BTC Mining & AI Compute
The Daily Crypto Update for Institutional Investors
CoreWeave Inc Has Offered To Purchase BTC Miner Core Scientific (NASDAQ: CORZ) For USD ~1B - Additionally, Core Scientific Will ‘Host CoreWeave’s High-Performance Computing Services, Capturing Significant AI Compute Opportunity’
According to ‘a person with knowledge of the matter,’ CoreWeave’s all-cash offer of USD 5.75 per share was made on Monday. The bid has a 55% premium to Core Scientific’s three-month volume-weighted average price as of May 31. Additionally on Monday, the firms announced 12-year hosting agreements that will see Core Scientific hosting CoreWeave’s high-performance compute (HPC) operations. As part of the deal, Core Scientific will revamp several of their existing sites to accommodate CoreWeave's NVIDIA GPUs. The modifications are slated to begin in the early part of the second half of 2024, with full operational status anticipated in the first half of 2025. The agreements also provide CoreWeave ‘with options over the next 60 to 90 days to further expand its hosting footprint with Core Scientific at additional select sites…’ CORZ is up ~40% since the deal was reported on and the agreements were announced.
According to Adam Sullivan, Core Scientific’s CEO, the new contracts allow the firm to capture ‘exciting growth opportunities in AI compute… while also maintaining our strong [BTC] mining franchise.’ Sullivan sees the relationship with Coreweave as allowing his firm to diversify its business model ‘and balance our portfolio between bitcoin mining and alternative compute hosting.’
Core Scientific, valued at USD 4.3B in 2021, was one of several major miners that saw balance sheet weakness in 2022 amid BTC’s sell-off. In January, the firm announced it had emerged from chapter 11 bankruptcy with a 'strengthened balance sheet and enhanced competitive position.’ In a CNBC article titled ‘[BTC] miners sink millions into AI businesses, seeking billions in return,’ and published Monday, Core Scientific’s CEO is described as ‘[beefing] up the company’s nonbitcoin business as it reentered the public market.’ Sullivan joined the firm in 2022 while it was in bankruptcy proceedings.
In April, CoinShares (STO: CS) wrote in a research report that the firm expects BTC miners to increasingly seek income from AI compute. The report suggests that in some energy-secure locations, AI compute can offer higher revenue. BTC mining, on the other hand, according to CoinShares, requires less upfront costs.
Takeaway: The economics of BTC mining are such that revenue per unit of computing power is diminishing. Paired with the difficulty of predicting BTC prices, miners have employed numerous strategies to mitigate the balance sheet risks seen in 2022. These have included a range of diversification strategies, including subsidies for ‘voluntary energy conservation’ in Texas. Given AI compute and mining’s similar need for energy, this diversification strategy is natural. The interplay between the two is only beginning to be discussed and explored.
CRYPTO HEADLINES
US spot BTC ETFs had nearly USD 890M of inflows yesterday. Fidelity’s FBTC led flows with ~379M, while BlackRock’s IBIT had USD ~274M of inflows, reaching USD ~20.5B in AUM. Grayscale’s GBTC had its first day of positive flows in over two weeks, with USD 28M. - link - @Farside
FTX’s group of debtors reached an agreement with the IRS to settle a USD 24B tax claim. Subject to the court's acceptance, FTX has committed to an initial payment of USD 200M within two months, followed by a further USD 685M as a subordinate claim to customers and other creditors. The IRS initially filed a USD 44B claim against the exchange before reducing the claim to USD 24B. - link - @Cointelegraph
The University of Austin partnered with BTC custodian Unchained to launch a BTC endowment initiative. The partnership aims to secure USD 5M in BTC, set to be locked for a period of five years. Unchained’s CEO Joseph Kelly kick-started the fund with a 2 BTC contribution, reflecting support for UATX's dedication to free speech and innovation. - link - @UATX
Tether invested USD 18.75M in Taiwan-based XREX Group to enhance crypto innovation and cross-border payments. This strategic investment aims to boost USDt-based transactions in emerging markets and support the development of 'regtech' solutions. The collaboration also introduces a new stablecoin, XAU1, targeting improved financial accessibility and transaction efficiency in the targeted regions. - link - @Tether
Blockchain scaling startup Avail raised USD 43M in Series A funding from Founders Fund, Dragonfly, and Cyber Fund. After securing a USD 27M seed round, this new funding will bolster the advancement of Avail's Unification Layer and Fusion Security layer. Having branched off from Polygon in March 2023, Avail is focused on improving blockchain scalability and interoperability, particularly targeting the issues of data availability and the fragmentation of blockchains. - link - @Avail
Stashh Labs has raised over USD 3.3M for its NFT marketplace upgrade, Stashh 2.0. The funding, involving Animoca and others, will enhance support for various blockchain ecosystems and expand features like messaging and gaming. Stashh 2.0 focuses on encrypted NFTs and new use cases for creators and collectors. - link - @TheBlock
Galaxy Digital issued a multimillion dollar loan to Animoca Brands co-founder Yat Siu who pledged collateral in the form of a tokenized violin. The violin, which is 316 years old and was once owned by Russian Empress Catherine the Great, will be held in physical and digital form by Galaxy against the loan. - link - @Bloomberg
Japanese crypto exchange DMM Bitcoin announced plans to cover over USD 300M in BTC stolen from its exchange. The company intends to secure USD 352.4M through borrowing and other capital raises to reimburse its users from the hack last week which saw ~4,500 BTC stolen from the exchange. - link - @TheBlock
BitMEX raised the leverage cap for ETH perpetual contracts to 200x. The move comes in response to the US approval of spot ETH ETFs, with BitMEX seeking to attract traders looking to exploit the volatility and price movements of the asset. - link - @BitMEX
Crypto firms were targeted by supply chain email breaches this morning. Attackers sent phishing links through newsletter mailing lists after a vendor was compromised. Bitfinex CTO Paolo Ardoino and CoinGecko founder Bobby Ong acknowledged the breach, urging users to be wary of sham token launches and to exercise vigilance with email newsletters. - link - @Cointelegraph
Bain Capital Crypto has launched a second crypto fund. After establishing a USD 560M fund in March 2022, the firm is maintaining its investment strategy in early-stage DeFi and Web3 projects. The fund’s size was not disclosed. - link - @CoinDesk
Turkey announced plans to implement a transaction tax on stocks and crypto assets. The move is aligned with Finance Minister Mehmet Simsek's initiative to improve fiscal stability and control inflation, which has been persistently high in the country. - link - @Reuters
TOP ARTICLES
OPEN-SOURCE RESEARCH / LONG-READ OF THE DAY
BTC Enters Accumulation Period, Bitfinex Alpha, June 4, 2024
Bitfinex's weekly research note discusses on-chain metrics and their impact on BTC's outlook.
CRYPTO MULTIMEDIA
How The US Government Can Protect The Dollar Through Stablecoins, Unchained, June 4, 2024
Former CFTC chair Chris Giancarlo and his former chief innovation officer Daniel Gorfine discuss a range of topic including stablecoins, CBDCs, and crypto regulation.
CHART OF THE DAY
The BTC hash rate has expanded by 1,708% since the start of 2020. It is estimated that ~30% of the hash rate is located in the US...
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