Inflation concerns, institutional support, and statements from bigwigs... Multiple factors have contributed to the increasing popularity of cryptocurrencies. On the afternoon of February 19th, Beijing time, Bitcoin was heading towards $53,000 on multiple exchanges, bringing the market value of the entire Bitcoin market close to $1 trillion.

At the same time, the "mining" market news continued, and well-known companies and market players rolled up their sleeves and announced their participation. On February 18, GPU giant Nvidia announced the launch of a processor CMP dedicated to mining Ethereum, which is expected to meet the expected ROI (return on investment) of "miners". On February 19, Macau casino tycoon Zhou Zhuohua also publicly entered the market, and his Hong Kong-listed company Suncity Group is planning to purchase 1,000 cryptocurrency mining machines.

Bitcoin market cap approaches $1 trillion

As of 7:30 pm Beijing time on February 19, according to statistics from Bloomberg Terminal, the market cap of Bitcoin has reached 980 billion US dollars. This news further stimulated market trading volume, and frenzied trading pushed up the price of Bitcoin. On exchanges such as Bitflyer, Bitstamp, ItBit, B2C2, Coinbase, Bitfinex, Kraken, and EXMO, the price of Bitcoin is heading towards 53,000 US dollars.

This surge in market value means that Bitcoin, a financial product originally considered an "alternative investment", has become more "profitable" than most listed companies, thanks to the continuous investment of countless corporate CFOs, fund managers, and risk-averse investors. According to statistics, there are only five listed companies with a market value of more than $1 trillion, including Apple, Saudi Aramco, Microsoft, Amazon, and Google. Bitcoin's market value is larger than that of Tencent and Facebook, which are now worth HK$7.11 trillion and US$767.1 billion respectively.

Entering 2021, the cryptocurrency market has been booming. From the perspective of return rate alone, it has left traditional assets far behind. As of 7:30 p.m. Beijing time on February 19, according to statistics from Southern Finance All Media, Bitcoin has risen from $29,000 to $53,000 this year, Litecoin has risen from $130 to around $230, and Ethereum has risen from $750 to around $1,900, with increases of 83%, 78%, and 156%, respectively. In addition, Dogecoin, Ripple (XRP), Stellar, etc., which are priced at the cent level, have even more astonishing volatility and are very speculative.

In contrast, the global stock market, bonds, and precious metals cannot match the returns of cryptocurrencies. The Nasdaq index, which soared 44% last year, has risen 7.6% this year; gold has been weak since it hit $2,000 per ounce in August last year, and recently fell below $1,800 to around $1,770.

Nvidia enters mining machine production

On the other hand, the "mining" market is also full of news. Because "miners" are buying up the market and causing market prices to go up, Nvidia, the leading GPU manufacturer, had to announce that it would manufacture GPUs specifically for "mining" before the new GPUs hit the market. The company said: "Let GPUs belong to games, and let new products belong to "miners."

Although the CPU was originally the main engine of the "mining machine", as the difficulty of mining increases, the GPU has also been rewritten to help the "miners" with their hard work. In the recent GPU market, Nvidia's old GPUs, the current RTX 30 series, are in short supply and the prices are driven up, which has caused trouble for Nvidia's original loyal users. Nvidia GPUs are sought after by some gamers and are hot hardware devices in the gaming market.

Since the beginning of 2021, Ethereum has surged by 150%, which has also attracted "miners" to do everything they can to "mine". In early February, a Vietnamese Internet cafe called Star Gaming posted a picture on social media saying that it had used RTX 3080 Nvidia GPUs for "mining". In the photo, dozens of RTX 3080s were connected in series, reflecting that the hardware investment of a mining machine is not cheap, but the Internet cafe still claims that "mining" has higher returns than running an Internet cafe.

Nvidia has long been asked by investors whether it intends to produce mining machines. In mid-January this year, the company's CFO Colette Kress was asked this question again by investors, and she replied at the time that "the business volume brought by mining is very small." However, on February 25, Nvidia is about to launch a new generation of GPUs, the RTX 3060. The current frenzy in the "mining" market is expected to seriously interfere with the original market supply and demand, which will cause strong dissatisfaction among old users and game users. At this juncture, Nvidia has to take measures.

Matt Wuebbling, global head of the company's gaming brand GeForce, announced that Nvidia took two steps to deal with the invasion of "miners". First, the software program of RTX 3060 was rewritten to cut the "hash rate" by 50%, in other words, the "mining" efficiency was reduced by 50%. Second, in order to prevent "miners" from continuing to insist on competing for new GPUs, a CMP (cryptocurrency mining processor) specifically for "mining" will be launched.

Nvidia's GPUs are mainly used for mining Ethereum, and CMP is also designed for Ethereum. Ethereum is the second most traded cryptocurrency after Bitcoin. Currently, one Ethereum is worth about $1,920, and its recent appreciation rate has even exceeded that of Bitcoin. In fact, the ROI (return on investment) of "mining" is the determining factor for "miners" to adopt Nvidia GPUs. After comprehensively considering the hash rate of the GPU, electricity costs, and hardware investment costs, if the price of Ethereum is high enough, a considerable ROI will be formed, which will lead "miners" to buy GPUs or customized "mining machine" equipment without hesitation.

On February 19, Suncity Group, owned by well-known Macau casino businessman Zhou Zhuohua, announced its entry into the "mining machine" market on the Hong Kong Stock Exchange. The company said it would acquire 1,000 cryptocurrency mining machines from an unnamed seller. The announcement disclosed that the mining machines are mainly distributed in Inner Mongolia, Xinjiang and Sichuan Province. However, the announcement did not disclose the initial transaction price, nor did it specifically introduce the types of cryptocurrencies. In addition, the disclosure this time was only a memorandum of understanding, which means that the buyer and seller need to further negotiate and there is no guarantee that the final transaction will be completed.

Controversy surrounds the value of cryptocurrency investment

On February 18, the world's first Bitcoin ETF was officially launched on the Toronto Stock Exchange. The full name of this ETF is Purpose Bitcoin ETF, code BTCC, and it is issued by Canadian asset management company Purpose Investment. BTCC performed well on its first day of listing, with a trading volume of US$165 million.

In fact, there have been several cryptocurrency tracking products in Europe that function similarly to ETFs, but Purpose Investments said in a statement that BTCC can directly invest in physical or digital Bitcoin and is the first true Bitcoin ETF.

The market is still arguing about the investment value of cryptocurrencies. Gundlach, CEO of Double Line Capital, known as the "new bond king," said on social media on February 18: "I am a long-term bearish on the US dollar and bullish on gold, but in the past six months, my views on both have been neutral. A lot of money is pouring into narrow investment channels, and Bitcoin is an asset under the stimulus plan." Although Gundlach did not say that Bitcoin has any value, he at least acknowledged the rational factors behind this asset boom.

Bill Gates also made public his views on Bitcoin. He said that he neither invested in Bitcoin nor wanted to make predictions about Bitcoin's price trend. He believed that the rise and fall of Bitcoin "may just be based on enthusiasm or the views of various circles on it."

There are still many people who openly "bombard" Bitcoin, and regulatory agencies are one of them. Newly appointed U.S. Treasury Secretary Janet Yellen once again reminded investors on February 18 that Bitcoin is a "highly speculative asset." (21st Century Business Herald)