FT : China’s crypto crackdown delivers windfall to global bitcoin ‘miners’

China’s crypto crackdown delivers windfall to global bitcoin ‘miners’
Solving puzzles in return for digital coins has become more profitable as competitors exit

International bitcoin “miners” are reaping rewards from China’s effective ban on the energy-intensive practice, generating ever higher profits by filling a vacuum left by former Chinese rivals in creating digital tokens.

China’s largest bitcoin-producing provinces launched a clampdown on computer-powered bitcoin mining in June, part of a broader attempt to cut down on carbon emissions and a push against private cryptocurrencies as the country works on its own officially-backed digital coin.

The country had been the world’s biggest producer of bitcoins, accounting for half of the global output. Miners elsewhere say cooling production there has opened up the market to other competitors.

“Think of average daily global bitcoin production as the pie. The size of the pie stayed the same, and each existing miner was able to help themselves to a much bigger piece,” said Shane Downey, chief financial officer of Hut 8 Mining, a Toronto-based listed company.

Bitcoin miners create new coins by using powerful computers to solve mathematical puzzles. The number of coins that can be produced each day is fixed, so with fewer rivals, it is easier and cheaper to make new coins.

The improving economics has meant that entrepreneurs are now launching new mining operations in countries around the world.

The overall computer power dedicated to bitcoin mining globally initially halved in the aftermath of China’s move, but it currently stands about 30 per cent lower than in May, according to data website Blockchain.com.


The profitability of bitcoin miners depends on the prevailing market price of the coins, the cost and amount of electricity required to run the servers and the rate at which new units can be mined. Bitcoin’s rise on Monday back to $50,000 from summer lows below $30,000 could add a further incentive to miners.

“It’s like we’ve doubled the number of machines we have,” said Fiorenzo Manganiello, the founder of private equity company Lian Group, which owns one of the largest renewable bitcoin mining farms in Europe.

Hut 8 Mining has been one of the companies benefiting. The company notched up a 241 per cent year on year boom in mining revenues in the second quarter, raking in C$31.4m ($25m), with its chief executive noting that June and July proved to be bumper months as a result of China’s move. Mining profits registered C$19.3m over the period, from C$697,000 in the same period last year.

“Following China’s ban on domestic miners, global [production] fell by approximately 40 to 50 per cent, and at Hut 8, we started mining approximately 40 to 50 per cent more bitcoin, with no directly attributable cost increase,” Hut 8’s Downey said.

UK-based mining company Argo Blockchain also reported a 180 per cent increase in revenues in the first half of 2021, citing a change in global mining conditions that allowed it to produce more digital coins without increasing the number of machines it uses. Pre-tax profits soared to £10.7m, compared with £523,074 in the first half of 2020.

Sam Doctor, chief of strategy at US digital asset specialist BitOoda, estimated it would take about 18 months for capacity to return to pre-ban levels. Replacing the lost capacity will take time because it involves upgrading power infrastructure and building new facilities.

Miners from China have tried to migrate to neighbouring countries such as Mongolia and Kazakhstan, but many are unable to transport the equipment across borders. There are also concerns about the stance authorities will take about bitcoin mining in these new hubs.

Bitcoin mining has a severe environmental impact. It accounts for 0.4 per cent of the world’s energy consumption and it uses more electricity annually than Finland or Belgium, according to the Cambridge Bitcoin Electricity Consumption Index. Miners in China had a particularly large effect due to their reliance on coal-powered energy.

“As things stand today, we believe cryptocurrencies have a long way to go to satisfy ESG criteria,” said analysts at French asset manager Candriam in a recent report, referring to investment standards pertaining to environmental, social and governance issues.

Outside of China, mining activity is gravitating towards places with abundant sources of renewable energy, such as Norway and Canada. But as demand exploded, specialist site operators have found it hard to build new facilities rapidly enough.

“It will take about a year or more for mining capacity to recover. There is a lot of new mining equipment being sent to the US and Canada instead of China, but data centre capacity is a bottleneck,” said Kjetil Hove Pettersen, chief executive of Norwegian miner and datacentre operator KryptoVault.

In the US, Texas has been one of the key beneficiaries of the new landscape, while specialist sites in Norway and other European countries are buckling under demand.

“We have people calling us and begging us to accept their machines. Some have offered 50 per cent of their future profits if we give them space in our data centres,” Manganiello added.

The price and quality of computers required for mining new units has also declined. Before China’s crackdown, miners had to pay ever increasing prices for their computers as they searched for more efficient ways to acquire bitcoins. Due to the glut of servers now collecting dust in China, the price of computers has collapsed and barriers to making money have become lower.

“Right now, the profitability of bitcoin mining is so high that even the oldest, least efficient machine can be profitable,” said KryptoVault’s Hove Pettersen.

FT : The two deals forcing Britain to show its hand on M&A

The two deals forcing Britain to show its hand on M&A

Britain’s M&A identity crisis
A global Britain that is open for business has been the mantra of Boris Johnson’s government as it has tried to define its ambitions after Brexit. 

Yet in a post-Covid world, Johnson and his team — which includes Thatcherite free-market ministers such as business secretary Kwasi Kwarteng — have recognised the importance of self-reliance and economic sovereignty. 

The current spate of takeover bids for listed UK companies is shaping up to be a key test of which of these philosophies will prevail, the FT’s Sylvia Pfeifer reports. 

Critics say Britain’s leaders have for too long adopted a case-by-case approach to takeovers, one that hasn’t always been consistent. 

And they barely seemed to notice a flood of acquisitions of companies such as security group G4S, motor recovery specialist the AA, insurers RSA and LV= and potentially now Wm Morrison, whose roots stretch back to a 19th-century Yorkshire market stall. 

Two takeovers in particular, however, pose more difficult questions.

There’s the proposed £2.6bn acquisition of Ultra Electronics by Cobham, which is owned by the US private equity group Advent International, and Nvidia’s planned $54bn takeover of British chip designer Arm. (Also coming down the tracks is a possible bidding war for the aerospace and defence group Meggitt.) 

Kwarteng has announced a formal investigation into the takeover of Ultra, a key supplier to the Royal Navy. The UK has referred the Arm deal for a national security review, and must now decide whether to open an in-depth probe based on both national security and competition concerns after the Competition and Markets Authority’s chief Andrea Coscelli said last week that the deal risked “stifling innovation” and causing higher prices. 

This approach has made the British government’s response to a foreign takeover of strategic national assets difficult to predict.

When SoftBank agreed to buy Arm after the country’s 2016 vote to leave the EU, politicians hailed it as a vote of confidence in post-Brexit Britain. When Advent bought Cobham, the UK asked for commitments, but those pledges didn’t prevent the private equity firm from selling off more than half of the Cobham business within 18 months. 

Two interventions don’t make an industrial policy. But with Johnson’s government looking to tighten its scrutiny of takeovers via the National Security and Investment Act, due to come into force in January, they might offer some clues.

>>> US After Hours Summary: PANW +10.4%, RIOT +3% higher on earnings; CARA jumps +24% on FDA approval; TBPH drops -24.9% on clinical data for Izencitinib


After Hours Summary: PANW +10.4%, RIOT +3% higher on earnings; CARA jumps +24% on FDA approval; TBPH drops -24.9% on clinical data for Izencitinib

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: PANW +10.4%, RIOT +3%

Companies trading higher in after hours in reaction to news: CARA +24% (FDA approval of KORSUVA), BXC +6.6% (authorizes new $25 mln share repurchase program; also announces termination of ATM offering), CWH +5.5% (increases dividend), NRZ +3.9% (increases dividend), NOV +1.8% (announces supply contract with COSCO Shipping), MOS +0.8% (authorizes new $1 bln share repurchase program), EXR +0.3% (increases dividend), WMB +0.2% (CFO to retire)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: None

Companies trading lower in after hours in reaction to news: TBPH -24.9% (reports its study of Izencitinib did not meet its primary endpoint), SO -0.2% (CFO to retire; names new CFO)

>>> Palo Alto Networks beats by $0.16, beats on revs; guides OctQ EPS below cons

Palo Alto Networks beats by $0.16, beats on revs; guides OctQ EPS below consensus, revs above consensus; guides FY22 EPS above consensus, revs above consensus
  • Reports Q4 (Jul) earnings of $1.60 per share, excluding non-recurring items, $0.16 better than the S&P Capital IQ Consensus of $1.44; revenues rose 28.3% year/year to $1.22 bln vs the $1.17 bln S&P Capital IQ Consensus.
    • Q4 billings grew 34% yr/yr to $1.90 bln vs $1.695-1.715 bln prior guidance.
  • Co issues mixed guidance for Q1 (Oct), sees EPS of $1.55-1.58, excluding non-recurring items, vs. $1.60 S&P Capital IQ Consensus; sees Q1 revs of $1.19-1.21 bln vs. $1.15 bln S&P Capital IQ Consensus. Co guides to Q1 billings of $1.29-1.31 bln.
  • Co issues upside guidance for FY22, sees EPS of $7.15-7.25, excluding non-recurring items, vs. $7.09 S&P Capital IQ Consensus; sees FY22 revs of $5.275-5.325 bln vs. $5.02 bln S&P Capital IQ Consensus.

>>> US Close Dow +0.61% S&P +0.85% Nasdaq +1.55% Russell +1.88%

Closing Stock Market Summary

The stock market had a strong start to the week, as investors remained steadfast in buying the dip amid some encouraging Covid news. The S&P 500 (+0.9%) and Nasdaq Composite (+1.6%) set intraday record highs, with the Nasdaq also closing at a record high.  

The Dow Jones Industrial Average (+0.6%) trailed its large-cap peers with a 0.6% gain while the Russell 2000 (+1.9%) and iShares Micro-Cap ETF (IWC 143.33, +3.87, +2.8%) outperformed after underperforming last week. 

Briefly, the FDA fully approved the Pfizer (PFE 49.93, +1.21, +2.5%)-BioNTech (BNTX 382.10, +33.42, +9.6%) vaccine for people 16 years and older, which provided some hope that vaccination rates will increase. In addition, the IHME vaccine model suggested that coronavirus cases could be peaking in the U.S.

The gains were relatively broad-based, as advancing issues outpaced declining issues by a 2:1 margin at the NYSE and a 3:1 margin at the Nasdaq. Seven of the 11 S&P 500 sectors closed higher, including the energy sector (+3.8%), which rose 4% as oil prices ($65.60, +3.35, +5.4%) rebounded 5%. 

The heavily-weighted information technology sector (+1.3%) advanced 1.3%, while the defensive-oriented utilities (-1.3%), real estate (-0.4%), consumer staples (-0.4%), and health care (-0.02%) sectors were excluded from the advance amid some slippage into the close. 

Other supportive factors included preliminary manufacturing and services PMIs for August out of the eurozone and U.S. that were expansionary (although they did decelerate from July), news that Treasury Secretary Yellen will back Fed Chair Powell for a second term, and a Barron's cover story that described the mega-cap technology stocks as "unstoppable." 

Elsewhere, Treasury yields were subdued despite the bullish price action in the major indices, reportedly because of the deceleration in the IHS data, reduced trading volume, and a wait-and-see mindset for Fed Chair Powell's speech on Friday. Mr. Powell will speak during the annual Jackson Hole Economic Symposium. 

The 10-yr yield decreased one basis point to 1.26% while the 2-yr yield increased one basis point to 0.23%. The U.S. Dollar Index decreased 0.5% to 92.99. 

Reviewing Monday's economic data:

  • Existing home sales increased 2.0% m/m in July to a seasonally adjusted annual rate of 5.99 million (consensus 5.85 million) from an upwardly revised 5.87 million (from 5.86 million) in June. Total sales in July were up 1.5% from a year ago.
    • The key takeaway from the report is that the supply of existing homes for sale at more affordable price points remains extremely limited. That is driving up the pace of price increases well beyond the pace of income growth, which is creating affordability pressures for prospective buyers, particularly first-time buyers, and leading much of the sales growth to occur in higher-end markets.
  • The preliminary IHS Markit Manufacturing PMI decreased to 61.2 in August from 63.4 in July. The preliminary IHS Markit Services PMI decreased to 55.2 in August from 59.9 in July.

Looking ahead, investors will receive New Home Sales for July on Tuesday. 

  • S&P 500 +19.3% YTD
  • Nasdaq Composite +15.9% YTD
  • Dow Jones Industrial Average +15.5% YTD
  • Russell 2000 +11.8% YTD

NY Post : Visa buys ‘CryptoPunk’ NFT for $150K in ethereum

Visa buys ‘CryptoPunk’ NFT for $150K in ethereum

Visa announced Monday that it’s bought a non-fungible token of a digital artwork called a CryptoPunk for nearly $150,000.

NFTs are digital assets that represent ownership of virtual items like computerized art and sports highlights.

“We think NFTs will play an important role in the future of retail, social media, entertainment, and commerce,” Cuy Sheffield, Visa’s head of crypto, said in a statement. “This is just the beginning of our work in this space.”

CryptoPunks were one of the earliest NFT projects and have skyrocketed in value as collector’s items.

The CryptoPunks project includes a total of 10,000 unique pixel-art portraits of people, zombies, aliens, and apes.

“Over the last 60 years, Visa has built a collection of historic commerce artifacts – from early paper credit cards to the zip-zap machine,” Visa said Monday on Twitter. “Today, as we enter a new era of NFT-commerce, Visa welcomes CryptoPunk #7610 to our collection.”Larva Labs, which created the CryptoPunks in 2017 on the Ethereum blockchain, says on its website that the series “inspired the modern CryptoArt movement.”

Transaction records show that Visa bought the CryptoPunk NFT for 49.5 ethereum last week, when that amount of the digital currency was worth just under $150,000.

As of Monday morning, that amount of ethereum would be worth just over $165,200, showing how volatile cryptocurrencies can be.


“NFTs have the potential to become a powerful accelerator for the creator economy and lower the barrier to entry for individual creatives to earn a living through digital commerce,” Visa’s Sheffield said. “NFTs are starting to usher in a new form of social commerce that empowers both creators and collectors.”

Sheffield noted that NFTs present new opportunities for musicians, artists and other creators to connect with fans. He also said there are untapped opportunities for small and medium-sized businesses in the space.

The market for NFTs exploded earlier this year, with $2.5 billion in sales in the first six months of 2021, up from just $13.7 million in the first half of 2020.

Sheffield said NFT sales have already surpassed $1 billion in August alone, citing data from OpenSea, an NFT marketplace.

NFTs, or one-of-a-kind, verifiable digital assets that grabbed headlines around the world when Sotheby’s sold an NFT by the artist Beeple for a whopping $69 million.

Celebrities and internet has-beens have jumped on board, trying to cash in on the new form of ownership that’s fueling billions in transactions.Even hotel heiress Paris Hilton announced in June that she invested in Origin Protocol, a decentralized platform that’s focused on launching NFTs and joined the company as an adviser.

“I see NFTs, or non-fungible tokens, as the future of the creator economy,” Hilton said in an April blog post. “Whether art or music or fashion or design, NFTs allow me to express myself and allow all creators to directly reach their audience, creating a new type of marketplace.”

(ZH) Morgan Stanley: The US Consumer Is Headed For A Double-Dip Recession

Morgan Stanley: The US Consumer Is Headed For A Double-Dip Recession

Two weeks ago, well before most banks slashed their GDP forecasts (most notably Goldman who took a machete to its Q3 GDP estimate of 8.5% and now sees just 5.5% growth in Q3), we noted that "a sudden negative change" had taken place in the economy, predicting (correctly) that retail sales would be a big miss (they were). Specifically, we looked at the latest ominous trend in consumer spending which was notably inflecting lower at a time when the latest UMich survey found that reactions to market prices on purchases for homes, vehicles, and household durables were the most negative ever recorded in the long history of the surveys, with a record number of respondents remarking on the bad buying conditions for virtually every product category.
And while most banks have been quick to attribute the sudden freeze in consumer spending to covid fears, one analyst agreed with our view that something more fundamental had changed: as Morgan Stanley's chief equity strategist Michael Wilson writes this morning, "disappointing retail sales and consumer sentiment suggest the US consumer is fading" and while Wilson shares our view that most blame Delta he, like us, thinks this is more about a payback in demand.
This is how Wilson - who just last week was tapped on the shoulder and hiked his year-end S&P price target - lays out his typically contrarian view:
There is an old adage that says never bet against the US Consumer's willingness to spend. In fact, it was one of the primary reasons we led the charge on recommending consumer cyclicals back in April 2020 at the depths of the COVID recession. Indeed, with Congress expeditiously providing record amounts of fiscal stimulus last year, the table was set for a major consumer stand against the downturn. Fast forward 16 months and it's fair to say the US consumer has not disappointed. But, after a year of remarkable resilience from the US consumer, it begs the question: "Is it sustainable?" While there is little doubt about the US consumers' willingness to spend, the other key variable to consider is their ability to spend.
To be sure, this isn't the first time Wilson has turned bearish on the US consumer: back in April, after riding one of the best periods of outperformance for consumer discretionary stocks in history, Morgan Stanley downgraded the sector given the bank's view for an eventual payback in spending during the pandemic.
The reasons were twofold:
  • first, there wasn't much of a recession at all when looking at Real Personal Consumption over the last 18 months.
  • second, It's the same story when looking at nominal retail sales which tells us we should expect a reversion to trend now that the stimulus is behind us.
These observations have not been lost on the market: since April, consumer discretionary stocks have underperformed and it's accelerated over the past few weeks as consumer confidence and retail sales numbers disappointed (Exhibit 3 and Exhibit 4).
The relative underperformance has been even worse for Amazon, the king of retail during the pandemic. With the company suggesting there will be payback on demand, Wilson warns that "this seems like a pretty good leading indicator of what to expect for consumer discretionary more broadly" adding sarcastically that last time he checked, "consumption is 70% of the economy and that's a big number to overcome, even if investment comes back strongly next year as our economists expect."
And yet, with all of this very clear writing on the wall with respect to potential payback in consumption, Wilson was surprised to see the consensus shrug off the recent collapse in the UMich consumer confidence survey. In fact, even with his increasingly bearish view on consumption, he were a bit "shocked" by just how dramatic of a fall the survey produced:
  • First, the headline plunged to new cycle lows, below the levels witnessed during the worst of the lock downs and when it really did feel like a recession.
  • Second, it's not unprecedented for consumer sentiment to fall to new lows post a recession. In fact, we saw the same thing in the prior two recessions (red circles on Exhibit 5). In the 2001- 2009 and 1982-89 expansions, consumer sentiment never really recovered and both of those cycle proved to be less exciting for consumer oriented stocks and the economy. Contrast that with the 1990-2000 and 2009-2020 expansions where the consumer sentiment continued to climb and fueled the longest and strongest recoveries on record.
So all else equal, just looking at the chart below one would conclude that the US consumer is headed for a double-dip recession even as stocks make new all time highs.
Needless to say, it will be important to see if consumer sentiment can recover in the months ahead as it will determine what kind of economy cycle we are likely to experience both in terms of its duration and what leads.
Wilson's take of this troubling development is that this lines up with his view for "a hotter but shorter cycle" as demand was pulled forward in this cycle like never before. The problem is what happens next: payback is likely in the near term as consumption reverts back toward trend as illustrated earlier. This spells trouble for the consumer discretionary sector and any sector that is over reliant on an ebullient consumer.
Bottom line, Morgan Stanley continue to recommend long consumer staples over discretionary, preferably equal-weighted as shown in Exhibit 3but market cap weighted should work, too.
Separately, and in keeping with the bank's recent downgrade of the semiconductor sector, Wilson adds that consumer electronics is another area which looks especially vulnerable which is one reason Morgan Stanley remains cautious on semiconductors and parts of Tech hardware. Here the strategist notes that "another trade we continue to like is communication services over semiconductors which has been working this year but has been trading in a range lately and looks ready to break higher if we are right about our payback in demand thesis and a consumer that is less optimistic."
Outside of equities, Wilson also believes that the recent consumer weakness also explains why bond yields have remained so stubbornly low even in the face of high inflation readings and a Fed that is moving ever closer to tapering (aside from the fact that the bulk of the selling appears to originate during Tokyo hours suggesting that it may be far more flow based than fundamental). The fact that Morgan Stanley's cyclicals/defensive stock ratio broke to new lows last week is a sign that yields may soon follow.
Ironically, if the Fed were to talk more aggressively about tapering at this week's Jackson Hole meeting, Wilson thinks it would lead to lower yields in the near term as the bond market may view that as a mistake as growth is decelerating and the Consumer is fading. Such a move would further support the bank's more recent defensive tilt and while it may weigh on the bank's preferred financials position, Wilson is keeping that side of the barbell in the case it is wrong about growth decelerating more than expected and rates rip to the upside.

WSJ : Vox Media Agrees to Acquire Punch, Weighs Going Public

Vox Media Agrees to Acquire Punch, Weighs Going Public
Digital media company is buying a cocktail website founded by Bertelsmann’s Penguin Random House

Vox Media LLC said Monday it is buying Punch, a cocktail website founded by Bertelsmann SE’s Penguin Random House, part of a bid to deepen its coverage of food and drinks.

Vox Media and Penguin Random House declined to disclose terms of the deal.

The deal with Punch comes as Vox Media—owner of tech-focused website the Verge, current-events site Vox.com and sports-focused SB Nation—is considering several options that would allow the company to finance further expansion, according to people familiar with the matter. Those options include going public through a special-purpose acquisition company, or SPAC, a traditional IPO or raising additional funding, said the people familiar with the matter.

Talia Baiocchi, the founder and editor in chief of Punch, will join Vox Media and report to Amanda Kludt, editor in chief of the Vox Media food site Eater. In an interview, Ms. Kludt said she sees opportunities for collaboration between the two sites, including maps that help readers find the best food and drinks in their cities.

Several digital-media companies have explored going public this year to raise capital for acquisitions and provide venture investors with long-sought returns. Executives at Group Nine Media, Vice Media Group and Vox Media have all considered SPAC mergers, and BuzzFeed has reached a SPAC deal that is slated to close later this year.

SPAC mergers provide a quicker path to the public markets but can come with risks and trade-offs for investors, as companies try to determine their valuation and line up financing. The market has cooled of late, with shares of many companies that merged with SPACs having dropped in recent weeks.

Punch is the fifth acquisition Vox Media has made in the past several years. In April, it struck a deal to acquire Cafe Studios, maker of the podcast “Stay Tuned With Preet,” which is hosted by former Manhattan U.S. Attorney Preet Bharara.

Vox Media expects to generate about $400 million of revenue this year and turn a profit, people familiar with the matter said. The New York Times earlier reported Vox Media was weighing offers to go public.

Vox Media has covered the dining industry since 2013, when it acquired Eater as part of a $30 million deal that also included real-estate site Curbed and now-closed fashion site Racked. New York Media, which Vox Media acquired in 2019, operates the food site Grub Street.

Ms. Baiocchi said in an interview that Punch was originally conceived as an online magazine with Crown Publishing, an imprint of Penguin Random House that published a book she wrote. Launched in October 2013, Punch was run out of Ms. Baiocchi’s living room for the first two years with a small budget and a mission to cover wine, spirits and cocktail culture.

Readership of the site grew and advertisers came with it, Ms. Baiocchi said. Liquor-industry heavyweights, including Bacardi Ltd. and Campari Group SpA, became advertisers, spurred in part by word-of-mouth marketing by industry enthusiasts. In addition to its articles and drinks recommendations, Punch has produced 10 books and gift products and has launched a branded content studio and an events business. Ms. Baiocchi declined to disclose how much revenue Punch generates and whether it is profitable.

In early 2020, Penguin Random House began exploring a sale of Punch after Ms. Baiocchi realized that the site needed additional tools and resources to grow. Over margaritas at Claro in Brooklyn, N.Y.’s Gowanus neighborhood, Ms. Baiocchi and Ms. Kludt discussed the possibilities for a deal.

“Everyone in the cocktail industry reads Punch,” Ms. Kludt said. “They have a large consumer audience, and they’re a must-read for everyone in the trades.”

Punch and Eater share many advertisers in the liquor industry, so the deal will make Vox Media a more important partner for its clients in that category, said Ryan Pauley, Vox Media’s chief revenue officer.

“The brands are going to get a lot more leverage out of the partnership between Punch and Eater as one company than they have in the past,” Mr. Pauley said.