As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
META CRYPTO HEAD TO STEP DOWN: In a series of Tuesday tweets, David Marcus, a Meta (MVRS, FB) executive and co-creator of the not-yet-launched Diem digital currency, said, "Personal news: after a fulfilling seven years at Meta, I've made the difficult decision to step down and leave the company at the end of this year. While there's still so much to do right on the heels of launching Novi - and I remain as passionate as ever about the need for change in our payments and financial systems - my entrepreneurial DNA has been nudging me for too many mornings in a row to continue ignoring it. The one thing I'm the proudest of during my time here is the amazing kickass team we've assembled over the last three years. This is the most resilient, passionate, determined and talented group of humans I've ever worked with. I find comfort and confidence in knowing that they will continue to execute our important mission well under @skasriel's leadership, and I can't wait to witness this from the outside. I know there's greatness ahead... I now look forward to having more free time in the months to come before I start building something new and exciting again. Onward!"
COINBASE TO ACQUIRE UNBOUND SECURITY: In a Tuesday company blog post, Coinbase (COIN) announced the acquisition of Unbound Security. The company said, “Based in Israel, it is a pioneer in a number of cryptographic security technologies, including the emerging field of secure multi-party computation, a highly advanced technology for which Unbound Security's co-founder, Yehuda Lindell, is a world leader. With this acquisition, Coinbase not only gains access to some of the world's most sophisticated cryptographic security experts, including Unbound Security co-founder and current Vice President of Research and Development, Guy Peer, who brings more than 20 years of experience in cryptographic security, but also a presence in Israel, a well-established and rapidly growing technology hub. This presence in Israel will add an additional powerful prong to Coinbase's global talent acquisition strategy, following on closely to recent thrusts into engineering talent bases such as India, Singapore and Brazil...In addition to the technological expertise that we will gain through this acquisition, we also plan to establish a tech center of excellence in Israel that will ensure that Coinbase is always at the bleeding edge of security and blockchain technology. We've long recognized Israel as a hot bed of strong technology and cryptography talent, and are excited to continue to grow our team with some of the best and brightest minds in these fields. The Unbound Security team will form the nucleus of this new research facility, which we plan to grow over time…This acquisition is subject to customary closing conditions and is expected to close in the coming months.”
RIOT ACQUIRES ESS METRON: Riot Blockchain (RIOT) announced Wednesday that it has acquired Ferrie Franzmann Industries d/b/a ESS Metron. The total consideration payable in the transaction is valued at approximately $50M, consisting of up to 715,413 shares of Riot common stock and $25M in cash, funded with cash on the balance sheet. The company said, “The acquisition of ESS Metron, currently a key supplier to Riot's Whinstone facility, is highly complementary to Riot and its ongoing infrastructure expansion to 700 MW. ESS Metron provides highly engineered, custom product offerings mission-critical to Bitcoin mining infrastructure and significantly improves Riot's ability to improve its internal engineering capabilities. ESS Metron's engineering proficiency has been a critical component in developing Riot's customized immersion-cooling technology for its previously announced 200 MW immersion-cooling expansion project.” ESS Metron is expected to continue to operate as an independent subsidiary of Riot, with the entire employee team being retained. ESS Metron is based in Denver, Colorado, operating from facilities totaling approximately 121,000 square feet. The facilities are subject to long-term lease agreements.
Additionally on Thursday, Riot announced monthly bitcoin production and operations updates for November 2021. In November 2021, Riot produced 466 BTC, an increase of approximately 298% over its November 2020 production of 117 BTC. Year to date through November 2021, the company produced 3,387 BTC, an increase of approximately 262% over its BTC production during the same 2020 period of 935 BTC. As of November 30, 2021, Riot held approximately 4,464 BTC, all produced by the company’s self-mining operations. Riot currently has a deployed fleet of approximately 29,095 miners, with a hash rate capacity of 3.0 exahash per second.
Following the news, Roth Capital analyst Darren Aftahi initiated coverage of Riot Blockchain with a Buy rating and $55 price target. Aftahi views Riot as "an equity-based way to gain exposure to the quickly expanding Bitcoin mining and infrastructure market," adding that its acquisition of Whinstone is "a game-changer" since it enables the company to nearly double its capacity by the end of FY22. Hosting could diversify some risk away from the underlying volatility of Bitcoin, Aftahi added.
MARATHON, COMPUTE NORTH EXPAND AGREEMENT: Marathon Digital Holdings (MARA) announced Wednesday it has expanded its agreement with Compute North to host more than 100,000 of Marathon’s previously purchased bitcoin miners at multiple locations. In May, Marathon announced a binding letter of intent with Compute North to host approximately 73,000 of Marathon’s bitcoin miners in Texas. The agreement has been expanded to now include over 100,000 of Marathon’s previously purchased bitcoin miners. As a result, Marathon has now procured hosting arrangements for all of its previously purchased bitcoin miners. Under the terms of the agreement, Compute North will now be deploying Marathon’s bitcoin miners across the United States, focusing on wind and solar farms. Once all 133,000 of Marathon’s bitcoin miners are deployed, the company’s hash rate will be approximately 13.3 EH/s, its blended cost of electricity and hosting will be approximately $0.042 per kilowatt hour, and Marathon’s mining operations will be approximately 77% carbon neutral.
Additionally on Friday, Marathon published unaudited bitcoin production and miner installation updates for November 2021. Cash on hand was approximately $623.7M and total liquidity, defined as cash and bitcoin holdings, was approximately $1.1B. The company received approximately 15,520 ASIC miners from Bitmain during the month of November and 56,826 miners year to date with an additional 8,477 miners currently in transit. Following successful system upgrades to the power plant in Hardin, MT, the company produced approximately 34 bitcoin on December 1, 2021, as the power plant and Marathon’s miners in Hardin began operating near full capacity. Maintenance and upgrades to the power generating facility in Hardin, MT negatively impacted bitcoin production for a portion of November, resulting in 196 self-mined bitcoin during November 2021. The company increased total bitcoin holdings to approximately 7,649.1 with a fair market value of approximately $437.4M and the existing mining fleet consists of 31,000 active miners producing approximately 3.2 EH/s.
MICROSTRATEGY SELLS SHARES TO BUY BITCOIN: MicroStrategy (MSTR) announced Monday that between October 1 and November 29, it purchased 7,002 bitcoins for $414.4M in cash, at an average price of approximately $59,187 per bitcoin, inclusive of fees and expenses. As of November 29, MicroStrategy holds 121,044 bitcoins that were acquired at an aggregate purchase price of $3.57B and an average purchase price of approximately $29,534 per bitcoin, inclusive of fees and expenses. As previously disclosed on June 14, the company entered into an open market sale agreement with Jefferies, pursuant to which the company may issue and sell shares of its class A common stock, having an aggregate offering price of up to $1B from time to time. Between October 1 and November 29, MicroStrategy had issued and sold an aggregate of 571,001 shares under the sale agreement, at an average gross price per share of $732.16, for aggregate net proceeds of $414.4M.
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Overstock (OSTK), Ideanomics (IDEX), Pareteum (TEUM) and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin rose roughly 3% this week at $56,265 in U.S. dollars, according to TradeBlock.