Although that may cause a temporary decline in Bitcoin’s hash rate and result in liquidations, the hoarding by miners could intensify.
Bitcoin investors characterized as fundamentalists who are in it for the long haul, institutional investors that look to diversify and speculative investors that are day trading could all be set off at once to hoard Bitcoin as mining activity recedes.
When an asset is accumulated because of its unique features, then liquidity, safety and a guaranteed return of principal are considerations.
What the company effectively did is create a Bitcoin treasury by earning a yield on its loaned crypto assets that creates a liquidity effect in Bitcoin futures.
Bitcoin is gaining in scarcity premium — the measure of investors’ desire to hold the asset — and despite a higher volatility, the hoarding of Bitcoin puts it in direct competition with gold and treasuries.
The Bitcoin futures ETF’s implied interest — the interest rate equal to the difference between the spot rate and the forward or futures rate — has been moving higher because of the contango.
The expansion of the crypto-lending business is an important force to reckon with as Ether and stablecoin loans are favored by investors willing to take more risk on the basis that Bitcoin gains in treasuries’ status.
He holds a master’s degree from the University of Southern California, a master’s in economics from the University of Amsterdam, and certification in financial engineering from Columbia University.