Chip revolution

Miners are in for a treat

Author

Angelina Berger
May 09, 2023

Welcome back. This week marks the one-year anniversary of Terra’s collapse. On this day last year, terraUSD (UST), which was supposed to hold a $1 peg, fell to just 35 cents. The entire $60 billion Terra ecosystem collapsed just days later. And Coinsider called it—just sayin’.

Today: Banking crisis updates, a mining chip milestone, and Coinbase’s trip to Bermuda. Let’s go.

—Angelina

Banking’s Game of Dominoes

The U.S. banking sector looks poised for another round of potentially major crises as the words “bank failure” become more and more common for market watchers. Let’s unpack what’s going on—and of course how this impacts crypto.

First Republic Bank was the first shoe to drop. It revealed that $100 billion in deposits flowed out of the bank in Q1, triggering a major sell-off. First Republic was put into FDIC receivership and sold to JPMorgan Chase last week.

  • First Republic is the third midsize bank to fail in less than two months, replacing Silicon Valley Bank (SVB) as the second largest banking failure in U.S. history.

Regional banks were hit next. PacWest acknowledged last week that it’s considering a potential sale—which could suggest that failure is imminent, given that SVB and First Republic did the same before collapsing.

Western Alliance Bancorp shares tumbled late last week after the Financial Times suggested it was exploring a sale. But Western Alliance denied the report, claiming that there is “not a single element of the article that is true.“

Where does this leave crypto? Unlike U.S. banks, Bitcoin has been holding strong. Bitcoin’s dominance rate, which measures BTC’s share in the broader market, has been on the rise since the onset of the banking crisis in March.

"You see outperformance of BTC within the crypto market when regional bank share prices collapse,” Lewis Harland, Decentral Park Capital's portfolio manager, told CoinDesk. “This signals that BTC is the high-quality, anti-dollar liquid play for investors as the crisis unfolds further.”

Chipping Away

Former Twitter CEO Jack Dorsey’s fintech company Block just completed the prototype design of its new five-nanometer (5nm) ASIC chip—a major step in mining hardware development.

In a nutshell: ASIC (aka “application specific integrated circuit”) chips are popular among crypto miners because they can be customized to efficiently mine BTC.

What makes this one different? Block’s new ASIC is the first chip of its kind with an open-source design.

  • The open-source design is crucial to decentralizing the BTC mining process, Block says.

  • The main issue with Bitcoin mining is "the diversity of manufacturing and supply chain,” according to Block’s hardware lead Thomas Templeton.

  • Block’s new chip aims to reduce the high level of concentration in the mining industry by making the design openly available to all.

Looking ahead: Chip heavyweight Intel recently shuttered its Bitcoin-specific ASIC production, leaving a gap in the mining hardware market for Block to potentially fill. The demand for ASICs is there, too—the resurgence of BTC’s price brought mining revenues back to attractive levels and incentivized many miners to return to their rigs.

Coinbase’s Beach Getaway

Remember how we mentioned that Coinbase received its license to operate in Bermuda last week? Well, now we know why.

Coinbase is opening a derivatives exchange in Bermuda, the company announced last Tuesday. The new Coinbase International Exchange allows Coinbase to tap into derivatives trading, a popular corner of the global crypto industry that’s effectively iced out of the U.S. due to heavy oversight.

  • FYI: Derivatives trading represents some 70% of the entire crypto market.

Zoom out: Gemini joined the party by launching its own international derivatives exchange on the same day as Coinbase. That makes two U.S. crypto heavyweights expanding offshore…do I sense a trend here?

In other news:

  • CoinMarketCap is launching the crypto version of Shark Tank.

  • Sui, the highly anticipated L1 blockchain built by former Meta employees, launched its mainnet—without an airdrop, to the dismay of crypto Twitter.

  • Bitcoin maxis’ worst nightmare came true…BTC-based memecoins are now a thing.

  • The SEC erased what would have been its first formal definition of “digital asset” last minute.

Crypto Job Board

And that’s what you need on your radar today in crypto. Will we see more U.S. banks fall, or is the banking crisis finally contained? Hit reply and share your thoughts. Catch you back here next Tuesday!