BITCOIN: Public Market Paths for Crypto Billions

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Here is a founder's dream. You and a partner own 60% of the company you founded. That company printed $2.5 billion of revenue last year. You have massive political capital to influence the industry in which you are a top player. To cash out, you are looking at an IPO -- the real regulated kind -- of $9 to $12 billion. Welcome to Bitmain, which was founded in 2013 and makes Coinbase and Binance look like amateur town. The company is behind Antpool, the world's largest cryptocurrency mining pool, and is also the largest producer of mining hardware. The next step in the playbook is neural network processing, which also requires specialized graphics cards, a market currently dominated by Nvidia. We still think that mining is something that should be done by traditional banks to support the crypto rails. And so if Bitmain does go public, it will open a fascinating window into the operations and economics of manufacturing global trust machines using hardware and software.

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Let's take another potentially meaningful instrument. The saga around a Bitcoin ETF continues to grab headlines, this time with a combined effort from $45 billion AUM asset manager VanEck and crypto company SolidX. Prior efforts were all shot down by the SEC due to an "immature" market -- pointing to everything from liquidity, to execution, to volatility. The lack of an ETF, in turn, created an absolute nightmare in the public equities markets. Instead of buying something efficient at 20 bps, investors flooded into blockchain-pretenders like Long Island Ice Tea. Which caused the SEC to start chasing these opportunists to shut them down. But it looks like VanEck may have an ETF contender that is made up of actual cryptocurrency in cold storage with an insurance layer against hacking. That sounds way better than an ETF made out of CME/CBOE futures to us. Except the planned minimum investment is $200,000.

Let's linger on the differences between these two potential events, and the existential questions they create. One is a currency (or store of value) in which digital economic activity is denominated. The more economic activity shifts into it, the better; speculative trading and labyrinthine financial structures don't count. The second is a traditional oligopolistic champion with regular old equity, selling a claim on profits off $2 billion in revenue. That revenue is essentially a toll-booth on the functioning of the Bitcoin network. If Bitcoin continues to exist at all, Bitmain continues to charge its toll for network maintenance. Which one sounds like more of a sure thing?

Source: Bloomberg (Bitmain), Marketwatch (NVIDIA), WealthManagement (VanEck), Bimain Equipment (BlockonomiHashnest)