ADVERTISEMENT

The start of 2023 raised hopes that the blockchain industry was on the road to recovery, but weaker-than-expected financial performance and a spate of negative news in February have cast doubt on this outlook. However, these headwinds do not affect all sectors of the industry evenly. Non-fungible tokens (NFTs) and security tokens managed to decouple from the broader 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 dives 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 for getting a quick idea of ​​the current state of the blockchain industry.

Download and purchase this month’s report at the Cointelegraph Research Terminal.

Can the mining industry consolidate its finances?

The bear market has seen multiple headlines about struggling miners, particularly publicly traded US mining operations with high levels of debt that consequently suffered from lower Bitcoin (BTC) prices. However, the release of new and highly efficient mining hardware in 2022, such as Bitmain’s Antminer S19 Pro and S19 XP and Microbt’s WhatsMiner M53, has result in efficiency gains of up to 30%, according to data from the Hashrate Index. Cointelegraph Research’s August 2022 trend report signaled investors to the release of this new hardware and projected that the hash rate of the Bitcoin network would increase as a result.

Since August, the hash rate has continued to reach new all-time highs despite bearish market conditions, which traditionally trigger a crash. Iris Energy has purchased 44,000 Antminer S19j Pro miners, and CleanSpark has also added 20,000 S19j Pro+ miners to its arsenal. This is despite Iris Energy defaulting on its debt obligations in November.

Staying ahead of the rest of the network is critical in the mining industry. Those who manage to raise capital and acquire new electricity-saving hardware before everyone else will be able to make significant profits before the difficulty catches up again. For the 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 and threatening the backbone of the DeFi sector. On February 12, it was revealed that the Securities and Exchange Commission had launched a crackdown on Paxos, a major stablecoin issuer. The SEC sent Paxos a notice from Wells, informing the company of the regulator’s intention to file a lawsuit against it for offering unregistered securities, and specifically referring to Binance USD (BUSD) as the security in question. In the wake of the notice, BUSD lost more than 40% of its market capitalization.

Since stablecoins provide secure ways for traders to make a profit, this crackdown is a huge threat to the industry. Many fear that Paxos will no longer be the only target and that these actions will become more widespread. Labeling stablecoins as securities is a surprising move by the SEC, given that there are no obvious profit expectations from them.

It remains to be seen if the SEC action will be followed by similar steps against Tether and its stablecoin USDT (USDT), which is allegedly being used by North Korea and Venezuela to evade sanctions. Other key 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 comprises some of the best talent in the blockchain industry. By bringing together academic rigor and filtering through hard-earned, practical experience, the team’s researchers are committed to delivering the most accurate and insightful content available on the market.

Demelza Hays, Ph.D., is the research director at Cointelegraph. Hays has assembled a team of subject matter experts in finance, economics and technology to bring to market the leading source of industry reports and insightful analysis. The team uses APIs from various sources to provide accurate and useful information and analysis.

With decades of combined experience in traditional finance, business, engineering, technology, and research, Cointelegraph’s 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 informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific investment product or security.