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MicroStrategy Makes $250M BTC Investment, as YAM Sees $60M Collapse — Crypto News of the Week

2020.08.15 Adam James

Once again, it was an eventful week in the world of blockchain technology and cryptocurrencies. We saw the billion-dollar company MicroStrategy buy more than $250 million in BTC, a DeFi project collapse by $60 million in minutes, and a major derivatives exchange change its tune on KYC requirements — these stories and more in this edition of OKEx Insights' Crypto News of the Week.

Nasdaq-listed MicroStrategy buys 21,454 BTC for reserves

After first revealing its plans to hedge against inflation with alternative assets — such as Bitcoin (BTC) and gold — late last month, MicroStrategy has purchased over $250 million in BTC. Specifically, the Nasdaq-listed business intelligence company valued at $1.2 billion acquired 21,454 coins, though it did not reveal the details of exactly how the coins were purchased.

MicroStrategy Incorporated's CEO, Michael J. Saylor, explained in a press release:

“Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders. This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”

Key takeaways:

  • MicroStrategy's significant purchase of BTC as a primary treasury reserve asset, as well as the statement from the company's CEO, serve as endorsements for the first and foremost cryptocurrency and lend significant legitimacy to the case of Bitcoin as an alternative investment.
  • It stands to reason that more publicly traded companies may look to BTC as a reserve asset — particularly if MicroStrategy's plan pays dividends in the near future.
MicroStrategy stock price, year-to-date
MicroStrategy Incorporated stock chart, year-to-date. Source: Google

DeFi project YAM collapses from $60M to $0 almost instantly

Yam Finance, a yield-farming "experiment," collapsed after having only existed for roughly two days — dropping from a market capitalization of $60 million to $0 in less than one hour.

The price of one YAM token peaked at approximately $167 before becoming worthless after a critical bug was discovered that saw the protocol render governance impossible.

The project has since announced plans to migrate to new protocol, YAM 2.0.

Key takeaways:

  • The exuberance surrounding yield farming and decentralized finance may be tempered by this not-entirely-unexpected failure.
  • The short-lived hype surrounding YAM and its subsequent collapse will serve as a warning not only to the DeFi community but also to the wider cryptocurrency community, which has become extremely greedy in recent weeks.
Seven day chart showing collapse of YAM's market capitalization
The total market capitalization of YAM over the past 7 days. Source: CoinGecko

Ethereum mining profit hits two-year high as transaction fees soar

The per-day profit of mining Ether (ETH) hit highs this week not seen in over two years — a direct result of skyrocketing transaction fees on the Ethereum network and increased demand for ETH and DeFi tokens.

The average transaction fee USD valuation on the Ethereum network has not been this high since 2015, as per data sourced from Blockchair. Likewise, the median transaction fee in ETH is at all-time highs.

Key takeaways:

  • The mania surrounding decentralized finance is taking its toll on the Ethereum network, which powers almost every DeFi platform.
  • Scalability has been a primary concern for Ethereum for years, and the skyrocketing transaction fees only underscore the importance of Ethereum 2.0 solving scalability issues.
ETH median transaction fee
A chart illustrating the median transaction fee in ETH. Source: Blockchair

Revolut's crypto holdings grew 152% year-over-year

Revolut is reporting strong results in regard to the crypto side of its business. According to an annual report from the European fintech unicorn and alternative banking solution, its customers held £93.3 million in crypto assets at the end of last year — a 152% increase from the £37.1 million held at the end of 2018.

Despite the increased growth in Revolut's crypto business, the company is still operating at a loss.

Key takeaways:

  • Though this remains unconfirmed speculation, it stands to reason that the value of crypto being held in Revolut has and/or will increase in 2020 — based on the previous year-over-year growth, increased interest from institutional investors, and the potential for U.S. banks to provide custodial solutions for digital assets.
  • Rumors continue to persist that fintech giant PayPal will soon be launching crypto brokerage services via Paxos, which may be partly in response to increased demand for cryptocurrencies in the fintech sector.

BitMEX to enforce mandatory user identification requirements

BitMEX has announced that all users will be subject to mandatory identity verification, after years of only requiring an email address, password and country of residence. The new verification requirements will see users needing to submit proof of location and answer questions about trading experience, among other things, by the end of a "grace period" concluding in February 2021.

Key takeaways:

  • BitMEX has long been a primary destination for individuals looking to trade crypto derivatives with high leverage and virtually zero KYC requirements. Mandatory identity verification will certainly change the face of the exchange, as well as trim its user base in the near term.
  • The primary motivation for BitMEX's new policy likely stems from fears of increased regulatory pressure and scrutiny. Its parent company, HDR Global Trading Limited, is incorporated in the Republic of Seychelles — where individuals are not permitted to use the exchange.
Decreasing daily volume for BTC futures on BitMEX
BitMEX BTC futures daily volume has been decreasing over time. Source: skew.

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.