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Stock markets have seen unprecedented levels of trading in recent days, fueled by retail trading activity tied to Wall Street Bets. Robinhood — which became the key figure in this drama as the venue through which much of the publicly visible trading occurred — has been a focal point of this market backdrop after buckling under the pressure of heightened activity and temporarily limiting purchases of certain stocks, like GameStop and AMC. 

In response, Robinhood came forward and tied its response to the underlying settlement infrastructure. Robinhood said in a blog post that the limits on trading were connected to soaring clearinghouse deposit requirements. The firm later said that a move to real-time trade settlement would remedy f the issues that faced not only Robinhood but other brokers. Here’s from the blog:

“The clearinghouse deposit requirements are designed to mitigate risk, but last week’s wild market activity showed that these requirements, coupled with an unnecessarily long settlement cycle, can have unintended consequences that introduce new risks.”

Shane Swanson of Greenwich Associates — a market structure wonk and former director at Citadel Securities — breaks down exactly what happened to the markets last week and why things stopped trading on a new episode of The Scoop podcast.

Here’s Swanson:

“I like to use examples because I am a simple guy and examples seem to help. If I am a broker and I have $10,000 worth of capital and these aren’t the accurate numbers, but say that allows me to trade $100,000 worth in the market because I have some leverage capabilities. And I am going to let somebody trade with me and I am to give them margin which means I’m going to lend them money and they’re going to trade, and I am exposed to that lending risk. And they trade all the way up and they use all my $100,000 that I am allowed to expose myself to, once I hit that $100,000 I can’t trade anymore. I can’t expose myself to any more risk. I have used up the bucket of capital of which I am allowed to trade now.”

As for what happens next, Swanson told The Scoop that “it’s always hard to go backwards on cost,” referring to the ramifications of moving from T+2 to a more instant settlement process.

“It all depends. If the costs are egregious enough that the industry has to absorb commissions could come back. Movement from T-plus 2 to T-plus 1 settlement would be over a long enough time horizon I believe that would not be something that ends up impacting the retail investors in terms of cost,” Swanson explained.

A full summary of this conversation will be published next week. We hope you enjoy the episode.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Up-and-running bitcoin miners may have enjoyed the relatively slow growth of the network’s mining difficulty over the past few months, in comparison to bitcoin’s eye-popping price increases.

After a small 1% growth on January 23, bitcoin’s mining difficulty is set to adjust above 21 trillion before this weekend, an increase of about 3% compared to the current level of 20.8 trillion. Meanwhile, bitcoin’s price is now  $38,000, representing a significant increase from mid-October when the market started to move above $11,000.

During the same period, bitcoin’s mining difficulty and hashing power have lagged behind the surging prices, leading bitcoin’s mining revenue per terahash-second of computing power to highs not seen since August 2019.

The difficulty, as the name implies, is a determining factor in how “hard” it is to mine a block, or specifically to find a hash below a given numerical target. The difficulty level shifts based on how much processing power is connected to the network and is adjusted roughly every two weeks. 

Although bitcoin’s mining difficulty did adjust to a new all-time high on January 9, it actually only increased by 3.5% compared to the previous high of 19.9 trillion, recorded on October 18. 

As The Block reported at the time, bitcoin’s mining difficulty adjusted a negative growth of 16% in late October. This development was due to Chinese miner operators migrating from hydropower stations in Sichuan and Yunnan provinces to fossil-based power plants in the northern Chinese territories of Xinjiang and Inner Mongolia.

After these miners gradually came back online — while new shipments of machines hit the market around the same time — the network’s hash rate began increasing again amid bitcoin’s price jump throughout Q4. 

For how long?

A combination of factors appears to be behind the relatively slow growth of the mining difficulty so far, which – at least for now – may be welcome news for those with active mining operations.

The shortage of wafers from the world’s biggest semiconductor firms such as Samsung Foundry and TSMC have led to limited supplies of the newest bitcoin mining equipment from Chinese manufacturers despite increasing demand from their customers.

Preorders for top-of-the-line mining hardware made by Bitmain and MicroBT are already sold out until the second half of 2021. Over the past several months, multiple mining farm operators, especially North America-based facilities, have announced news of procuring the newest hardware ranging from several thousand units to as many as 70,000 units in a single order. 

Some large preorders since December include 58,000 units of Bitmain’s AntMiner S19 and S19 Pro as well as 6,000 Canaan’s Avalon 1246 purchased by Core Scientific, 15,000 AntMiner S19s from Riot Blockchain, 70,000 S19s from Marathon Patent Group, 14,000 units of MicroBT’s WhatsMiner M30S from Compute North as well as $25 million worth of M30S purchased by Blockstream.

“Some of the orders that have been lining up since December are massive. Some of these orders are expected to be fulfilled by Q2, so we might see a sizable increase in difficulty around that time,” said Dmitrii Ushakov, the chief commercial officer for BitRiver, which provides mining colocation services in Russia and Central Asia.

So far, Argo and Riot have each said that about 1,000 units of their preorders are currently being shipped. Marathon said this week that the delivery of 4,000 units of its S19 Pros on-order has also started.

Meanwhile, China has been undergoing a period of energy rationing in the past few months amid a shortage of coal-based power. Affected regions, including Inner Mongolia, have curbed industrial utility to prioritize residential demand, according to December reports by S&P Global and The New York Times.

While it’s hard to gauge the exact impact of this power shortage on mining farms, local industry players told The Block that some mining facilities have indeed been cut off from their power supply and are on a waiting list to get back online.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Office of the Comptroller of the Currency (OCC) granted another crypto-focused firm conditional approval to operate as a national bank.

Protego will join Anchorage as a banking editor with approval from the federal government, according to a new announcement from the U.S. banking regulator.

Protego aims to serve institutional clients interested in digital assets. The Seattle-based firm plans on being a “vertically integrated and fully regulated bank built on blockchain.” Now, as a nationally chartered trust bank, it can hold, trade, lend and issue digital assets to clients. These will be its four primary services, according to the bank.

However, Protego is still in the organizational phase of development, according to the OCC’s announcement. It will have 18 months to meet the terms of its conditional approval. It will be able to convert to a national trust bank when it begins to operate. Currently, it’s a Washington State-chartered trust company.

This conditional approval comes after the era of Brian Brooks’ leadership. Brooks was Coinbase’s head legal counsel before joining the OCC under the Trump Administration. During his time at the head of the agency, Brooks made considerable strides on the digital asset policy front, including clarifying that federally chartered banks can hold custody of digital assets and granting the first conditional banking license to a crypto company. Anchorage nabbed the first conditional license in mid-January.

Blake Paulson, a career bank examiner, took over as Acting Comptroller just days after the Anchorage approval. Paulson will serve until a Senate-approved nominee takes office.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.