9/7/23 Roundup

Onramp Weekly Roundup

Hi all,

This is Dylan LeClair, presenting this week’s Onramp Weekly Roundup.

Before we get started… If you’re a HNWI or Institution looking for the best way to get exposure to bitcoin, Onramp Bitcoin could be the right fit for you – schedule a chat with us to discuss your situation & needs.

And now, here’s the weekly roundup…

Navigating the New Frontier: FASB Rules Bring Change to Corporate Accounting for Bitcoin

In a unanimous decision, the U.S. Financial Accounting Standards Board (FASB) has approved groundbreaking accounting rules tailored for companies holding bitcoin on their balance sheets. Expected to be published by year-end and to take effect in 2025, the new regulations mandate companies to report their bitcoin assets at “fair value.” This aims to reflect the asset’s current exchange rate, marking an improvement over the existing accounting method that treats bitcoin as an intangible asset, permitting only downward revisions in valuation. Companies will now be required to make separate line entries for bitcoin on their balance sheets and provide additional disclosures, such as footnotes explaining significant holdings and any restrictions thereon.

This regulatory shift contrasts with accounting issues faced by MicroStrategy, the world’s largest publicly-traded bitcoin holder. In 2022, the Securities and Exchange Commission (SEC) took issue with MicroStrategy’s non-GAAP financial disclosures, designed to show income without considering the impairment of its bitcoin holdings. Under existing U.S. GAAP guidelines, no clear rules existed for reporting the value of bitcoin holdings. The forthcoming FASB regulations are anticipated to resolve these ambiguities, allowing companies like MicroStrategy to report their financial condition more transparently. However, it’s worth noting that these new rules have limited scope and do not extend to other types of digital assets with the exception of ethereum.

Bitcoin Miners: Unsung Heroes in Strengthening the Energy Grid

Contrary to prevailing opinions that portray bitcoin mining as an energy drain, the recent partnership between Riot Platforms and the Electric Reliability Council of Texas (ERCOT) showcased how bitcoin miners can be indispensable in fortifying the robustness of power grids. In August, during an extreme heatwave, ERCOT remunerated Riot with $31.7 million in energy credits for voluntarily curtailing their energy usage. This practice, known as “demand response,” is pivotal for grid stability, particularly during periods of extreme weather or high consumption.

During an energy emergency declared just last night by ERCOT, which was likely due to a significant power plant going offline, energy storage systems set an all-time usage record. This event emphasizes the crucial role that controllable load resources like bitcoin miners can play. They not only serve as a buffer during such crises but almost certainly prevent the need for rolling outages by balancing supply and demand.

In this win-win relationship, Riot not only offsets its operational costs through energy credits but also provides ERCOT with a vital, controllable load resource that can be adjusted to ensure grid stability. Rather than being just energy consumers, bitcoin miners act as a kind of life insurance for the grid, soaking up excess power during times of low demand and freeing up resources when the grid is overstressed.

Recognizing this unique benefit, Texas legislators have enacted mining-friendly policies to encourage this symbiosis between bitcoin miners and the state’s energy infrastructure. The recent emergency event underscores the value that bitcoin mining can bring in enhancing grid resilience, thus challenging the common narrative that portrays it solely as an energy-consuming operation.

U.S. Dollar's Resilient Rally

The U.S. dollar is experiencing its longest rally in years against its fiat peers, propelled by the robust performance of the American economy and the Federal Reserve’s stance on elevated interest rates. This ongoing strength is attracting investment into the U.S., offering higher yields than those available in Europe and Asia, thereby applying upward pressure on the dollar. This phenomenon signifies diverging global economic pathways: While the U.S. economy exhibits resilience against interest rate hikes, Europe and Asia confront slowing economic activity. Both the ICE Dollar Index and the Bloomberg Dollar Spot Index validate this trend, putting the dollar on track for its eighth consecutive weekly gain—the longest streak since these indices were established. This divergence in economic strength has led other nations to adopt defensive postures on their currencies, highlighting the dollar’s dominant position in the current global financial landscape.

All of this emphasizes that while the dollar may be a poor long-term store of value, most other fiat currencies appear to have even worse prospects. This reality will likely act as a tailwind for alternative assets and monetary mediums in the years to come.

Podcast of the Week

This week on The Last Trade, hosts Marty Bent, Jesse Myers, and Michael Tanguma were joined by Bitcoin venture capitalist Max Webster.  Max is deep in the world of Bitcoin-based applications and brought his zeal for the expansive and growing world of Bitcoin’s utility beyond the investment case for digital gold.  If you’ve wondered where Bitcoin is headed in terms of its role as the native currency of the Internet, this is the episode for you.

Check out the full episode here.

Closing Note

Wrapping up this week’s digest, Onramp Bitcoin invites you to explore our offerings on our website.

With an industry-leading multi-party custody solution, Onramp allows Bitcoin withdrawals without triggering a taxable event. Onramp stands as an optimal solution for HNWI and institutions seeking Bitcoin exposure prior to transitioning to self-custody.

If Onramp’s offerings align with your needs, or those of someone you know, feel free to schedule a chat with us here.

Onward and Upward,

Dylan LeClair