Chinese app Meitu buys $40 million worth of bitcoin and ethereum
The interface of the app Meitu is displayed on a mobile phone in Yichang, central China’s Hubei province, Feb 22, 2021.
Meitu, a Chinese company that makes a photo editing app, has purchased bitcoin and ether, becoming the latest firm to buy cryptocurrencies.
The Hong Kong-listed company said on Sunday it bought $22.1 million worth of ether and $17.9 million worth of bitcoin on March 5.
Meitu follows the likes of electric car company Tesla and Square in purchasing bitcoin. But the Chinese appmaker appears to be the first major company to buy ether, a cryptocurrency that works on the ethereum blockchain.
Bitcoin is based on its own blockchain, the technology that underpins it.
Ethereum is a completely different network. It’s an open-source blockchain that allows developers to build apps on top of it. The cryptocurrency ether can be used to pay or interact with services built on top of the ethereum network. These are often called decentralized applications or dApps.
Ethereum’s Upcoming EIP 1559 Upgrade Could Cause ETH Price to Skyrocket
Blockchain developers on the Ethereum network have approved a proposed change to the network that would ‘burn’ a small amount of Ether (ETH) every time that the currency is used to pay ‘gas fees’ on a transaction. According to Bloomberg, the proposal, known as ‘EIP 1559’, will be bundled into an upgrade in July or August of this year.
Many analysts believe that the reduction in the supply of Ether tokens will lead to higher token prices overall. This is because a reduction in the supply of Ether will make the asset more scarce.
In addition, EIP 1559 is slated to take the guesswork out of Ethereum network transaction fees. Currently, fees on the Ethereum network are so inconsistent that users on the network rely on sites like ETHGasStation to help them determine what their transaction fees will be at any given time.
In July 2020, OKCoin’s Olivia Lovenmark explained to Finance Magnates that: “to date, gas fees have been determined based on an inefficient auction process.”
“EIP 1559 would improve this by making it clear what fees are with an automated system that is comparable to Bitcoin’s difficulty adjustment in the sense that both adjust, based on network volume and usage.”
Indeed, “EIP 1159 proposes a ‘BASEFEE’, which automatically adjusts to the network’s congestion level of transactions, providing a ‘market rate’ instead of users referencing prices paid.”
Tim Beiko, Senior Product Manager at ConsenSys, also told Bloomberg that EIP 1559 will make it so transactions can only be paid for with Ether, a move that will ‘cement Ether’s role in the ecosystem’.
Increased Scarcity of ETH Tokens Could Make the Asset More Valuable
Why is it so significant that EIP 1559 will lead to the destruction of ETH tokens? Analysts say that it is because of increased scarcity.
In the cryptocurrency world, scarcity is described as one of the attributes that make Bitcoin (BTC) suitable for use as a ‘Store of value’ or ‘hedge against inflation’. Before EIP 1559, a number of analysts had concerns about inflation on the Ethereum network, since the supply of ETH was theoretically infinite.
Indeed, Eric Turner, Director of Research at crypto analytics firm, Messari, told Bloomberg that EIP 1559 “is probably one of the biggest milestones we’ve seen recently,” he said. “Now, they’re actually controlling inflation on Ethereum” and “in some cases you’re looking at negative inflation so it’s definitely important.”
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Increased scarcity on the Ethereum network could lead to even further price gains for ETH tokens, which have already seen massive growth over the past 12 months. A year ago, the price of ETH was roughly $200; today, that price has increased to $1700, which is an increase of roughly 750 percent. By contrast, the price of Bitcoin has risen roughly 530 percent over the same time period.
Before Its Acceptance, EIP 1559’s Importance for the Future of Ethereum Was Recognized Last Summer
In July 2020, Ari Paul, Co-founder and CIO of BlockTower Capital, tweeted that EIP 1559 was “make or break” for the network.
“My arguments on this aren’t terribly complex but are nuanced enough that I fear individual pieces getting taken out of context, but I’ll give it a shot in brief form,” he wrote.
My arguments on this aren’t terribly complex, but are nuanced enough that I fear individual pieces getting taken out of context, but I’ll give it a shot in brief form. /1 — Ari Paul ⛓️ (@AriDavidPaul) June 27, 2020
“The past couple weeks in DeFi have been a microcosm of bootstrapping network effects in a competitive space. The winner(s) in both DeFi and Ethereum’s L1 competitive space need to be sound as a platform for their value proposition, but after being sound, it’s probably about ‘getting big fast’.”
“Currently, all crypto use cases except maybe ‘digital gold’ are tiny and very leapfroggable. Facebook didn’t need a single Friendster user to succeed. The winning L1 and dApps won’t need a single current user. 7.4 billion people not yet attached.”
Finance Magnates reported earlier today that Ether whales are said to control roughly 70 percent of the supply of ETH tokens.
Chinese selfie-editing app maker Meitu buys $40 million worth of bitcoin and ethereum
Actress Angelababy attends Meitu’s smartphone promotional event on November 23, 2017 in Beijing, China. Visual China Group via Getty Images
Chinese beauty app maker Meitu has scooped up $40 million worth of bitcoin and ethereum.
The company could make crypto purchases of up to $100 million under a plan approved by its board.
Meitu appears to be the first major corporate buyer of ethereum.
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Meitu, a hot Chinese app maker, on Sunday revealed a $40 million cryptocurrency investment in a filing to the Hong Kong Stock Exchange.
The photo-retouching company, which is hugely popular in China, said it bought 15,000 units of ether and 379.12 units of bitcoin at about $22.1 million and $17.9 million, respectively.
Meitu appears to be the first major company to have purchased ether, a digital asset that operates on the Ethereum blockchain. Under a plan approved by its board of directors, the company said it could use cash reserves to make crypto purchases of up to $100 million.
The company said cryptocurrency prices “are still highly volatile,” but added its $40 million bet serves as a means of diversification away from just cash and strengthening long-term shareholder value.
Meitu said it invested in ether as a “logical preparation” to enter the blockchain industry since Ethereum has the largest number of decentralized applications on its network.
“Blockchain technology has the potential to disrupt both existing financial and technology industries, similar to the manner in which mobile internet has disrupted the PC internet and many other offline industries,” the company said in a statement. Meitu therefore plans to evaluate the technology for its future projects.
The company said it added bitcoin to its portfolio after seeing an increasing number of publicly-listed companies adopting the token. A flurry of crypto investment by major Wall Street players saw bitcoin’s price hit an all-time high of $58,354 in late February.
Bitcoin was last trading 1.6% down at $50,148, while ether fell 0.6% to $1,715 on Monday. Both are up 70% and 136% year-to-date, respectively.
Shares in Meitu closed 6.6% lower at $2.54 per share, after rising by more than 14% at one point earlier in the day.