Here’s What You Missed in Crypto This Week

As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week’s top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.

SEC APPROVES SPOT ETHER ETFS: The Securities and Exchange Commission approved the first U.S. exchange-traded funds investing directly in cryptocurrency Ether, Bloomberg’s Emily Graffeo and Suvashree Ghosh reported Monday, citing filings and statements from asset managers. 21Shares, Bitwise Asset Management, BlackRock (BLK), Invesco, Franklin Templeton, Fidelity Investments and VanEck were among the issuers to receive approval. “Our clients are increasingly interested in gaining exposure to digital assets through exchange-traded products which provide convenient access, liquidity and transparency,” Jay Jacobs, U.S. head of thematic and active ETFs at BlackRock, said in a statement. (read more).

RIOT ACQUIRES BLOCK MINING FOR $92.5M: Riot Platforms (RIOT) announced Tuesday that it has acquired Block Mining for total consideration at closing of $92.5M. Riot paid the purchase price through $18.5M of cash from its balance sheet plus $74M of Riot common stock. Additional consideration, up to a maximum of $32.5M, can be earned by Block Mining through 2025 through the execution of additional power purchase agreements to add additional power capacity. The acquisition of Block Mining immediately increases Riot’s hash rate, expands Riot’s footprint geographically, and provides exposure to additional energy markets outside of ERCOT. Block Mining is a vertically integrated bitcoin miner consisting of two operational sites, both in Kentucky, totaling 60 MW of operational capacity with potential to expand up to 155 MW. Of the existing and operational 60 MW, 23 MW are currently being used for self-mining, 19 MW are vacant and available for immediate miner deployment, and 18 MW are contracted by bitcoin mining tenants under hosting agreements. Riot intends to further expand Block Mining’s two sites, targeting 110 MW for self-mining operations by the end of 2024. Additionally, Block Mining owns a greenfield expansion opportunity also in Kentucky, adjacent to an existing substation, presenting an opportunity to develop 60 MW and with potential to expand to 150 MW. Block Mining’s team will remain in place to operate existing assets in Kentucky and drive expansion. (read more)

On Wednesday, Riot announced that it was successful in its application to the Ontario Capital Markets Tribunal to cease trade the June 10, 2024 shareholder rights plan implemented by the Board of Directors of Bitfarms (BITF). The cease trade order terminated Bitfarms’ Poison Pill, which contemplated a 15% trigger. Jason Les, CEO of Riot, stated: “This ruling from the Tribunal in favor of Riot’s application is a win for all Bitfarms shareholders. The adoption of the off-market Poison Pill is yet another example of the broken corporate governance that plagues Bitfarms and of the ongoing attempts by the Bitfarms directors to entrench themselves. We appreciate that the Tribunal acted quickly and decisively to remove the Poison Pill. We continue to believe that our three director nominees – John Delaney, Amy Freedman and Ralph Goehring – must be elected to the Bitfarms Board at the 2024 Special Meeting of Shareholders scheduled for October 29, 2024 in order to repair Bitfarms’ poor corporate governance.” (read more)

Following the decision, Bitfarms issued a statement in response and announced that its Board of Directors has unanimously approved the adoption of a new shareholder rights plan. “The Tribunal has decided to cease trade Bitfarms’ Rights Plan, which effectively terminates the Rights Plan. The Rights Plan was put in place to preserve the integrity of the independent Special Committee’s strategic alternatives review process in light of attempts by Riot to opportunistically acquire the company,” said Brian Howlett, Lead Director. “In light of this decision, the Bitfarms Board has adopted the New Rights Plan to ensure the interests of all shareholders are protected. The Board and the Special Committee remain committed to maximizing value and seeking to achieve the best outcome for the Company and its shareholders.” The plan has been adopted to ensure that all shareholders of the company are treated fairly and equally in connection with any unsolicited take-over bid or other acquisition of control of the company. The plan is not being adopted in response to any specific proposal to acquire control of the company, and the board is not aware of any pending or threatened take-over bid for the company. However, the board is aware that Riot is seeking to replace three directors on the Bitfarms board at the company’s hybrid special meeting of shareholders. The plan allows Riot to proceed with its nominations and solicit proxies in respect of the meeting. (read more)

Additionally on Wednesday, Needham lowered the firm’s price target on Riot to $13 from $15 and kept a Buy rating on the shares. The firm is reducing its FY24 EBITDA view to $542M from $614M to capture reported monthly production numbers and power curtailment credits through June while also lowering its assumption for bitcoin transaction fees which decelerated through the quarter, the analyst said. (read more)

Meanwhile on Thursday, Stifel initiated coverage of Riot with a Speculative Buy rating and $18 price target. Riot has faced operational headwinds in the past, but the company is approaching a turning point with the phased build-out of Corsicana, fleet upgrades at Rockdale and the acquisition of Block Mining, said the analyst, who thinks the market currently underappreciates Riot’s “clear line of sight in becoming the largest Bitcoin miner and cementing market leadership.” The company is financially well-positioned with about $1.2B in net cash, affording the flexibility for strategic growth opportunities, the analyst added. (read more)

COINBASE FINED OVER SERVICES TO HIGH-RISK CUSTOMERS: On Thursday, the U.K.’s Financial Conduct Authority announced CB Payments Limited has been fined GBP 3,503,546 for repeatedly breaching a requirement that prevented the firm from offering services to high-risk customers. CBPL is part of the Coinbase Group (COIN). The firm entered into a voluntary requirement in October 2020, which followed significant engagement with the FCA relating to concerns about the effectiveness of CBPL’s financial crime control framework. The VREQ prevented CBPL from taking on new high-risk customers while it addressed issues with its framework. Despite the restrictions in place, CBPL onboarded and/or provided e-money services to 13,416 high-risk customers. Approximately 31% of these customers deposited around $24.9M. These funds were used to make withdrawals and then execute multiple cryptoasset transactions via other Coinbase Group entities, totaling approximately $226M. Therese Chambers, joint executive Director of Enforcement and Market Oversight at the FCA said: “The money laundering risks associated with crypto are obvious and firms must take them seriously. Firms like CBPL that enable crypto trading need to have strong financial crime controls. CBPL’s controls had significant weaknesses and the FCA told it so, which is why the requirements were needed. CPBL, however, repeatedly breached those requirements.” (read more)

On Tuesday, Citi upgraded Coinbase to Buy from Neutral with a price target of $345, up from $260. The analyst said shifts in the U.S. election landscape and the Supreme Court’s overturning of the long-standing Chevron precedent has changed its view on Coinbase’s regulatory risks. The Major Questions Doctrine likely increases judicial scrutiny of the SEC’s regulation by enforcement strategy, the analyst said. While Coinbase shares are up 52% year-to-date, the opportunity from a more conducive regulatory environment is “too large to ignore,” contended Citi. It believes this could potentially unlock sidelined institutional capital. Coinbase could also benefit from a potential U.S. crypto catchup against relatively higher on-chain activity that has developed abroad, added the firm. (read more)

MARA PURCHASES $100M OF BITCOIN: MARA (MARA) announced Thursday that it has purchased $100M of bitcoin and currently holds over 20,000 BTC on its balance sheet. Furthermore, effective immediately, MARA will adopt a full HODL approach towards its bitcoin treasury policy, retaining all bitcoin mined in its operations, and will periodically make strategic open market purchases. “Adopting a full HODL strategy reflects our confidence in the long-term value of bitcoin,” said Fred Thiel, CEO. “We believe bitcoin is the world’s best treasury reserve asset and support the idea of sovereign wealth funds holding it. We encourage governments and corporations to all hold bitcoin as a reserve asset.” (read more)

IRIS ENERGY PRICE TARGET RAISE: On Wednesday, Canaccord raised the firm’s price target on Iris Energy (IREN) to $15 from $12 and kept a Buy rating on the shares. The firm said while bitcoin mining remains an attractive ROI business model, the company is now sitting in a position of relative bargaining strength as it ponders how to monetize ~2GW of procured power, all of which is expected to come online in the next couple of years. (read more)

Additionally on Wednesday, the company announced it has secured an additional 150MW of immediately available power capacity at its Childress site. This increase follows the approval of network studies by ERCOT and execution of an amended connection agreement with AEP. This increases the company’s total secured grid-connected power capacity to 2,310MW. (read more)

CRYPTO STOCK PLAYS: Publicly traded companies in the space include Bit Digital (BTBT), Coinbase, Core Scientific (CORZ), Greenidge Generation (GREE), Marathon Digital, MicroStrategy (MSTR), Riot Platforms, Stronghold Digital Mining (SDIG) and TeraWulf (WULF).

PRICE ACTION: As of time of writing, bitcoin rose about 1% this week to $67,610 in U.S. dollars, according to CoinDesk.