Market commentary from 13.01.2021

An overview of what is happening in the crypto markets, summarised by Crypto Finance AG Senior Trader Patrick Heusser in the market commentary.

Market commentary

Good Morning!

Mining reward tokens meet DeFi yield farming.

Yes, it sounds crazy, but it is actually a pretty straightforward investment. One of the biggest cloud mining platforms, Poolin, has launched the pBTC35A (ERC20) token. It features the following:

  • Power efficiency –> 35 J/TH
  • Electricity costs –> $0.0583/kWh

The (let’s call it) IPO price of this token is USDT 100 per 1 pBTC35A token. You might now be asking yourself “What is its fair value price?”

Two of the four variables regarding the profitability of a mining pool are fixed (see above). What’s left is the price of the mining hardware device (in this case the Bitmain’s AntMiner S19) plus the price of bitcoin. The price of bitcoin should only become relevant when it goes below the current break-even price for mining. According to miner profitability data tracked by Poolin and F2Pool, break-even is at around $6,500.

So, what is the fair value now?

1 AntMiner S19 has a computing power of 95 TH/s –> current cost is $6,200

1 pBTC35A token represents 1 TH/s (with the two fixed variables described above)

Calculation: AntMiner price / Terahash units = 6200 / 95 = $65

The CEO of Poolin justifies this hefty premium as a convenience cost. Imagine you would need to run the mining operation yourself.

Initially, I thought this might be a nice diversification in a crypto portfolio. But after going through the pricing structure of the token, I believe the price will highly correlate with the price of bitcoin.

Read more about this topic here.

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About the author

Patrick Heusser

Patrick Heusser is Head of Trading at Crypto Broker AG. Prior to joining the company, Patrick worked as an Interest Rate Trader at UBS and held various positions in the IRCC (interest rate, commodity and foreign exchange trading) in London, New York, Singapore and Zurich. Patrick is an expert in trading and risk management. He also gained experience in other areas, such as building start-up companies. Patrick has a degree in banking from a business school. He has also taken various courses in technical chart analysis.