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Bitcoin Failed As Inflation Hedge? What The Current Global Situation Tells Us

Bitcoin has felt the consequences of war, just like the rest of the world. The current geopolitical situation generates uncertainty for both households and markets. The question of a million dollars for bitcoin seems to be whether it can still work as a hedge against inflation or has February proven the opposite.

Geopolitics And Bitcoin

A report by QCP Capital points out that, historically, the has been a poor correlation between BTC and Gold prices, which puts into question if the digital asset can be treated as a hedge against inflation to help protect the value of investments and individuals’ savings.

Sanctions against Russia will be felt by everyone around the world. Global oil and gas prices have already surged and are expected to escalate further. Inflation increases as the economic consequences of the pandemic meet with a war.

Investopedia explains that “Assets that are considered an inflation hedge could be self-fulfilling; investors flock to them, which keeps their values high even though the intrinsic value may be much lower.”

For this reason, gold has been the go-to hedge against inflation asset for years. And bitcoin has been long-described as “digital gold”, but the little correlation between them during times of risk-off means the digital asset has traded more like “a high-beta leveraged risk asset with a strong correlation to Tech and NASDAQ.”

Bitcoin and gold show poor correlation over time | Source: QCP Capital

However, there are more things to take into consideration as we enter what seems to be a key point in history for the crypto market and blockchain technology.

The report further notes that “where BTC has more crucial macro use-case now is its ability to serve as the primary weekend hedge for event risk, while traditional markets are closed.”

Providing spot and options liquidity at all times makes it work as the new last resort hedge for traders who previously used middle eastern markets. Also, Bitcoin has proven to reflect downside risk before any other markets can open.

Moreover, NewsBTC recently reported how Gold had been outperforming Bitcoin after Russia started the attack on Ukraine, but the digital coin took back its dominant position after recovering to roughly $40,000 last Thursday while Gold declined.

Related Reading | Bitcoin Volumes Surge As Ruble Plummets

While at firsts investors ran to gold amidst geopolitical concerns, it is precisely in these times of turmoil when bitcoin makes its case as it is more accessible, easy to move, and use –as a form of money–than gold.

And BTC Is Rallying Today

In a Fox Business Live with Euro Pacific Capital CEO Peter Schiff and journalist Layah Heilpern, the stockbroker continued to slam at BTC and favor gold only. He has claimed for years that the digital asset will slump to $0 and that it “is not going to hedge against anything.”

Heilpern had her bitcoin arguments more than ready and slammed back saying that Schiff’s projection has never come to a realization and the fundamental value of bitcoin has been working perfectly during this year’s turmoils:

“You can’t trade peer to peer in gold. Bitcoin is literally an alternative monetary system.”

As Heilpern explained, you cannot send donations to Ukrainians –or anyone– in gold; you cannot flee a country carrying gold bars.

Related Reading | Possible Scenarios For Bitcoin, How The Market Has Reacted To Past Wars

Reportedly, amidst frozen bank accounts many civilians from Ukrania and Russia have started to use BTC as both populations have been greatly affected by a war they did not start.

Moreover, the war will only make the U.S. inflation higher, and the case for Bitcoin is anything but closed as mass adoption is a possibility that would likely shift the narratives entirely in its favor.

And on top of that, the digital coin has been surging in price today. Trader Sven Henrich shared his view on the current Bitcoin rally. The expert claims there are four main reasons for it:

  1. Fundamental: “Adoption & acceptance continues to expand, i.e #ebay but also institutional. This path will continue in my view. There is no sign of regression, but continued expansion.”
  2. Sentiment: “The Ukraine crisis highlights how Bitcoin can act as a support mechanism to raise funds when traditional avenues are cut off. Blockchain & decentralized money to become more relevant.”
  3. Technical: “Bitcoin made a higher low versus equities in February showing a positive divergence & defense of a key trend. Start of correlation decoupling process?”
  4. Safety Trade: “Sanctioned money may seek Bitcoin as a safe haven (unconfirmed) This also invites risk as it gives an excuse to accelerate regulation (long term positive/short term risk).”

Bitcoin back up to $41,154 in the daily chart | Sources: BTCUSD on TradingView.com

 

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Cardano Whales Devour Dip, Why They Don’t Care About Price Action

Despite the crypto market’s bloodshed, in the past few days, the Cardano (ADA) trading activity has been relentless, and its holders’ balance remains strong with a multi-year high.

Into The Block data indicates that the wallet balance held by long-term Cardano holders hit a multi-year high on February 23.

“Regardless of the price action, Cardano‘s holders remain strong. The balance held by HODLERS- addresses holding >1 year, is at a multi-year high. These HOLDERS increased their positions to 10.12b $ADA, the largest balance since December 11, 2019.”

Source: Into The Block

Despite the geopolitical tension causing the altcoin’s price to drop dramatically, traders have increased their position of Cardano.

Holders have accumulated the highest balance of ADA since December 2019. Cardano’s network recent developments might be serving as fuel to its supporters, and as a consequence, many believe its price will climb.

“Every bounce is still getting sold off, waiting for a final leg down before a reversal. Would consider buying this at 0.50,” an analyst noted.

A Finder’s poll indicated several analysts believe the price of ADA will reach $58 by 2030, and a few thought it might close this year at $2.72, a 160% increase. Many traders received the $58 prediction as an exaggeration unless the Cardano ecosystem truly manages to explode during the following years.

Expert Vanessa Harris was also bullish on the altcoin. She expects it to close 2022 around the $3 mark, adding that its criticized slow-paced growth could pay off as nations turn their eyes towards it:

“It is one of the few smart contract platforms that have placed security, correctness [and] decentralization at their core, backed by formal methods and peer-reviewed research… While this means Cardano moves more deliberately in the short term, long term this resilience should support adoption by nation-states and non-governmental organizations. We are already seeing this adoption happen in Ethiopia and Tanzania.”

However, other experts remained bearish and cited “lack of execution and poor technology” and alleged that “They have failed on their promise of delivery for the last several years.” But however slow, the expansion of its DeFi ecosystem is starting to happen and might support the loyal holders’ sentiment.

Related Reading | Cardano Daily Transaction Volume Up, But ADA Prices Remain Sluggish

Cardano DeFi Expansion

Cardano volumes and transactions are growing as developers focus on building the first dApps solutions and its DeFi space is set to grow. It has even surpassed the on-chain activity of Ethereum ranking 2nd in 24h transaction volume after registering $17.04 billion on February 22.

In terms of gaining traction, the decentralized exchange SundaeSwap, an Automated Market Maker DEX, was anticipated by many users and launched at the beginning of the year. It tumbled at the beginning due to congestion. But after some adjustments of the block size done by IOHK, the transactions run smoothly now and SundaeSwap reports a Total Value Locked of $21 million.

The boom of NFTs is also contributing to the Cardano blockchain attraction. The non-custodial decentralized exchange ecosystem Arcadex will soon be launched on the network. It has generated enthusiasm for providing a wide variety of DeFi services through both DEX and NFT marketplaces.

Despite the slow-paced growth and 6-month downtrend, Cardano is still gaining traction and holders are not letting go. More growth is expected as the Cardano roadmap aims to increase scalability.

Related Reading | Bitrue Announces Support For Cardano (ADA) As Base Pair On Exchange

Price Of ADA

At the time of writing, Ada is down to $0.83, shedding around 0.72% over the past 24 hours.

Cardano price down to $0.83 in the daily chart | Source: ADAUSD on TradingView.com

 

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Stablecoin Supply Near $200 Billion, Faster Growth Than Rest of Crypto

Stablecoin supply shows significant growth during the year. The market cap of the top stablecoins is roughly $181 billion, over 11% of the total crypto market, which is now at $1,6 trillion after shedding over $140 billion in the past two days over geopolitical concerns. Consequently, data shows that stablecoins are growing at a much faster pace than the crypto market this year.

Crypto total market cap at $1,6 trillion in the daily chart | Source: TradingView.com
Faster Than The Crypto Market

Having significantly accelerated their pace since 2020, data from Arcane research shows that stablecoins like USDT, USDC, BUSD, UST, and DAI are growing faster than the crypto market.

Tether (USTD) still takes the lead of all stablecoins with a 44% market share and a $79 billion market cap at the time of writing. USD Coin (USDC) follows reporting a market share of 29% and a capitalization of over $57 billion. Binance USD (BUSD) takes third place with a 20% share and $18 billion market cap. The following chart shows the total circulating supply near $200 billion.

The circulating supply of top stablecoins growing exponentially fast since 2021 | Source: The Arcane Research Weekly Update – Week 7

However, the stablecoin USDT has not reported a very active growth since the summer of 2021, growing merely 1% in 2022. On the other hand, USDC has been growing extremely fast since last year, reporting a 20% growth in 2022 alone.

By the end of 2021, Arcane Research had projected the fast growth of USDC to outshine USDT and eventually take its crown. Given the previous numbers, they are now projecting for USDC to become the largest stablecoin by market cap at the end of June.

Moreover, the algorithmic stablecoin Terra UST (UST) has seen a 19% growth over the year and DAI 9%.

Furthermore, while the crypto market’s Fear and Greed Index has sunk to the extreme fear area again, trader Byzantine General had noted that “Historically when tether dominance reaches 4.5% to 5% it marks a bottom on $BTC. Seems like sentiment reaches peak fear around that level.”

Byzantine General explained that “It’s considered bearish when USDT dominance goes up because it means people want to get out of coins and flee to something more stable.”

The chart shows Tether’s dominance at 4.5 on February 21 | By trader Byzantine General on TradingView

He further pointed out that “Some people think a high tether price and dominance is bearish. Some think the market cap increasing (because of new prints) is bullish .”

Related Reading | Stablecoins Total Market Cap Breaches $179 Billion Mark – Can It Go Higher?

Are Authorities Ready For A Giant Stablecoin?

Meanwhile, The Biden administration, the Federal Reserve System, and the Financial Stability Board have taken an unsurprisingly skeptical stance on stablecoins. They were right in the spotlight of the report Assessment of Risks to Financial Stability from Crypto-assets published on February 16.

In this report, the authorities claimed that “Crypto-assets markets are fast evolving and could reach a point where they represent a threat to global financial stability due to their scale, structural vulnerabilities and increasing interconnectedness with the traditional financial system.”

“The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (CPMI-IOSCO) are coordinating with the FSB to determine regulatory approaches for GSCs, including those intended for use in mainstream payments.”

However, some experts believe that if stablecoins continue the fast pace of growth, they might become too big to fail thus proving concerns by the FED and FSB wrong.

Related Reading | Fed Chair Jerome Powell Argues Private Stablecoins Can Co-exist with US CBDC

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Crypto Winter or Not, Here’s Why Index Trading Can Help Spread the Risk

The crypto market just shed 3.49% over the day to $1,6 trillion. With concerns over Russia and Ukraine and rate increases by the Federal Reserve in the U.S, cryptocurrencies are tumbling. Many investors fear a crypto winter, but whether it is here or not, diversification is still vital.

James Wang, Head of Tokens at Amun, explained to NewsBTC how index tokens allow to gain instant exposure to the best-performing and most liquidity assets, diversify portfolios, and help spread the risk.

Related Reading | Ethereum Founder Vitalik Buterin Welcomes Another Crypto Winter

Crypto total market cap at $1,6 trillion in the daily chart | TradingView.comAmun Limited is a technology company that simplifies the access to passive investment on crypto through index trading products, providing broad exposure to particular blockchain ecosystems and DeFi sectors.

While crypto index funds are not popular yet compared to traditional index trading, James Wang explained that index tokens are a very useful tool because users gain instant access to a diversified portfolio of assets without having to manage multiple purchases manually.

This massively simplifies the buying process and cuts out all of the transaction fees that come with buying multiple coins individually and provides an easier on-ramp for newcomers to cryptocurrency investing, he noted.

Amun index trading products can be a tool in times of volatility because traders can move their exposure “towards a specific market segment that might be weathering the storm better than others.”

“For most investors, dollar-cost averaging is the most sensible way to allocate capital. DCA is a way of spreading out risk over time. Index investing is a way of spreading out risk over space. By employing both, investors can gain crypto exposure without the headache of deciding when or what to buy.”

Wang noted that “Almost all the growth in the S&P 500 in recent years were driven by tech and biotech” and added that Amun believes “blockchains are the next chapter of the internet and having exposure in this emerging field could be as rewarding as investing during the early years of the internet.”

“From a product perspective, the S&P 500 index has been a benchmark for the industry and a key indicator of the US economy. We hope to create an index that will serve as the benchmark of the crypto economy over the coming years.”

Safety, Fluidity, And Diversity

Wang pointed out that Amun’s tokens consist of some of the most dependable projects in crypto, “the largest and most established DeFi projects on tier-1 blockchains like Ethereum, Solana, and Polygon.”

“You no longer need to sign up to an exchange or hire a broker to invest in industry indexes.” 

As crypto users demand safety, fluidity, and diversity of their transactions, Wang noted that “Fluidity and diversity are considerations already baked into index investing,” like so:

“Diversity of investment is achieved by grouping 8 or 10 leading projects in a given market segment and giving users exposure to each of them. The potential number of indexes is limited only by the number of unique use-cases the blockchain space produces. Fluidity is provided by the ease with which users can enter or exit an investment at the click of a button via token swaps or minting.”

Moreover, Wang added that the open-source protocol Amun is built on passed multiple audits before being released, and they are part “of a large, vibrant community of developers that are busy maintaining and refining the underlying technology,” thanks to their integration with Ethereum, Polygon, and Solana.

Crypto Mass Adoption

Wang thinks that during the DeFi and NFT boom we are witnessing, “some people are probably more familiar with the NFT space than the crypto space in general.” However, using index tokens gives everyone “a chance to invest without having to exhaustively research an entirely new industry and provide easier financial management than investing manually.”

For this reason, Wang thinks it is a possibility for index tokens to play a bigger role in the near future.

“Suppose we can get people to understand the benefits of investing in index tokens,” he said. “In that case, I think it could play a role in the mass adoption of cryptocurrencies — not least through their inherent simplification and ease of use. “

Wang stated that Amun’s next products “will aim to give investors broad exposure across all blockchain platforms.” With a “total blockchain index”, they intend to launch a product that “will serve as the S&P 500 of crypto by representing all smart contract platforms such as Ethereum, Solana, Avalanche, and Fantom.” 

Furthermore, Wang also noted that while “centralized exchanges are the main targets for regulators right now,” “Decentralized assets being traded on decentralized exchanges are the furthest away from regulatory scrutiny at the moment.”

However, as the regulatory framework will inevitably shift, “we’ll ensure that at every step we are doing all we can to stay fluid and evolve however we need to, to comply with new regulatory requirements.”

Related Reading | Small Cap Index Lead Gains In February, But What Is Bitcoin Doing?

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Bitcoin Mining Stocks Lose 50-60% Value Since Crypto Price Peak

Bitcoin mining stocks have drastically collapsed since November following the effect of the hashrate’s 23% growth and bitcoin’s downtrend on the miner’s rewards.

Mining Stocks Sharp Decline

Arcane Research data shows that the largest bitcoin mining stocks have collapsed since November after being caught up in the market’s volatility. 

The miner giant Marathon Digital Holdings’ (MARA) stock first plummeted on November 9th falling from over $81 to $79, followed by more dramatic drops and little upward movement. MARA is at $28,63 at the time of writing, a 66% drop since November.

The other large miner Riot Blockchain (RIOT) has gone from its November high of $45,97 to $19,73 at the time of writing, a 55% drop.

Source: The Arcane Research Weekly Update – Week 6

Meanwhile, Core Scientific (CORZ) plummeted from $14,5 in November to a low of $6,99 mid-January but recovered over 70% of its value in February now trading at $10,54 with a positive response from investors to production and operations updates.

Related Reading | Intel Announces Mining Chips’ First Clients: BLOCK, Argo Blockchain, and GRIID

On the other hand, following bitcoin’s slight recovery in January, MARA saw an increase of 33%, and RIOT jumped 34% from its low points.

The Arcane Report notes a possible underestimation of the bitcoin mining industry back in November. Investors might have overseen how the industry’s new capacity would make it more competitive. This factor plus the miners decreased profits and bitcoin’s downtrend are likely behind the mining stocks’ big drop.

“This massive decline should have taught bitcoin mining investors that the high beta behavior of bitcoin mining stocks is a double-edged sword.”

Low Mining Profits

The bitcoin miner’s rewards took a hit as the price of the coin declined since its November $69k All-Time High, which reflected in the mining stocks downtrend.

Miners increased capacity last year as the dropping hashrate that followed China’s ban on crypto mining promised high profits for the activity. However, the increase of the capacity came online later in the year, thus the rising hashrate levels did not follow bitcoin’s price, as usual, rather they met the coin at its fall.

Consequently, it was not only the decrease of bitcoin’s price that lowered miners’ profits but also the contrasting rising hashrate, which led to more competitiveness and an increase in mining difficulty.

Mining stocks have seen slight recoveries as bitcoin shows a short-term upward trend. However, if another bull market does not meet with the coin soon, mining stocks are likely to keep slumping.

Furthermore, Arcane Research data estimated the cash flow of mining one bitcoin for Antminer S9 –often described as the most powerful miner in the market with 13.5TH/s, but demands more power than s19 to mine the same amount of BTC– and Antminer S19 –which can reach 110 TH/s hashrate–.

Vulnerable to the digital coin’s volatility, S9 cash flow dropped 60% since November 9th and S19’s decreased 41%.

Source: The Arcane Research Weekly Update – Week 6

Related Reading | Environmental Debate: New York Crypto Mining Plant Permit Delayed

Bitcoin Price

Bitcoin continues to recover showing 4.2% gains over the last 24-hour. The digital coin is 3% up over the last month.

Bitcoin trading at $44,079 in the daily chart | Source: BTCUSD on TradingVIew.com

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NewsBTC 2022-02-11 23:59:12

An expert has claimed that crypto is trading like risk assets and looking like growth equities, and as the traditional market is likely to continue to see high volatility over the next months, the institutional adoption of crypto is slowing down until global equity markets find stability.

Crypto Institutional Adoption

The institutional adoption of digital assets is believed to be key to the future maturity and consolidation of the cryptocurrency market. The landscape of cryptocurrencies will likely keep on changing as a response to the ways worldwide regulations, macro environment, and mass adoption develops in the following years.

Although many important corporations have started to gradually approach digital coins like bitcoin, there might be still a long way to go for institutional money to massively enter the market.

Recently,  Bloomberg reported a JPMorgan strategists’ note in which they claim that “The biggest challenge for bitcoin going forward is its volatility and the boom and bust cycles that hinder further institutional adoption.”

Similarly, Alex Kuptsikevich, a senior financial analyst at FxPro, explained to Forbes that Bitcoin’s price “is determined not so much by volatility as by crowd interest. Without investor interest, it quickly goes sour, and with it, it picks up just as fast. In bitcoin’s favor is the reduced supply growth rate and its finiteness.”

“We should also note that the entry of institutional investors, the increasing acceptance of bitcoin as an asset for portfolio diversification, and the increased trading turnover in cryptocurrencies make the price less volatile over time.”

Related Reading | Goldman Sachs: Mainstream Adoption Won’t Boost Bitcoin Price

Crypto total market cap at $1,8 trillion in the daily chart | Source: TradingView.com
Why Growth Stocks Can Drive Investors In

In a Bloomberg Television interview with Adam Levinson, chief investment officer at Graticule Asset Management Asia, the expert noted that the current volatility of growth stocks and the traders’ fear over the Federal Reserve (FED) raising interest rates is slowing down the pace at which institutions decide to invest.

Levinson claims that many traditional institutions have already decided to allocate in crypto, but the current volatility has kept them away from investing.

“They don’t want their first foray into the space to be a money-losing proposition quickly.[…] Institutional allocations will wait until the global equity markets, particularly growth equities, have stabilized.”

The U.S. inflation has increased significantly and consequently so did the Vix ‘fear’ index, which measures the expectation of volatility for the stock market based on S&P 500 index. High inflation numbers create more pressure for the FED to increase rate-hikes and many investors believe the traditional markets are potentially set for a big sell-off.

Vix volatility index 14.43% up in the day to 27.35 | Source: Tradingview.com

Since bitcoin has been trading more like a stock, this directly affects the crypto market. The total capitalization has been recovering in the past week, but might see more volatility soon.

As Levinson noted, “What has happened this year is that you move to an environment where the Fed is being forced to raise rates, as are other central banks, and you are seeing a change in the extremely abundant liquidity environment.” As a result, “Crypto suffered. Crypto is basically traded as a risk asset, looking like a growth equity,” he added.

However, Lenson thinks that over the middle of the year there will be a situation “where crypto trades better than growth equities,” which could result in more institutional investors going forward and investing in crypto.

Related Reading | Could Crypto Adoption Represent a Compliance Opportunity for Banks?

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Crypto Market To Drop 80% Like Early Internet Company Stocks?, Why This Analyst Thinks So

The crypto market cap has recently begun to recover regaining $2 trillion. However, an analyst thinks a bear call could be in place given several similarities between the dot-com bubble in 2000 and the current crypto market.

Related Reading | Crypto Market Cap Regained $2 Trillion With Bitcoin Reaching At $45K

Crypto Mirrors The Internet. Good Or Bad News?

Recent studies show that the adoption curve of cryptocurrencies is looking similar to the early adoption of the internet around 1993, which could point in at a hyper-inflection point to happen soon where crypto and its related technologies become a regular tool used in everyone’s day-to-day lives. This could call for demand to increase and value to rise with it.

However, an analyst predicts that similarities with the internet could turn into a repetition in history where the crypto market would drop around 80% as the Nasdaq did back in 2000 amidst the dotcom bubble, a result of speculative investments and an overabundance of capital markets funding dotcom startups that later failed to make a return.

Investopedia explains that the dotcom bubble “was a rapid rise in U.S. technology stock equity valuations fueled by investments in Internet-based companies in the late 1990s.” The Nasdaq rose five-fold between 1995 and 2000, but then dropped reaching almost 77% in losses by Oct. 4, 2002.

“Even the share prices of blue-chip technology stocks like Cisco, Intel, and Oracle lost more than 80% of their value. It would take 15 years for the Nasdaq to regain its peak, which it did on April 24, 2015.”

Analyst Tasha Che shared via Twitter a take that traces the possibility for the crypto market to enter an extended bear market with a similar drop to the Nasdaq’s in the 2000s. Che sees these main similarities:

  • By 2000, the internet had a user base of 413 million people, around 6% of the world’s population. Nowadays, around 60% of the global population is using the internet, says Internet World Stats. In parallel, recent data collected by the GWI indicates that 10% of working-age internet users own some form of cryptocurrency, roughly 6% of the current world’s population as well.
  •  Both markets had a multi-year bull run due to the hype over “breakthrough tech” while being “thinly supported by actual use cases”.
  • “Monetary policy headwind”. In a similar macroeconomic scenario, in 2000 The Federal Reserve lifted 6 rate hikes by quarter-point in 1 year in an effort to slow down the rising prices of goods and services.
  • “In 2000 Bloomberg Internet Index reached a peak market cap of $2.9 trillion (about $3.5 trillion to today’s dollars)”, which then fell to $1,2 trillion by the end of the same year. Chen believes that “Given internet stocks back then cover wider subsectors than crypto today, a $2.5-3 trillion market cap would put crypto at par w/ dot-com valuation then.”

Crypto total market cap at $1,9 trillion in the daily chart | Source: TradingView.com

The expert further noted that the two years that Nasdaq dropped 80%, “It was blessing in disguise for internet industry–weeded out opportunists, gave real builders breathing room to build & allowed organic growth. But absolutely brutal for investors.”

Chen states that this opinion is not “a straight bear call” given that “history doesn’t repeat blow by blow”, but with such a similar setup she thinks it may be “in the cards”. The missing factor is a blow-off top, which is defined as “a sudden rise in price and volume, followed by a sharp decline in price also with high volume.”

If that blow-off top happens in the next few months by going back to the $3 trillion cryptos total market cap range, Chen thinks we would “almost surely see history rhymes.”

Related Reading | Crypto Winter Is Thawing With Bitcoin And Ethereum Rebound Signal

The Opposite View

However, other users pointed out that Chen’s data does not properly take into account the nearly 5x M2 money supply increase over the last 20 years, which has risen from $4.6 trillion in 2000 to $18.45 trillion in 2020.

Another user noted that the two markets may not be systemically correlated outside of sentiment given that the Internet speculation in 2000 gave foot to the overly inflated market, but the now speculation in crypto could be seen as “a parallel liquid market.”

It was also pointed out that crypto represents a different case due to the assets being more reflexive. Growth in usage can reflect in price and increases in price can lead to usage. However, the dotcom bubble did not slow down internet usage as “nobody needed to buy AMZN to use Amazon.”

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Why Crypto Is Following The 1990 Internet Adoption Curve

The adoption curve of crypto is believed to be in its early stages, and Wells Fargo data shows its close similarities with the early stages of internet adoption back in 1990, giving a glimpse of how crypto could become a part of everyone’s lives as it reaches the mainstream.

In a Brief History of The Internet, internetsociety.org notes that “The Internet has revolutionized the computer and communications world like nothing before.”

If crypto is the next revolution and many industries are already jumping in (finance, music, fashion, gaming, social media, etc), what will our world and portfolios look like once mass adoption happens?

Related Reading | Crypto Mass Adoption: Bringing Digital Currencies Into Everyday Life

90’s Internet Vs. Crypto Technology

A Wells Fargo Investment Institute report has compared how users started to embrace the internet in 1990 with the current cryptocurrency adoption rates.

The investment adviser suggests that both internet and crypto adoption started at a slow pace, but as the former “hit an inflection point, and then steeply accelerated”, the following years could show a similar spike for the crypto industry.

The report notes that in the cases of several technologies, “decades passed between the actual inventions and surging adoption rates.”

Only 1% of the world population and 14% of Americans were using the internet by 1995 even though it was invented in 1983. The experts think these numbers look familiar to the current rates of cryptocurrencies adoption.

Citing Crypto.com, collected data reveals that by 2021 almost 3% of the world’s population had become crypto users (221 million in June 2021). The most impressive part is how fast the industry got to that percentage, given that only four months before that time the number of users was half in size, around 100 million.

A common factor among how users approach new technologies in their early stages is the period of time many need to “figure out what the technology is, what it can do, and how it can benefit them.” In this matter, data shows that in 2021 crypto newcomers believed the space is still in its early adoption stage, “as they find the technology daunting and use cases unclear.”

Data represented in the following charts hints that the cryptocurrency adoption rates could be taking a similar road to “other earlier advanced technologies, particularly the internet.” Meaning that crypto could soon enter “an inflection point of hyper-adoption” like these other technologies, in which cases the rising path has not looked back.

“For the internet, that point was the mid-to-late 1990s. After a slow start in the early 1990s, internet use surged from 77 million in 1996 to 412 million in 2000. By 2010, worldwide internet use had grown to 1.98 billion, and today it sits at 4.9 billion.”

Shared by Wells Fargo

The following chart closely compares the growth of internet adoption from 1993 to nowadays and the rise in crypto users since 2014. Experts believe that “cryptocurrency use today may even be a little ahead of the mid-to-late 1990s internet,” showing no doubt of the rising adoption that could “soon hit a hyper-inflection point.”

“It often takes many years for consumers to widely adopt new advanced technologies.”

Shared by Wells Fargo

Experts at Wells Fargo foresee that “cryptocurrencies eventually will follow an accelerated adoption path similar to recent digital inventions,” meaning wifi, smartphones, and so forth. All innovations that are now part of most people’s daily lives.

Moving Into Early Majority

NewsBTC had previously explained that an adoption curve portrays the cumulative rate at which people adopt and react to a product and technology over time.

Its original model, Everett Rogers’s diffusion of innovations, shows five segments of an adoption curve’s life cycle: Innovators, Early Adopters, Early Majority, Later Majority, and Laggards.

As the adoption of this new technology moves into the early majority –and mass adoption–, more investors are likely to lose the fear of the crypto industry, and with increasing demand value is believed to spike.

Moreover, an important factor that may slow down the path toward adoption is the lack of a clear regulatory framework for the industry, which drives investors and consumers away. But as governments cannot look away for much longer, clarity is expected to come soon enough and also drive an increase in adoption.

Related Reading | Goldman Sachs: Mainstream Adoption Won’t Boost Bitcoin Price

Crypto total market cap at $1.9 trillion in the daily chart | Source: TradingView.com

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What Could Push Bitcoin Above The $100K Threshold

Despite the recent downfall of the crypto market, the projection of Bitcoin (BTC) to cross the $100k threshold remains seen as a matter of time. Back in December, Bloomberg Intelligence indicated that the anticipated mark would happen eventually “due to the economic basics of increasing demand vs. decreasing supply,” and new data shed some light on that idea.

Bitcoin Vs. Crude Oil

In a new Bloomberg Intelligence report, data shows trends that could favor Bitcoin and Ethereum prices.

The report noted that “Representing advancing technology, Bitcoin is gaining traction as a benchmark global digital asset, while oil is being replaced by decarbonization and electrification.”

Lack of supply elasticity is an attribute shared by Bitcoin and Ethereum that “sets them apart from commodities”.

For commodities, “rising prices thwart demand and increase supply”, but the top cryptocurrencies might tell a different story.

“Increasing Bitcoin and Ethereum demand, and adoption vs. diminishing supply, should follow the basic rule of economics and raise prices.”

In the following chart, Bloomberg shows a juxtaposition of the decreasing BTC and ETH supply along with the excess of crude oil and liquid-fuel production compared to consumption heading toward 13% in 2023, noting that the U.S. “has been a top headwind for commodity prices”.

Source: Bloomberg Intelligence

Related Reading | Why The Bitcoin At $100K Discourse Remains Strong Despite Market Crashes

Mainstream Adoption

Experts think that BTC “is well on its way to becoming global digital collateral”, while its revolution in the “digitalization of finance” is in its early days. Future mainstream adoption will lead to increased demand for bitcoin.

The report predicts that the future developments in the macroeconomics and politics of the U.S. –dollar dominance, jobs, votes, taxes, and the aim to oppose China’s policies and find leverage against them– will lead U.S. policymakers into creating proper regulations for cryptocurrencies and ETFs.

Beyond El Salvador adopting BTC as legal tender, the proximity of the U.S. midterm elections has evidenced the American senators and politicians’ race to follow along. In Wyoming, Arizona, and Texas politicians are pushing to turn the digital coin into a legal tender, pointing at Bitcoin as a new defining factor to get well positioned in the polls.

A wider acceptance of bitcoin is expected to happen with more regulatory clarity because fear and misinformation could diminish, thus more investors would jump in meaning mainstream adoption.

The report also notes that this greater mainstream adoption of Bitcoin is looking unstoppable, which would likely benefit its price.

“The launch of U.S. futures-based exchange-traded funds in 2021 appears as a baby step by regulators that we think culminates with ETFs tracking actual cryptos via broad indexes.”

Bloomberg data shows that “Rising demand, adoption and depth of Bitcoin should leave few options for volatility but to decline.” For this reason, they think it’s going through a “price-discovery stage”.

The following chart shows “the upward trajectory of Bitcoin futures open interest vs. the downward slope in the crypto’s volatility vs. the stock market”, noting that Bitcoin’s 260-day volatility is 3x of the Nasdaq 100, which contrasts its volatility during the launch of futures in 2017, which was closer to 8x.

Source: Bloomberg Intelligence

Regarding the Federal Reserve’s tightening measures, Bloomberg experts had previously predicted that “Bitcoin will face initial headwinds if the stock market drops, but to the extent that declining equity prices pressure bond yields and incentivize more central-bank liquidity, the crypto may come out a primary beneficiary.”

Related Reading | Bitcoin Leverage Ratio Suggests More Decline May Be Coming

Bitcoin recovering at $40,775 in the daily chart | Source: BTCUSD on TradingView.com

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Why NFTs Took Over Crypto Trading Volume While Ether Struggled

The NFTs market had one of its best months yet in January with a record trading volume of $6 billion while cryptocurrencies like Bitcoin and Ether plunged dramatically over the investors’ fear of the Federal Reserve (FED) tightening.

Related Reading | TA: Ethereum Breaking This Confluence Resistance Could Spark a Fresh Surge

The NFT Space Doesn’t Stop

Ether had its worst month in 2 years falling 55% from its all-time high (ATH) at $4,812. On Wednesday, the only all-time high the coin saw was in a 40-day correlation coefficient of 0.65  –the top is 1– with the S&P 500, Bloomberg reported. This indicates Ether could be facing more obstacles as macroeconomics develop.

Source: Bloomberg

However, NFT traders did not respond with the same fear. In fact, the non-fungible token market soared in trading volume during January with a record high of over $6 billion.

The NFT avatar projects are turning out very profitable with huge support from collectors, communities, and celebrities. The popular Bored Ape Yacht Club currently has a floor price of 99.0 ETH, according to OpenSea, and a trading volume of 82,076,32 ETH in the last 30 days.

At the moment, the top collection on OpenSea –ranked by volume, floor price, and other statistics– is Azuki, another avatar project. Its floor price is at 10.9 ETH and flipped the Bored Ape Yacht Club‘s trading volume with 92,241.73 ETH in the last 30 days.

Besides avatars, in January the non-fungible tokens also saw some creators turn into millionaires overnight when their NFTs got viral, like a young student from Indonesia (Ghozali Everyday) who minted his selfies and became an OpenSea and social media sensation; and a Chinese entrepreneur (IreneDAO) who won the hearts and bucks of the crypto community, reporting a total volume of 2,367.1283 ETH traded in less than a month.

Every time these events hit the headlines, the enthusiasm and curiosity of many people cannot help but grow. They used to dream of Hollywood, now they dream of NFTs.

But going even bigger, celebrities, musicians, athletes, major brands and companies keep jumping into the NFT industry as they foresee large profits in the future.

Furthermore, OpenSea’s rival LooksRare reported trading volumes of $2.25 billion at the end of the month, 50% of OpenSea’s. However, the LooksRare model of sharing profits with traders has been called unsustainable. Some believe their soaring trading volumes are due to ‘wash trading’, which is a form of price manipulation where traders buy and sell assets to increase prices.

Related Reading | Indonesia Based Boy Named Ghozali Becomes Millionaire By Selling Selfies On OpenSea As NFTs

But Why Do NFTs Keep Soaring?

As the price of Ether decreased dramatically last month, NFT traders saw this as an investment opportunity, indicating an inverse correlation between the non-fungible tokens and crypto-assets. Similarly, NFT holders usually prefer not to sell at a loss.

Ethereum trading down to $2,346 in the daily chart | Source: ETHUSD on TradingView.com

The NFT ecosystem tends to involve a lot of emotions, bragging, and fees that can encourage investors not to sell. The non-fungible tokens trade a lot more like art pieces than stocks, so decisions are not taken the same way.

Recently, FTX founder Sam Bankman-Fried hinted in an interview with The Block that he was surprised about the NFT market’s outcome during January. He pointed out that “The fact that they’re non-fungible makes them less liquid,” and added that “The whole psychology is also very interesting.”

And “psychology” might be a very fitting word for it. These holders usually want to be able to gloat over the NFTs they own, and with the new avatar features from Twitter and Reddit, the bragging is more than encouraged.

“But I have also been a bit surprised about how much they’ve been out performing recently. The fact that you’re public about owning one makes it harder to sell because it is a public giving up on something versus a private rebalancing of your portfolio.”

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Bloody Altcoin January Shows Why Bitcoin Remains The Crypto Safe Haven

Bitcoin has outperformed all crypto Market Cap-Weighted Indexes in January as traders turn to less risky assets amidst fear over the Federal Reserve tightening, thus the king of digital assets claims its position as crypto’s safe heaven.

Related Reading | Bitcoin Begins To Form A Bottom? Why $40K Is The Next Target

 Bitcoin As a Crypto Safe Haven

The thought of Bitcoin (BTC) being a safe haven asset is quite popular, but it opposes the critics who claim BTC –and all crypto assets–  is too risky, volatile, and speculative to become a safe haven. However, inside the crypto market it remains the less risky asset.

January was a very volatile month for the crypto market amidst the investors fear over The Federal Reserve (FED) hawkish moves, but an Arcane Research report shed light on how Bitcoin outperformed the other crypto indexes in the market during the bloodshed, thus maintaining its image as the less risky crypto asset to investors, especially during times of high volatility and uncertainty.

As traders take a more conservative position and look away from the most speculative assets, the Arcane report highlights how all crypto indexes saw losses between 20% and 31% this past month.

However, like the following charts show, BTC outperformed all altcoins conserving the highest crypto market cap and counting less losses. Meanwhile, the Small Cap Index fell the hardest, showing how the crypto market shifted amidst the traders’ conservatory tendency.

Source: Arcane Research

 

Source: Arcane Research

This gets us back to the “BTC as a crypto safe haven” belief, since the digital coin remains the least risky crypto asset to investors, who lean on it in times of turmoil.

On the other hand, the market sentiment is carefully improving “with the Fear and Greed Index now ‘only’ signaling ‘fear’ after a sustained period of ‘extreme fear’”. This could mean a better landscape for altcoins as traders’ position might turn around to the less “boring” assets.

At the moment of writing, Bitcoin trades at $38,545, up 0.98% in the last 24 hours.

Bitcoin trading at $38,545 in the daily chart | Source: BTCUSD on TradingView.com
What Studies Have Said Over The Years

Beyond the crypto market, some studies had predicted that “Investors in the US may cautiously use bitcoin as a hedge against uncertainties.”

A study from 2019 that assessed whether Bitcoin could be a hedge at the intraday level gave results that indicated that “Bitcoin can be deemed a hedge at various periods of time” as well as a “diversifier for currency investors.”

Furthermore, their results from a non-temporal threshold analysis revealed that “Bitcoin is a safe haven during high and extreme periods of market turmoil for the CAD, CHF and GBP, but fails to act as a safe haven for the other currencies.”

Then in 2020, other experts concluded the following:

Based on the WHO COVID-19 pandemic proclamation on March 11, 2020, we test the Bitcoin and Ethereum as safe-havens for stocks. Our dynamic correlations and regressions results show that Bitcoin and Ethereum, as the two major cryptocurrencies, display short-term safe-haven characteristics for stocks.

However, other research carried out in the same year had opposing conclusions, coming to deny the digital coin as a safe haven:

“During the period under consideration, we find that the S&P 500 and Bitcoin move in lockstep, resulting in increased downside risk for an investor with an allocation to Bitcoin.”

As the international political and economic panorama evolves with high uncertainties this year, new data to come will most likely be relevant when making a case about how the crypto market reacts and which digital coins can become the most useful tools.

Related Reading | TA: Bitcoin Near Crucial Juncture: Why BTC Could Surge Further

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How The Fed’s Move Could Affect The Crypto Market

The Federal Reserve (Fed) had its January Federal Open Market Committee (FOMC) meeting on Wednesday and the crypto market tumbled afterward. The Fed’s move, although hawkish, wasn’t a complete surprise.

As the Fed promises to modulate interest rates in order to achieve its goals of raising employment and getting price stability, investors responded with fear. Bond yields are climbing above pre-pandemic levels, thus affecting the traditional and crypto markets.

Investors fear the Fed’s focus on getting inflation under control because the markets’ reaction is not a priority amongst the entity’s task.

If the Fed moves on to more hawkish reports, markets are likely to keep reacting in a downward motion.

How Hawkish Is The Fed?

The central bank had already reported that “With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”

Now, the Fed announced interest rates will remain unchanged. However, a quarter-point rate hike is expected to happen in March, which would be the first rate hike since 2018. Afterward, they will start shrinking the balance sheet, which has swelled to nearly $9 trillion in response to bond holdings.

The FOMC released a statement that explained: “The Committee expects that reducing the size of the Federal Reserve’s balance sheet will commence after the process of increasing the target range for the federal funds rate has begun.”

“The economy no longer needs sustained high levels of monetary policy support,” Powell stated yesterday.

“The balance sheet is substantially larger than it needs to be. There’s a substantial amount of shrinkage in the balance sheet to be done. That’s going to take some time. We want that process to be orderly and predictable.”

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, told Bloomberg that “Chairman Powell has to walk a tightrope – he needs to communicate that the Fed is 100% committed to bringing inflation back down to 2%, while not causing a recession or stock market crash by tightening monetary policy too quickly.”

“The stock market is especially vulnerable… We believe the economy will stay out of recession and the bull market in stocks will continue this year, but we are concerned that the volatility we have already witnessed this month will increase in the months ahead and would exercises caution in the near term.”

Opposite to the general fear about the FED being too hawkish, Gerber Kawasaki Co-founder & CEO Ross Gerber told CoinDesk that Powell is aiming for a less aggressive tightening cycle than it was perceived and he might represent a great opportunity for long-term investors since his ultimate goal is to have “another long expansion with lower inflation like what we had under Obama for a very long time.”

Gerber foresees a difficult year where investors might face the harsh reality of the markets but thinks of short-term losses as “part of the process” because “markets don’t go straight up”. However, that short-term forecast still paints a bad picture.

Related Reading | IRS Called Cryptos And NFTs A Mountain Of Fraud

Traditional And Crypto Markets React

“Clarity on the timing and extent of rate hikes, as well as the degree of balance sheet reduction, should help calm markets,” Comerica Wealth Management CIO John Lynch said. “We believe left unto normal market forces, the U.S. Treasury yield curve will gradually steepen given global cyclical recovery and less severe pricing pressures.”

However, the Nasdaq stock index was down by 3.34% and the S&P 500 index decreased 2.1% after the Fed released the statement. Both Bitcoin (BTC) and Ethereum (ETH) prices decreased as well. Bitcoin, commonly perceived as an inflation hedge, showed signs of trading like a stock once more by reversing as the central bank tightens.

Bitcoin trading down to $36,353 in the daily chart | Source: BTCUSD on TradingView.com

Galaxy Investment Partners CEO Mike Novogratz told CNBC that “We’re going through a big re-rating” in global markets, this includes crypto. He added “It’s going to be a tough year for assets. … We’re going through a paradigm shift,” but at the same time he thinks that “A lot of the beatdown has happened.”

Volatility is expected to increase in the following months, expecting major changes in the macroeconomic landscape. Investors’ positions are likely to turn more conservative, away from more speculative assets like crypto. When interest rates are high, savers and investors turn to safer returns in government bonds.

Related Reading | ‘Bitcoin Rush’: Small-Time Solo Miners Strike Gold With Full BTC Blocks

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Solana Suffers Outage And Tanks 16%. What’s Next?

The past few days may have weakened the image of Solana (SOL). High levels of network congestion brought a new outage to the network and SOL fell the hardest amongst the top 20 cryptocurrencies amidst the market crash.

Here’s What Happened

Last week, it was reported that Solana’s network was clogged, resulting in many failing transactions and DeFi users not being able to adjust their collateral positions to reflect the new valuation of the coin amidst the crypto market fall.

In a Solana blog post, the team explained that the incident experienced by validators was due to excessive duplicate transactions sent by bots and “related to issues previously identified that engineers have been working to improve and resolve”.

This is not the first outage for the Solana network. The 18-hour network outage in September 2021 caused by heavy transaction traffic remains the harshest one. And just this month, this has been the second, following an outage on January 4.

Related Reading | Algorand, Solana, And More Lead List Of Biggest Losing Altcoins

Liquidated Solana Users

The DeFi lending protocol built on Solana, Solend, stated that the market crash “caused many accounts to become liquidatable and created many profitable arbitrage opportunities.”

SOL price dramatically plummeted as the whole crypto market tumbled, thus users with collateral needed to increase their position in order to not have their assets liquidated. Position liquidators receive a bounty from liquidated positions, so when scenarios like this happen they “race to close eligible positions”, as Laine the blockchain business that operates validators on Solana explained.

This is the reason behind bots, created to help liquidators win the race, but for this, “they submit the same transaction dozens or hundreds of times”. This turns into a mass of duplicated transactions that need to be verified by validators.

There was a massive quantity of attempts by Solend users trying to deposit and repay to avoid liquidations, but all they met was network congestion.

“This large load caused validators to falter, especially since they were not filtering out duplicate transactions optimally, wasting precious compute. The thousands of duplicate bot transactions also drowned out legitimate user transactions.”

Solend further stated, “In addition, there was some erroneous volatility on the Pyth price feed, which caused wrongful liquidations (e.g. some users supplying mSOL and borrowing SOL were liquidated due to prices moving out of sync).”

Solend later announced that they are working to reconcile problems encountered by users. The platform will “Reimburse 100% of the penalty for users liquidated due to abnormal volatility on the SOL feed” and “Reimburse 50% of the penalty for other liquidations.”

SOL Price Tanked

SOL is now down 42% in the last week and decreased dramatically from $144 on early Thursday to around $80 on Monday. It has now recovered slightly to $92,42 at the time of writing.

Consequently, SOL lost its position as the 7th-largest coin to XRP, and overall saw the deepest pool of blood among the top 20 cryptocurrencies, with many users left wondering if their network is worth the risk.

Solana trading down to $92,28 in the daily chart | Source: SOLUSD on TradingView.com

Related Reading | Solana Could Flip Ethereum To Become “Visa Of Crypto,” New Study By Bank Of America Shows

What’s Next For SOL?

Solana released the v1.8.14 update to “mitigate the worst effects of this issue” and alleged that “engineers have been working to improve and resolve” the issues related to network congestion starting with the 1.8 release. More updates to implement v1.9 are expected over the following 8 to 12 weeks.

“These forthcoming releases are aimed at improving the state of the network, with more improvements expected to roll out in the next 8-12 weeks. Many of these features are currently live on Testnet, where they are being rigorously tested.”

Many users didn’t find relief in the answers from the Solana-supporter CEOs and its co-founder Anatoly Yakovenko and called them out for allegedly doing false claims and dishonest wordplay. The network might be in a key point for its future growth. The new updates need to scale with the demand and provide trust to the disappointed users.

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Cardano Price Up And Down Amidst SundaeSwap Launch

The price of Cardano (ADA) surged and plunged on the same day, starting with the excitement around the launch of its first decentralized exchange, the DEX SundaeSwap, then following the downtrend of Bitcoin.

SundaeSwap’s Wins And Failures

ADA’s price had been up around 10% in the last week tied to the launch of Cardano’s beta version of its first decentralized app (DApp) SundaeSwap, a decentralized exchange (DEX) that allows token staking and aims to “decentralize not just the access to financial services, but also the core business model itself.”

“We are launching with a Beta label because, while the DEX’s smart contracts have been fully audited and the DEX will meet all industry standards for security, the implementation of fully decentralized governance will not be immediately possible due to existing transaction size limits on the Cardano blockchain.”

SundaeSwap’s launch entails the inclusion of its utility token SUNDAE, which offers holders the availability to vote on the governance protocol, plus trade, strake and lend coins. The token’s price will be determined by the community as prove of its goals towards decentralization.

“The Sundae Token is a utility token central to the healthy operation of the SundaeSwap DEX. We are focused on building the most useful decentralized exchange protocol we can, in line with the decentralized ethos that we all believe in. As part of that, we strongly believe that this protocol doesn’t belong to us, the company who wrote the software, but to us, the whole SundaeSwap community.”

They explained that at the protocol’s launch, 7% of the community supply of the token would be “locked by the DAO into a smart contract called The Taste Test,” and added that at the end ten days, “all of these tokens will be used to create the ADA/Sundae liquidity pool, establishing the initial price for the token.”

Not long after trading on the DEX started, users were dissatisfied about congestion on the net, orders pending over hours, and failing transactions. SundaeSwap’s team had already warned about this possibility ahead of the launch.

CEO Mateen Motavaf addressed the complaints in a bolds and cap message that said “IF YOUR ORDER IS ON-CHAIN, IT WILL BE PROCESSED ORDERS ARE FAILING DUE TO CONGESTION, PLEASE BE PATIENT”.

The team had written on January 8 “We want to inform you all that while orders may take days to process, everybody’s orders will be processed fairly and in the order they were received.”

They remain confident that “the protocol can meet the normal day-to-day load once things settle down.”

Cardano’s Scalability

The Cardano roadmap is currently focusing on several updates to optimize and scale the network, hoping to achieve faster transaction and adopt the layer 2 Hydra solution.

Its partner company Input Output just announced a promising scaling update that is supposed to increase Plutus script memory units per transaction to 12,5 million. The first change is supposed to take effect on January 25.

“Improvements in Memory/CPU parameters for Plutus remain one of 11 ways that Cardano intends to scale in 2022. Other paths include block size increase, Pipelining, Input Endorsers, Node enhancements, on-disk storage, sidechains, Layer 2 Hydra scaling solution, Offloading computation and the Mithril solution.”

– Input Output

Issues aside, Cardano has already grown stronger in its competition with Ethereum, recording a higher trading volume at times and lower fees.

Related Reading | Cardano Enters The Basho Stage: How It Improves Performance

Bitcoin Behind Cardano Crash?

Today, Bitcoin fell around 10% to under $38,000. At the same time, the total market cap fell bellow $2 trillion.

Analysts have alleged before that Bitcoin rules over the health of the crypto market, thus its downtrend could affect other coins like ADA.

Many enthusiasts were expecting a bullish trend for the Cardano coin hoping for its price to reach $2 amidst future optimizations and SundaeSwap’s launch, but this setup has been spoiled.

The SundaeSwap launch pushed Cardano toward a surge of 7.5% from its day-low price of $1.32 to $1.42, then stabilizing at $1,40. Then, following the crypto market’s downtrend, ADA decreased to around $1,20.

The general downtrend of the market followed the general worry over a more hawkish Federal Reserve, expecting higher interest rates. It also happened in parallel to Russia’s announce of a crypto ban.

ADA trading down at $1,2 in the daily chart – Source: ADAUSDT on TradingView.com

Related Reading | Cardano Hits Bottom? What You Should Consider Before Rushing Into ADA

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Binance’s CZ Explains Why Banning Crypto Ads Won’t Affect Demand

Several regulators around the globe have taken a hostile approach around crypto exchanges and crypto-related companies by forbidding them to advertise the industry to the general public. However, Binance’s CEO Changpeng Zhao thinks this will not affect the high demand of the market.

Curbing Crypto Ads

Crypto-related firms have been accused by international regulators of marketing their services with misleading messages that undermine the risk digital assets investments could possess to users.

Spain, U.k., and Singapore have banned the advertisement of crypto to different extents.

In Singapore alone, crypto exchanges and other licensed companies can only publish ads on their own websites and mobile apps to avoid reaching the general public.

The country’s ban includes “any form of advertisements or promotional materials in public areas such as Singapore public transport, public transport venues, broadcast media or periodical publications, third party websites, social media platforms, public events or roadshows.”

“MAS stresses that DPT service providers should conduct themselves with the understanding that trading of DPTs is not suitable for the general public. These Guidelines set out MAS’ expectation that DPT service providers should not promote their DPT services to the general public in Singapore.“

Spain requires a pre-approval for any crypto advertisement directed towards an audience of 100,000 or more people and all ads and must include a warning like such: “Investments in crypto-assets are not regulated. They may not be appropriate for retail investors and the full amount invested may be lost.”

In the U.K., authorities have banned several ads that they have claimed to be “irresponsible and took advantage of consumers’ inexperience or credulity.” 

Related Reading | Fidelity Says What We’ve Been Thinking: Countries & Central Banks Will Buy BTC

Why It Won’t Affect Price

The price of cryptocurrencies is driven by demand and supply, meaning the interest users have in the market and the availability of each digital coin. For this reason, the effects that bans might have on the adoption of cryptocurrencies are believed to be important for the future of the market.

Binance CEO Changpeng Zhao (also known as “CZ”) alleged during a CNBC International interview that the reason why regulators take this approach on advertisements is that the crypto industry has a huge demand.

Even though the CEO thinks these bans could slow down the industry’s growth, CZ is not worried about the macro picture because he thinks the demand for crypto is so high that curbing crypto ads will have little impact.

Changpeng Zhao claimed that most users are driven to the crypto industry through “word of mouth” marketing rather than ads.

“Clampdown on crypto advertising is unlikely to have much of an effect on demand, as most of the crypto users come from word-of-mouth promotions anyway.”

CZ noted that Facebook and Google opposed crypto ads for a long time and even though they are giant platforms that reign over the internet, this has not affected the adoption of digital assets.

Binance is the largest crypto exchange in the world and it recently withdrew its application to start a cryptocurrency exchange in Singapore after facing pressure from the country’s regulators over concerns of risks and consumer protection.

The exchange, however, has not lost interest in conducting business in the country. The global regulatory framework is miles away from becoming clear, and Binance is working to adapt and comply, taking “strategic, commercial and developmental” considerations.

CZ stated that Binance hasn’t driven its eyes away from Singapore for the country might change its regulatory framework later on.

The future location of Binance headquarters remains a mystery. CZ said they are exploring “everywhere in the world.”

The CEO noted that Binance is working with many authorities to help them build a comprehensive regulatory framework for the crypto market.

Related Reading | Binance’s CZ Wants Entrepreneurs To Create Coins. Does His Argument Make Sense?

Crypto Total Market Cap

At the time of writing, the global market cap of cryptocurrencies sets its price at $1,8 trillion, showing a decline of %3 in the daily chart.

Crypto total market cap at $1,8 trillion in the daily chart | Source: TradingView.com

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Ethereum The New Hard Money?

A debate arose about the possibility of Ethereum becoming hard money and ended up highlighting more downsides to the digital asset than anything else.

The founder of a Bitcoin investments managing platform, Charles Edwards, shared a chart that showed the circulating supply activity of Ethereum and Bitcoin and argued that “Ethereum has entered the hard money game. For the past 3 months, Ethereum’s inflation rate has been lower than Bitcoin.”

Chart by Glassnode. Shared on Twitter

“Hard money is not only about low inflation of supply, it is also about immutability of inflation – oil is not suddely hard money even when OPEC decides that supply rates are throttled.”

-Twitter user @alpha_authority

Related Reading | Solo Ethereum Miner Hits The Jackpot With 170 ETH For Mining A Block

Hard Cash Or Hard Fees?

In the short history of the cryptocurrency boom, many have debated the possibility for cryptocurrencies to surpass fiat currencies at some point. It is a feasible future scenario for Bitcoin, but other digital coins can only dream of it.

As Investopedia explains, “Hard money maintains a stable market value relative to real goods and services and a strong exchange rate relative to foreign currencies,” and its uses involve “lower transaction costs and risks”

In the case of cryptocurrencies, hard money would mean that a certain coin could not be subject to arbitrary modification. Opposite to Bitcoin, Ethereum’s rules can be –and have been– changed. Its supply schedule has been modified more than once, which indicates it can keep changing.

The burnings of ETH make it temporarily deflationary, seeking a higher market cap. But as the protocol and issuance schedule of Ethereum are malleable, the chart above does not prove that the digital coin can even get close to being hard money.

Furthermore, there are the inescapable high gas fees, expected to lower significantly by 2023 with layer 2, but most likely not low enough for consumer spending, commerce, and mainstream adoption. The rates can incentivize holding ETH, but not transacting, and other centralized blockchains like Cardano are already proving to be more economical.

Even though Ethereum shows a lower inflation rate than Bitcoin, the supply also sets the digital coin below Bitcoin’s standards.

Bitcoin has a finite supply of 21 million BTC. 80% of all coins have already been mined, but it would take the new supply of coins over 100 years to be exhausted. This is said to create digital scarcity. On Ethereum’s end, the circulating supply is unknown, it doesn’t have an overall cap.

Some users also believe that “a deflationary base asset is not good for Ethereum apps” and that it will actually become a problem for its growth in the future.

 

Related Reading | TA: Ethereum Topside Bias Vulnerable If It Continues To Struggle Below $3.2K

Ethereum In The DeFi Space

Recently, Analysts at JPMorgan, who have favored Ethereum over Bitcoin before, claimed that ETH is losing its dominance in the Decentralized Finance (DeFi) space due to emerging strong competitors like Terra, Avalanche, and Solana.

Its share of total value locked in DeFi lowered from almost 100% in 2021 to 70% by the end of it and could continue to drop. The analysts from the Wall Street banking giant think the necessary scaling of the network “might arrive too late,” Bloomberg reported.

“In other words, Ethereum is currently in an intense race to maintain its dominance in the application space with the outcome of that race far from given, in our opinion,”

The experts think that this loss of dominance could bring a downtrend for ETH’s price.

Ethereum Price

Ethereum trades at $3120 at the time of writing, down 1.75% in the last 24 hours.

ETH trading at $3,120 in the daily chart | Source: ETHUSD on TradingView.com

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The NFT Investor’s Worst Nightmare: IRS Craves For A Crackdown

Last year, when the NFT Everydays: The First 5,000 Days by Beeple sold at Christie’s for $69.3 million, it catapulted the non-fungible token’s market into the mainstream. A large number of people have invested billions in this industry and the boom is not stopping.

Recently, NewsBTC reported an aggressive surge in the NFT trading volume this year despite the falling crypto market. A report by Dappradar showed that in the first ten days of January, NFT trading generated around $11.9 billion.

Our previous report quotes Mason Nystrom, a senior research analyst at Messari, who alleged that “The cryptomarkets are fairly correlated – the market tends to rise and fall with Bitcoin. This has made it surprisingly interesting over the recent downturn as the NFT market has continued to increase in volumes.”

However, the rapid rise of the NFT space has not moved the officials of the Internal Revenue Service (IRS) to shed some light on the taxation parameters for the assets.

Even taxation experts are confused on the matter and can only speculate about the possible outcomes. As a large share of NFT traffic comes from the younger generations, are users prepared for tax filing season? The IRS is gazing at future penalties.

Related Reading | January Proves Turbulent For Investors But NFT And GameFi Seems To Be Eating Good

The IRS Gears Up

In November 2021, the $1.2 trillion infrastructure bill was signed into law by President Joe Biden as a key part of his economic agenda, proposing large investments in the country’s infrastructure. The funding is to come from a few sources involving tax changes.

Watching over the cryptocurrency industry’s boom, the infrastructure bill directly targets its investors, but they fail to educate digital assets users on all the information they need to report. The unawareness could result in possible felony convictions for tax evasion.

However, the law updates the definition of the terms “broker” and “digital assets”, and clarifies that users with regular transactions or any crypto transaction over $10,000 must report that data to the IRS. In this case, taxation works for digital assets in a similar way it does for capital gains relative to stock and bond trades.

However, non-fungible tokens are not close to being as clearly defined by the law as other digital assets, so there is a lot of room left for interpretation. That’s a dangerous game for investors, but the IRS investigators seem eager for cases to surge soon and are ready to crackdown on the market. They might see billions of dollars coming from the NFT gains tax bills.

Are NFT Investors Evading Taxes?

The murky confusion originates because it is not clear whether NFTs are taxable as art collectibles or not. It is fundamental to be aware of this because most crypto assets and stocks have a long-term capital-gains rate up to 20%, but for art collectibles, it’s 28%. And if NFTs are to be considered as ordinary income, the rate could go as high as 37%.

Michael Desmond, the former chief counsel at the IRS who is now a partner at Gibson, Dunn & Crutcher, commented for Bloomberg that the rising NFT trading traffic might force the IRS to clarify the rules, “but it may begin auditing people first.”

The best-case scenario is gearing up and going through large amounts of paperwork, like the NFT investor Adam Hollander did, spending 50 hours checking months’ worth of transactions. He stated that “It’s an absolute nightmare,” and added that “There are people who aren’t going to be willing to do what I’m doing.”

And that nightmare really is the best-case scenario compared to tax evasion penalties.

Related Reading | Sports NFT Marketplace Lympo Suffers An $18.7 Million Hack

Total crypto market cap at $1,9 trillion in the daily chart | Source: TradingView.com

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Cardano Enters The Basho Stage: How It Improves Performance

The software platform Cardano has entered the third stage of its roadmap, the Basho era. It promises to improve the network’s performance and scalability.

Cardano’s roadmap is “a summary of Cardano development” divided into five eras to deliver improvements in diverse functionalities of the network that are “delivered across multiple code releases”.

Now that the platform’s core smart contract capability Plutus has been deployed, the launch of the Basho era focuses on scaling Cardano, promising “Parameter adjustments, improvements, enhancements and other innovations” supposed to increase the network’s capacity.

They also call it “an era of optimization”, promising to enhance the performance and interoperability “to better support growth and adoption for applications with high transaction volume.” It is supposed to bring high performance, resiliency, and flexibility to the network.

Related Reading | Cardano Foundation Completes Funding To Plant 1 Million Trees

Scalability And Interoperability

Scalability and interoperability are some of the main solutions that Cardano wants to offer as the “ethereum killer”. While the Ethereum network is working to handle up to 100,000 transactions per second (tps), Cardano plans to reach millions of tps through the second-layer solution Hydra.

On the interoperability’s side, the Basho stage will introduce the sidechains, “new blockchains, interoperable with the main Cardano chain”, which eventually intends to allow the blockchains, with different architectures and codes, to be able to communicate: interoperate.

The Cardano Roadmap explains that “Sidechains can be used as a sharding mechanism by off-loading work from the main chain onto a sidechain to increase the capacity of the network. They can also be used to introduce experimental features without affecting the security of the main blockchain.”

Similarly, this stage will also introduce parallel accounting styles: “the ability to support and switch between UTXO and account-based models will be added using sidechains.” This is also meant to enhance interoperability and “support new kinds of use cases on the network.”

“Building on these foundations, and steadily increasing capacity and throughput to deal with the growth in the DApp ecosystem and onboard first hundreds of thousands, then millions of new users. From DeFi degens to citizens of developing nations.”

Cardano has been widely criticized for its slow start. Many people thought the platform was lagging behind, noting it took a long time to deploy its first smart contract. However, the CEO of the Cardano Foundation Frederik Gregaard argues that they take a careful approach to launch functions, with rigorous testing and peer review.

This time around, the Basho stage’s launch report noted that they expect “periods of high demand, network congestion at times”, but they see it as part of the ‘journey’ and added that they will be maintaining a “considered, safe approach”.

“We’re on an exciting journey and usage will be high. While we may at times feel impatient, this is the way. Here’s how we will optimize and scale as we grow.”

What The Basho Era Promises To Solve

The optimization and scalability improvements have been divided in the report between “on-chain solutions” and “off-chain solutions”. Here is what they intend to solve:

For on-chain solutions:

  • Block size increase: the network recently increased the block size by 12.5% to 72KB and “further increases will be applied over time”.
  • Pipelining: intends to propagate blocks “to at least 95% of peers within five seconds” to provide “the headroom to make more aggressive scaling changes”.
  • Input Endorsers: “This improves the consistency of block propagation times and allows higher transaction rates.”
  • Memory /CPU parameters for Plutus: improves the efficiency of memory usage across the chain.
  • Plutus script enhancements: a “more effective usage of the powerful EUTXO model through smart contract optimization,”
  • Node enhancements: intends to “help even distribution of stake and reward computations across the epochs”. The new node version “reduces peak load at critical points,”
  • On-disk storage: “RAM-constrained systems will be able to run nodes (…) and memory will no longer be a bottleneck on scalability.”

For off-chain solutions:

  • Sidechains: “Assets can be moved between chains as needed.”
  • Hydra: “provides a more efficient means to process transactions off-chain,”
  • Off-chain computing: “Transactions occur outside of the blockchain itself, yet can offer fast, cheap transactions via a trust model.”
  • Mithril: results in “Multi-signature aggregation that is fast and efficient without compromising security features.”

Related Reading | Cardano’s Ecosystem Explodes, Why ADA Could Be Quick To Resume Bullish Trend

ADA’s Price

ADA trades at $1,28 at the time of writing, up 3.74% in the last 24 hours, but 59.1% down from its last peak in September 2021. ADA trading at $1,28 in the daily chart | Source: ADAUSD on TradingView.com

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Lawmakers Ask The CFTC To Clarify Their Role Monitoring Crypto Risks

Bipartisan lawmakers from the U.S. House and Senate Agriculture Committees have requested clear information from the chair of the Commodities Futures Trading Commission (CFTC) about the crypto industry and their role in monitoring it and taking enforcement actions.

The CFTC chair Rostin Behnam intends to expand the regulator’s authority over the crypto market. Democrats and Republicans from the Senate and House Agriculture Committees agreed that the agency plays a “critical role“.

In a letter that Bloomberg described as “a rare show of bipartisanship in a divided Congress”, the lawmakers asked chair Benham to answer several questions in order “To understand the scope and size of digital asset markets, the benefits and risks presented by these emerging technologies” and “the role of the Commission with respect to these markets”.

“The CFTC has a critical role to play to ensure the integrity of digital asset markets. While some of these technologies have the potential to modernize the financial system, it is imperative that customers are protected from fraud and abuse and that these markets are fair and transparent.”

The lawmakers approached the risks of the crypto industry and called for the CFTC to widen their engagement to protect consumers from losses and scams.

The letter details alleged risks from the industry and reiterated that the CFTC is enabled by the Commodity Exchange Act to take enforcement actions for violations coming from digital asset marketplaces.

“Despite the CFTC’s responsible engagement, this industry is still subject to risks of abuse, including consumer fraud and cybercrime. Consumers reported losing nearly $82 million to 2 cryptocurrency scams between the fourth quarter of 2020 and first quarter of 2021, more than 10 times the amount from the same six-month period a year earlier.”

The lawmakers are also concerned about risks in the DeFi space and “any DeFi protocols offering derivatives contracts on unregistered exchanges”. However, they noted that “there are still questions about who is responsible for monitoring DeFi markets for fraud and manipulation, safeguarding customer
funds, and ensuring parties meet their obligations to one another.”

Related Reading | Did US Regulators Began Offensive Against Crypto Platforms? CFTC Fines Kraken

Authority Of The CFTC

In October 2021, during chair Rostin Behnam’s confirmation hearing, he appealed to Congress looking to expand the CFTC’s regulatory authority and stated that the entity is ready to be the “primary cop on the beat”

“the total size of the digital asset market was US$2.7 trillion and among that $2.7 trillion, nearly 60% were commodities. So with that in mind, I think it’s important for this committee to reconsider and consider expanding authority for the CFTC,”

Behnam’s statement seemed to contradict Gary Gensler’s, chair of the Securities and Exchange Commission (SEC), who sees most cryptocurrencies as equity. This has seemingly turned into a race amongst regulators to gain more authority.

The SEC’s view on how to define Ether has become unclear. If the two largest cryptocurrencies by market cap (BTC and ETH) are not securities, then the SEC has a large size of the market out of regulatory reach.

However, the lawmaker’s letter defined both Bitcoin and Ether as commodities, which would mean that both of these assets fall under the CFTC’s jurisdiction.

“The CFTC has long considered certain digital assets to be commodities and courts have agreed. In fact, the two largest digital assets by market capitalization are commodities: Bitcoin and Ether. These two digital assets alone make up approximately 60% of the $2.7 trillion market. Futures contracts on Bitcoin and Ether are currently traded on CFTC-registered derivatives exchanges.”

Related Reading | How the CFTC fine on Coinbase could affect future crypto company listing

Crypto total market cap at $2.0 trillion in the daily chart | Source: TradingView.com

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Visa Survey Shows Crypto Payments Could Boom In 2022

The payment company giant Visa Inc just surveyed 2,250 small businesses from nine countries to understand if merchants are planning to adopt crypto to receive payments. Results show that over 25% of them want to start doing so this year.

Reuters reported that Visa expects many retail businesses to join the crypto boom starting this year. The payment company has been long involved in the cryptocurrency industry and is interested in its mainstream acceptance as an opportunity to grow its own line of products and services.

Visa currently offers cryptocurrency-linked cards for consumers to make purchases using digital currencies. However, this service doesn’t mean stores directly accept digital assets as payments. The user’s holdings directly turn into a fiat currency “instantly, behind the scenes” as they pay.

Even though Visa consumers are reportedly adopting crypto with over $3.5 billion in crypto-linked digital transactions in 2021, merchants have been skeptical about directly receiving it as payment so far.

Visa’s Crypto Survey Results

Visa surveyed small businesses from the United States, Brazil, Singapore, Canada, Russia, United Arab Emirates, Hong Kong, Germany, and Ireland.

Reportedly, small businesses from North America were the least enthusiastic about starting to accept cryptocurrencies as a form of payment. 19% of small businesses from the U.S. and only 8% from Canada want to offer digital currencies as a form of payment this year.

However, over 30% of small retailers from the United Arab Emirates, Hong Kong, Singapore, and Brazil –where the crypto industry is booming– intend to allow users to pay using crypto in 2022.

Furthermore, around three-quarters of the surveyed retailers thought that accepting crypto as a payment option would be “fundamental” for their businesses to grow.

Related Reading | Visa Creates Service To Advise Financial Institutions On Cryptocurrencies

BitPay Chips In

Similarly, CEO of crypto payments platform BitPay Stephen Pair just made comments that contribute to the 2022’s forecast on digital currencies acceptance.

BitPay company provides cryptocurrency payment processing services for retailers and reportedly has seen a growing number of businesses using their services to directly receive digital currencies as payment.

Pair thinks that “There could be an inflection point in 2022″ for the common use of digital coins “where it starts to become a little unusual for you to not have some”. He commented the following:

“I think in 2022, you’ll see many more people — that next wave of people — getting interested in crypto both from an investment perspective and a ‘let’s try it for a payment’ [perspective]…There’s going to be many more places with that service — that you’ll be able to spend crypto and do it in an in-person setting, which may make people more comfortable trying it out than perhaps if it’s on a website where they’re not sure if they’re doing it right or wrong.”

Related Reading | FinTech Behind Cardano’s First Stablecoin Launches Bank Accounts And Visa Debit Cards

Crypto total market cap at $2.0 trillion in the daily chart | Source: TradingView.com