As you may have heard, Bitcoin (BTC-USD) broke out to $24,000 today! As you may NOT have heard, there’s also good news from both the “crypto bank” space – and Solana (SOL-USD). Let’s dive in.
Bitcoin Breaks Above Month-Long Range
Last time I showed you the chart – just two days ago – BTC was trading at the top of its month-long range. That was $22,000 (with the bottom down around $18,000). I also mentioned that our Crypto Investor Network experts were “looking for BTC to break out in the short-term to $23,000.”
Well, today BTC broke through $24,000. Bitcoin is the orange line in the chart below; the blue line is ETH – which has made up even more ground:
In Ethereum’s case, people seem to be celebrating progress toward the big “Merge” with its Beacon Chain, which will move Ethereum from proof-of-work to proof-of-stake. The Merge is now expected on September 19.
The narrative for bitcoin is all about the Federal Reserve. Yes, the Fed is likely to keep raising interest rates, as it has since March (for the first time since 2018). No, this hasn’t been good for crypto prices… Or stocks, for that matter.
But this next rate hike is looking smaller than previously anticipated. Last week, Fed watchers were overwhelmingly expecting a +1% hike. Now, most of them expect +0.75% (to a target range of 2.25%-2.50%). My colleague Jeff Remsburg has a great, quick rundown of why people expect less aggressive hikes in Friday’s InvestorPlace Digest.
Next date to watch: Wednesday, July 27. That’s the official policy statement from the Federal Open Market Committee. We’ll also have just gotten a whole bunch of economic reports on housing, manufacturing, supply/trade, and more… And as I’ve written before, the macroeconomic news seems to be having the greatest impact on bitcoin, in particular.
Guess Which Blockchain Added the Most Users This Year
If you guessed Solana (SOL-USD)… You’re 100% correct! Ethereum didn’t even come close; in fact, it lost New Daily Addresses, according to CoinMarketCap:
#Ethereum, #BNBChain, or #Solana: How are these L1 handling the Bear Market? 🐻 – (p5)
The number of new network participants has been gradually falling since November 2021 for both #Ethereum & #BNBChain, but #Solana has managed to buck the trend.
— CoinMarketCap (@CoinMarketCap) July 19, 2022
Binance Chain (BNB-USD) held pretty steady during this time – while Solana multiplied its user base.
Even after New Daily Addresses on Solana dropped off amid network outages/congestion – just as the crypto market started collapsing in May…
“Solana saw its new daily active addresses climb by 58.6% [in 2022 to date], making it the only major layer-1 to consistently grow its user base throughout the bear market,” according to CoinMarketCap.
On the flip side: Solana may be the #2 blockchain by new users… (Binance Chain being #1.) But “the activity did not amount to inflows,” notes CoinDesk:
“Total value locked (TVL) on decentralized finance (DeFi) applications running on Solana dropped to $2.9 billion this week. That compares to $14.9 billion in early December!
It’s a steeper fall than Ethereum or Binance Chain has had. Both are down -65% since the December peak – but Ethereum is still the undisputed king of DeFi, at $55.4 billion TVL. The same is true for NFT sales… Although Flow (FLOW-USD) and WAX (WAXP-USD) have actually surpassed even Ethereum in total NFT transactions, according to CryptoSlam.
Even with such faster speeds and way cheaper fees, Solana has had a hard time matching the “network effect” of Ethereum to sell NFTs. Sales volume on Solana remains like a tenth of Ethereum’s… And transactions are roughly half what’s traded on Ethereum to date. (The latter metric has greatly improved in the last 30 days, though, when Solana has actually transacted more NFTs than anyone!)
Bottom line: Solana needs to get its network issues together in time for the Ethereum Merge to change the game. While the Merge is unlikely to lower “gas” fees, Ethereum’s upgrades should make it faster and more scalable, which is the other selling point of “Ethereum killers” like Solana.
Bitcoin “Crypto Bank” Reports +33% Earnings Beat
Feels like forever since I’ve seen much positivity in the crypto-bank space… But hey, look: Silvergate Capital (NYSE:SI) just exceeded expectations for both revenues and earnings in yesterday’s Q2 report!
Specifics: Revenues rang up at $79.8 million, which was +13% higher than analysts had anticipated – and +88% year-over-year!
Diluted earnings per share were $1.13, which “beat the Street” by +33% – and were +41%, year-over-year.
If you’re surprised: It’s because of Silvergate’s business model. Rather than providing savings accounts where you deposit cryptocurrency and earn crypto in return (at a high yield)… Silvergate clients typically are looking to deposit their bitcoin or ETH – then get a loan denominated in U.S. dollars.
For example: In March, a MicroStrategy (NASDAQ:MSTR) subsidiary borrowed $205 million from Silvergate Bank and collateralized it with bitcoin. Silvergate has been in this game for years – whereas Goldman Sachs, for instance, just got into it in April.
Indeed, most of these Silvergate clients are crypto miners… Although institutions – namely, crypto exchanges – can use Silvergate to settle transactions in U.S. dollars (or euros) with other clients of the “Silvergate Exchange Network” (SEN). Settlement is “near real-time” with “immediate availability,” even on evenings, weekends, and holidays. No banking hours in crypto!
However: Even though Silvergate’s digital-currency customer base grew +29%, year-over-year, the transaction revenue they paid fell -22% in the crypto crash. Similarly, SEN transfers were down -20% year-over-year.
Luckily, Silvergate is primarily a lender. Most of its revenue is from interest paid on its loans… And net interest income was up +132%, year-over-year! Net interest margin spiked from 1.16% to 1.96%. In this rising-rate environment, Silvergate is simply charging higher interest to these crypto miners, etc. And they may need more loans the longer this bear market goes on.
Bottom line: While crypto-mining stocks get a “Hold” or “Sell” rating in our Portfolio Grader by Louis Navellier… Their bank gets a “Buy” rating. I’ve included Louis’ full Report Card on Silvergate Capital below. He makes this tool free and publicly available, so go here to plug in any stock to see its Fundamental and Quantitative Grades.
On the date of publication, Ashley Cassell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.