The market has shown significant growth this year…
2022 will be the year of massive adoption of cryptocurrencies in the US, according to Bloomberg senior commodity strategist Mike McGlone.
As he stressed, the market showed significant growth this year.
This is due to the loose monetary policy of developed countries, whose authorities have sought to mitigate the impact of the coronavirus crisis by taking relief measures.
As a result, there was an explosion of liquidity and, consequently, a dramatic increase in demand for shares and other alternative assets.
A Bloomberg analyst believes that the US Federal Reserve will lift its support program next year.
This is indicated by a significant increase in inflation and a fairly large labor market.
This should lead to a drop in the stock market, however defensive assets such as Bitcoin will continue to rise. “The Fed’s attempt to curb inflation and reduce bond yields is creating a macroeconomic environment that will fuel the growth of cryptocurrencies such as Bitcoin and Ethereum. By the end of 2021, the market will be deviating from the stock markets and this may signal further growth in digital assets,” McGlone said.
Once again, the analyst confirmed his forecast that the price of bitcoin tends to $ 100,000.
The landscape of cryptocurrencies is changing dramatically
The landscape on cryptocurrencies is drastically changing, the value of which now exceeds 2.6 trillion. with large institutional “players,” such as well-known insurance funds, entering the digital assets market, according to Bank of America.
At the same time, strong winds are blowing from developments such as the installation of Bitcoin ATM in stores of the largest supermarket chain and US company, Walmart, but from the new ETF, which is traded on the New York Stock Exchange under the code name BITO.
So according to BofA, pension funds have increased their exposure to digital assets.
Particularly:
The Fairfax County Police Officers Retirement System and Fairfax County Employees’ Retirement System are seeking approval to invest $ 50 million in a mutual fund with direct exposure to digital assets after a combined investment of $ 73 million in 2018 and 2019 equity Morgan Creek Digital Assets.
The Houston Firefighters Assistance and Retirement Fund has announced a $ 25 million investment in bitcoin and ether (Ethereum’s native token).
Queensland Investment Corporation, Australia’s 5th largest pension fund, has expressed interest in digital assets.
Korea Teacher’s Credit Union plans to invest in digital assets in 2022.
However, according to the American bank, the investment of pension funds in digital assets, in general, is in an exploratory stage.
The state pension funds in the US are extremely underfunded, with the non-financed liabilities at the end of 2019 reaching ~ 1.25 trillion. dollars, which led many to try to bridge the gap between the program’s assets and investment liabilities.
However, the pension funds worldwide held AUM (assets under management) 35 trillion. at the end of 2020, which means that if they increase their exposure to cryptocurrencies, a strong wind will blow in the market.
Walmart has set up a Bitcoin ATM
Walmart has added 200 Coinstar ATMs to US stores that shoppers can use to buy bitcoin in cash. Coinstar plans to install a total of 8,000 ATMs across the United States.
According to BofA, Walmart has ~ 4,700 stores in the US, indicating that bitcoin kiosks are located in ~ 4% of US stores.
ATMs are nothing new – there are already ~ 26,000 of them in the US and ~ 30,000 worldwide.
And although their charges are high, their installation remains good news.
BITO: The first approved Bitcoin ETF in the US
As you know, ProShares Bitcoin Strategy ETF (BITO) is the first approved Bitcoin ETF in the US.
It has been trading on the New York Stock Exchange since last Tuesday.
According to BofA, this will pave the way for other ETFs of future performance and eventually for spot ETFs beyond Bitcoin.
What the streams say
The transparency provided by Blockchain technology provides a clear picture of the digital asset ecosystem that is not available in traditional financial markets.
But what can investment climate streams say about cryptocurrencies and NFTs?
According to BofA, investors generally prefer to hold tokens in their wallets and often carry them to exchanges (net outflow) when they intend to sell them, which can increase price pressures.
Particularly large inputs to exchanges can quickly put downward pressure and lead to extensive correction.
Instead, investors transfer tokens from exchanges when they intend to hold them (or hold them for a lifetime – HODL), raising prices.
What about Stablecoins
Stablecoins are digital assets linked to an asset, such as a fiat currency (eg the US dollar), a commodity (such as gold), other digital assets, or a combination of assets to maintain a fixed value.
Digital asset owners and traders use stablecoins to transfer funds, reduce exposure to more volatile digital assets without converting digital assets into fiat currency, “lock in” trading profits and as a safe haven if expected recession.
The existence of potential buying or selling pressure from stablecoin flows is inversely proportional to the way tokens flow.
Investors often transfer stablecoin from their personal wallets to exchanges (net outflow) when they intend to buy tokens, increasing market pressure.
Investors, on the other hand, transfer Stablecoins from exchanges to their personal wallets (net inflow) when they do not intend to buy tokens or after sales, increasing price pressures.
What equipment does cryptocurrency mining require and how much does it cost – How are miners paid and taxed and how much money does mining make on average per month?
A double-digit percentage of the population is now estimated to be Greeks engaged in the trading of cryptocurrencies on various platforms, while on the contrary the -very energy-intensive- bitcoin or ethereum mining has now become prohibitive for individuals, as the equipment depreciates quickly, while the price of electricity in Greece is high. This assessment is expressed, speaking to APE-MPE, by the civil engineer and self-made businessman Georgios Nolis, CEO of the company “Lancom Ltd”, based in Thessaloniki, which operates in the field of data center services and cloud computing.
Due to the rapid rise of cryptocurrencies – which experienced unprecedented growth in the midst of a pandemic – and the fact that more and more people are now engaged in them, APE-MPE sought professionals with a long presence in the field of information technology and deep market knowledge form a more active picture of what the current situation is in Greece and internationally. Among them, G. Nolis spoke anonymously and others anonymously.
Energy consumed by Finland, the example of China and the bold El Salvador
So what are cryptocurrencies? According to experts in APE-MPE, it is digital money, which is not controlled by an individual or a central bank and is completely decentralized. For example, in the case of Bitcoin, which has an exchange rate (5/10/2021) of 42,553.18 euros (compared to 2,925.45 euros for ethereum), all transactions are recorded in a public directory – something like a digital ledger. – the maintenance of which requires large amounts of energy, while the cryptocurrency is given as a reward to those who solve complex mathematical puzzles with computers. This process is called “mining”, in English “mining”, and requires powerful computer systems.
Overall, bitcoin is considered extremely energy-intensive, as in order to “maintain” its production system, it needs every year the electricity consumed by a country like Finland (while back in the distant 2010, when its value was very low, you could mining with a simple computer with a powerful graphics card and minimal energy costs).
According to data gathered by APE-MPE from various sources, China, until recently a global mining hub, announced on September 24, through its central bank, that it declares all transactions with cryptocurrencies illegal, expressing fears of money laundering. However, any concern, groundless or not, does not change the fact that digital money is growing more and more on the planet – it is indicative that in the last five years the consumption of electricity for bitcoin mining has increased tenfold, while every year and a half the computing power required mining is doubling – with the result that governments and organizations are increasingly turning their attention to cryptocurrencies, potential opportunities and risks.
In fact, in early September, El Salvador became, despite public outcry, the first country in the world to adopt bitcoin as its official currency, with its 40-year-old president, Najib Boukele, declaring that the dominant cryptocurrency would help. save $ 400 million a year, which it will save on commissions it currently pays on remittances, while also providing access to financial services to 70% of residents who do not currently have a bank account (a quarter of its GDP). El Salvador comes from cross-border remittances, according to the World Bank).
How many miners are there in Greece?
“There is no methodology to calculate the number of people or companies involved in cryptocurrency mining in a country or region. Crypto mining is based on the logic of anonymity, as are cryptocurrencies, so we can only speculate. “I know many miners who are involved in one to ten” mining rigs “as amateurs (s.s. the equipment required for mining) and a few who have the so-called” mining farms “, ie mining farms, mainly rented abroad,” he explains. at APE-MPE George Nolis.
Amateur miners are usually people who are involved in computers and new technologies, not to mention those who simply invest in rigs, because they decided to enter the field on a trial basis, in order to gradually expand their activities in the future. Professional miners usually employ a group of people, who work 24 hours a day, to optimize the return on their investment. “In general, Greece is not particularly suitable -at the given time- as a country for this activity, due to the very high price of electricity, as well as due to high temperatures (therefore even higher electricity consumption for air conditioning, in order to maintain the equipment)” he notes.
What equipment does cryptocurrency mining require and how much does it cost?
Mining requires state-of-the-art equipment, as the competition is greater and the newer the equipment, the greater its performance (measured in hash per second). For overall efficiency, of course, power consumption must be taken into account. “There are” ASIC miner “and” mining rig “options. In the first case, we are talking about a specialized machine, which does powerful mining, usually on a specific cryptocurrency, which makes it quite to very binding for the future. In the second case, we are more flexible, because we create an array of usually widely used graphics cards and we can “extract” most of the cryptocurrencies “explains George Nolis.
“Obviously mining is of no use to individuals. In a healthy business, however, electricity costs, VAT and equipment depreciation can, under certain conditions, make the investment profitable, especially if the price of Ethereum rises (it has reached 3,400 euros in September 2021 and over 3,600 euros in May 2021). If these are combined with experience-strategy, strong know-how, development of specialized software that optimizes mining and protects equipment from damage, 24-hour performance monitoring services, then the performance can be very valuable, especially in long-term investments “he estimates and adds that because all this changes daily, there is always the risk of losing part or all of the investment, especially if it is combined with trading.
How are miners paid and taxed and how much money does mining make on average per month?
But what is the possible efficiency of mining? A very good example is a relatively modern mining rig for Ethereum cryptocurrency mining, with 15 NVIDIA RTX 3080 graphics cards with a combined output of 1,250 MH / s (MH / s: one million hashes per second). Its cost today reaches 20,000 euros without VAT. It consumes up to 4,800 watts, so it burns about 1,000 euros per month on electricity, with a theoretical charge of 0.30 euros per kilowatt hour, including adjustable charges, etc. With a selling price of Ethereum – on average – at 2,500 euros, it can “mine” 65% of a piece within 30 days, worth about 1,600 euros. So, the net profit, deducting the electricity, will be around 600 euros per month, with the current “mining difficulty”, which is constantly increasing.
The miners are generally remunerated with the so-called “Proof of Work”, as well as with the confirmation / cross-checking of transactions made in the respective blockchain cryptocurrency network, such as the Ethereum network. In simpler words, they are paid because they have computing power in the network they participate in and their fee is given in the respective cryptocurrencies and their subdivisions. The fee “enters” an electronic “wallet” and so one can gradually accumulate his cryptocurrencies there. If he wants to do more than just collect them in a wallet, he has to sign up at an exchange office and convert them into whatever he wants, either in other cryptocurrencies or in dollars, euros, etc.
“As far as taxation for the production of cryptocurrencies is concerned, this is theoretically meant for a legal entity, as an individual is not going to make a real profit after taxes these days, he will only lose money. The income from the production of cryptocurrencies in companies is normally taxed, after being converted into FIAT currency (eg euro) in exchange and transferred to the current bank account, at the current rate (22% for the tax year 2021). Of course, all expenses and depreciation are deducted, since the income is considered to result from a productive process “, announces Mr. Nolis, clarifying that the above does not concern income from trading cryptocurrencies, where other rates / procedures apply.
Opportunity for the future Greece?
During the pandemic crisis, cryptocurrencies moved in an unprecedented upward direction, have piqued the interest of investors worldwide in a short period of time and are now considered by many to have “come to stay”, although they still have a long way to go before they mature. . “I strongly disagree with the ‘criminalization’ of mining and cryptocurrencies and I believe that they will gradually prevail over traditional banking institutions,” notes George Nolis, who “sees” an important opportunity for Greece, which he links to the growing use of Renewable Energy Sources (RES): “I believe that Greece in particular will play a leading role in Europe for the production of electricity from RES.
However, the existing energy transmission network (IPTO and HEDNO) does not have the appropriate dimensioning and of course the necessary planning to support this development. The result of all the above is that we have already, for years, many photovoltaic parks, which while producing “clean” electricity, its absorption is much lower than production. So there is a very serious opportunity to organize “containerized” mining infrastructure, with excellent profit margins, but like any opportunity, it requires quick moves and determined investors. However, with this methodology, Greece can also become a pioneer in mining, with almost no environmental footprint “.
The world’s second-largest cryptocurrency by capitalization, Ethereum (ETH), has caused a stir in the market this year.
At the time of writing, it was up 8% to $ 3,200, with a market capitalization of more than $ 377 billion.
However, Ethereum founder Vitalik Buterin is extremely bullish about the future of cryptocurrency, especially after the recent upgrade of London hardfork and the implementation of EIP-1559.
During his interview, Buterin said he expects the ETH price to increase tenfold.
That is, the ETH price will reach $ 30,000 by the end of the year.
That means Ethereum (ETH) will have a staggering $ 3 trillion valuation, making it the largest of all the Big Tech companies in the world.
The “against” with Cardano
The Cardano (ADA) price hit a record high of $ 2.54 per currency (+ 17%) on Friday, August 19, with investors awaiting the planned upgrade of Alonzo – a move that will allow the integration of smart contracts and thus address what network critics have described as one of the network’s most obvious shortcomings.
The smart contract functionality will allow Cardano to integrate more applications, including decentralized financing platforms (DeFi) for auto lending and cryptocurrency trading.
The improvement could dethrone Ethereum, which is now the leader among blockchains, thanks to the fact that it enables smart contract operations.
It is recalled that Cardano is expected to be upgraded in late September – early October.
Investment rotation
Initially, Ada’s uptrend rallied, to a large extent, a similar boom in the cryptocurrency market to its rival Ethereum, which also made a significant upgrade.
Then Ada fell, as did Bitcoin (BTC), which recently topped $ 48,000.
However, Cardano’s token began to outperform, and volatility in Bitcoin increased after the publication of the US Federal Reserve’s minutes.
The rapid rise in stablecoin issues could, in a reasonable amount of time, pose a direct threat to the financial markets, according to Fitch Ratings.
In particular, the possible contamination of the financial markets associated with the liquidation of stablecoins could put strong pressure on the imposition of an even stricter regulatory framework in relation to the fledgling “fixed currency” sector.
In this case, it is worth noting that stablecoins are cryptocurrencies that are linked to an asset or currency such as the dollar or the euro.
We can also refer to them as fixed currencies.
They are so named as they are adjusted so that their price has a fixed value.
The Tether
The aforementioned risk of contamination is related to the collaterals of stablecoins that confirm the size, liquidity and risk of the holder of the specific digital assets.
Less risks are created by currencies that are fully backed by safe, liquid assets.
For example, the USD Coin, the second largest stablecoin, is backed by US dollars in a 1: 1 ratio, with fiat currencies held in bank accounts.
However, stablecoins that use fractional reserves or adopt higher risk assets may be at greater risk.
For example, Tether, the largest issuer of stablecoin, revealed that as of March 31, 2021 it held only 26.2% in cash compared to the cryptocurrencies it had issued.
The rest of its reserves were frozen deposits and government bonds, with 49.6% of them being commercial bonds (CP).
In other words, as of March 31, 2021, Tether held $ 20.3 billion in commercial bonds, while its consolidated assets stood at $ 41 billion and are likely to grow even further.
The total assets associated with Tether in US dollars on June 28 reached 62.8 billion.
According to Fitch, the above data suggest that corporate bond holdings may be higher than those of most funds on both Wall Street and emerging markets.
A sudden massive takeover of Tether could affect the stability of credit markets if combined with a sell off in corporate bonds.
It is recalled that, in a similar case, a fully secured coin, Iron, zeroed in June…
Is it stable?
Meanwhile, projects that could be done quickly systemically, such as Diem, have caught the attention of regulators.
As Fitch reveals, US regulators have also noted that “entities” with asset-like distributions similar to Tether’s may not be stable if short-term credit margins widen significantly, as in periods of economic stress in 2020 and 2007. -2008.
If nothing else, this contradicts the way in which fixed currencies are “marketed” to the public.
In this climate, regulating the stablecoins market could improve the level of transparency and turn collateral into less risky assets.
The process can also affect – or be influenced by – the circulation of central banks’ digital currencies.
According to Fitch, the authorities are unlikely to intervene to save stable currencies in the event of turmoil, in part because of moral hazard.
The view that Bitcoin is a better investment than gold was voiced by Troy Gajeski, a senior executive at the SkyBridge Capital fund, which manages $ 7.5 billion in assets.
According to him, the precious metal is expected to reach new historical highs for 2021, but the fund insists on Bitcoin and cryptocurrencies as they are expected to show greater profit margins.
Speaking to Bloomberg, Gajeski said that both gold and Bitcoin are expected to rally in the coming months, even if the US Federal Reserve (Fed) lifts its support measures to support the economy, a move that will intensifies volatility in markets. “With Bitcoin you can ‘earn’ a little more profit than with gold,” Gajeski noted.
In recent weeks, the international investment community has been watching the Fed’s announcement of rising inflation amid waiting for measures to be phased out in the world’s strongest economies to tackle the coronavirus crisis.
The above mood has left a “gap” on what will be the safest and most profitable investment in the post-coronavirus era, especially in the midst of the trend away from “traditional” markets, such as stocks and the foreign exchange market.
In a lengthy report, US investment bank Goldman Sachs outlined some of its positions on cryptocurrencies and how Ethereum will surpass Bitcoin.
What do cryptocurrencies have and do they arouse investment interest? Why will Ethereum surpass Bitcoin?
These issues are analyzed in a 40-page report by Goldman Sachs, the American investment bank.
Note that the total capitalization of cryptocurrencies on May 24, 2021 was 1.42 trillion. dollars with Bitcoin at $ 35,500 or $ 660 billion total value and Ethereum at $ 2,200 with a total value of $ 248 billion.
In total there are over 5,200 different cryptocurrencies but the first 20 Bitcoin, Ethereum, Techer, Cardano, Binance Coin, Dogecoin, XRP, Polkadot, usd Coin, Bitcoin Cash, Litecoin, Chainlink, Stellar, Solana, Theta etc. gather the most interest.
Goldman and cryptocurrencies
In a lengthy report, US investment bank Goldman Sachs outlined some of its positions on cryptocurrencies and how Ethereum will surpass Bitcoin.
For the role of Bitcoin as a macroeconomic element
Cryptocurrencies as a special category of assets
For the role of digital stores
The role of cryptocurrencies in balanced investment portfolios
In its report, Goldman Sachs seems to show its preference for Ethereum (a completely new technology platform) over Bitcoin (an asset of value and an alternative payment system) as the three biggest moves in the cryptocurrency ecosystem – payments, DeFi and NFTs – are mainly based on Ethereum.
The more people use it, the more things are built on it and the higher the price will eventually be.
And since much of the world has been heavily associated with Bitcoin over the past five years, it will take some time for many to realize that there is so much more to Bitcoin.
According to Goldman Sachs, cryptocurrencies are a new class of assets that derive their value from verified information and the size and development of their networks. Here are the details:
The term “cryptocurrencies” – used by most people – function as a digital medium of exchange, like traditional currencies e.g. dollar or euro called fiat – is essentially misleading when it comes to estimating the value of these items.
Indeed, the Bitcoin-based blockchain was not designed to replace a fiat currency – it is a reliable payment network.
As a cryptographic algorithm creates proof that the payment was executed correctly, no third party factor is required to verify the transaction.
The blockchain and cryptocurrency were therefore designed to replace the banking system and others such as insurance that requires a trusted broker.
The blockchain differs from other “digital” trading mechanisms such as PayPal, which depends on the banking system to prevent fraud.
To be credible, the system needed to create an asset that had no liabilities or contingent liabilities, which must be a separate entity such as a commodity.
And to achieve this, blockchain technologies have used natural resources – oil, gas, coal, uranium and hydrogen – through ever-increasing computing power to create cryptocurrencies.
From this perspective, the intrinsic value of the cryptocurrency network is the reliable information that the blockchain generates through the mining process, and the cryptocurrencies are required to unlock this reliable information and make it marketable and flexible.
It is therefore impossible to say that the network has value and role in society if there is no corresponding currency or cryptocurrency in this case.
And the value of the currency depends on the value and development of the network.
Because the network is decentralized and anonymous, it faces legal challenges for the future development of cryptocurrencies.
Some people use cryptocurrencies to launder money laundering (AML or Anti Money Laundering), as evidenced by the recent ransom demanded in Bitcoin by the Colonial Pipeline and the Irish Health Service.
Regulators can prevent the use of cryptocurrencies as a substitute for the dollar or other currencies, making them non-convertible.
An item has value only if it can be used or sold.
Authorities in China and India have already challenged the cryptocurrencies for payments.
As a result, the market share of cryptocurrencies used for other purposes, such as “smart contracts” and “information badges” is likely to continue to grow.
However, even these non-monetary uses will have to be recognized by the courts in order to be accepted in business – a question we leave to lawyers.
The network creates value, unlike other products
Unlike other products, cryptocurrencies derive their full value from the network.
A Bitcoin has no value outside of its network.
The value of oil also comes largely from its transmission network, but at least the oil can burn to generate heat outside that network.
At the other end of the spectrum, gold requires no network at all.
Bitcoin holders face the growing risk of network disintegration from a competing network backed by a new cryptocurrency.
Since the demand for gold does not depend on a network, but on the unit, so you do not need a network and this is an advantage of gold.
Indeed, most of the value assets used as defensive investments – such as gold, diamonds and collectibles – only pose a risk to unit demand.
This makes them defensive assets, when there is a shock in the markets, investors turn to gold, that means defensive assets.
People may collapse around them but they retain their value.
Transactions increase value, creating risk
Cryptocurrencies are not traded like gold, nor should they be.
Using any standard valuation method, transactions or expected online transactions are the key determinant of the value of cryptocurrencies.
The more transactions the blockchain can verify, the higher the value of the network.
Trading volume and demand for commodity information are closely related to the business cycle.
Gold and bitcoin do not compete for assets, as some commonly argue, on the contrary they can coexist.
Because the value of the network and therefore the cryptocurrency comes from the volume of transactions, the storage of cryptocurrencies as an asset of value reduces the available cryptocurrencies for transactions, which reduces the value of the network.
Because gold does not have this property, it is the only asset that institutional investors hold as physical reserves.
Almost all other goods are traded or held on paper in the form of futures contracts to avoid interference with the transmission network.
Think e.g. If investors demanded deliveries of natural oil in their transactions, the world’s oil would not reach.
This suggests that, like oil, investments in cryptocurrencies should be made in the form of futures contracts.
Cryptocurrencies can be used indefinitely.
This resilience makes them an asset of value, provided that demand does not disrupt flows in the cryptocurrency network.
So what are cryptocurrencies? A strong network?
The network provides cryptocurrencies with extremely strong support that no other commodity has.
Operators and developers are all paid in cryptocurrency.
Likewise, users – traders, investors and speculators – are also fully secured.
This gives bitcoin holders an incentive which in turn creates more demand for the currencies they already have.
Similarly, Ethereum owners have an incentive to create applications and other products on the Ethereum network to increase the value of their cryptocurrencies.
Because cryptocurrency holders have a stake in the network, speculation coexists.
Even during periods of strong corrections, cryptocurrency holders are motivated to work together to create the next new uptrend.
It’s all about the information
Since the value of cryptocurrency depends on the value of reliable information, blockchain technology is important when it comes to trading needs.
For the Bitcoin blockchain, this information is the log of each balance sheet on the network and the transactions between them are the substitute for banks.
In the case of a smart buy-and-sell contract – a piece of code executes according to a predefined rule – for Ethereum, both the terms of this contract (the code) and the status of the contract (execution or not) are validated in the Ethereum blockchain.
As a result, in a transaction an investor cannot claim a money transfer without the network agreeing that the contract was actually performed.
In our view, the most valuable elements of cryptocurrencies will be those that help verify the most critical information in the economy.
Over time, the decentralized nature of the network will alleviate concerns about storing personal data in the blockchain.
Someone’s digital profile could contain personal data such as property ownership, medical history and even IP rights.
As this information is unchanged – it cannot be changed without consent – reliable information can then be identified and exchanged.
A blockchain platform like Ethereum could potentially become a major marketplace for vendors of trusted information, as Amazon is for consumer goods today.
Digital economy
While there are many overpriced networks, some are likely to emerge as long-term winners in the next stage of the digital economy, just as today’s tech titans emerged from the explosion of tech companies Apple, Google and others.
This transformation is happening now – there are already about 21.2 million cryptocurrency holders in the US alone.
However, technological, environmental and legal challenges remain.
Ethereum 2.0 is expected to increase capacity to 3,000 transactions per second in Temporary Protected Status or tps, while sharding – which will escalate Ethereum 2.0’s Proof of Stake (PoS) system through parallel transaction verification – has the ability to increase the capacity to 100,000 tps.
For environmental reasons, Visa can process up to 65,000 tps but typically performs around 2,000 tps.
PoS can also significantly increase computing time for transactions per second, which will further encourage technological adoption.
While overcoming financial challenges will likely be manageable, legal challenges are the biggest for many cryptocurrencies.
They recently demanded a ransom of 75 bitcoins from the Colonial Pipeline which were actually paid.
This is a reminder that cryptocurrencies still facilitate criminal activities that have high social costs.
For Ethereum, new companies that aim to disrupt funding, legislation, or medicine by incorporating information stored on the platform into their algorithms are likely to face legal recognition issues.
If cryptocurrencies are to survive and thrive to the fullest, they must define a concept of “sufficiently decentralized” that will satisfy regulators.
Otherwise, the technologies will soon be exhausted.
In short: bitcoin is good and will be used as a “rare resource” to make PoS systems work “instead of natural resources”, but while bitcoin may end up being useful Et Ethereum – which will serve as the basis for a reliable information market, something similar to Amazon that dominates consumer goods transactions today internationally.
Ethereum will surpass Bitcoin
Goldman believes Ethereum has a good chance of overtaking bitcoin as the dominant digital cryptocurrency:
Based on the evolving blockchain technology that has the power to disrupt global funding, but with limited clear use bitcoin has been identified as a solution that seeks to solve a problem.
Many investors now see bitcoin as a digital store of value, comparable to gold, housing or fine wine. However, all real value assets in history have generated either income however bitcoin currently does not provide income and has a moderate utility.
However, unlike bitcoin, several other encryption assets have clear financial reasons for creating them.
Ethereum looks like the most likely candidate today to surpass bitcoin, but this is by no means certain.
What is stock of value?
A stock of value is anything that retains its value over time.
While value financial stocks such as stocks and bonds retain their value because they generate a given cash flow, performance is not a prerequisite for value.
Art, wine, gold and non-performing coins are widely used as a store of value.
However, all of these assets have clear material uses other than being value reserves.
This utility creates a “convenience return” – the incentive for people to own it – which reflects both the utility that a consumer derives from the use of these assets and the relative lack of that utility – a fact recorded by the famous Adam Smith’s paradoxical Diamond-Water.
The price always comes from the use
The key to value assets such as gold and real estate is that whoever invests in them has earned, that is, they retain their value in the long run.
Indeed, all significant value reserves developed real uses before they became investment assets.
For example, gold was first used in jewelry to symbolize permanence, commitment or immortality.
Gold was made through savings for many centuries.
And when societies began to grow and needed a means of standardizing international trade, gold was the natural choice to solve this economic problem, as most companies already had gold.
Actual use is important for value stocks because demand and consumption tend to be price-sensitive concepts.
For example, the demand for jewelry is the factor that affects the gold market, when the price of gold increases the demand for jewelry decreases.
Ethereum will gain Bitcoin as a stock of value
Given the importance of real uses in determining value, Ethereum has a good chance of overtaking bitcoin as the dominant digital stock of value.
The Ethereum ecosystem supports smart contracts and provides developers with a way to create new applications on their platform.
Most decentralized financing (DeFi) applications are built into the Ethereum network, and most cryptocurrency type NFTs are currently issued through Ethereum.
The higher number of transactions in Ethereum against bitcoin reflects this dominance.
As the use of cryptocurrencies in DeFi and NFTs becomes more widespread, Ethereum will gain its own momentum.
Ethereum can also be used to store almost any information securely and privately in a decentralized environment.
And this information can be identified and exchanged.
This means that the Ethereum platform has the potential to become a large market for reliable information.
We see this today with the sale of digital art and collectibles online through the use of NFTs.
But this is a small scale in its actual practical uses.
For example, people can store and sell their medical data through Ethereum to research pharmaceutical companies.
A digital profile on Ethereum could contain personal information such as property ownership, medical history and even IP rights. Ethereum also has the advantage of operating on a decentralized global basis rather than centrally, such as Amazon or Microsoft, possibly providing a solution to concerns about the sharing of personal data.
An important argument in favor of bitcoin as a store of value is its limited supply.
But demand, not scarcity, drives the success of value stocks.
No other stock of value has a fixed supply.
The supply of gold increased by almost 2% per year for centuries and remained an acceptable value reserve.
Many rare items such as osmium are not stocks of value.
In fact, a stable and limited supply risks increasing price volatility, encouraging accumulation and forcing new buyers to create bubbles.
Bitcoin and advantages
The most common argument in favor of bitcoin that prevails over other cryptocurrencies is the advantage of the first move and the large user base.
However, history has shown that in an industry with rapidly changing technology and growing demand, the first-move advantage is difficult to maintain. Think Myspace and Facebook, Netscape and Internet Explorer or Yahoo and Google.
For encryption networks, active user numbers were very unstable.
During 2017 and 2018, Ethereum managed to acquire an active user base that was 80% of the size of Bitcoin within a year.
Ethereum’s governance structure, with a core team of developers proposing new solutions, may be better suited to today’s dynamic environment in which encryption technology is changing rapidly and systems that do not quickly upgrade can become obsolete.
Indeed, Ethereum is undergoing much faster upgrades to its protocol than Bitcoin. Specifically, Ethereum makes the transition from Proof of Work (PoW) to Proof of Stake (PoS).
Bitcoin energy consumption is already the size of the Netherlands, ie the Netherlands, and could double if bitcoin prices rise to $ 100,000.
Goldman’s conclusion: Ethereum is the platform that solves financial problems here and now, while bitcoin is “a solution that seeks a problem”.
This is why two weeks ago, JPMorgan also took a positive approach to Ethereum.
1) The European Investment Bank (EIB) used the Ethereum blockchain to issue € 100 million in a zero-interest digital bond.
The transaction involved a series of bond tokens in the Ethereum blockchain, where investors buy and pay for security tokens using traditional fiat money
2) The first Ethereum ETF (ETHH) was released on April 20 by Purpose Investments in Canada, followed by three more Ethereum ETF releases the same month.
3) The introduction of the EIP1559 protocol in the summer of 2021 is important.
The goal of EIP 1559 is to make Ethereum transaction charges more predictable by introducing an automatically calculated base fee for all transactions depending on network activity. Once paid with ethereal, this fee will be removed immediately, which means reduced Ethereum offer in the future
4) Ethereum 2.0 is expected to become much more energy efficient by the end of 2022.
Ethereum 2.0 includes a change from Proof-of-Work Energy Intensification Mechanism to a much less Proof-of-Stake Validation Mechanism.
As a result, less computing power and power consumption would be needed to maintain the Ethereum network.
5) Rising bond yields and a possible easing of monetary policy are putting downward pressure on bitcoin as a form of digital gold, in the same way that higher real yields are putting downward pressure on traditional gold.
Some argue that bitcoin and ethereum can coexist and seemingly become even more popular and eventually hit new all-time highs.
As a reminder, FundStrat sees bitcoin rise to $ 100,000 from $ 36,000 to $ 37,000 this season and Ethereum rise to $ 10,500 from $ 2,200 this season.
And while it seemed to be stabilizing, Bitcoin is once again under threat of collapse, as the Chinese government announced on Friday (April 21st) that it would impose severe restrictions on cryptocurrency mining and trading – to the point that many analysts are talking about a ban.
“Let China ban bitcoin mining. “So mining will become more decentralized, the black market will thrive and the lie that China controls the digital market will collapse,”said well-known Whalepanda analyst.
In particular, according to a written statement by Chinese Vice President Liu He and the authorities of the Supreme State Council, stricter measures are needed to defend the domestic financial system.
The statement, released on Friday afternoon, said it was “out of the ordinary” to stop mining and change current trading habits in the cryptocurrency market to address major social risks.
In this context, according to messari, the price of the most popular cryptocurrency slides by 10%, to $ 36,000, with the news from the “dragon country” already making the rounds of the world.
Bitcoin is down more than 40% from its all-time high of $ 64,000 in April.
Other cryptocurrencies also recorded strong losses, with ether losing almost 12%, Binance Coin falling more than 14% and Dogecoin falling more than 12%.
Just two days earlier, China had banned financial institutions and payment companies from providing cryptocurrency trading services and warned investors to avoid such speculative transactions.
Multiple blows
The announcement by the Chinese government comes a day after the announcement of the regulation of the cryptocurrency market in the United States of America.
In particular, on May 20, the US Treasury Department announced that it would require any transaction over $ 10,000 to be reported to the Public Revenue Service (IRS).
As a result, the most popular cryptocurrency slipped again below $ 40,000, until, finally, bandwidth stabilized in it.
“Cryptocurrencies are causing significant problems, facilitating illegal activities,” the statement said.
“This is why the President’s program includes additional resources for the IRS to be able to handle their development.
Under the new scheme, cryptocurrencies and cryptocurrency transfer accounts, as well as cryptocurrency payment service accounts, will be covered.
In addition, as in cash transactions, companies that receive cryptocurrencies with a fair market value of more than $ 10,000 must declare their transactions.
The news caused a slight decline in bitcoin, which now stands at $ 40,000.
Steel nerves and historical corrections
The sharp changes in the prices of cryptocurrencies have brought to the fore two reasons why these assets are at high risk: the limited supply and the lack of a central bank.
This is pointed out by most analysts who comment on the shelling transformations and changes that took place in the cryptocurrency market on Wednesday, May 19, 2021, emphasizing that whoever wants to become a millionaire needs a qualification!
The steel nerves …
If nothing else, it is the most volatile asset, with “hell” away from “paradise”, sometimes just a few hours or even minutes.
And while Bitcoin remains one of the best assets in terms of performance over the last 10 years, many “corrections” are written… History.
The chart below shows the most historic falls of the cryptocurrency.
Bitcoin plunged below $ 40,000 today in a three-and-a-half-month low, dragging down other digital currencies following new restrictions by China on cryptocurrency trading.
Bitcoin, the largest and most well-known cryptocurrency, was already under pressure from a series of Twitter posts by Tesla CEO Elon Musk, but news from China brought it to $ 38,514, down 9%. Recently, its price reached $ 40,157, down 6.4%.
The currency is now almost 40% lower than the record high of $ 64,895 on April 14. It is also heading for its first monthly drop since November 2018.
Bitcoin movements also hit other cryptocurrencies, with ether falling 15% to $ 2,875.36.
The fall in cryptocurrencies was triggered last week by Elon Mask posting that Tesla would no longer accept bitcoin as a means of payment.
Sales intensified after China announced it was banning financial institutions and payment companies from providing cryptocurrency-related services. He also warned investors to avoid speculative trading in cryptocurrencies.
If the value of Ethereum reaches $ 8,000 then its total capitalization will be the same as that of Bitcoin
Ethereum has grown by more than 400% since the beginning of 2021 and some already claim that Bitcoin could be capitalized.
$ 3,940 worth of Ethereum has a total market capitalization of $ 458 billion and $ 48,750 worth of Bitcoin has a total market capitalization of $ 915 billion.
For the record, the total capitalization of all cryptocurrencies is 2.28 trillion. dollars Ethereum reached $ 4,063, recording gains of about 450% for 2021 … so far.
With a market capitalization of $ 500 billion, Ethereum must double in price to reach Bitcoin. “You will not be surprised if the gap closure could not happen in late 2021 or early 2022,” said Seamus Donoghue, vice president of strategic alliances at Metaco. “The investment position around bitcoin as gold number 2 or a wealth asset is interesting, but it represents a $ 10 billion to $ 12 trillion cryptocurrency market.”
Redistribution of funds in the cryptocurrency market
“A potentially much bigger opportunity is to re-evaluate the capital markets and that has to do with smart contracts and Ethereum starring.”
The issue of overturning one cryptocurrency to pass another is not new.
In the previous bull market of cryptocurrencies, Ethereum attracted a lot of interest, although together with Bitcoin they finally managed to raise the most funds.
Ethereum will play a big role in the future as many investors see this perspective, ie the redistribution of funds between cryptocurrencies.
Ethereum’s reputation as the future platform that could be the building blocks of this new economy is already growing.
The role of the European Investment Bank
In April, the European Investment Bank raised € 100 million by selling a two-year digital bond using Ethereum blockchain technology.
This was remarkable not because it is the first bond issue in cryptocurrency, but because it is the first with an AAA rating based on rating agencies.
It’s a hint for the future and it could work on a scale, with much lower costs, less mediation and more transparency.
But the journey to a possible redistribution of funds still has a long way to go.
The catalyst is the upgrade of Ethereum 2.0
There are endless things that need to happen on the Ethereum platform or network that need to be resolved.
One of the problems in a coded format is creating liquidity in a secondary market for Ethereum-related assets.
But if that could be resolved in the next 1.5 years, a lot could happen.
Other problems in Ethereum should also be addressed, such as speed and efficiency issues, high transactions.
This is widely expected to be resolved in an upcoming Ethereum 2.0 upgrade.
It ‘s still uncertain when the Ethereum 2.0 upgrade will be completed, perhaps in early 2022 as a possible timeline, but it could be the game of change that Ethereum will reach for Bitcoin.
If we get to the point where people believe this could happen then this will be an important catalyst.
Not far away… if the value of Ethereum reaches $ 8,000 then its total capitalization will be the same as that of Bitcoin.
