Author: Liu Jibin, senior Bitcoin miners, 500.COM Chief Observer
Original title: Is “Mining Capitalization” a short-lived or the general trend?
The establishment of the business model of mining capitalization relies on three conditions: one is that Bitcoin does not have the probability of returning to zero by default; the second is to agree to maintain a unilateral upward trend in the long run; and the third is that the situation of large fluctuations in currency prices will be long-term And it exists from time to time.
Since 2020, as the price of Bitcoin has gone wild, some listed companies with virtual currency “mining” as their main business have emerged one after another, such as RIOT Blockchain, Bit Digital, Marathon Patent Group and several other companies in the United States and Canada. The stocks of listed companies have skyrocketed, attracting attention and become a major attraction in the capital market. Coincidentally, 500.COM, an old NYSE listed company listed on the stock exchange for many years, also suddenly issued a new personnel appointment announcement on December 21. It entered the field of blockchain and cryptocurrency with a high profile. 500.COM shares rose by 134% on that day. And trigger the fuse. So, is the combination of “mining” business and capital market a result of individual companies taking advantage of the rising currency price, or is it based on the general trend of the situation?
Some commentators believe that, although the short-term performance trend of many listed companies with the theme of “mining” is in the ascendant, it does not reflect their true commercial value. It is just a short-lived caused by the rise in the currency price. Fight back to its original shape. The long-term fluctuation of currency prices will cause the income of listed companies to be unstable. Therefore, for the capital market, “mining” as a business model is not mature enough.
However, as the country’s attitude towards “mining” has gradually become rational and relaxed, Bitcoin’s global consensus value continues to accumulate, and the investment mentality and organizational capabilities of “miners” have become more mature, the “mining” business has become more sophisticated than before. At any time, it is more in line with the tone of capital, and it is more likely to be sought after by the capital market.
1. Policies are becoming looser, and “mining” compliance has become the main theme.
In China, “mining” used to be synonymous with “grey area” and “side-scrubbing”. From defining “mining” as backward technology, including it in the eliminated industry, to removing it from the list of eliminated industries, and then policy Supporting mining, this series of subtle changes is having a significant impact in the field of “mining”. In Sichuan, Ganzi, Ya’an, Liangshan and other cities have successively supported blockchain “mining” and built demonstration areas for hydropower consumption. Take a large block chain big data center in Ganzi Prefecture, which is invested and operated by 500.com, a listed company, as an example. The “mine” commonly known among the population in this circle is firmly exploring the path to compliance, except for the formal power usage approval. The data center also has complete qualification procedures for park approval, project filing, environmental assessment, energy assessment, safety assessment, water conservation, fire protection, IDC permit, etc. given by relevant government departments. It can basically match the qualifications and qualifications of standard IDC data centers. The standards are in line.
As the “channel” of “mining” business logic, digital currency exchanges have also begun to actively embrace supervision and explore compliance. On December 15, OSL, a subsidiary of BC Technology Group (863.HK), was the first to obtain the first virtual asset license (or digital asset license) issued by the Hong Kong Securities Regulatory Commission, and also became the first digital Huobi exchange in China to obtain a license; Mainstream domestic exchanges such as Huobi, OKEX, and Binance continue to strengthen their compliance and security strategies, and obtain policy support by cooperating with national security supervision. For example, Huobi launched the “Technology Assisting Police Channel” as early as the beginning of 2019, providing important data and powerful technical support for the judicial authorities in the data analysis, evidence collection, and fund tracking of blockchain fraud and money laundering cases.
Mines and exchanges are the focus and difficulty of the “mining” business in pursuing compliance. This “one tandem”, “one reality and one virtual” compliance trend is consistent. Although it is not to cater to the taste of capital, it will Perceived by capital. In fact, capital has always been ambiguous and entangled in “mining” before: not only greedy for its “beauty”, but also feel that it is not “right to the right”. From this perspective, the gradual “regularization” of the various sectors of “mining” has also solved the “threshold” problem for the capital market to accept the “mining” business.
2. The consensus continues to grow, and the stable rise of currency prices promotes the stability of the business model.
The steady rise in the value of Bitcoin is undoubtedly the key to strengthening the “mining” business model, and the consolidation of the value of Bitcoin in the final analysis depends on the increase in the consensus of investors, especially various financial institutions, on Bitcoin.
Since 2020, many asset management institutions around the world have strongly acquired Bitcoin and become the main buyers in the Bitcoin trading market. Grayscale funds continue to buy, buy and buy, and continue to increase their holdings of bitcoins, but they can’t get in; investment institutions such as Block.one (EOS parent company), Microstrategy, One River and other investment institutions also show their “pinxie” qualities and increase their positions. At the same time, traditional financial institutions such as banks, insurance companies, and payment companies are also vigorously strengthening their layout in the cryptocurrency market. Singapore’s DBS Bank has launched fiat currency trading services for mainstream cryptocurrencies; Massachusetts Life Insurance Company of the United States buys bitcoin for its general investment accounts; cross-border payment platform Paypal allows users to buy, sell and hold bitcoin on the platform; Visa also Announced support for cryptocurrency payments; Jack Dorsey, CEO of mobile payment giant Square, even believes that “Bitcoin will eventually become the world’s single currency in the next ten years.” The long-term deployment of Bitcoin by many financial institutions has a considerable role in promoting the consensus of Bitcoin. It not only greatly increases investors’ confidence in the value of Bitcoin, but also reduces circulation by “snowing” a considerable amount of Bitcoin, which strengthens Bitcoin. “Golden” attribute of preservation and appreciation.
Based on the above-mentioned changes in attitudes and behaviors towards Bitcoin, the business model of “mining” entering the capital era has become more apparent. We assume several judgments as the basis for the establishment of this business model:
One is that Bitcoin does not have a zero probability by default;
The second is to agree to maintain a unilateral upward trend in the long run;
Third, the situation of large fluctuations in currency prices will exist for a long time and from time to time.
The above-mentioned investment institutions’ “Pixiu-style” currency deposit actions represent their high recognition of the first two points. At the same time, the firm actions of these institutions are implicitly guiding this trend. In contrast, the third point is actually just a problem of cash flow tolerance, and this point is relatively easy to solve for capital.
3. “Miners” are becoming more mature and are no longer “Wu Xia Amen”.
The early “miners” were relatively cute and simple. From their point of view, “mining” was for making money, and “posture” was not important. Just do it if you see it right, don’t be too complicated. But in a series of cases, “mining” is like playing an online game. The difficulty is low at the beginning and “naked” is invincible. It can be carried by a few hard strokes. The boss level becomes higher and higher after the game, and the chance of seeing game over is also higher. The bigger one comes, you don’t choose a helmet for defense, buy a cane for attack, and add rubies to thicken the blood. How many lumps can you endure? In the 2.0 version of “Mining World”, capital blessing may become an important factor for players to “clear the customs”:
(1) Increase life value: The blood thickness can withstand the toss, the redundant fund plan is sufficient, and the currency price plummets, which can effectively defend against the dimensionality reduction blow caused by the currency price fluctuation;
(2) Adding physical attacks: Capital has always been a weapon for model duplication and expanded reproduction. As long as the model is proved to be stable and feasible to the capital market, capital can provide more bullets for “miners” to improve their combat effectiveness.
(3) Spell value addition: Who said that “mining and killing monsters” can only smash head-on? Compared with the earlier simple “mining” mode, “capitalized mining” is a fantasy game that does not require close combat.
(4) Team bonus: Capital is a platform and has its own halo. Head resources such as high-quality mines, sticky mining pools, and large-scale mining machine holding institutions will inevitably release a bonus effect of 1+1 greater than 2 after the integration of the capital platform!
Compared with the case of the “martyrs” who collapsed on the beach at the end of 2018, the “survivors” and “latecomers” have accumulated enough blood of themselves or others, and they will treat “mining” more rationally. The relationship between business income and risk has also become more aware of the blessing effect of the “capital” set of superb equipment on “mining and fighting monsters”. In the past, it was “dare to think” (compliance is difficult to solve) and “too lazy to think” (mining income is high and win-win), but now it is the trend and imperative. It is foreseeable that in the near future, more leading resources in the “mining” industry chain will be capitalized and integrated.
“Mining” was not a “laying win” before, and it will not be a “laying win” in the future. Only by participating in the wave of “mining capitalization” can we avoid the ultimate risk and enjoy business dividends to the maximum. With the blessing of capital, the closed-loop “mining” model of own high-quality mines + equal-loaded own mining machines + redundant capital plan is obviously a more stable, lasting and imaginative business model, and it will definitely It will drive the “mining” ecological chain to take off again.
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