Bloomberg recently released its March 2021 Crypto Outlook Report. According to this report, the volatility of most assets such as stocks and bonds had intensified throughout 2020. In contrast, the volatility of Bitcoin declined and in turn, gained legitimacy in the eyes of capital markets — throughout 2021, this trend is expected to continue. Bitcoin is replacing gold in portfolios, transforming its image as a speculative risk asset to a global digital store-of-value.
Bloomberg’s report highlights bitcoin price consolidation is within the range of US$40,000 to US$60,000 with a greater likelihood of responsive buyers on the lower end of the range. Amid an increasingly favourably macroeconomic environment, optimism remains for bitcoin’s growth with its next price threshold estimated at US$100,000.
Canaan is well-positioned to meet demand for the asset. Throughout 2021, we have highlighted our advantages in production capacity and product quality, having successfully locked-in orders for the year across new markets. This will enable us to gain a greater market share in global computing power for 2021.
Institutions are expressing optimism at bitcoin’s expected appreciation
Bitcoin’s breakthrough of $100,000 is expected to result in more institutional support. Matthew McDermott, the global head of digital assets for Goldman Sachs, said that in the firm’s survey of 300 clients, 40 percent of respondents currently have exposure to cryptocurrencies. From a price perspective, 76 percent of clients believe that bitcoin will see prices of between US$40,000 to US$100,000 by the end of 2021 while 22 percent believe that prices will exceed US$100,000. Reflective of a positive sign of growth in institutional adoption, 61 percent of clients expect their digital asset holdings to increase in the coming year.
The factors underpinning Bitcoin’s position as digital gold
Bloomberg’s report also touched on the main factors supporting bitcoin’s current price trajectory, namely: the decline in bitcoin price volatility, the rapid flow and diversion of institutional investments towards bitcoin, and Tether’s position as a digital anchor for the US dollar.
Bloomberg conducted a comparison of three sets of indicators, namely Grayscale Bitcoin Trust and Gold ETF; Gold-Bitcoin and S&P 500 Index; and Bitcoin and Amazon.
In its analysis, Bloomberg found that both the Grayscale Bitcoin Trust and Gold ETF were relatively stable.. However, the amount of money flowing out of gold is increasing in correlation with the funds flowing into bitcoin. Here, Bloomberg pointed out that the ratio of bitcoin’s price to that of gold has exceeded 10x — breaking the resistance it’s held since 2017 — and is now moving in the direction of 100x. With leading global firms such as Tesla and Meitu now holding large amounts of cryptocurrencies, this is ultimately reflective of the long-term optimism of traditional institutions towards bitcoin and other digital assets.
From a volatility standpoint, Bloomberg Terminal shows that the 260-day volatility rate of the Gold-Bitcoin 75/25 Index has reached its lowest level and is 20 percent lower than the same risk measure of the S&P 500 Index. Meanwhile, in comparing both Amazon and bitcoin, bitcoin is seemingly a more robust investment with its volatility on a continuous decline.
Lastly, the market capitalisation and transaction volume of Tether, the world’s largest US dollar-backed stablecoin, has increased by 10x. Due to its direct peg to the US dollar, Tether’s growth also provides strong support for the argument that bitcoin is now challenging the dominance of gold as a safe haven asset.
Meeting demand with a robust supply chain strategy
In line with bitcoin’s ongoing growth, the crypto mining sector has experienced an upward trend, stimulated by surging prices. With this, the total income of miners has also increased, exceeding US$1.36 billion in February and breaking the previous all-time high of US$1.25 billion in December 2017. Looking at the supply side, the current computing power of the entire network is over 155EH/s and the mining difficulty is at 21.45T, underscoring the increasing intensity of computing power competition in bitcoin mining.
For both miners and institutional entrants alike, the rate at which computing power can be deployed has become a determining factor to success in today’s mining space. Beyond our stable, robust production capabilities, Canaan is also distinguished as the only mining machine manufacturer leveraging a multi-foundry strategy. This means that we have a comparative advantage under current supply constraints. Strategically partnering with a network of established chip manufacturers has allowed us to realise the mass production of N+1 process chips, which provided a buffer against the production capacity of chips currently taken up by GPU graphics cards and 5G mobile phones.
Enhancing the mining experience with AvalonMade
In 2020, Canaan began to instil the “AvalonMade” ethos across our AvalonMiner product line to optimise the mining experience. AvalonMade represents a holistic approach to optimising the mining experience, spanning core performance, machine structure, logistics and supply chain, as well as customer service, in order to elevate the overall product experience for our customers.
At the heart of the Avalon Made ethos lies a culture of engineering. At Canaan, we are committed to craftsmanship backed by academic expertise — this is why we have complete front-end and back-end chip design capabilities, as well as a team dedicated to designing custom circuit modules. In order to maximise machine performance across different partner foundries, Canaan has accumulated over 100 intellectual property rights in key areas such as low voltage, high energy efficiency computing, and chip heat dissipation.
In terms of machine performance, Canaan’s AvalonMiner series sees an average of 1 to 2 new AvalonMiner models annually. Within each iteration of AvalonMiners, we strive to offer improvements and optimisations in the computing power and energy efficiency ratio of our hardware. Among the AvalonMiner series, the A1246 is the first AvalonMiner with a computing power of 90T-100T and an energy efficiency ratio of 30J/T-40J/T.
Imbuing the spirit of Avalon Made, Canaan advocates for the highest commitment to craftsmanship and we always seek to provide a superior mining experience starting from the smallest of details. In terms of hardware structure, the degree of integration in Canaan’s mining machines has continuously improved since our A10 series of mining machines. As part of the upgrades, the main control board and power supply were combined into one, eliminating the need for additional accessories such as the Raspberry Pi while allowing the machine to be used straight out of the box. The mining machines are also made of alloy — which is light, thin, and sturdy — ensuring not only ease of use but also long-term durability. The sliding rails of the hash board are also now placed inside the machine and combined with an in-built, reinforced card slot. This prevents the hash board from falling off during the transportation process, therefore preserving product quality. The fans in our mining machines are also equipped with temperature sensing components, and the main control board can adjust the fan speed according to the temperature of the air inlet and outlet.
Under the AvalonMiner series, customers also benefit from an enhanced dashboard interface with our mining firmware featuring two user-defined mining modes. The high-performance mining mode allows for the actual computing power of the machine to exceed the pre-rated parameters.
At Canaan, we have established a long-term strategy to explore expansion opportunities across North America, Central Asia, and North Europe, having pre-sold 120,000 mining machines in the North American market alone. As Canaan continues to improve on our delivery efficiency, we have set up dedicated logistics routes overseas for better one-stop customs clearance.
With strong production capacity, high-quality manufacturing, and a robust logistics and supply chain, Canaan is set to drive the new era of the global mining industry.