For a long time, China has been the promised land for bitcoin miners and much of the network's hashing power has been on Chinese soil. However, this year the Chinese government has launched a manhunt for bitcoin miners and the industry has almost completely disappeared from the country. In recent days, the story suddenly came out that China is considering revising and possibly lifting the ban on bitcoin mining. However, if we look at the source in question, none of that seems to be true. The National Commission for Reform and Development (NCHO) has published a notice that does not say anything about lifting the ban on bitcoin mining. The only thing in the notice regarding bitcoin mining is that the NCHO plans to add “crypto mining” to the list of undesirable industries.
List should help entrepreneurs in the country The idea of the list of undesirable industries is to give entrepreneurs insight into the policies of the Chinese government. So, “Crypto mining” is now likely to be on this list as an industry that the government intends to eliminate. That at least gives entrepreneurs the information they need to determine whether it's a good idea to invest in the industry in question. Contrary to what we heard in the media, China does not seem to be considering lifting the ban on bitcoin mining at all. It is purely about adding “crypto mining” to the list of undesirable industries. The NCHO has given the public until November 21 to respond to the plans. Interestingly, the NCHO has already tried the same with regard to “crypto mining” in 2019 and that it failed to get the industry on the list at the time due to the reluctant mining sector. Now that it has almost completely disappeared from China, it seems unlikely that there will be much opposition to the NCHO's plans. The public consultation on this idea therefore appears to be a formality. Biggest geopolitical blunder of the 21st century Contrary to what we have been able to read in the media in recent days, the ban on bitcoin mining in China does not seem to be up for discussion at all. With which the country can easily write the biggest political blunder of the 21st century. Bitcoin continues to grow and the mining industry is more profitable than ever. If bitcoin is indeed the money of the future, then having a large part of the mining industry in your country is a huge advantage. That has been the case for years, but after the ban earlier this year, all companies with the northern sun have left and a large part has settled in the United States. If bitcoin continues to grow in the same way it has over the past twelve years, China has given the United States a huge gift. Even if China does decide to lift the ban on bitcoin mining, it remains to be seen to what extent miners will come back. Doing business in a climate where those in power can change their point of view at any time is also not attractive. It seems that China has shot itself in the foot with this.
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China's central bank on Friday announced a ban on all cryptocurrency payments and services, escalating its ongoing clampdown on bitcoin and other digital coins as it moves to roll out its own virtual currency.
Chinese regulators' latest action "strictly prohibits" exchanging cryptocurrency for legal tender, providing information or pricing services, and trading in cryptocurrency derivatives. The measure also applies to overseas exchanges that provide services online within the country's borders. Violators will face criminal penalties. This marks Beijing's latest ratcheting up of restrictions on what it sees as a vehicle for capital flight and competition for its digital yuan, now set to roll out as early as 2022. The price of bitcoin, the world's leading virtual currency, fell by as much as 9% after the announcement to below $41,000 before paring its losses. The statement, signed by multiple authorities including the People's Bank of China, the Cyberspace Administration of China and the Supreme People's Court said virtual currencies had "disrupted the economic and financial order" and bred money laundering, illegal fundraising and fraud. Virtual currencies do not have the same legal status as legal tender, and may not be circulated in markets as currency, the document stated, naming specific examples including bitcoin and Ethereum. Takahide Kiuchi, executive economist at Nomura Research Institute and a former Bank of Japan policy board member, called the latest move an "extension" of measures to "ban all virtual currencies except central bank digital currency." China in June ordered five state-run banks including Industrial and Commercial Bank of China, Agricultural Bank of China, as well as mobile payments giant Alipay, to cut off cryptocurrency transactions. It also imposed a broad ban on virtual-currency mining that month, driving many miners overseas and slashing the country's share of digital coin creation, once above 80%. Also on Friday, the authorities announced even tougher mining restrictions, barring new operations and accelerating exits from existing projects. Supplying electricity to miners is prohibited, and such projects cannot receive financial, fiscal or tax support. The PBOC plans an official launch of the digital yuan as soon as 2022, following testing at the Winter Olympics. China plans to revise its laws to add it as legal tender and ban private-sector issuance of digital currencies, whose proliferation poses an oversight challenge for regulators. Capital flight is another factor. Cryptocurrencies have been used to circumvent Beijing's capital controls since before the coronavirus pandemic, and regulators have sought to close this loophole. The direct impact of the ban will be limited, as China's influence on virtual currency markets has diminished. But as the U.S. hammers out new regulations and other countries work toward their own digital currencies, market watchers are keeping an eye out for similar moves elsewhere. The central banks of Australia, Singapore, Malaysia and South Africa have announced a joint initiative to trial international settlements using central bank digital currencies (CBDC). The initiative, dubbed Project Dunbar, will prototype shared platforms enabling direct transfers between institutions using digital currencies issued by multiple central banks. The pilot’s findings will be used to inform the “development of global and regional platforms” in addition to supporting the G20’s roadmap for improving cross-border payments. Project Dunbar will be carried out in partnership with the Bank for International Settlements (BIS) Innovation Hub from its Singapore Center. The project will engage multiple partners to develop different distributed ledger technology (DLT) platforms and explore different designs that would enable central banks to share CBDC infrastructure. A joint announcement emphasizes the efficiency savings associated with DLT-based payments, stating: “These multi-CBDC platforms will allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks, eliminating the need for intermediaries and cutting the time and cost of transactions.” Michele Bullock, assistant governor of the Reserve Bank of Australia (RBA), highlighted that “enhancing cross-border payments has become a priority for the international regulatory community,” adding that the RBA is “very focused” on the matter in its domestic policy work. “Project Dunbar brings together central banks with years of experience and unique perspectives in CBDC projects and ecosystem partners at advanced stages of technical development on digital currencies,” said Andre McCormack, head of the BIS Innovation Hub Singapore Centre. He added: “With this group of capable and passionate partners, we are confident that our work on multi-CBDCs for international settlements will break new ground in this next stage of CBDC experimentation and lay the foundation for global payments connectivity.” The RBA has consistently downplayed the need for a domestic CBDC, however, citing the success of the New Payments Platform, which allows instant digital transfers 24-hours a day.
The European Commission is considering a new registry to register all citizens' possessions. This should not only include properties in the form of real estate, land and shares, but also assets such as precious metals, cryptocurrencies, jewelry, works of art, cars and boats. This is evident from a new document entitled 'Feasibility Study for a European asset registry'. According to the European Commission, such a register is necessary to prevent tax evasion and money laundering. It provides the authorities with more information to map out money flows. From the text of the proposal: "Data collection and interconnection of registers is an important tool under EU law to speed up competent authorities' access to financial information and facilitate cross-border cooperation. Several possibilities researched to collect information with a view to establishing an asset register that can then be used for a future policy initiative. It will examine how to analyze information from different sources on asset ownership (e.g. land registers, company registers, trust and foundation registers, central securities depositories, etc.) and how the design, scope and challenges of such an asset register of the Union can look like. It will also be examined whether data on the ownership of other assets, such as cryptocurrencies, works of art, real estate and gold, can be included in the register." Financial repression Although this is only a proposal, this is a very worrying development. It gives governments even more insight into the wealth of citizens, on top of the information they already collect. It is striking that the proposal only focuses on the interests of governments, supervisors, banks and NGOs and does not take into account the interests of European citizens. The proposal also does not clarify why a more detailed registration of assets is necessary. Under the guise of money laundering and terrorism, such a register further affects the freedom and privacy of citizens. Governments use it as an excuse to exercise more control over their own population. The proposal is therefore strongly criticized from various quarters. According to the German politician Markus Ferber, the European Commission is passing its book. "These plans are completely disproportionate. The relationship between the citizen and the state reminds me of China, not EU member states, when these kinds of plans are made." Control State The German newspaper Die Welt concludes that with this register all assets of gold and bitcoins become traceable, while the Austrian newspaper Die Presse reminds of a chapter from Orwell 1984. According to the Austrian Kroner Zeitung, such a registration of assets is impracticable in practice. and also very expensive. According to the German magazine Focus, the EU wants to map the wealth of all people down to the last cent: "If this register were established, the consequences are obvious. For example, for politically unwelcome citizens - and not only criminals - it will be much more difficult in the future to continue their activities. investigative journalists or whistleblowers, who are threatened with more targeted reprisals. Controlling money flows, investments and assets is contrary to human dignity. Under the guise of preventing money laundering, we are all being vetted. Now is the time for civil disobedience. People have to take to the streets, like the yellow vests in France." Capability mapping is the next step in tightening control over citizens. Earlier, the European Commission advocated stricter supervision of cryptocurrencies. She wants to register all crypto addresses, so that anonymous transactions come to an end. The European Commission also issued a directive this summer to ban transactions over €10,000 in cash across the European Union. A worrying development, even for savers who have nothing to hide.
Bitcoin and Ethereum accumulation continues in the spot market as the focus now shifts towards the derivatives market. Here, some interesting observations can be made, each of which shows us how Futures and Options have been affecting the spot market. And vice-versa. Those looking for profits in Bitcoin and Ethereum might find the derivatives market as an alluring opportunity. How does the market look? At the moment, the market is at its best in a long time. Both Bitcoin and Ethereum investors are in a solid spot as the Open Interest [OI] hit new highs today. Futures OI for BTC seemed to be at a 4-month high of $17 billion. The same was the case for ETH, with the OI standing at $14 billion. That being said, it’s worth noting that the ETH market is in a much different position than the BTC market, varying in many ways. ETH market has been hyper bullish Volumes on 31 August and 1 September were almost close to Bitcoin’s levels of $41 billion. These volumes aren’t usual for ETH as the same mostly remain within the range of $30 billion. Plus, over the same time frame, when ETH volumes were close to BTC’s, daily liquidations touched a 3-month high of $194 million. However, if you take a closer look, you’ll observe that most of these liquidations came from short contracts. Short liquidations for Ethereum rose to a monthly high of $130 million. This transpired primarily because of ETH’s rally over the last 2 days, a period during which ETH went up by 18.81%. Right now, people are demanding stability from Ethereum’s market. BTC market has been steadily bullish At the time of this report, daily volumes were still within the normal range of $100 million. Bitcoin OI in Perpetual Futures contracts also hit an 18-month high of $14.157 billion. These are good figures for a market that has been bullish for over a month now. Even the Implied Volatility to Realized Volatility spread seemed to be at its highest level of 0.9%, a level last seen on 30 May. A huge reason behind this is because the BTC spot market has been rising gradually, with a hike of “just” 4.83% in the last 4 days. Plus, with Bitcoin crossing $50k again, the OI by Strike’s 12k Call contracts for $50k seems to be turning profitable as the 24 September expiry inches closer. All in all, the derivatives market is in a really profitable state right now.
The overall sentiment among cryptocurrency enthusiasts is back to “neutral” after the significant gains Bitcoin has posted in the last 12 days. Despite the renewed optimism, BTC needs to reclaim a crucial price level as support to advance further. Bitcoin Must Reclaim $40,000 Bitcoin has enjoyed an impressive 43% rally over the past two weeks, gaining over nearly 13,000 points in market value. Its price went from a low of $29,800 on Jul. 21 to hitting a high of $42,600 over the weekend. The bullish impulse was forecasted by a descending triangle pattern that developed on BTC’s daily chart. Although the technical formation projected a 40.5% advance from the breakout point at $32,600 towards the 200-day moving average at around $46,000, the $40,000 resistance zone has proven challenging to break through. The leading cryptocurrency has retraced by more than 8.6% over the last few hours, dropping below the 100-day moving average at $39,900. Now, Bitcoin must reclaim this crucial support level to continue its upward advance. IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model reveals that over 750,000 addresses have previously purchased nearly 550,000 BTC at a price of around $40,000. Such a large concentration of addresses “Out of the Money” at this level suggests that any signs of price weakness could encourage them to exit their positions to avoid further losses. Under such unique circumstances, a sell-off would likely push Bitcoin towards the next critical area of support that sits at $36,770 based on transaction history. Nonetheless, a spike in buying pressure that allows Bitcoin to reclaim $40,000 as support could lead to an upswing towards $44,000. The IOMAP model shows no critical supply walls between these price points, crediting the optimistic outlook.
The European Commission has proposed legislation updates this week that introduce new rules for cryptocurrency service providers. Under the new updates to the EU’s anti-money laundering and countering terrorism financing (AML/CFT) rules, providers of cryptocurrency services will be mandated to collect information on the sender and recipient of cryptocurrency transactions and the owners of cryptocurrency wallets.
The new rules effectively lift cryptocurrency service providers from a murky and unregulated industry and impose the same know-your-customer (KYC) rules that the EU financial and banking systems have been enforcing for the past decades. “The proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. Today’s amendments will ensure full traceability of crypto-asset transfers, such as Bitcoin, and will allow for prevention and detection of their possible use for money laundering or terrorism financing,” EC officials said today. “In addition, providing anonymous crypto-asset wallets will be prohibited, just as anonymous bank accounts are already prohibited by EU AML/CFT rules.” EU officials hope the new rules will help authorities impose stricter rules on the cryptocurrency ecosystem and crack down on cybercrime and terrorist groups using accounts at cryptocurrency exchange portals to launder illegal funds. While the new rules are being enforced in the EU, any cryptocurrency service provider that wants to operate or transfer funds to an EU entity or individual would have to collect data on all users, even if the other party resides outside the EU. The new rules are currently proposed as an amendment to the 2015 EU Regulation on transfers of funds (Regulation 2015/847). The proposed text is available here [PDF]. A vote on the proposals is expected later this year, barring any delays or additional ammendments. China's digital yuan trials racked up 34.5 billion yuan ($5.34 billion) in transactions by the end of June, according to a white paper released Friday by the People's Bank of China. The currency has been used in 70.75 million payments so far across more than 1.32 million "scenarios" -- not only in retail settings like stores and restaurants, but also for public transportation, utility bills and government services. The central bank said it has "no preset timetable" for a full launch.
The test shows the rapid strides Beijing has made toward a central bank digital currency, an idea that is seeing increasing interest elsewhere in the world, including in the U.S. China has recently cracked down on other digital currencies, with the PBOC warning that asset-linked "stablecoins" pose risks to global financial systems. The pilot program for the virtual currency began in late 2019 in five locations, including Shenzhen and venues for the 2022 Winter Olympics in Beijing, with Shanghai and five others added last November. More than 20.87 million personal wallets and 3.51 million wallets for organizations and companies have been created so far. Smartphone apps, wearable devices and smart cards can all house digital-yuan wallets. According to a source familiar with the situation, the PBOC intends to continue local trials during the 2022 Winter Olympics in Beijing toward an official rollout as early as next year. For now, the central bank will further expand the pilot program to cover "all possible scenarios" for transactions and improve the system's stability and data security. Research will continue into the digital yuan's impact on monetary policy and the financial system, and Beijing will move forward with changes to the relevant legislation to provide a legal basis for the currency. The rise in popularity of cryptocurrency and the digital token market received with enthusiasm the news that two of Wall Street's best-known funds will start investing in this revolutionary technology. George Soros and the Rockefeller family have taken their first steps to invest in cryptocurrency.
The man who managed to break the Bank of England was skeptical at the beginning of the year regarding virtual currencies, now however he gives its fund manager the go-ahead to start operating with these assets. Adam Fisher, who oversees the macroinvestments of Soros Fund Management and who moves $26bn from his headquarters in New York, has obtained internal permission to start trading with virtual currencies, the US news agency Bloomberg said. However, it is not Soros' first move regarding crypto markets, he has already been indirectly betting on them. His fund acquired a large share in 'Overstock.com' at the end of 2017, thus becoming the third owner of the e-commerce company. This company became the first retailer to accept digital tokens as a means of payment in August last year, as well as plans to launch a cryptocurrency stock market that can operate within the platform. The Rockefellers adopted a similar strategy, who announced in April a cooperation agreement with the CoinFund company that is dedicated to investments in crypto currencies. Venrock, the family's official venture capital arm, was the one who carried out the operation, and whose partner, David Pakman, called it a "long-term investment". The cryptocurrency market attracts more and more personalities, although it is not necessary to be one of them to start investing. Millions of people have already discovered the smartest strategies to invest with eToro, the leading social trading network worldwide. Thanks to the risk management tools offered by this platform, every user can protect their positions and enjoy deposits and withdrawals without complications and instantaneous execution. In addition, eToro offers its new members a free $100,000 account with which to measure and test their strategy. Due to the social nature of this community, users can discuss with the best eToro investors about cryptocurrency investment strategies such as Bitcoin, using the 'CopyTrader' technology that automatically clones the investment portfolios of the most successful traders. The booming popularity of cryptocurrency has triggered criticism across the globe, particularly in Vietnam. However, both investors and regulators have shown keen interest in a potential central bank digital currency. Statistics compiled by cryptocurrency data provider Chainalysis ranked Vietnam 13th in Bitcoin investment gains at $351 million in 2020. The country outweighed several larger and more developed economies such as Australia, Saudi Arabia, and Belgium. To boot, Vietnam has high levels of grassroots cryptocurrency adoption, ranking tenth overall on Chainalysis’ Global Crypto Adoption Index.
“Upon further inspection, what stands out the most is the number of countries that appear to be punching above their weight in Bitcoin investment as compared to their rankings in traditional economic metrics. Vietnam can perfectly epitomise the situation,” the data analysis noted. Elsewhere, according to a recent survey in March by Statista, 21 per cent of around 1,000-4,000 respondents in Vietnam said they had used or owned cryptocurrencies in 2020. While Vietnam has seen extraordinary economic growth over the last two decades, significantly reducing its poverty rate from over 70 per cent to below 6 per cent since 2002, the country ranks 53rd in GDP at $262 billion and is categorised as a lower-middle income country by the World Bank, according to Chainalysis. Meanwhile, US investors are the greatest beneficiaries, collectively making over $4 billion in realised Bitcoin gains in 2020 – three times as much as the next highest country, China. The surging appetite for bitcoin and other types of cryptocurrencies is undeniable, illustrated by their skyrocketing price over year within one year. As of July 3, 2021, Bitcoin price reached nearly $34,000, compared to around $9,000 in the same day last year. Several central banks across the globe have aired intentions to trial central bank digital currencies (CBDC) trials, including the Bank of Korea (BoK) and Bank of Japan (BoJ). BOK and BOJ's experiments to study the feasibility of issuing their own digital CBDC would pave the way for South Korean and Japanese companies, including those operating in Vietnam, to implement digital currencies. Regulators believe CBDC could "modernise their financial systems, ward off the threat from cryptocurrencies and speed up domestic and international payments," according to Reuters. Regional asset owners are still wary of volatile cryptocurrencies, but they say central bank-backed digital currencies could become investment-friendly over the next five to 10 years, according to Financial Times. The BoJ in April confirmed it would test the technical feasibility of the core functions and features required for CBDCs as a payment instrument, including issuance, distribution, and redemption. Similarly, the BoK said on May 24 that it would start a 10-month test of the digital won in August with a budget of around $4.45 million. Most recently, El Salvador became the very first country in the world to adopt bitcoin as legal tender at the beginning of June, a move that delighted the currency’s supporters. This has not been a good week for cryptocurrency investors. They’ve seen about a quarter of the value of all crypto assets wiped out amid a crackdown on crypto mining and transactions in China. The price of bitcoin, the dominant crypto asset, plunged below $US30,000 on Tuesday before recovering to trade above $US33,000. Last Friday, it was still trading at $US40,000. Bitcoin’s market capitalisation has plunged from nearly $US1.2 trillion ($1.6 trillion) at its peak two months ago to about $US630 billion in an overall crypto market, whose value has shrunk from $US2.5 trillion earlier this year to $US1.35 trillion. "The implosion in crypto prices in response to China’s actions is the latest demonstration of what has been a permanent feature of crypto assets - their violent volatility." The latest implosion in the volatile bitcoin price – a year ago it was trading at only $US9300 – came after China followed up a crackdown on crypto mining last month by ordering its major banks and digital payments giant Alipay not to provide services related to cryptocurrency transactions. The anti-crypto push in China is unlikely to be unique as governments and central banks around the world have been increasingly concerned about the implications of the explosion in crypto assets and their value. While China’s actions have been the most dramatic, the US passed new anti-money laundering legislation earlier this year that will enable the US Treasury to regulate cryptocurrencies. The Biden administration has foreshadowed new regulations to prevent digital currencies from undermining its anti-money laundering laws. That’s consistent with views in Europe and other developed economies, concerned about tax evasion and the use of crypto assets in criminal activities.
There are also concerns about financial stability, given the vastly increased acceptance of crypto assets as an alternate investment category and the longer-term threat that they might pose to conventional central bank-issued money. China’s motivations for its assault on cryptocurrencies include concerns about money-laundering, which is a particular issue for a country that imposes stringent capital controls and exerts pervasive and intrusive scrutiny and control over the activities of its citizens. The authorities have also been clamping down on the dominant digital payments companies, concerned about their growing power within the economy and financial system, the anonymity of transactions and the implications for financial stability. They have sought access to the fintech’s customers’ data. China effectively pulled the rug from under what would have been the world’s largest initial public offering earlier this year, Ant Group’s $US300 billion-plus float, as part of a broader effort to more intensely regulate its previously lightly regulated or unregulated fintechs. The directives to its banks and Alipay fit within that larger push to tighten central control over all financial activity. The restrictions on bitcoin mining had different drivers. In May, the government imposed a severe crackdown on crypto mining which, given that an estimated 65 per cent to 70 per cent of all bitcoin mining capacity was based in China, represents a massive threat to the cryptocurrency. China is eyeing to further boost the technological application and industrial development of blockchain over the next decade, according to a guideline released by industrial development and cyberspace affairs authorities.
By 2025, the country aims to take the comprehensive strength of its blockchain industry to the most advanced level in the world, said a document jointly released by the Ministry of Industry and Information Technology and the Office of the Central Cyberspace Affairs Commission. The country's blockchain industry and its industrial standard system shall begin to take shape by 2025, with the blockchain technology applied to multiple economic and social fields, the document noted. In the next five years, China shall support the establishment of three to five backbone enterprises with international competitiveness, as well as a number of innovation-driven enterprises and three to five blockchain industrial clusters. By 2030, the blockchain industry shall see further expansion in both comprehensive strength and industrial scale, and deepen integration with next-generation information technologies such as big data and artificial intelligence, the document added. Currently, there are around 75,000 blockchain-related enterprises in China, according to data from corporate information provider Tianyancha. Bitcoin extended its losses after China vowed to crack down on the cryptocurrency's mining and trading activities in an effort to prevent financial risks at a meeting chaired by Vice Premier Liu He on Friday, May 21. t was a doubled move against virtual currencies coming just after three Chinese financial regulators banned financial institutions from crypto-related businesses on Wednesday. China will also clamp down on illegal activities in the securities market, and maintain the stability of stock, bond and forex markets, the State Council's Financial Stability and Development Committee said after the meeting. China powers most of the world's bitcoin mining. According to data from the Cambridge Center for Alternative Finance, China accounted for over 70 percent of the world's computing power for bitcoin between September 2019 and April 2020.
Cryptocurrency mining has drawn regulatory attention in China in recent years. In April 2019, China's National Development and Reform Commission put cryptocurrency mining on a preliminary list of industries it wanted to eliminate, citing concerns including energy-wasting and regulation. However, the final version released in November removed cryptocurrency mining from the list. In June 2019, China's central bank – the People's Bank of China – issued a statement saying it would ban all domestic and foreign cryptocurrency exchanges and Initial Coin Offering websites. By the end of April 2021, north China's Inner Mongolia Autonomous Region said it would "clean up and shut down" all cryptocurrency mining operations to reduce carbon emissions in the coal-based region. Beset by the escalating regulations in major economies, bitcoin failed to recover from its tumble week after Tesla's CEO Elon Musk's tweets doubting its environmental impacts. The U.S. Treasury Department on Thursday also called for new rules that would require large cryptocurrency transfers to be reported to the Internal Revenue Service and the Federal Reserve flagged the risks cryptocurrencies posed to financial stability. China's Hong Kong also proposed on Friday that cryptocurrency exchanges operating in the city will have to be licensed by the markets regulator and will only be allowed to provide services to professional investors. At time of writing, bitcoin is traded at $39,000 each, about half from its all-time high a month ago of over $63,500 and similar to the level of the beginning of the year. Cryptocurrencies could stay a feature of global markets as something akin to “digital gold,” even if their importance in economies remains limited, former US secretary of the treasury Lawrence Summers said. Speaking at the end of a week in which bitcoin whipsawed, Summers told Bloomberg Television’s Wall Street Week that cryptocurrencies offered an alternative to gold for those seeking an asset “separate and apart from the day-to-day workings of governments.” “Gold has been a primary asset of that kind for a long time,” said Summers, a paid contributor to Bloomberg. “Crypto has a chance of becoming an agreed form that people who are looking for safety hold wealth in. My guess is that crypto is here to stay, and probably here to stay as a kind of digital gold.”
If cryptocurrencies became even a third of the total value of gold, Summers said that would be a “substantial appreciation from current levels” and that means there’s a “good prospect that crypto will be part of the system for quite a while to come.” Comparing bitcoin to the yellow metal is common in the crypto community, with various estimates as to whether and how quickly their total market values might equalize. Yassine Elmandjra, a crypto analyst at Cathie Wood’s Ark Investment Management LLC, said earlier this month that if gold is assumed to have a market cap of about US$10 trillion, “it’s not out of the question that bitcoin will reach gold parity in the next five years.” With bitcoin’s market cap about US$700 billion, that could mean price appreciation of around 14-fold or more. However, cryptocurrencies do not matter to the overall economy and were unlikely to ever serve as a majority of payments, Summers said. Summers is on the board of directors of Square Inc, which this month said that sales in the first quarter more than tripled, driven by skyrocketing bitcoin purchases through the company’s Cash App. Summers’ comments were echoed by Nobel laureate Paul Krugman, who doubted crypto’s value as a medium of exchange or stable purchasing power, but said that some forms of it might continue to exist as an alternative to gold. “Are cryptocurrencies headed for a crash sometime soon? Not necessarily,” Krugman wrote in the New York Times. “One fact that gives even crypto skeptics like me pause is the durability of gold as a highly valued asset.” Separately, Tesla Inc CEO Elon Musk is again writing on Twitter about technology and cryptocurrencies, and this time he is clear on where his support is at. In a thread started by Musk comparing magic to technology where someone asked what he thought about people “who are angry at you because of crypto,” Musk wrote that the “true battle is between fiat & crypto. On balance, I support the latter.” Bitcoin rose after Musk’s post, and was trading at about US$38,700 as of 9:32am New York time on Saturday. Musk has made similar comments before, including in December last year when he tweeted that “bitcoin is almost as bs as fiat money.” In February, he said that “when fiat currency has negative real interest, only a fool wouldn’t look elsewhere.” Earlier last week, Musk wrote on Twitter that he would not be selling any dogecoin, and he also posted a cryptic image of a dollar bill with a shiba inu replacing the face of a former US president. Bitcoin ended the week in the volatile territory after a new warning from Chinese officials over cracking down on cryptocurrencies. The earlier sell-off on Friday hit bitcoin believers still fuming after Musk did an about-face and criticized the token for its energy usage. The last few days has seen huge volatility and sharp plunges in the prices of crypto currencies, with coins and tokens across the board falling by between 20% - 40%, and then followed by the inevitable bounce back. The story is the same across mega and large cap names such as Bitcoin and Ethereum, through to the myriad of mid and small cap coins and tokens.
Over the last few days, Bitcoin hit a low of $30,000 while Ethereum hit as low as $2000, before Bitcoin bounced back to $37,400 (at the time of writing) and Ethereum retraced up to the $2680 range (at the time of writing). This huge and sharp plunge across cryptos in the last 24 hours has occurred on the back of a week long period in which many crypto prices were already in a sustained downtrend. Is what we are seeing now a shakeout or a healthy correction? Is the bounce back a dead cat bounce or the turning point in a new uptrend? Who knows. There are many views on crypto asset prices (just look at Twitter), and at the end of the day, it’s the combined trading and liquidity of the millions of traders and speculators across the world which create the prices, and the volatility. But in this volatile period, it may be worth diversifying some of your crypto holdings into gold and silver bullion, real and tangible assets that have been wealth preservation and financial insurance for thousands of years. |
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