Market update - August 23rd 2024

US macroeconomic data exceeded expectations, easing recession fears.

CPI was in line at 2.9%, jobless claims were lower, and retail sales were stronger than expected. The S&P 500 reached near-record highs, and Mr Market is now pricing a 133% chance of a rate cut in September, down from a 200% chance earlier this month. Fed minutes show several Fed officials acknowledged a plausible case for a July rate cut, but the committee voted unanimously to keep rates steady. Bitcoin subsequently shot up to around $62k and now lies at around $61k, although the futures market is not convinced this warrants a 50bp cut in September as of filming this video.

In the Bitcoin Mining sector, Bitfarms (BITF) announced a $125 million stock-for-stock bid to acquire Stronghold Digital Mining (SDIG), valuing the latter at a higher market cap than its current $66.4 million. Stronghold has a hash rate of 4 EH/s and 165 MW of power capacity, valuing the bid at $31 million per EH or ~$570k per MegaWatt, which is in the midrange compared to previous acquisition deals YTD. Bitfarms sees this acquisition as a move to access the PJM Interconnection market and expand to 10 EH/s by 2025. It is also likely in response to a bidding war with Riot. By increasing its size and diluting equity, Bitfarms will likely make itself less appealing to Riot, discouraging further takeover attempts. However, Riot's stake now stands at 19.9% in Bitfarms, approximately 10bps below the 20% 'Poison Pill' threshold, granting shareholders one right per share and further diluting Riot's stake and influence.