below a critical technical indicator on Thursday and erasing all gains since the end of February. Trading firms such as QCP Capital have attributed the bearish sentiment to wallet activity from a German government entity and defunct crypto exchange Mt. Gox, and some market analysts say there’s more pain ahead. “Bitcoin selling pressure is unlikely to decrease in the coming days,” said Rachel Lin, founder at on-chain crypto exchange SynFutures, in an interview. “The German government still has over $2.3 billion worth of Bitcoin, Mt. Gox has more than $8 billion, and the US government has over $12 billion. “The market expects most Mt. Gox users to dump their tokens, but we might see a bounce back if the selling is lower than anticipated. On the other hand, if there is enough selling to push the price lower, we might be looking at the $50,000 level soon,” she said. Alex Kuptsikevich, a FxPro senior market analyst, echoed the sentiment in an email to CoinDesk: “Bitcoin dropped below the 200-day moving average and has so far been unable to bounce back above it, trying to stay within established patterns. “From the current position, a further drop to $51,000 (February consolidation area) is more likely than the same amount of growth to $65,000,” Kuptsikevich added. Moving averages are a measure of an asset’s closing prices in a time frame that can help identify a trading opportunity. Mt. Gox started distributing bitcoin and bitcoin cash stolen from clients in a 2014 hack on Friday, sending BTC down 8% as traders reacted. In addition, a wallet connected to the German Federal Criminal Police Office (BKA) has moved millions of dollars worth of bitcoin to crypto exchanges since mid-June. Traders say these movements imply an intention to sell the assets that were forfeited in 2013 from a piracy marketplace. Meanwhile, BTC prices seemed to briefly recover mid-morning in Europe, rising to nearly $55,000 from a low of $53,600 in early Asian hours. The sudden drop had caused over $550 million in crypto longs, or bets on higher prices, to be liquidated in the past 24 hours. https://www.coindesk.com/markets/2024/07/05/bitcoin-traders-target-50k-as-billions-in-btc-selling-pressure-looms/

2024-07-05 10:19

Bitcoin traded around $54,400 in Europe, a 24-hour drop of 5.8%, having earlier fallen to the lowest level since late February The slump coincides with defunct crypto exchange Mt. Gox moving $2.6 billion worth of BTC to a new wallet prior to commencing creditor repayments. Michael Saylor's software company MicroStrategy, which holds over 210,000 BTC, and bitcoin miner Hut 8 led the declines. U.S. crypto-adjacent stocks were in the red in pre-market trading on Friday as bitcoin (BTC) crashed to the lowest level since February. Michael Saylor's software company MicroStrategy (MSTR), which holds over 210,000 BTC, and bitcoin miner Hut 8 (HUT) were the worst affected, sliding 8.5% and 9.5%, respectively. Other mining companies, including Marathon Digital (MARA), CleanSpark (CLSK) and Riot Platforms (RIOT), fell between 6%- 7.5%. Cryptocurrency exchange Coinbase (COIN) lost 6.5%. Bitcoin is hovering around $54,400 as of mid-morning in Europe, a fall of 5.8% in 24 hours. It earlier slumped as low as $53,600, its lowest level since late February. The decline coincides with defunct crypto exchange Mt. Gox moving $2.6 billion worth of BTC to a new wallet, and saying it was commencing creditor repayments 10 years after it collapsed. Traders seem to have been spooked by the prospect of recipients immediately offloading their coins, creating mass selling pressure. Read More: Mt. Gox Doomsday Scenario Involves Bitcoin Cash, Not Bitcoin: Analyst https://www.coindesk.com/markets/2024/07/05/us-crypto-stocks-sink-in-pre-market-trading-as-btc-slumps/

2024-07-05 06:33

The defunct crypto exchange announced last month that it will begin repayments in July. The long-term impact of the repayments may be less severe the some anticipatee, said WOO X COO Willy Chuang. Mt. Gox was one the leading crypto exchange, handling over 70% of bitcoin transactions in the early years. Mt. Gox said on Friday that it started making repayments to customers, ending a near 10-year wait for some users to get their crypto back after a 2014 hack sent the crypto exchange into bankruptcy. The company was once the world’s top crypto exchange, handling over 70% of all bitcoin (BTC) transactions in its early years. The hack resulted in the loss of an estimated 740,000 bitcoin. The announcement added selling pressure on bitcoin and the broader crypto market after Mt. Gox announced last month its intention to start repayments in July. Bitcoin plunged to as low as $53,600, its lowest level in five months. The freefall led to over $580 million in bullish bets being liquidated. The world's largest digital asset remained under $55,000 mid-morning in Europe, according to CoinDesk Indices data. It started the week close to $63,000. "Mt. Gox moved 47,228 BTC, signaling the start of their repayment process, which has caused some market fear due to the large potential sell-off ... However, it's worth noting that despite these concerns, the long-term impact may be less severe as the market gradually absorbs the selling pressure," said Willy Chuang, COO of crypto exchange WOO X. Some customers may have to wait as long as 60-90 days to receive their payouts, but Mark Karpeles, the exchange's former CEO, confirmed in a direct message to CoinDesk on X that these are worst-case figures. "Those are deadlines linked to the number of transfers to process, each exchange might have a slightly different internal policy and decide to credit everyone later than sooner or sooner than later," he said. Exchanges approved by the trustee to process repayments include Bitbank, BitGo, Bistamp, Kraken and SBI VC trade, a Japanese exchange. https://www.coindesk.com/business/2024/07/05/mt-gox-begins-repayments-in-bitcoin-and-bitcoin-cash/