Schlagwort: blockchain analysis

When El Salvador became the first country to adopt Bitcoin as legal tender in September, excitement rippled through the cryptocurrency world. It was a big step for crypto at large, and a giddy indicator of what the future could hold. Soon, enthusiasts started speculating if another country would follow.

Most believed it would be another low-income country, given weak currencies are typically very prone to shifting market environments and high inflation. Panama was perhaps the favourite, as they swiftly announced a bill to make Bitcoin legal tender following El Salvador’s move last year. Paraguay was another guess often floated, buoyed by their bill to regulate Bitcoin mining and trading before Christmas. All the frontrunners seemed to be Latin American, however, with Honduras and Guatemalan rumours also circulating on Internet forums.

Nobody got it right though. Because yesterday, the winner was announced as…a small city in southern Switzerland by the name of Lugano.

With a population of 62,000, Lugano is the ninth largest city in Switzerland. Sitting beautifully on Lake Lugano, it looks every bit as idyllic as a Windows screensaver.

So, what does the crypto announcement mean?

Lugano have played it a little differently than El Salvador, who went all-in on Bitcoin alone. The Swiss city have announced that Tether and LVGA (a CHF stablecoin), as well as Bitcoin, are now “de facto” legal tender.

El Salvador’s bet on Bitcoin is a lot more impactful and economically consequential on a macro scale, and not only for the fact that it is a country rather than a small city such as Lugano. But that’s not to say this won’t change anything in Lugano.

Citizens can now pay taxes in crypto, as well as parking tickets, tuition fees and public services. 200 businesses are also anticipated to accept payment for goods and services. So, while Bitcoin is not on equal footing to the Swiss franc, I think its especially interesting that stablecoins have been included as an option for citizens.

A repeated criticism of El Salvador’s decision was the detrimental impacts that Bitcoin’s notorious volatility would have when adopted as legal tender. But with stablecoins, price is obviously not a concern given the peg to fiat. It gives citizens a neat extra option – want to hold your savings in stablecoins, farming yield on a DeFi protocol, before seamlessly transferring over cash for your parking ticket? Well, that’s now possible.

Criticism

Of course, people will criticise the move as pointless and a publicity stunt. But in reality, what is bad about that? Here we are talking about a city of 62,000 in the middle of Europe, which never would have happened otherwise. What does the city have to lose? Blockchain startups, crypto unicorns and freelance enthusiasts are all the target of this change, but even if it only leads to a small bump in tourism, that’s still a win.

As I said above, the scale of the law is so minor that it is unlikely to cause any serious ramifications, such as what sceptics on El Salvador claim. The IMF, who urged El Salvador last month to “narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status”, won’t be knocking on the Lugano mayor’s office anytime soon. The concern surrounding financial integrity, protection of citizens and fiscal liabilities (given El Salvador’s small pool of government resources) won’t be a concern in Switzerland.

Tether

Tether are in partnership with Lugano, with chief technical officer Paolo Lugano saying at yesterday’s Plan B event that the firm had fund of 3 million Swiss francs together with Lugano officials, in order to push the adoption of Bitcoin, Tether and the LVGA token. He repeated the main goal – an initiative focused on making the city a buzzing blockchain hub in Europe.

It’s a fun episode in the exciting world of crypto, and it will be interesting to track whether Lugano can attract talent, businesses and traders to their beautiful city.

So, who is going to be next?

 

The post Lugano, Switzerland takes leaf out of El Salvador’s book appeared first on Coin Journal.

Cardano is in a correction, but fundamentals are getting better

• Cardano is in a correction as the broader crypto market eases up after the end of February rally. 

• Cardano’s core fundamentals are getting better as three upgrades are set to make Cardano better for Dapps.

• One of the upgrades recently implemented triggered a 12% price rally.

Cardano (ADA) is one of the biggest platform blockchains by market capitalization. While it has been a work-in-progress for the last couple of years, Cardano’s core metrics are stronger than many of its competitors. 

One of the factors that make Cardano stand out is its security. Cardano’s Ouroboros Proof-of-Stake algorithm is the first provably secure Proof-of-Stake algorithm. This is an essential metric because with most financial applications now moving to the blockchain, it could be catastrophic if they run on unsafe blockchains. It’s part of why Ethereum continues to dominate the DeFi market despite its obvious cost and scalability issues. 

While Cardano is yet to gain mass adoption, things are looking pretty positive. Several big projects, including a Metaverse project, are coming to Cardano. Besides, the Cardano team has announced several significant updates that could help propel Cardano forward in 2022. 

Cardano technical updates could trigger a price rally

The IOHK had scheduled three major updates for 2022, which have already been effected. One of the updates it has implemented is the introduction of light wallets and a Dapp store. The goal is to make Cardano run more efficiently now that it has already introduced smart contracts.

The announcement saw ADA shoot up by over 12%. It’s an indicator that as the other updates are introduced, investors expect the Cardano blockchain could run even more efficiently. Some of the scheduled updates include the introduction of side chains for even better scaling and a solution that will help with synchronization. 

Cardano trading in a bearish channel 

Source: TradingView

Cardano is currently trading in a bearish channel though volumes are low. In the past 24-hours, Cardano has broken through the 100-day moving average at $0.9271, and the selloff is accelerating. 

If Cardano breaches $0.90, prices below $0.85 could be a reality in the short term. On the other hand, if there is a reversal and Cardano pushes through the 50-day moving average at $0.9495, it could be a good signal for prices above $1 in the near term. 

Summary 

Cardano is working on three major upgrades expected to make it more attractive to Dapps developers. However, like the rest of the market, Cardano is currently in a minor correction after a rally in late February.

The post What are Cardano’s prospects after the first network upgrade for 2022? appeared first on Coin Journal.

Like many, I watched the excellent Michael Jordan documentary, The Last Dance, during one of approximately thirteen lockdowns in my native Ireland in 2020. There’s one episode in particular that I was reminded of this week, following the developments in Russia and the implications on the cryptocurrency market. It is the sixth episode, examining Jordan’s status as a role model.

“If I had a chance to do it all over again, I would never want to be considered a role model. It’s like a game that is stacked against me. There’s no way I can win”, Jordan lamented.

Jordan, of course, was a global superstar in the 90’s. Kids queued around the block to grab his latest pair of sneakers. His poster adorned teenage bedrooms around the globe. Millions young shoulders donned jerseys with the number 23 on the back.

However, Jordan faced criticism for not utilising his platform to do enough; for not embracing his responsibility as a role model. Not that he was a bad role model, by any stretch. Merely that he took the line of “I’m just an athlete, I just put the ball in a hoop”. Certainly, his lack of activism contrasts to several current sports stars, from basketball heir LeBron James to Formula 1 driver Lewis Hamilton.

In many ways, I felt for MJ. But then again, that’s the game he played – like it or loathe it, there are parts of every job that people don’t like.

Changpeng Zhao

What caused my mind to wander to Jordan’s gravity-defying skills was the issue of the economic sanctions being levelled against Russia, and how the how the cryptocurrency industry ties in to it. Binance CEO Changpeng Zhao gave an interview on Bloomberg TV which I felt took a leaf out of Michael Jordan’s book.

“It’s not our decision to make to freeze user accounts…I think we should separate the politicians to the normal people”, he said. “We are following the position supported by governments all around the world. Again, we do not make the sanction rules; there are organisations who make those rules – we follow them”.

But does CZ, Binance and cryptocurrency at large not have a responsibility to stand up and join the masses in levelling economic sanctions? Are they providing Russia a means to circumvent financial sanctions? Are Binance thereby indirectly inhibiting what are, at heart, measures designed to prevent a war and the deaths of countless innocent people?

Or is Binance merely an exchange? Is CZ merely a CEO of a finance company? Is Michael Jordan simply a basketball player?

Moral Dilemma

In truth, I’m not sure how I feel about this. To be clear, I love crypto with all my heart. I believe it will change the world for the better. It will disrupt what I believe is an archaic, inefficient and unfair financial system, helping to build a more democratic society and a more transparent, trustworthy and efficient monetary framework.

A lot of those advantages come down to the perks that decentralisation offer. The cutting out of middlemen, the pivoting of trust from institutions – who can be corrupt, stack rules in the elite’s favour, increase inefficiency and fees etc – to math, in the form of a transparent, verifiable ledger which the world has come to know as the blockchain.

But what if that decentralisation facilitates malevolent entities such as Russia to circumvent sanctions, granting them the ability to wage a war on an innocent country?

Poking fun at myself a little here

It’s given me pause and, like I said, I love crypto. I’ve scoffed in the past at what I believe are silly arguments against crypto, such as “it’s for criminals” or “it helps drug dealers”. Sure, but it’s a drop in the ocean – you think the US dollar isn’t used for any crime? (A study from 2009 found that 90% of US dollars contain traces of cocaine).

But the Russian issue has given me pause for thought. Binance, which is centralised, does have the ability to freeze accounts. A KYC-compliant exchange, it has the ability to, say, freeze the account of a Russian oligarch shifting millions of dollars in crypto around. This ability to freeze – because it is centralised – is what crypto purists lament, sniggering at Binance for not being true to the philosophies of crypto.

Kraken

While Binance CEO Zhao played the Michael Jordan card, Kraken CEO Jesse Powell went a step further when refusing to acquiesce to Ukrainian Vice President Mykhailo Fedorov’s below request to freeze all Russian accounts.

“Bitcoin is the embodiment of libertarian values, which strongly favour individualism and human rights” Powell contested.

But what if those individuals are Russian billionaires in cahoots with Putin, funding a devastating war?

 

Ukrainian Vice President Mykhailo Fedorov’s appeal to crypto exchanges

So what is the solution?

It’s really difficult. Indeed, we are seeing similar examples all across Big Tech. Twitter banning Trump was possibly the most prominent case – to paraphrase Powell above, is that not one individual exercising his individualism? Spotify’s messy tussle with Joe Rogan is another moral grey area, while Facebook’s feeble efforts to combat false information. Obviously here, the stakes are bigger with the war in Ukraine, but the themes of liberty, censorship and restrictions are similar.

Like I said, I love crypto, and I truly believe in my heart that it can do so much good for this world that we live in. But should we be gung-ho in advocating for a fully decentralised world when malevolent actions of this scale could benefit from it?

Ultimately, I still think the benefits outweigh the downsides. I think it’s slightly exaggerated right now as to what Russia could actually do with cryptocurrency, as on a sovereign scale it simply is not feasible to transact meaningfully. Their frozen foreign assets of $630 billion (for which they could otherwise fight the economic sanctions and help support the ruble) would comprise over three quarters of the Bitcoin market cap. Not to mention the trackable transparency that blockchain offers. The advantages which crypto can offer worldwide are simply too large.

As for the specific cases of Binance and Kraken, I agree with Zhao and Kraken. Like Michael Jordan was just a basketball player, they just run fintech companies. Since when should they make decisions of this magnitude? That’s for governments to do, and both have indicated that they will obey the law, should the politicians decide to act (as happened with the freezing of assets in Canada of protestors recently).

There’s advantages and disadvantages to everything, especially when on the scale of what crypto is trying to do, i.e. disrupt the entire financial sector. The current financial sector certainly isn’t perfect – let’s not forget that. I’m not claiming crypto is either, but it’s only just beginning and it won’t be going anywhere anytime soon. Look how far it has come already in barely a decade.

So don’t twist it, crypto is still the good guy.

 

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Luna has been on a tear recently, shooting up a staggering 50% in the last week. At $34 billion, it is currently the seventh largest cryptocurrency by market cap. Even more headline-worthy is that it has now flipped Solana ($32 billion) and Cardano ($31 billion), who occupy the eighth and ninth spots respectively.

Via CoinMarketCap

Luna Token

Luna, of course, is the token that fuels the DeFi ecosystem of Terra Labs. The real product is a group of stablecoins, the largest of which is the dollar-pegged UST. To boil the token’s utility down in simple terms, Luna’s price will go as far as UST goes.

As UST gains adoption, Luna rises, and vice-versa. If UST market cap rises, Luna supply is burned and hence the Luna price goes up (and vice-versa). This is due to the unique algorithmic mechanism by which the Terra stablecoins retain their fiat pegs (market agents are incentivised to do this via arbitrage).

Right now, the UST stablecoin is sitting pretty with a market cap of $13 billion (15th largest crypto) – the fourth largest stablecoin but the only one offering the tantalising quality of decentralisation. This decentralisation is the unique selling point of UST, of course. The three heavy hitters ahead of UST are all centralised, which is very much a dirty word in crypto. The biggest is the much-maligned Tether ($79 billion, 3rd largest crypto), Circle’s USDC is next ($53 billion, 5th largest) and Binance USD is third ($18 billion, 12th largest).

So with Luna’s meteoric rise over the last year in mind, it follows that we can expect to see similar growth in the stablecoin – which the graph below from CoinMarketCap details, a formidable rise from just $2.8 billion this time last year to today’s $13 billion for the market cap of UST.

UST market cap via CoinMarketCap

Total Value Locked

Another way of tracking the mushrooming UST market cap is to examine the total value locked (TVL) in the Terra ecosystem. Much like every other datapoint related to Luna, it makes for impressive reading. A chunky 11.2% of the $290 billion TVL in the entire DeFi space is now locked up in Terra, according to DefiLlama. Galloping past Solana, Avalanche, Fantom and BSC, Terra now comfortably sits in second, with its $23.5 billion in TVL well clear of BSC in third at $12.4 billion. Ethereum, of course, still rules the roost with its $117 billion representing a 55% share of TVL.

TVL on Luna (purple on graph) has been growing steadily, now representing 11.2% of total DeFi TVL

Contra-Market

But it’s not just the gross gains that stand out. An intriguing quirk of Luna over the last year or so has been it’s propensity to move countercyclically. It is currently only 10% off all time highs (Bitcoin is 36% off all time highs while most alt coins are significantly worse off) – a symbol of how it has been resilient through a fallow period for crypto over the last few months. Indeed, at a correlation of 0.34 with Bitcoin over the last 9 months, it’s remarkably low by crypto standards. The reason for this is that during periods where crypto has fallen, investors have shed crypto exposure and instead bought up the stablecoin UST, hence pumping the Luna price.

So to wrap this up, Luna now boasts the following:

• Second largest TVL in the DeFi space
• Largest decentralised stablecoin (UST)
• Only 10% off all time highs
• Extremely low correlation to the wider market by crypto standards

With these impressive attributes and a market cap of $34 billion, Luna is no longer an alt coin. It’s in the bigtime.

 

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Last Thursday, following the news Russia invaded Ukraine, I wrote this piece assessing the hedge capabilities of Bitcoin amid the crisis. With gold holding up its end of the bargain well as it breached a 17 month high, Bitcoin let the team down and fell 7%.

Gold bugs mocked the crypto enthusiasts, as Bitcoin seemingly blew its perfect opportunity, rendering the long-supported argument that Bitcoin is a sovereign hedge as wishful thinking. Bitcoin was trading at circa $37,400, while Gold was at circa $1,920.

Bitcoin Revives

But there’s never a dull moment in crypto, and things have changed dramatically since. Bitcoin is up 17% from those lows, trading at circa $44,000. Gold, meanwhile, is trading at similar levels as previous ($1,920).

It’s interesting to revisit my analysis from Thursday in light of the recent movements of gold and Bitcoin, and the onslaught of economic sanctions which have been levelled against Russia. Last week, following the announcement of the Russian invasion, I concluded that the 7% fall in Bitcoin proved that the cryptocurrency had not yet achieved the status of a store of value asset. Instead, I argued that the red candle proved investors had dumped it for safe haven assets such as cash and gold amid the market volatility. In crises, correlations go to 1, and there’s a flight to quality. People shed crypto exposure as the world went bananas – just like what happened in March 2020, when the COVID pandemic came knocking on our doors.

So, does that conclusion need to be revisited?

Well, yes and no. There’s still no getting around the fact that in the immediate aftermath of the invasion, Bitcoin plummeted while the “hedge” asset that it is striving to replace – gold – held firm, climbing to a 17 month high. But such has been the scale of the rebound of crypto, we need to dig deeper and re-examine.

Economic Sanctions & The Modern Fiat System

The key development since last week’s analysis has been the onslaught of sanctions against Russia. Airspaces are closed to Russian aircraft, Russian banks are getting frozen out of the SWIFT network and Moscow’s ability to use its warchest of $630 billion in foreign reserves has been restricted. This latter point regarding the foreign reserves is particularly compelling when assessing Bitcoin’s price movements. The US, UK, EU and Canada agreed to “prevent the Russian central bank from deploying its international reserves in ways that undermine the impact of our sanctions”.

Remember, in the modern financial system, fiat money is actually something you are owed, rather than something tangible which you actually have. So while the cash you hold in your bank account is considered something you “have”, in reality it is owed to you by your bank, which you collect once you withdraw from an ATM or transfer to another account (at which point the recipient of the transfer will then be “owed” the bank’s liability).

What we are seeing in the markets now is that these assets, given Russia don’t quite “have” them, can be cut off. Putin has found out the hard way that those $630 billion in foreign reserves aren’t quite as liquid as he thought.

Alternatives

Of course, there are alternatives to fiat. Were Russia’s $630 billion in reserves held in gold bullions, there could be no such restrictions. Gold locked away in a Russian vault is nobody else’s liability, Russia simply “have” it, in every sense of the word. As Canadian citizens may have realised recently following the freezing of bank accounts for protesters, fiat cannot always guarantee that access.

Of course, in the last decade we have seen the emergence of another asset which offers this quality – Bitcoin. Holding your private keys is every bit as good as stashing a gold bullion under your bed (and significantly easier). However, as Bloomberg’s Joe Weisenthal pointed out in his newsletter this morning, it’s not fathomable for Russia to hold significant reserves in Bitcoin, given the size of the market. While gold’s market cap hovers around $12 trillion, Bitcoin’s market cap is merely $826 billion (with a propensity at times to dip much lower). So it’s not feasible for governments to hold large amounts of Bitcoin at the current market cap (Russia’s $630 billion in foreign reserves would amount to three quarters of the Bitcoin supply).

Other Implications

So until Bitcoin matures and expands to more lofty levels, it can’t offer what gold can right now. Indeed, many analysts frequently point to gold’s market cap in extrapolating the potential for Bitcoin’s growth, and it certainly presents a compelling benchmark. But for now, all investors aren’t as large as the Russian state and Bitcoin can still have value. The Russian ruble’s movements in the last few days show this distinctly. Shedding 20% of its value against the US dollar, Russian citizens have seen their net worth crater in real terms.

Via XE.com

Of course, if they had Bitcoin, they could have escaped this fiat debasement. So how about we check out the volume on the BTC-Ruble exchanges? Ah yes, yesterday we hit a 9 month high, as Russians fled to exchanges as they feared further sanctions and ruble weakness.

Via Kaiko

It’s not the first case of (hyper)inflation we have seen (ask Venezuela or Zimbabwe) nor the first case of citizens fearing for their savings (hello Greece and Cyprus) and it highlights just how powerful Bitcoin could be as an asset class, should it continue to grow and ever stabilise. So the way I look at the past week of enthralling price action is this: Bitcoin isn’t a reputable store of value right now, but we are seeing all the right signs that it’s getting there, and it’s given us a glimpse of the power it could hold.  

Watershed Moment

What’s happening at the moment is a watershed moment in history, in that previously autonomous central banks are no longer in control of the assets they normally utilise to conduct financial operations. And at this moment, Bitcoin is still a toddler learning to walk with regards to its development and required infrastructure (as well as the market cap mentioned above), so it would be difficult for a nation such as Russia to circumvent sanctions via cryptocurrency. The challenge would be exacerbated too by the transparent nature of the blockchain – a key argument used by crypto enthusiasts in fighting against the thought that crypto could be a tool for sovereign malevolence down the line.

But it may not be too far off. Indeed, we already have a prominent example of a state jumping into magical internet money to circumvent sanctions, if not on the scale of what would be necessary for Russia in fighting against half the world’s restrictions: Iran.

Iran’s crypto tactics

The middle eastern country faces strict sanctions from the US. Iran’s solution, however, is to convert what energy it does not need (Iran has an abundance of fossil fuels) into cash via buying bitcoins from bitcoin miners (who use fossil-fuels in their mining). These bitcoins can then be used to purchase whatever they please, including imports. And the US can do nothing about it. Russia, for its part, is the third largest cryptocurrency miner in the world (average monthly hashrate share of 11% as of Jul-21, according to University of Cambridge). To stir the pot a little more, Putin appeared to soften his stance on cryptocurrency when the Russian central bank proposed a ban on the industry: “Of course , we also have certain competitive advantages, especially in the so-called mining, I mean the surplus of electricity and well-trained personnel available in the country”. Hmm.  

Cambridge Bitcoin Electricity Index, with Russia the third largest crypto miner in the world. 

In wrapping up, it’s easy to see the route towards a store of value for Bitcoin, even if this week has showed that, while it’s getting there, it hasn’t quite achieved the safe-haven status yet. But Satoshi let the genie out of the bottle when he invented the blockchain in 2009, and geo-political tensions in this increasingly fragmented and chaotic world (not to mention a certain coronavirus and all the vaccine mandates and other consequences born out of the pandemic) have thrown up all sorts of implications and potential use cases for Bitcoin.

Crypto can be good! Ukraine’s crypto wallets have, as of time of writing, received $31.7 million in donations, according to blockchain analytics firm Elliptic. They are also now accepting donations in Polkadot, with more to be added soon

We can debate whether the consequences are good or bad (and like most things on the scale of Bitcoin, there are a selection of both), but one thing which is becoming increasingly clear is the fundamental value and myriad use cases that an alternative to fiat offers.

Yes, there are advantages and disadvantages, but in terms of the price, if you zoom out enough, Bitcoin has only trended one way historically – up. And with the way the world is heading, I certainly don’t see many reasons that the future will be any different.

 

 

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