Data & Insights Recap - Bitcoin mining stocks bump, FDUSD weathers the end to zero fee trading

Mining your own business

Source: Yahoo Finance

• It is truly the era of miner mayhem these days as the bitcoin block producers are facing pressure after April’s halving, but also facing renewed attention as miners hold resources valuable to AI companies.
  • Not to mention that Donald Trump met with bitcoin miners at Mar-a-Lago last week, claiming that he would advocate for them in the White House if he were to become president. On Truth Social, he also noted that he wanted “all the remaining Bitcoin to be MADE IN THE USA!!!” 
• In the world of AI x bitcoin miner synergies, we saw Core Scientific secure a 12-year contract with AI Hyperscaler CoreWeave, expected to generate over $3.5 billion in revenue. The CEO of Core Scientific said the partnership would allow the company to “diversify [its] business model and balance our portfolio between bitcoin mining and alternative compute hosting.” The deal involves Core Scientific supplying 200 megawatts of infrastructure and revamping its existing sites to accommodate CoreWeave’s operations.
  • CoreWeave also made a bid to takeover Core Scientific for $5.75 per share in an all-cash deal. At the time, this was a premium, although shares in Core Scientific have surged on the news and are now currently priced around $9.88. 
  • It makes sense that AI firms would want to tap into the vast computer power that these bitcoin miners have, and the bitcoin miners are looking for extra cash after the halving cut their block rewards down to 3.125 BTC just a few months ago. So, it does seem like a win-win for these two companies to come together. 
• But another prediction in the post-halving world was the expectation of bitcoin miner consolidation as competition heats up. We are already watching an attempt by Riot Platforms (formerly Riot Blockchain) to take over rival Bitfarms. Initially, at the end of May, Riot submitted a proposal to buy all of Bitfarms’ outstanding shares for $2.30 a piece, which at the time was an almost 25% premium to their trading price. Bitfarms rejected the bid, saying it “significantly undervalues” the firm, prompting Riot to buy a 9.25% stake. 
  • Things for Bitfarms were not helped by its monthly update in June, where the miner reported a 45% decline in mining revenue in the first full month post-halving. 
  • Bitfarms said they were going to take a “poison pill” approach to block the Riot takeover as the larger miner began to acquire a bigger share of the company. It essentially allows Bitfarms to issue more shares once an entity acquires a 15% stake in the company, allowing them to dilute the holding. Riot Platforms criticized the move, although there is not much they can do about it. As of Thursday, Riot owned 14% of Bitfarms’ shares. 
  • Bitfarms did announce plans to develop a mining site in Pennsylvania that will allow its mining capacity to grow to 35 EH/s by 2025, which helped boost the stock and added merit to the idea that the Riot bid was too low, as the stock now trades at $2.89.
• Core Scientific was relisted on Nasdaq earlier this year after emerging from bankruptcy but is outperforming bitcoin on a 1-year time horizon, up 188% since it began trading again.
  • Bitfarms is up 113% over the past year, just behind bitcoin, bolstered by takeover efforts and their 2025 projections.
  • It is perhaps surprising to see the mining sector thriving like this in the wake of the halving, but the long term impacts are still not being felt yet. 

First Digital, last laugh

Source: The Block

• At the end of April, Binance made yet another change to its spot fee tiering. Binance notably put an end to its Zero Trading Fee promotion for several pairs. We have talked about Binance and FDUSD in the past, as Binance seemed to relist the stablecoin in an attempt to replace BUSD after it got shut down. To drum up excitement for the stablecoin, which it previously delisted in favor of its own stablecoin, the pairs with FDUSD as their quote asset were initially listed with favorable fee rates. Most notably, BTC/FDUSD was free to trade. 
  • After taker fees were put back on the BTC/TUSD pair, it made BTC/FDUSD the only free way to trade bitcoin on the world’s largest crypto exchange. As we have discussed, this helped propel the relatively small stablecoin into the spotlight.
  • It seems as though in December, Binance made a number of other major FDUSD pairs also free to trade as part of a broader promotion. 
  • FDUSD continued to gain prominence on the exchange, with pairs of the stablecoin accounting for over 35% of spot volume on the exchange in April, outpacing the peak set by TUSD, which was Binance’s previous attempt at a successor to BUSD. While in December 2022, BUSD pairs made up 39% of volume on the exchange, FDUSD was proving to be a suitable competitor, managing to amass its dominance in a much shorter period of time.
• But on April 25th Binance ended the zero fee FDUSD trading promotion, both for bitcoin and the pairs made free to trade in December. There is still a zero maker fee promotion on all the pairs, but a similar promotion still exists for TUSD. 
  • FDUSD’s dominance has been waning since the end of the promotion, but it still remains quite prominent, on pace to make up 33.55% of spot trading in June. 
  • The popularity of BTC/FDUSD does not seem to be dissipating, though. The pair did $4.5 billion of volume in the past 24 hours, compared to BTC/USDT’s $2.5 billion and BTC/TUSD’s $9.6 million. However, for other spot assets, the USDT USDT pairs dominates. 
  • It is still slightly more favorable to trade in many FDUSD pairs due to the no maker fee, but it is not as much as a draw. USDT is the larger and more well known stablecoin, which has allowed it to still be favored even without any incentives.
  • USDT pairs might be facing an eventual pressure in the EU on the exchange as it looks to comply with the MiCA regulation, although it is unclear how much of Binance’s volume comes from the European bloc. 
  • Regardless, it seems that the end of free trading didn’t impact FDUSD all that much. 

Macro moves

Source: CryptoCompare, Yahoo Finance

• While it has no doubt been a busy Q2 for crypto, there has also been a lot of attention directed towards the state of the U.S. economy and what it means for interest rates.
  • At the end of 2023 it seemed like inflation in the U.S., and in many other countries, was starting to calm down from its post-coronavirus surge. In order to tame the soaring costs, central banks including the Federal Reserve raised interest rates to the highest they’ve been in decades as a means to cut down consumer and business spending. 
  • Markets rallied in Q4, both in crypto but also in equities, as traders saw interest rates finally being cut in 2024, which would help stimulate economic growth. At the start of the year, traders were expecting as many as seven rate cuts in the U.S. before the end of 2025. 
  • But as we have discussed, Q1 of this year tampered a lot of those bets as data on prices and the labor market indicated a stalling on the improvements seen in 2023. Many officials from the Federal Reserve were issuing cautious remarks, indicating that rates were going to likely have to stay higher for longer and with some even hinting that it was possible another rate hike could be in the cards. 
• But as May rolled around, we started to get some data that showed some more cooling in the U.S. economy. While seven rate cuts were now off the table, people were still hopeful we would at least get a little relief from the current 5.25% to 5.5% rate in the U.S. before the year was out.
  • In turn, this meant that price movements in both crypto and more traditional assets were moving in tune after data was released; dropping in the wake of data that showed inflation still running hot or a resilient labor market, and rising after data indicated more favorable conditions for a rate cut. 
  • Most recently, at the Fed meeting last week, the bank held interest rates steady, as was expected, but also released an updated dot plot, which shows expectations for what the Fed sees happening in the coming year. The dot plot still showed one rate cut in the cards for 2024, which was both good and bad news. The previous dot plot signaled three cuts for the year, so fewer cuts were forecast, but it did mean that the Fed did not see rates getting higher. 
• With several data releases a month moving the broader market, we have started to see bitcoin once again move in tandem with equities. 
  • Bitcoin’s correlation with gold has not actually been surging that much, although it was on the rise from mid-April into late-May, which makes sense since gold is typically considered more of a safe haven asset. 
  • But bitcoin’s correlation with the S&P 500 reached 0.9 on June 9th, and with the Nasdaq 100 hit 0.86 on the same day, both strong positive correlations that had been rising since mid-May, indicating a similarity between the price action over the past month. 
  • And the correlations do seem to be rising as of now, with more room to strengthen the narrative that bitcoin behaves as a more traditional risk asset. 

ZKsink

Source: GrowThePie

• A couple of weeks ago we discussed how Linea was attempting to grow its dominance in the ZK rollup space with its Linea Surge campaign, which at the time seemed to be working. 

• • However, the hype seemed short-lived, as Linea has fallen back below ZKsync Era in terms of transactions and active addresses after a bump at the end of May. 
• But it has not been all rosy for ZKsync Era, either. The network has faced a decline in activity and users since March, albeit a slower drop-off than the plunge Linea recently took. 
  • ZKSync Era confirmed their airdrop last week, with 3.6 billion tokens being distributed to over 695,000 addresses that had met the criteria for interacting with either ZKsync Era or its non-EVM compatible predecessor ZKsync Lite.
  • When ZKsync Era first launched in March 2023, it was the first zkEVM to hit the mainnet. While there were no concrete plans for a token, the CEO of Matter Labs, the developer of the network, did say a token would be necessary down the line to decentralize the sequencer. 
  • Naturally, this did lead to a lot of airdrop farming on the platform, and the actual announcement of an airdrop can oftentimes dent metrics after users know about a snapshot date that confirms their allocation. 
  • ZKsync did clarify that the snapshot for airdrop inclusion was taken on March 24, 2024, the one year anniversary of ZKsync Era. While this news seems to have been officially verified by the announcement this past week, there was a lot of speculation about the snapshot having already been taken with the ZKsync community, which could have led to the drop off starting before anything was officially disclosed. 
  • The 7-day moving average of active addresses fell from over 455,000 at the end of February to just 218,000 on June 10th. Similarly, the 7-day moving average of transactions has dropped from 1.75 million on February 29th to 512,000 on June 10th. The airdrop was confirmed on June 11th, and both metrics have actually gotten a small bump since. The airdrop is a one-time distribution, unlike other protocols who do multiple installments, but the claim period starts this week, so it could be users who were eligible coming back to the network to be ready to receive their tokens. 
• Despite the downturn, ZKsync Era is still the most popular ZK rollup network. That being said, its activity and user count pale in comparison to Arbitrum One and Base, the most prominent optimistic rollups. 
  • But if ZKsync is unable to turn around its falling metrics, it could leave room for a new ZK rollup to come out on top. 

It's bitcoin's world

Source: CoinGecko

• Bitcoin’s market dominance, the market share of bitcoin’s market capitalization relative to the total market capitalization across crypto tokens, shot up to 52.92% over the weekend, climbing up from below 50% at the end of May. 
  • Bitcoin is the largest crypto asset, and its market dominance has not fluctuated all that month over the past year. It has stayed within the range of 44% and 53%, being boosted since last summer as the excitement around spot ETF approvals lifted bitcoin relative to its peers. 
  • Bitcoin’s dominance reached 52.86% in April, reaching its highest level since April 2021. It was the culmination of bitcoin’s dominance continuing to grow after ETF approval and a sharp uptick in bitcoin’s position relative to other assets amidst fear of a wider conflict in the Middle East. 
  • But after that, while bitcoin’s dominance remained elevated relative to the level of late 2021 to early 2023, its grasp on the market began to fade as other assets like memecoins began to catch on, and ether also good its moment to shine with its spot ETF approvals on March 23rd. 
  • But bitcoin’s dominance shot up again this weekend, reaching a new high not seen since April 2021, the start of the first major bull market, which helped propel other crypto assets to sizable market caps. 
  • Bitcoin itself has not actually been doing that well for the last few days, dragging a bit in the wake of the Fed revealing that it only anticipated one rate cut in 2024 and down 5.3% for the past week. But many tokens were left worse off. Most large caps fared okay, but some smaller tokens (although still with market caps over $1 billion) like FLOKI, STRK, IMX, and FIL are down double digits over the past 7 days. 
  • Bitcoin, like in the case of the Middle Eastern conflict, was in a better position to weather the downturn in risk assets. While all cryptocurrencies typically get grouped into the risk asset category (although some argue bitcoin is actually a safe haven), bitcoin is likely to be considered less risky than a lot of its counterparts, which have not seen the same level of regulatory approval and institutional adoption. 
  • Bitcoin’s dominance is already dropping, though, as other tokens have begun to rebound from the Fed news.