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Ethereum Foundation Says Berlin Hard Fork Addressed ‘Clear and Present’ Threat
Bloomberg
(Bloomberg) – Bitcoin’s extreme volatility carried into the weekend as the world’s largest cryptocurrency continued to whipsaw investors with double-digit percentage moves.The digital token slumped as much as 13% Sunday, and traded 12.3% lower at $33,178 as of 10:19 a.m. in New York, holding below its 200-day moving average. A day earlier, Bitcoin had climbed more than 8% to move back above $38,000 following a tweet from Elon Musk.A measure of implied volatility on Bitcoin comparable to the U.S. equity market’s VIX indicator sits above 130, higher than the stock version has ever gotten in 30 years. Thirty-day historical volatility in the coin is about 100, some seven times more than the S&P 500 and surpassing the comparable measure in lumber futures, and an ETF designed to pay twice the daily return in crude oil.Investors in Bitcoin are experiencing one of its rockiest weeks ever after a string of negative headlines, with prices swinging as much as 30% in each direction Wednesday alone, when it fell as low as $30,016, the least since January. Even with the gyrations, Bitcoin is still up more than 250% in the past year.The turbulent stretch began after Musk said Tesla would no longer accept Bitcoin as payment for its electric vehicles, citing the coin’s intensive energy use. Another blow came Friday when China reiterated a warning that it intends to crack down on cryptocurrency mining as part of an effort to control financial risks.“Bitcoin has two problems, ESG and decreasing reliance on China, both of which could take some time” Edward Moya, senior market analyst with Oanda Corp., wrote in a note.Other cryptocurrencies also slumped on Sunday, with Ethereum briefly trading below $1,900 and satirical token Dogecoin dropping more than 16%, according to Coinmarketcap.com.Read more: Musk Tweets He Supports Crypto in Battle Against Fiat CurrenciesThe latest warning from Beijing followed a statement earlier in the week disseminated by the People’s Bank of China that financial institutions weren’t allowed to accept cryptocurrencies for payment.China has long expressed displeasure with the anonymity provided by Bitcoin and other crypto tokens. The country is home to a large concentration of the world’s crypto miners who use vast sums of computing power to verify transactions on the blockchain.“It is no surprise that governments are not inclined to give up their monetary monopolies. Throughout history, governments first regulate and then take ownership,” Deutsche Bank macro strategist Marion Laboure wrote in a May 20 report titled “Bitcoin: Trendy Is the Last Stage Before Tacky.” “As cryptocurrencies begin to seriously compete with regular currencies and fiat currencies, regulators and policymakers will crack down.”‘Higher Stakes’A mid-week report from blockchain analysis firm Chainalysis showed over half of the $410 billion spent on acquiring current Bitcoin holdings occurred in the past 12 months. About $110 billion of that was spent on buying it at an average cost of less than $36,000 per coin. That means the vast majority of investments aren’t making a profit unless the coin trades at $36,000 or higher.“The stakes are much higher now than they were in the past,” Philip Gradwell, chief economist at Chainalysis, said in an email. “This week’s price fall means that a lot of investments are now held at a loss. This is going to be a serious test for recent investors, but so much is at stake now that there is the incentive and resources to address the problems in crypto that prevent it from becoming a mature asset.”Weekends tend to be particularly volatile for crypto assets which – unlike most traditional assets – trade around the clock every day of the week. Before this weekend, Bitcoin’s average swing on Saturdays and Sundays this year comes in at 5.14%.That type of volatility is owing to a few factors: Bitcoin’s held by relatively few people, meaning that price swings can be magnified during low-volume periods. And the market remains hugely fragmented with dozens of platforms operating under different standards. That means cryptocurrencies lack a centralized market structure akin to that of traditional assets.“When noise is accompanied by a huge amount of speculation and the noise can be interpreted negatively, you get these huge swings,” said Eric Green, chief investment officer of equity at Penn Capital. “What goes straight up is going to come down at some point.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Ethereum: All You Need To Know To Decide If This Crypto Is Worth the Investment
InvestorPlace
As Bitcoin (CCC:BTC-USD) prices collapsed this week, crypto investors have been left looking much like a deer in headlights. ETF flows for most of the six popular blockchain ETFs have largely remained stagnant even as crypto prices plummeted. Source: Shutterstock The indecision highlights a worrying truth: Bitcoin investors are shifting from an aggressive profit-seeking crowd to one that’s increasingly fearful of missing out. In March, the Grayscale Bitcoin Trust (OTCMKTS:GBTC) – a proxy for institutional investor interest – saw its NAV premium flip from positive to negative. In their place, conservative investors have stepped in. On Wednesday, Wells Fargo (NYSE:WFC) joined other wealth management teams in announcing plans to open crypto trading to high-net-worth clients. (Apparently, it’s better to let your customers lose money than losing it yourself). Meanwhile, forward-looking investors moved onto more technologically advanced cryptocurrencies like Ethereum (CCC:ETH-USD), Cardano (CCC:ADA-USD) and Internet Computer (CCC:ICP-USD). Central banks have also announced plans to launch digital currencies of their own.InvestorPlace - Stock Market News, Stock Advice & Trading Tips That makes a BTC recovery ever more unlikely. As Bitcoin’s age starts to show, its future has never looked wobblier. Bitcoin Prices: Fallacy of the $60,000 Price Target Bitcoin’s 30% slide this week highlighted a fact that experienced investors have long known: Bitcoin has no fundamental value. Talks about $60,000, $600,000 or $6 million price targets ring hollow because cryptocurrency is only worth how much your next-door neighbor is willing to pay. (Lucky are those living next to a Goldman Sachs office). The Top 7 Ways to Invest in Semiconductors Now The lack of a serious price target has long benefited Bitcoin holders. Influential investors like ARK Innovation’s Cathie Wood have long proclaimed $500,000 price targets without providing any deep rationale. Squint hard enough, and any value seems possible. The benefits, however, cuts both ways. Since 2020, Bitcoin prices have become more like a leveraged bet on investor confidence than on cryptocurrency adoption. According to data from Thompson Reuters, the cryptocurrency now has a 25% correlation with the S&P 500 and a 34% correlation with Tesla (NASDAQ:TSLA). The stock market’s 4% wobble last week sent crypto prices crashing a third. Ordinarily, investors might want to buy the dip. The stronger-than-expected post-Covid recovery led banks to revise stock projection upward. Bitcoin would presumably win too. But this time might be different. As experienced crypto investors have also long known, Bitcoin’s community is astonishingly status-quo. As other competitors continue to rise, Bitcoin will find itself falling ever further behind. The Bitcoin Protocol: Miner League Stakeholder-led cryptocurrencies like Ethereum have motored ahead. In November, the world’s No. 2 crypto joined Cardano and other “third-generation” coins in launching an energy-efficient proof-of-stake protocol. Rather than have miners waste energy on pointlessly complex calculations, PoS systems run on a system of approved validators. Energy savings can top 99.7% or more, and crypto watchers expect Ethereum to fully transition its blockchain to the PoS protocol by the end of the year. These improvements are possible because cryptocurrencies like Ethereum rely on a stakeholder-based voting system rather than a mining-based one. With enough support from the Ethereum Foundation and community, beneficial proposals can proceed without miner support. Centralized cryptocurrencies have found it even easier to push changes. Ripple controls 60% of all XRP, making amendments virtually effortless to pass. Bitcoin, on the other hand remains relatively stodgy because of a historical quirk in its development: BTC miners hold an outsized vote in protocol changes. Though miners only account for 10% of supply, the Bitcoin protocol doesn’t work on a democratic voting system. Instead, all proposed changes run through a similar process – miners must reach a consensus for any proposal to pass. While the system can prevent fraud and security issues, it also makes the cryptocurrency demonstrably hard to change. The Bitcoin community put this theory to test in 2017 when they launched a bid to increase the cryptocurrency’s block size limit. Only when 95% of miners accepted the change did the software upgrade pass. That makes a switch to an energy-efficient PoS system virtually impossible without a hard fork. No miner will willingly vote for a more energy-efficient system when it would render their billion-dollar investments in ASIC machinery worthless overnight. It’s a prisoner’s dilemma where stakeholders acting in self-interest poisons the cryptocurrency for both themselves and everyone else. Already, former Bitcoin champions like Tesla CEO Elon Musk have walked back support for the energy-burning cryptocurrency. More backlash could be on the way. Rearranging Deck Chairs on the U.S.S. Bitcoin That hasn’t stopped Bitcoin fans from giving up hope. In April, Niklas Nikolajsen, the founder of Swiss crypto broker Bitcoin Suisse, predicted that Bitcoin would eventually move to the energy-efficient PoS protocol. “I’m sure, once the technology is proven, that Bitcoin will adapt to it as well,” the entrepreneur noted in a German TV interview. In truth, Bitcoin’s technology has fallen so far behind that it might not matter. Today, the cryptocurrency can still only act as a medium of exchange, not a payment processor or commercial bank. It’s the banknotes of the cryptocurrency ecosystem rather than the pipes or pumps. As time moves on, this weakness could become Bitcoin price’s death knell. In its current state, the crypto’s limited functionality makes it vulnerable to competition from central bank-sponsored digital currencies. China’s e-Yuan project has already threatened Bitcoin’s viability in the People’s Republic. A digital dollar could eventually do the same in the U.S., threatening the entire value of Bitcoin’s $1 trillion market capitalization. Combating this involves using blockchain technologies for more than transactions alone. Projects like Ethereum have already moved into NFTs, creating electronic deeds for artwork and collectibles. Others like Celsius (CCC:CEL-USD) allow users to borrow and lend money much like a commercial bank. The latest addition to the industry – Internet Computer – promises to use decentralized networks for cloud computing and website hosting. Bitcoin, however, has fallen short. Its current projects focus on minor improvements to wallets and bug fixing rather than the sweeping changes it needs to keep up. There’s a good reason why early moving crypto investors have abandoned Bitcoin’s stodgy technology. You should, too, while you still can. On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article. Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing. More From InvestorPlace Stock Prodigy Who Found NIO at $2… Says Buy THIS Now It doesn’t matter if you have $500 in savings or $5 million. Do this now. Top Stock Picker Reveals His Next Potential 500% Winner The post As Bitcoin Prices Slide Below $40,000, Should You Buy the Dip or Sell? appeared first on InvestorPlace.