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The Tidal Financial Group (Tidal) expanded rapidly over the last decade and encompassed multiple ETF related brands including Toroso Investments, Tidal ETF Services, and the ETF Think Tank. Going forward all activity will be unified under the Tidal brand as we become one company, dream, family, and platform focused on holistic ETF customer solutions.

Growth in Assets and Research

The ETF industry is experiencing record growth. Despite record flows, the total revenue generated from US ETF expense ratio revenue is still only about $12 billion annualized. Obviously, this is great for investors, but shows how hard it is to achieve success in the lower margin asset management world of ETFs. To put this in context, crypto currency mining is likely to generate $20 billion in revenue over the next 12 months. This week, we talk with our ETF Think Tank Strategist, Dan Weiskopf, and share his notes and thoughts on the miners and his recent visits to crypto mining facilities.

Dan’s Thoughts

Due diligence does not stop, especially in an evolution or, dare say revolution, like Crypto! While total revenues of Bitcoin miners fell sharply in June compared to May, they remain higher than in December 2020. The lower price of Bitcoin in December, at between $19,000 to $29,000 versus the $32,000 to -$40,000 range in June, reflect the sectors volatility and, dare say… the opportunity. Note the high price over these past 12 months was about $63,410, and the low price was $9,103. [1] Regardless, as we’ve experienced in the ETF industry, growth may feel linear looking backwards on a long timeline. The fact is, however, that there will be periods of fits and starts. How else is price discovery achieved, new opportunities discovered and disruption forced on the establishment?

According to The Block’s Data dashboard, Bitcoin mining revenues declined from $1.55 billion in May to $839 million. Note that part of the decline came before the change in the 28% difficulty rate and mining operation shifting out of China. What is even more surprising than the fact that Ethereum miners similarly saw a dramatic decline in their revenues, was the fact that this revenue base at this current moment is higher than Bitcoin. In June, Ethereum mining declined to $1.1 billion from $2.35 billion in May. Go figure?

As ETF Nerds, we thought we would point out that even with these lower results, the trailing combined revenues eclipse $20 Billion; far exceeding that of the ETF industry’s $12 Billion 12 month ETF ER KPI. For some further details we suggest people check out The BLOCK article by Yogita Khatri: https://www.theblockcrypto.com/post/110238/bitcoin-btc-ethereum-eth-miner-revenue-june

[1] According to Bloomberg

Again, due diligence does not stop, and Crypto does not sleep! To that point, Weiskopf just returned from a site visit to RIOT Blockchain’s Whinstone mining facility in Rockdale, Texas. Mining is an essential part of the security of the Bitcoin ecosystem. The size and scope of this facility will make it an important operation to the infrastructure buildout of Bitcoin, so having the opportunity to see it up close and personal was constructive due diligence. Other site visits around the U.S. are expected, and bigger is not always better. We expect mining to remain a fragmented industry led by entrepreneurship.

A couple of key takeaways from the visit:

  • The visit confirmed that, much like the picks and axes thesis we see for the blockchain evolution, the commitment of the people behind the scenes is unparalleled. Most crypto people focus on price. The people in the mining industry focus on operations and scale.
  • The buildout of facilities takes years of planning, capital, and a willingness to address problems head on as a team. Thank you Jason Les, CEO of RIOT, and Chad Everett, CEO of Whinstone, for the video and your team’s time and commitment.
  • The parallel relationship between harnessing energy, raw power and technology with human innovation and entrepreneurship is an important mission. Much like the ETF wrapper democratized investing for the world, the miner is safeguarding the security of the Bitcoin processing system… and this requires capital.

Twenty-five years ago, there were many ETF skeptics in the financial service industry, and today there is $6.55 Trillion wrapped as ETFs. Bitcoin skeptics and the value of the mining industry may remain. However, our bet is that 25 years from now, much will change across multiple industries as a result of the foundation that is being created today.

Disclosure

The information provided here is for financial professionals only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

All investments involve risk, including possible loss of principal.

The value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested, and can be affected by changes in interest rates, in exchange rates, general market conditions, political, social and economic developments and other variable factors. Investment involves risks including but not limited to, possible delays in payments and loss of income or capital. Neither Toroso nor any of its affiliates guarantees any rate of return or the return of capital invested. This commentary material is available for informational purposes only and nothing herein constitutes an offer to sell or a solicitation of an offer to buy any security and nothing herein should be construed as such. All investment strategies and investments involve risk of loss, including the possible loss of all amounts invested, and nothing herein should be construed as a guarantee of any specific outcome or profit.  While we have gathered the information presented herein from sources that we believe to be reliable, we cannot guarantee the accuracy or completeness of the information presented and the information presented should not be relied upon as such. Any opinions expressed herein are our opinions and are current only as of the date of distribution, and are subject to change without notice. We disclaim any obligation to provide revised opinions in the event of changed circumstances.

The information in this material is confidential and proprietary and may not be used other than by the intended user. Neither Toroso or its affiliates or any of their officers or employees of Toroso accepts any liability whatsoever for any loss arising from any use of this material or its contents. This material may not be reproduced, distributed or published without prior written permission from Toroso. Distribution of this material may be restricted in certain jurisdictions. Any persons coming into possession of this material should seek advice for details of and observe such restrictions (if any).

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