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News Overview 11/1: Twitter, Mining, EU, White Paper, FTX

Elon Musk bought Twitter and made Dogecoin’s price rise. Continued difficulties in mining and the low Bitcoin price have pushed the big miners to the brink of bankruptcy. The EU is considering restrictions to limit mining, citing the energy crisis. It’s been 14 years since the Bitcoin white paper was published. The FTX exchange is planning its own stablecoin.

Elon Musk acquired Twitter

The biggest news of last week was Elon Musk’s Twitter deal. The development of this deal has been followed by the media since the spring of 2022. For a long time, it looked like Musk would cancel the acquisition, but in the end, it went through as it should have. Twitter became a private limited company once the acquisition was completed. It means Twitter shares will be delisted from the New York Stock Exchange (NYSE).

Musk strode into Twitter’s headquarters carrying a sink in his characteristic style. Apparently just so he could joke on Twitter, “Entering Twitter HQ – let that sink in!”

This deal will have an impact on the crypto world in many ways. Twitter is the main social media for crypto discussion. The platform has long been plagued by an out-of-control bot problem, which Musk is expected to fix. Many believe that the problem has already been significantly improved.

Elon Musk is also a fan of cryptocurrencies. In addition to Bitcoin, Dogecoin is known to be close to his heart. It’s not surprising that Dogecoin has risen by more than 140% in a week!

Investors speculate that Musk will integrate Dogecoin into Twitter in one way or another. DOGE also rose 25% today after Musk tweeted a picture of his own Shiba Inu dog wearing a Twitter shirt.

Last week, it was revealed that Twitter is also developing its own cryptocurrency wallet. It is likely that the plan is to enable crypto transactions from one user to another. Dogecoin could also be used as a means of payment for account verifications or similar additional features.

Musk’s deal has been met with both admiration and criticism. In recent days, the hashtag #Mastodon has been trending on Twitter. It refers to a rivaling social media platform. Many Twitter users have switched to Mastodon in protest. Some have also started to complain about the potential monthly fee for verified accounts, such as author Stephen King.

Time will tell what Twitter will look like under Elon Musk’s leadership. It is likely that cryptocurrencies will be more strongly integrated into the service, which is at least a good thing. Binance, the world’s leading crypto exchange, has also invested 500 million in Twitter’s development.

Large Bitcoin miners on the verge of bankruptcy

We wrote three weeks ago about Bitcoin mining under the headline “Bitcoin mining is harder than ever.” This means that competition among miners has become extremely tough, but the Bitcoin price hasn’t risen to compensate.

More and more miners are competing for the same income. This inevitably means that companies operating at the margins of profitability are in trouble. The last few weeks have provided stark evidence of this. The latest victim is Argo Blockchain. Its share price plummeted by a staggering 41% at the start of trading yesterday.

Argo Blockchain’s share price has fallen as much as 97% from its February 2021 peak. Despite this, there are even bigger trouble spots in the market. A week ago, Core Scientific told investors that the company is out of money.

Core Scientific is one of the largest mining companies in the world. Its shares fell by more than 70 percent on the day of the announcement. That’s a total fall of a staggering 98.5% in less than a year!

Core Scientific says the company is suffering from the low Bitcoin price, increasing competition, and energy prices. In addition, Core Scientific has lost millions of dollars in the Celsius bankruptcy. It has been forced to sell nearly 7,000 bitcoins in recent months, but even this has not helped.

Many mining companies over-invested in the boom of 2021. These investments are not paying back the loans as fiercer competition and low Bitcoin prices have combined to squeeze returns. We are likely to see a lot of restructuring in the sector in the coming 6-12 months.

The return on Bitcoin mining (dollars per exahash) is currently at its lowest level in recorded history.

EU plans restrictions on Bitcoin mining

Let’s continue with the news on Bitcoin mining. The European Union has taken another step towards restricting Bitcoin mining. The backdrop is the raging energy crisis in Europe, which is expected to cause problems in the coming winter.

Many readers remember the EU’s attempt to ban Proof of Work earlier this spring. An attempt was made to get the ban included in the MiCA regulation, which is currently being finalized, but without success. Now they are trying to restrict mining in another way.

The plans are called the European Green Deal and REPowerEU. The aim is to identify solutions for Europe’s energy supply and measures that could be taken regarding Bitcoin mining. In practice, ways of blocking energy use for mining in the event of an energy crisis will be considered.

The EU has ambitions to demand that its member states also drop all tax breaks for mining companies. There is a clear desire at the EU level to support PoS-based cryptocurrencies, like Ethereum.

Even if the EU seeks to drive Bitcoin mining out of its borders, this will not have a significant impact on Bitcoin globally. There is very little Bitcoin mining in the EU. Moreover, one of the popular locations for mining farms, Norway, is not a member of the EU.

Similar talk has also been heard from across the Atlantic. In the United States, a report was published in early September which also suggests restrictions on mining. In the US, there may be bans at the state level, but in Texas, for example, there is a real mining boom going on right now with all green energy.

Bitcoin white paper turns 14 years

Let’s look at the third piece of Bitcoin-related news. Yesterday (31.10.2022) was the anniversary of the Bitcoin white paper! Satoshi Nakamoto released the Bitcoin white paper to the world on the 31st of October 2008. Few understood its importance to humanity at the time.

Bitcoin historian Pete Rizzo posted a Twitter thread yesterday with some interesting facts about the white paper. It also includes an email from Satoshi about the white paper’s release. It was sent to a cryptography mailing list, so the contents of that email have been preserved for the next generations.

We have selected some interesting facts from Pete Rizzo’s Twitter thread. Did you know that…

  • The Bitcoin white paper has only 2736 words. It is shorter than the Magna Carta (3550) or the US Constitution (4543).
  • Bitcoin is only mentioned twice in the white paper; first in the title and then in the bitcoin.org URL under the title. In the actual text, Bitcoin is not mentioned once!
  • It is widely believed that Satoshi invented the word Bitcoin quite late. It is possible that he also wanted to call it Electronic Cash or Netcoin.
  • Satoshi finished coding the Bitcoin software before publishing the white paper. He said he had been working on it for two years.
  • The Bitcoin white paper does not contain the word blockchain at all. Satoshi used the term timestamp server.
  • The most common word for the white paper is block. It appears 48 times in the document.

Have you already read the Bitcoin white paper? It’s only nine pages long. If you haven’t read the white paper, check it out from here.

FTX plans its own stablecoin

The crypto exchange FTX has been often in the news in recent years. With good reason, as FTX has emerged as one of the leading players in the market alongside Binance and Coinbase. At the same time, its founder Sam Bankman-Fried has risen to a very influential role.

FTX has one major shortcoming compared to Binance and Coinbase. It does not have a stablecoin. Binance has BUSD with Paxos, and Coinbase has USDC with Circle.

Stablecoins are currently very profitable for the companies behind them. The dollars backing the coins are invested in US Treasury bonds, which are paying a 4% yield. For example, if all USDC’s collateral dollars earned a 4% yield, the company behind it would make $1.7 billion a year just from holding the collateral!

Now FTX wants its share of the cake.

“I think you’ll probably be hearing something from us on that topic in the not-too-distant future.”, comments FTX founder Sam Bankman-Fried (SBF). He also tweeted a week ago that the market has entered The Second Great Stablecoin War. It was sparked by Binance’s announcement to convert USDC deposits into BUSD balances.

On paper, the situation of FTX looks very good. According to The Block, the exchange has between one and four billion dollars in a “war chest” to spend on various purposes. However, the founder Sam Bankman-Fried is coming under increasing criticism for his views on regulation.

According to rumors, SBF would have spent money in Washington to lobby against the DeFi market. It would force decentralized protocols under the same KYC as FTX (and other centralized exchanges).

Those who want more information can listen to SBF’s thoughts in this interview. It’s still a little unclear whose side Sam Bankman-Fried will ultimately take. But it’s worth remembering that similar criticism has been leveled at all the most influential players in the crypto scene.

In any case, the launch of stablecoin seems to be the next logical step.