Bitcoin hash rate continues to rise, but DeFi is under threat: Report
The start of 2023 raised hopes that the blockchain industry was on the road to recovery, but weaker-than-expected financial results and a flurry of negative news in February have cast doubt on those prospects. However, these headwinds do not affect all sectors of the industry uniformly. Non-fungible tokens (NFTs) and security tokens have managed to disconnect from the wider environment and showed positive signs in February, but the rest of the market remains cautious.
For those serious about understanding the various sectors of the crypto space, Cointelegraph Research publishes a monthly Investors Insights report that delves into venture capital, derivatives, decentralized finance (DeFi), regulation and much more. Compiled by leading experts on these various topics, the monthly reports are an invaluable tool to quickly get a sense of the current state of the blockchain industry.
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Can the mining industry consolidate its finances?
The bear market has witnessed several news stories about struggling miners, particularly publicly traded mining operations in the US with high debt levels that were correspondingly suffering from lower Bitcoin (BTC) prices. However, the release of new, highly efficient mining hardware in 2022 – such as Bitmain’s Antminer S19 Pro and S19 XP and Microbt’s WhatsMiner M53 – has resulted in efficiency gains of up to 30%, according to Hashrate Index data. Cointelegraph Research’s August 2022 Trend Report pointed investors to the release of this new hardware and predicted that the Bitcoin network’s hash rate would rise as a result.
Since August, the hash rate has actually continued to hit new records despite bearish market conditions, which traditionally cause a drop. Iris Energy has purchased 44,000 Antminer S19j Pro miners, and CleanSpark has also added 20,000 S19j Pro+ miners to its arsenal. This despite the fact that Iris Energy defaulted on its debt obligations back in November.
Staying ahead of the rest of the network is critical in the mining sector. Those who manage to raise capital and acquire new power-saving hardware earlier than others will be able to make significant money before the difficulty catches up. For miners who manage to raise this capital, there may be hope.
Intensifying regulatory pressure on the DeFi sector
Meanwhile, regulators are stepping up their enforcement actions, threatening the backbone of the DeFi sector. On February 12, it was revealed that the Securities and Exchange Commission had launched an attack on Paxos, a major stablecoin issuer. The SEC sent Paxos a Wells notice, informing the company of the regulator’s intention to file a lawsuit against it for offering unregistered securities — specifically referring to Binance USD (BUSD) as the security in question. In the wake of the warning, BUSD lost over 40% of its market value.
As stablecoins provide safe ways for traders to take profits, this breakdown is a major threat to the industry. Many fear that Paxos will not remain the only target and that these actions will become widespread. Labeling stablecoins as securities is a surprising move by the SEC, given that there is no obvious expectation of profit from them.
It remains to be seen whether the SEC’s action will be followed up with similar steps against Tether and its USDT (USDT) stablecoin, which is allegedly used by North Korea and Venezuela to avoid sanctions. Other important developments in this area can be found in the Regulation and DeFi sections of this month’s Investor Insights report from Cointelegraph Research.
The Cointelegraph Research team
Cointelegraph’s research department is made up of some of the best talent in the blockchain industry. Bringing together academic rigor and filtered through practical, hard-won experience, the researchers on the team are committed to bringing the most accurate, insightful content available on the market.
Demelza Hays, Ph.D., is the Director of Research at Cointelegraph. Hays has assembled a team of subject matter experts from finance, economics and technology to bring the premier source of industry reports and insightful analysis to the market. The team uses APIs from various sources to provide accurate, useful information and analysis.
With decades of combined experience in traditional finance, business, engineering, technology and research, the Cointelegraph Research team is perfectly positioned to put their combined talents to good use with the latest Investor Insights report.
The opinions expressed in this article are for general information purposes only and are not intended to provide specific advice or recommendations for any individual or about any specific security or investment product.
