#42 Tesla sells majority of Bitcoin holdings. ETH Merge Hype Everywhere.
Disclaimer: Everything we write in "The Crypto Insider Report" is an x-ray of the industry as we see it, through the lens of publicly available information. We are not financial advisors.
ETH Merge Hype Everywhere
I expect by now you are probably aware of the recent price rally ETH had. From around 1100$ to around 1600$ in what, something like a week? A cool 40 something percent. Some people are excited, some people are scared that a dump will follow from folks who want to make some profits in a bear market.
You probably also heard about ETH’s merge event. That’s when, essentially, Ethereum switches from proof of work to proof of stake, changing the model from miners verifying transactions to staking validators doing that work. Fewer compute cycles are used, no more need for crazy strong GPUs, all leading to a greener network. Awesome stuff. A piece in CoinDesk poses the question if the recent rally is driven by the merge announcement:
The main argument for this is that currently, for miners to be profitable as a business, they need to sell the ETH rewards they are gaining. In the new proof of stake model, running a validator will be significantly less expensive, so there would be less of a need to keep selling the rewards, relieving the sell pressure. Furthermore, the staked amount is locked. Everything put together can create a supply squeeze which would drive the price up. This thread sums it up:
As with everything in Crypto [and life, for that matter?], nothing is certain. Use your best judgement and don’t bet the house.
Mihnea
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Tesla’s sale of a big chunk of its Bitcoin holdings put in context
Tesla sold approximately 75% of its purchased Bitcoin amount in Q2 2022, adding $936 million of cash to its balance sheet, according to its shareholder letter on second-quarter earnings.
Elon Musk stated the following on his call with analysts: “The reason we sold a bunch of our Bitcoin holdings was that we were uncertain as to when the COVID lockdowns in China would alleviate. [...] So it was important for us to maximize our cash position, given the uncertainty in China”. He left the door opened for future purchases mentioning that “we are certainly open to increasing our Bitcoin holdings in future. So this should not be taken as some verdict on Bitcoin”. Tesla did not liquidate any of its Dogecoin position, implying that it is relatively small / not significant enough.
To recap, in January 2021, Tesla updated its investment policy to provide the company with more flexibility to further diversify and maximize returns on its cash that is not required to maintain adequate operating liquidity (i.e. excess cash), allowing it to invest a portion of such cash in certain alternative reserve assets, including digital assets, gold bullions, gold ETFs and other similar instruments. In its FY 2020 report, the Company stated that it acquired $1.5bn of Bitcoin, while also selling down $272m during Q1 2021 to test and prove the liquidity of the Bitcoin market (as stated).
Since then, Tesla had diamond hands re: its Bitcoin holdings while being obliged to take impairment losses in its P&L (which reduced its profitability) given the current accounting mechanics surrounding digital assets. Thus, digital assets are considered indefinite-lived intangible assets and any decrease in their fair values below the Company’s carrying value for such assets at any subsequent time to their acquisition required Tesla to recognize impairment changes, whereas it was not allowed to make upward revisions for any market price increases until a sale. In plain words, when Bitcoin price went below the acquired price, the carrying amount had to be changed to the lowest value and the Company had to record an impairment charge (i.e. book an accounting loss to its P&L). This had to be repeated each quarter if Bitcoin price went further below to the revised carrying value.
The accounting bodies are currently reviewing the standards for book-keeping digital assets. Until then, we can notice how a downtrend in prices can affect a company’s profitability. This fact coupled with issues in one of Tesla’s key markets (China), supply-chain disruptions, pressures from shareholders on the renewables front, pressures to keep margins in check (and thus to reduce the impact of impairment charges) and macro-economic conditions can affect even one of the diamond-ish hands of us all. Or maybe it was just pure egotistical behaviour?
Razvan
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Minecraft bans NFTs and blockchain
The maker of the hugely well-liked "Minecraft" game, Mojang Studios, declared on Wednesday that it will not support or enable the use of NFTs and other blockchain-related items in the game. Mojang Studios were bought by Microsoft in 2014 for $2.5 billion, so this might have something to do with it, knowing that Microsoft is building in silence its own version of the Metaverse.
Because NFTs are by their very nature highly rare collector's items, according to Mojang, they go against the game's cooperative and collaborative ethos. According to Statista, the ten-year-old sandbox game has sold an astounding 238 million copies, making "Minecraft" the all-time best-selling video game.
According to Mojang Studios, some third-party NFTs may not be dependable because they rely on blockchain technology, whose asset manager might vanish at any time. The corporation also objected to NFT prices that were inflated because of the FOMO they bring, which is totally unjustified.
Many other developers have likewise viewed NFTs with skepticism. Bloomberg claims that Ubisoft's entry into NFTs was condemned by its own staff. Play-to-earn blockchain games, according to Frost Giant Studios co-founder Tim Morten, are "dangerously close to a pyramid scheme," he said in an interview with Wired.
This matter was directly addressed on the minecraft.net website:
"As such, to ensure that Minecraft players have a safe and inclusive experience, blockchain technologies are not permitted to be integrated inside our Minecraft client and server applications nor may they be utilized to create NFTs associated with any in-game content, including worlds, skins, persona items, or other mods."
So far it makes sense, but we will see how this approach will be affected with every future step Microsoft is taking into the Metaverse direction, especially now with the purchase of Activision Blizzard for $68.7 billion.
Microsoft CEO, Satya Nadella, says: “When we think about our vision for what our metaverse can be, we believe there won't be a single centralized metaverse and there shouldn't be,” so maybe everybody will be able to have a strategy of its own when it comes to development, but a thing is clear: Metaverse will affect everybody.
Cosmin
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Should Your School be in 2022’s Top Universities for Blockchain?
(Image source: CoinDesk)
Coindesk is seeking our help until August 15th to identify worldwide universities that are paying attention to blockchain technology and Web 3 topics. 2022 has seen more and more universities worldwide follow the examples set by elite universities such as MIT and Oxford and have started building blockchain curricula and research centers to educate the next generation of developers, business executives and consumers.
MIT started leading the pack back in 2014 with the “Blockchain and Money” course taught at that time by Gary Gensler, who in 2021 became the chairman of the U.S. Securities and Exchange Commission (SEC). The course is now available to watch on YouTube on MIT’s channel. Since then hundreds of universities around the world have followed. For example, last week, University of Cincinnati announced that a recent donation has enabled the launch of two blockchain programs and a lab to begin this fall at its Carl H. Lindner College of Business. Similarly, Romania’s Faculty of Business Administration in Foreign Languages has kickstarted its blockchain initiatives with a series of blockchain focused workshops back in March 2022.
Against this backdrop, CoinDesk is kicking off its third annual Top Universities for Blockchain ranking, and are seeking nominations for any university with blockchain courses, faculty, clubs, conferences or research. The initiative, started in 2020, is tracking university blockchain activity and scoring schools worldwide for their scholarly impact, campus blockchain offerings, employment and industry outcomes.
By only submitting an informed application form, each school will be awarded two tickets to attend the Consensus event in person in 2023. If your school fits the criteria and is part of the minority that pays attenion to this emerging technology to the link below and fill in the form. Good luck!
https://www.coindesk.com/layer2/2022/07/20/nominate-your-school-for-the-2022-top-universities-for-blockchain/
Evelyne
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For more educational crypto content, check out the links below:
The Stakeborg DAO Talks on YouTube: https://www.youtube.com/playlist?list=PLOrFZZifNn4Nx4nSQL3WS52ALPXgrTSVG
Discord channel: https://discord.com/channels/901898461568442458/903006233584341052
StakeborgDAO Quarterly Reports: https://docs.stakeborgdao.com/reports/dao-quarterly-reports
Stakeborg Academy: https://academy.stakeborg.com/
Tnx🙏👍🦾
Very Well Done & Consistent ! Thank you !