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Here’s What You Missed in Crypto This Week
The Fly

Here’s What You Missed in Crypto This Week

MicroStrategy increases bitcoin holdings as Argo Blockchain to sell Helios facility to Galaxy

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.

MICROSTRATEGY INCREASES BITCOIN HOLDINGS: In a Wednesday regulatory filing, MicroStrategy (MSTR) announced that during the period between November 1 and December 21, MicroStrategy, through its subsidiary MacroStrategy, acquired approximately 2,395 bitcoins for approximately $42.8M in cash. The bitcoins were acquired at an average price of approximately $17,871 per bitcoin, inclusive of fees and expenses. On December 22, MacroStrategy sold approximately 704 bitcoins for cash proceeds of approximately $11.8M, at an average price of approximately $16,776 per bitcoin, net of fees and expenses. MicroStrategy plans to carry back the capital losses resulting from this transaction against previous capital gains, to the extent such carrybacks are available under the federal income tax laws currently in effect, which may generate a tax benefit. On December 24, MacroStrategy acquired approximately 810 bitcoins for approximately $13.6M in cash, at an average price of approximately $16,845 per bitcoin, inclusive of fees and expenses. After giving effect to the transaction, MicroStrategy increased its bitcoin holdings by 2,500 bitcoins, from approximately 130,000 bitcoins as of October 31 to approximately 132,500 bitcoins as of December 27.

On Thursday, Jefferies analyst Brent Thill lowered the firm’s price target on MicroStrategy to $110 from $140 and kept an Underperform rating on the shares. Although the company announced its first bitcoin sale for tax purposes, it remains committed to acquiring more bitcoin, Thill said. MicroStrategy has $454M remaining to issue additional equity, which can be used acquire more bitcoin or mitigate near-term liquidity and solvency risk, said the analyst. He pointed out that the company’s $4.03B bitcoin investment is now worth $2.2B, implying a $1.8B loss, or 45%. Thill believes the stock’s premium valuation relative to peers is not justified given the "lower growth profile of the business."

ARGO BLOCKCHAIN TO SELL HELIOS FACILITY TO GALAXY: Argo Blockchain (ARBK) announced Wednesday that it has entered into definitive agreements with Galaxy Digital (BRPHF), under which an Argo subsidiary will sell its Helios facility in Dickens County, Texas for $65M and refinance its asset-backed loans. Additionally, Galaxy has agreed to host Argo’s mining machines located at Helios. Pursuant to an equity purchase agreement, an Argo subsidiary will sell its Helios facility and real property in Dickens County, Texas and related assets to Galaxy for $65M, subject to customary post-closing adjustments. In addition, Galaxy will provide Argo with a new asset-backed loan in an aggregate principal amount of $35M with an initial term of 36 months. This financing will be secured by a collateral package that includes 23,619 Bitmain S19J Pro mining machines currently operating at Helios and certain machines located at Argo’s Canadian data centers. Argo has agreed to guarantee, on an unsecured basis, its subsidiaries’ obligations under the definitive agreements, and along with its other subsidiaries, has agreed to guarantee, on an unsecured basis, and provide certain additional collateral for, the financing. The cash proceeds received from the sale of Helios, along with a portion of the borrowings under the asset-backed loan, will be used to repay all existing indebtedness, prepayment interest, and other fees of approximately $84M and $1M, owed to NYDIG and North Mill Commercial Finance, respectively. Upon this repayment, approximately $6M will be returned to the company from a collateral account controlled by NYDIG.

Peter Wall, Argo’s CEO, said, "This transaction with Galaxy is a transformational one for Argo and benefits the Company in several ways. It reduces our debt by $41M and provides us with a stronger balance sheet and enhanced liquidity to help ensure continued operations through the ongoing bear market. It also allows us to focus on optimizing our operations with significantly lower capex and opex requirements."

FTX CUSTOMERS FILE CLASS ACTION SUIT: FTX customers have filed a class action lawsuit against collapsed crypto exchange FTX and former management, including Sam Bankman-Fried, Reuters’ Tom Hals and Dietrich Knauth reported Tuesday, citing the suit. The complainants, who are looking for a declaration that FTX holdings of digital assets belong to customers, allege the company pledged to separate customer accounts but instead let them be misappropriated.

"Customer class members should not have to stand in line along with secured or general unsecured creditors in these bankruptcy proceedings just to share in the diminished estate assets of the FTX Group and Alameda," the complaint said.

BITFARMS NAMES NEW CEO: Bitfarms (BITF) announced Thursday the promotion of president and COO Geoffrey Morphy to the position of president and CEO. Emiliano Grodzki has resigned as CEO and will remain a director on the board. Co-founder Nicolas Bonta will shift from the position of executive chairman to the role of chairman of the board. 

“At the time I joined, Bitfarms was already one of the largest bitcoin producers with strong operators and uniquely positioned for growth. The opportunity to capitalize on this solid foundation to build something great and long-lasting was undeniable,” said Mr. Morphy. “Since, we have assembled an accomplished and experienced team responsible for implementing a geographically diversified growth strategy and have become one of the most efficient bitcoin miners in the industry. During my tenure, we have continued to execute and grow our business through a Halving event, a bull market, and a bear market. The last six months have been demanding for all bitcoin miners. Yet challenging times are precisely why our emphasis on operating efficiency, cost controls, corporate governance and a diversified portfolio of underutilized energy sources are so important and position us for success in all environments. Our foundational work over the last five years built the strength and depth of skills we needed to navigate these external factors. As we look at Bitfarms’ path forward through 2023 and beyond the next Halving event, I am even more optimistic today about Bitfarms’ long-term prospects than when I joined the Company back in 2020.”

KRAKEN TO SHUTTER JAPAN OPERATIONS: In a Wednesday blog post, crypto exchange Kraken said, “We would like to inform you that after due consideration, Kraken has decided to cease its operations in Japan and deregister from the Financial Services Agency as of January 31, 2023. The decision is part of Kraken’s efforts to prioritize resources and investments in those areas that align with our strategy and will best position Kraken for long term success. Current market conditions in Japan in combination with a weak crypto market globally mean the resources needed to further grow our business in Japan aren’t justified at this time. As a result, Kraken will no longer service clients in Japan through Payward Asia. We value the trust our clients put in us and we will do what we can to minimize the impact of our decision for you. That’s why we are committed to ensure a seamless transition and we hope the information in this email will help you decide what is the best option for you. Kraken is fully funded to ensure all affected clients can withdraw their assets in a timely manner."

CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Ideanomics (IDEX), Riot Blockchain (RIOT), Overstock (OSTK), Pareteum (TEUM) and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.

PRICE ACTION: As of time of writing, bitcoin dropped roughly 2% this week to $16,375 in U.S. dollars, according to TradeBlock.

Keywords: bitcoin, ethereum, dogecoin, litecoin, crypto, cryptocurrency, cryptocurrencies, token, stocks, blockchain, stablecoin, regulation

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