💬 Market Commentary
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Bitcoin
In today’s issue, we wanted to share a recent article published by Anton Livaja, Ledn’s Information security lead, on how Ledn protected client data from the recent HubSpot breach.
Over the last weeks and months, a number of cryptocurrency companies, large and small, have fallen victim to data leaks from marketing service providers. The recent data breach suffered by HubSpot is a notable example.
As a result, the personal information of potentially millions of clients from affected companies was exposed. In some cases, this also included additional details about their accounts.
The impacted clients have now been identified as users of specific services, largely within the cryptocurrency and digital assets space, rendering them vulnerable to phishing attacks, social engineering and other types of attacks.
Ledn was not impacted by any of the recent data leaks, including the recent HubSpot incident.
This outcome is a result of going beyond standard security measures and tailoring company practices to our unique industry risks. We value our clients’ data as we do our clients’ assets and do everything we can to protect it.
Like other companies across many industries, Ledn uses HubSpot to manage our blog, emails and landing pages. HubSpot is a powerful tool that, if used correctly, can help businesses communicate with clients in an efficient way. Using automation platforms is a great way to level up your marketing, but it’s important to always keep security top of mind. Luckily there are ways companies can minimize their risk when interacting with platforms like HubSpot.
Anton’s full article breaks down the recent HubSpot incident and highlights the steps taken that resulted in Ledn’s client data being protected. It also includes helpful tips on how to improve security posture. You can read the full article here.
Despite the crypto market downturn, Bitcoin miners continue to expand operations in the Americas and HODL most or all of the bitcoins they mine. After the China blanket ban that created the massive exodus of miners out of mainland China, miners found a new haven migrating operations to the United States. Additionally, the U.S. neighbor to the north - Canada, already had bitcoin mining businesses running operations. Together, they have created a growing business hub for publicly traded crypto miners.
Bitcoin miners in the Americas continue to expand operations. Marathon, plans to increase hashrate 6.1x by the end of 2022. On average, based on the listed companies above, miners are planning to increase their hashrate by an average 3.6x by the end of the current fiscal year. It is estimated that the Bitcoin network hashrate will reach 300 EH/s by the end of 2022. The hashrate growth is expected to double from today’s current network hashrate levels. All of the mentioned Bitcoin mining publicly traded companies are based out of the United States and Canada. Estimating that those hashrate levels are reached, the U.S. and Canada combined will have 35.4% of the global hashrate, up from 9.6%, based on estimated data from University of Cambridge.
Out of the top 10 publicly traded companies that hold Bitcoin on their balance sheet, six of them are Bitcoin miners. So why are Bitcoin miners holding on to their Bitcoins? These publicly traded Bitcoin mining companies act as the BTC investment vehicles that give investors exposure to the digital asset without holding the asset directly. The miners hold and have continued to build Bitcoin treasuries to be more directly correlated to the price of the blue-chip digital asset. Capital expenditures for this business model tend to be high, therefore, miners need to maintain a liquid balance sheet. But why sell when they can get access to traditional capital markets. Miners can access capital via traditional markets by issuing debt or equity to finance their ongoing operations.
S&P 500
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Markets started the week with a glimpse of optimism as 312 publicly traded companies are set to report earnings this week. The S&P 500 edged slightly lower on Monday as the index fluctuated between green and slight red throughout the session. For investors, earnings will be a big market focus this week. Close to 7% of the S&P 500 index companies reported Q1 earnings on Monday. 76% of the companies that reported earnings on Monday beat earnings estimates with earnings growth rate raising from 4.7% to 5.1%. Wall Street analysts have voiced their concerns for corporate earnings as they are likely to take a hit due to high inflation pressures and pricing pressures having taken a toll on consumers.
In a survey carried out by market analysts, the number of S&P 500 companies that cited negative impact on Q1 earnings increased drastically compared to 4Q 2021. CEO’s and CFO across the board noted that global supply chain disruptions, material and labor shortages, COVID and rising costs would be the main drivers that would hinder corporate profits for Q1 2022.
Jan Hatzius, Chief Economist at Goldman Sachs noted that the Fed’s policy tightening “raises the odds of recession to 15% in the next year and 35% within the next two years”. Historically, 11 out of the 14 tightening cycles from the U.S. The Federal Reserve has seen a recession within two years after monetary policy implementations. Meanwhile, a Fed survey conducted by CNBC has a probability that a recession in the U.S. within the next 12 months stands at 33%, up 10% from the beginning of February, while probability in Europe stands at 50%.
From the same CNBC survey, from 33 respondents that included fund managers, strategists and economists, forecasts that the U.S. Federal Reserve will hike rates 4.7x on average this year. Nearly have of the surveyed believe that the central bank will hike rates five to seven times this year as it looks to fight staggering inflation.
Gold
Russia strikes back! The Central Bank will be purchasing gold from Russian local institutions at fixed prices. The move to buy gold to support the rubble comes after the dramatic fall in the Kremlin’s fiat currency. Additionally, the move to purchase gold once more will ensure local gold supply is being purchased and gold mining operations continue without interruptions. This is of importance, as due to international sanctions, Russia’s gold reserves and gold mining operations were completely cut off from the international capital markets. The ruble has regained ground from pre-invasion levels versus the U.S. dollar. The Central Bank announced on Monday that the ruble will be tied to gold at 5,000 rubles per gram of gold. The interesting fact is that when converting one ounce of gold into rubles, it would translate into 140,000 rubles (equivalent to ~$1,400 USD). The current price for an ounce of gold denominated in U.S. dollars, it currently goes for $1,970. The Central bank is purchasing local gold inventories at a circa 40% discount to market prices. Why this move by Russia could mean trouble for the U.S. dollar… Foreign countries holding dollar-denominated debt or dollar reserves will see the case to hold less of them and move them into more stable stores of value, i.e. gold or in this case, could even be the rubble. In the short term horizon, this could bring additional rapid inflation for the United States which is already dealing with the worst inflation in over four decades.
DeFi
Just a month after launching on the Avalanche network, Anchor looks to expand and unite DeFi ecosystems. Anchor ($ANC) is Terra Luna’s ($LUNA) most popular DeFi protocol with over $14 billion in total value locked (“TVL”). The expansion looks to set up and bring liquidity pools for stablecoins Tether ($USDT) and aUSD on Alcala. aUSD is Alcala’s most well-known and popular offering. Alcala is built on Polkadot ($DOT) and a few months ago received $250 million in funding to scale operations and create a larger ecosystem within Polkadot. This announcement is important as we continue to see the DeFi space integrating across other chains to bring liquidity across projects and provide a better user-experience.
Metamask first integrated with Apple Pay, now it adds four additional features directed to attract institutional capital. Gnosis safe, Hex custody, Parfin and GK8 are the new products available via MetaMask. Gnosis safe enables multi-signature features which allow collective parties to have access to a wallet and sign-off on transactions. Hex Trust offers asset custody services, DeFi, staking and trading optionalities for markets in APAC. Hex Trust has over $5 billion in assets under custody with over 200 institutional clients. GK8 offers DeFi as well as custody services, while Parfin offers trading and some custody services as well. These futures will look to cater to the needs of institutional players looking to get exposure in the digital assets space. The ease of integration and availability of simple tools makes the compelling case for traditional financial institutions to integrate with MetaMask and similar service providers.
Mining
Turmoil in the markets makes the Bitcoin mining difficulty drop for the third time this year. Bitcoin miners experienced a 1.27% drop in mining difficulty at the end of last week. The mining difficulty level currently stands at 28.23 trillion at a block height of 731,792. In March, the Bitcoin mining difficulty experienced two drops as miners unplugged from the network due to high energy costs. Demand for Bitcoin remains high despite the overall crypto market conditions.
What's Ahead
This article is intended for general information and discussion purposes only, it is not an offer, inducement or solicitation of any kind, and is not to be relied upon as constituting legal, financial, investment, tax or other professional advice. This article is not directed to, and the information contained herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to law or regulation or prohibited by any reason whatsoever or that would subject Ledn and/or its affiliates to any registration or licensing requirement. This article is expressly not for distribution or dissemination in, and no services are being marketed or offered to residents of, the European Union, the United Kingdom or the United States of America. A professional advisor should be consulted regarding your specific situation. Digital assets are highly volatile and risky, are not legal tender, and are not backed by the government. The information contained in this publication has been obtained from sources that we believe to be reliable, however we do not represent or warrant that such information is accurate or complete. Past performance and forecasts are not a reliable indicator of future performance. Any opinions or estimates expressed herein are subject to change without notice. We expressly disclaim all liability and all warranties of accuracy, completeness, merchantability or fitness for a particular purpose with respect to this article/communication. For full legal terms and conditions visit https://ledn.io/legal
About the author
Mauricio Di Bartolomeo
Mauricio is the co-founder and Chief Strategy Officer of Ledn.io. He grew up in Venezuela where he and his family learned about Bitcoin. Now based in Canada, Mauricio holds HBA and MBA degrees from the Richard Ivey School of Business in London, Ontario in Canada.
