The cryptocurrency space is always full of surprises. The latest unexpected news came from the CME Group's election nominee Dante Federighi, who proposed that CME Group launch a Bitcoin mining business.
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CME Group "should be ahead of this trend"
One may not immediately see the connection between CME's existing Bitcoin derivatives trading market and the establishment of a mine. After all, China currently has about 65% of the computing power of Bitcoin.
This is not so much a "go ahead of the trend" approach as it is a scramble to catch up. Don't forget, China has plenty of cheap energy and mining technology. Especially in today's highly competitive mining environment, operating a profitable mine is not so simple.
However, this does not seem to deter Federic, who has a background in investing in the energy industry.
The Fortezza Forza RMC Fund LLC co-founder detailed this growth plan for CME in an open letter to shareholders submitted to the Securities and Exchange Commission (SEC) this week. He said that mining Bitcoin and other cryptocurrencies will enable the group to create additional sources of profit for shareholders:
"Some of our biggest investors, such as BlackRock, are shifting investment to companies that create value for all stakeholders … CME Group needs to stay ahead of this trend by building solar / wind energy / Hydroelectric Power Stations to empower our global business. Then transfer excess energy to mining Bitcoin and other cryptocurrencies. "
Bitcoin mining is not the "core business" of CME
As one of the three B-2 directors nominated by CME Group, Federich noted that CME Group should consider investing in new businesses such as energy plants. This will benefit shareholders as excess energy can be used to mine cryptocurrencies.
Federic believes that the CME Group can quickly exchange the cryptocurrencies it has dubbed into fiat currencies with its ability to "match and clear transactions." He acknowledged that mining Bitcoin seems a bit out of CME's regular business, but he believes:
"Although this seems to be beyond our core business, I think it is a business that we should develop. We do matching and settlement transactions like miners. We will convert all newly mined cryptocurrencies into fiat currencies … Profits are another new source of income for shareholders; a deep understanding of new technologies has changed CME's global trading landscape and increased investor investment in focusing on ESG businesses. This is a win-win business. "
Is it good for the crypto space?
A major US institutional investor looking to enter the bitcoin mining space is undoubtedly a sign of bullish room. However, it remains to be seen whether Fedric will be elected to the board and whether his plans are well thought out enough to compete in this challenging industry.