Bitcoin monthly digest: September 2023

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We are thrilled to present the fourth instalment of our monthly Bitcoin newsletter. Our commitment to delivering invaluable insights into the Bitcoin landscape remains as strong as ever. What happened in the month of September, you may ask? Let's dive right in!

• Bitcoin mining: a solution to grid stability issues?

Energy is a vital factor in economic growth, but its significance is frequently downplayed in mainstream economic research. Addressing the challenge of volatile energy demand and its impact on the economy is a crucial challenge for grid operators. In traditional economic models, energy often takes a backseat to factors like capital and labor when explaining GDP growth. This oversight can hinder our understanding of the fundamental role that energy plays in driving economic development.

Bitcoin mining can serve as a solution to the problem of erratic energy demand. Energy demand fluctuates throughout the day and across seasons, posing challenges for energy providers. Bitcoin mining is the process of validating transactions on the bitcoin network. Miners compete to find solutions and are rewarded with bitcoin for their efforts. Importantly, the process of mining requires a substantial amount of energy. Could energy generators participate in bitcoin mining by redirecting surplus energy to the mining process during periods of low demand?

By doing so, energy providers can make productive use of excess capacity, ensuring that energy is not wasted during off-peak periods. Moreover, they can earn bitcoin rewards, creating an additional source of revenue. This approach incentivizes energy producers to maximize their energy generation capabilities, even if it exceeds current demand. Indeed, one of the unique features of bitcoin mining is its difficulty adjustment mechanism. As more computational power is dedicated to the network, the puzzles become more challenging, slowing down the rate at which new bitcoins are created. Conversely, when mining power decreases, the difficulty decreases, ensuring a consistent rate of bitcoin creation. This built-in mechanism prevents overproduction and maintains a stable supply of bitcoin. Also, mining pools allow individual miners to collaborate and share the rewards based on their contributions. This cooperative approach results in more consistent and predictable income for miners compared to solo mining.

Energy generators stand to benefit from integrating bitcoin mining into their operations. By doing so, they can create a consistent and competitive demand for their energy, optimize their infrastructure, and generate additional revenue. Furthermore, this approach has the potential to reshape the energy industry by promoting efficiency and reducing wastage.

• Pressure is mounting for a Bitcoin ETF approval

A group of influential U.S. Congress members has penned a forceful letter to SEC Chair Gary Gensler, urging the swift approval of spot Bitcoin Exchange-Traded Funds (ETFs). This bipartisan letter, signed by representatives Tom Emmer, Mike Flood, Ritchie Torres, and Wiley Nickel, underlines the pressing need to expand Bitcoin investment options and highlights the potential advantages for American investors. The letter emphasizes that the SEC must not discriminate against spot Bitcoin exchange-traded products (ETPs) and should ensure that investor-protective products are accessible to investors.

The lawmakers argue that spot Bitcoin ETFs could provide a regulated and secure avenue for investors to enter the world of digital asset, simplifying the process and possibly drawing in a wider range of participants. One key point in the letter revolves around the necessity of regulatory clarity. The Congress members contend that the absence of spot Bitcoin ETFs has driven investors toward unregulated and potentially riskier alternatives. The approval of such ETFs would establish a clear regulatory framework for these investments.

• New accounting rules could speed up Bitcoin's corporate adoption

The Financial Accounting Standards Board (FASB) is preparing to introduce new fair value accounting rules for Bitcoin. These rules are intended to offer a more accurate representation of the market value of digital assets and enhance transparency in the financial reporting of companies that hold cryptocurrencies. Expected to be released by the end of the year, these rules are slated to take effect from 2025, with the option for companies to adopt them earlier.

The FASB's move toward fair value accounting will require companies to regularly assess the fair market value of their digital assets and report any changes in value within their financial statements. This means that if the value of Bitcoin experiences significant fluctuations, companies must reflect these changes in their financial reports, providing stakeholders with a more precise financial snapshot. Previously, Bitcoin was treated as an intangible asset, resulting in accounting challenges. With fair value accounting, companies can report unrealized gains and losses periodically (e.g., quarterly), allowing them to benefit from asset price appreciation without selling. This change may encourage more companies to hold Bitcoin as a long-term asset.

The adoption of fair value accounting aligns with the increasing integration of Bitcoin into mainstream finance. As Bitcoin gains acceptance in the global financial system, adapting accounting standards to accommodate digital assets becomes imperative. The FASB's decision underscores the maturity of the market and its significance in the broader economy.

That's all for this month, folks! Make sure to get in touch with us by using the "Contact us!" button at the top of this page if you have any questions or comments.