First Mover Asia: Taiwan Chip Manufacturer TSMC Remains a Crypto Skeptic; Major Cryptos Decline

Bitcoin (BTC): $39,875 -3.3%

Ether (ETH): 3,017 -3.3%

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Bitcoin and other cryptos plummet

A day after bitcoin and other major cryptos had their best day since the beginning of the month, they were back in the doldrums as Russia escalated its attacks on the southern and eastern parts of Ukraine, spurring new angst among investors about the global economy.

The largest cryptocurrency by market capitalization dipped below $40,000 during Thursday trading and was recently down over 3% for the past 24 hours. Ether was changing hands at about $3,000, down similarly for the same period. Other major cryptos were solidly in the red. SOL and ADA were both recently off more than 4%. DOGE was a rare bright spot, up over 1.5%.

Crypto prices tracked equity markets, which also sank, with the tech-heavy Nasdaq off 2.1% and the S&P 500 down a percentage point as investors continued to shy away from riskier assets.

Meanwhile, economic fallout from Russia’s unprovoked invasion continued to mount.

A day after saying that peace talks with Ukraine had reached a dead end, Russian President Vladimir Putin acknowledged on Thursday that economic sanctions from the U.S. and other countries opposed to Russia’s unprovoked aggression were hurting his country’s oil and gas industry. E.U. countries continued to discuss the possibility of a complete ban on Russian energy products. The price of Brent crude oil, a widely regarded measure of global energy markets, soared past $111, a roughly 40% gain from the start of the year.

Paul Robinson, strategist at news and research website Daily FX, noted in an email that “contracting price action” for bitcoin over the first quarter this year “could continue to make things even choppier in the near term.”

Given the nature of volatility (expanding/contracting) and the fact that this is BTC, volatility is likely to ramp up again as we head towards the middle of the year,” Robinson wrote.

“Typically once BTC gets rolling it doesn’t take long to muster a fresh level of market interest,” he added. “If we were to see that fail to be the case this time around, then it could mean that BTC is headed for an extended period of sideways price action, or worse.”

S&P 500: 4,392 -1.2%

DJIA: 34,451 -0.3%

Nasdaq: 13,351 -2.1%

Gold: $1,973 -0.1%

Taiwan chipmaker TSMC does not mention crypto mining in its latest earnings

Taiwan Semiconductor Manufacturing Company (TSMC) posted another record profit for the quarter, hitting the $7 billion mark on continued strong demand for electronics and gadgets.

But absent from TSMC earnings was talk of mining. On the company’s earnings report for revenue by platform you can find categories like smartphone, high-performance computing, internet-of-things (IoT) and automotive, but nothing about crypto mining.

TSMC earnings (TSMC)

TSMC tends to be secretive when speaking about its customers. As a pure-play semiconductor foundry, the company has to be agnostic. Its engineers will fabricate chips for the fiercest of competitors, like AMD (AMD) and Nvidia (NVDA), so it stays silent on any sort of market commentary.

It wasn’t always this way, though. During the first major bitcoin mining boom of 2017, TSMC specifically called out crypto’s rise and mobile’s decline in a press release for its fourth quarter 2017 earnings.

“Our fourth-quarter business was supported by major mobile product launches and continuing demand for cryptocurrency mining,” said Lora Ho, senior vice president and chief financial officer of TSMC at the time. “Moving into first-quarter 2018, we expect the strong demand for cryptocurrency mining will continue while mobile product seasonality will dampen our business in this quarter. ”

But this being crypto, fortunes fall as quickly as they rise.

As crypto historians know, 2018 was a bear market for crypto, and this was reflected in TSMC’s earnings as the year continued.

By the third quarter, executives were blaming the “further weakening of cryptocurrency mining demand” for missed revenue guidance. By the end of the year, that language had been revised to “a big drop. It’s almost a double-digit.”

The 2018 bear market also hit other semiconductor companies hard too. Nvidia said that it had a glut of unsold graphics cards in its inventory, alongside an 18% fall in the company’s stock price shaving $23 billion off its market value, which Nvidia CEO Jensen Huang called the “post-crypto hangover.”

Fast forward to 2022 and TSMC is still skeptical about crypto’s long-term viability, especially when it’s also dealing with a period of high demand from other customers. It’s understood that TSMC just doesn’t want to allocate its limited fab capacity to businesses that it considers fairweather friends that fluctuate order volume on seasonality – crypto’s notorious bull and bear markets.

And we haven’t even mentioned Bitmain.

In early 2021, prosecutors in Taiwan charged Bitmain with setting up clandestine front companies to poach engineers from TSMC to help it accelerate the development of new business lines and diversify away from crypto.

Given Taiwan and China’s tense political status, the Taiwanese government does not allow Chinese firms to establish research hubs to develop technology for export to China. Chinese firms are allowed to set up branch offices in Taiwan, but they need to be specifically registered with the government and are closely monitored.

TSMC still allows for Bitmain to fabricate chips in its facilities, but TSMC requires the company to attest that its crypto-mining chips don’t violate any of TSMC’s intellectual property. If Bitmain does, the company will be banned and its chips discarded.

So it’s easy to see why TSMC doesn’t prioritize the crypto industry. The company bet big on crypto during the last bull run, and it was burned when the bear market started. Given the continued demand for semiconductors worldwide, there are also plenty of demand elsewhere.

Bitcoin Neutral, Support at $37K and Resistance at $46K

Bitcoin weekly chart shows support/resistance. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin (BTC) continued to bounce around the $40,000 price level this week, indicating uncertainty among market participants.

The cryptocurrency is down by 8% over the past week and slightly positive over the past 30 days. Most technical indicators are neutral, although short-term buyers could remain active between the $35,000-$37,000 support zone, similar to what occurred earlier this year.

Momentum signals, per the MACD indicator, are positive on the weekly chart and negative on the monthly chart. That suggests a period of rangebound price action could persist, albeit with an average price swing of 20%.

On the weekly chart, the 100-week moving average, currently at $35,388, is an important gauge of trend support. Buyers will need to keep BTC above that level in order to sustain the recovery phase.

Still, there is strong resistance at the 40-week moving average (equivalent to 200-days), which at $46,800.

Further, an upside target at $50,966 was within close distance on March 28, although a pullback unfolded, similar to what occurred in September of last year.

For now, bullish countertrend signals will need to be confirmed with weekly price closes above $40,000.