Goldman’s Crypto Chief Worries About Fraud, but Not Cryptocurrency’s Future

Goldman’s Crypto Chief Worries About Fraud, but Not Cryptocurrency’s Future

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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.

Investors lost a whopping $830 billion in crypto crash last week

NEW DELHI: Last week was very volatile for cryptocurrencies with Bitcoins plunging to $30,000 level before recovering slightly. In the process, it lost nearly half of its total value, bankrupting many of those who invested in it.Other coins also followed suit, crashing as much as 63 per cent in the last seven days. In essence, crypto investors lost a whopping $830 billion in the blowout last week. The total market cap of all cryptocurrencies stands at $1.49 trillion as of now.Many exchanges across the world faced problems due to heightened volumes and sell orders. These included Binance , WazirX (owned by Binance), Voyager and Coinbase, among others.There were two major reasons behind the crash. The first was the vehicle maker Tesla’s sudden decision to stop car purchases using Bitcoins, a measure they announced a couple of months back.The company cited environmental concerns over the computational ‘mining’ process behind its move. Mining basically refers to the process in which computers solve complex mathematical puzzles to enable transactions using Bitcoins and in return generate more Bitcoins. This is a high energy intensive process, requiring electricity often produced by burning coal.Bitcoin enthusiasts had hoped for its wider adoption as a currency after Tesla’s decision in March. But, the recent U-turn dashed those hopes. Besides, Tesla has also trimmed its Bitcoin investments, as per its latest quarterly report.Another reason behind the sell-off has been China’s crackdown on mining rigs across the country. China reiterated a warning last week that it intends to crack down on cryptocurrency mining as part of an effort to control financial risks.According to some estimates, China is home to the largest concentration of world’s crypto miners. This results in high electricity consumption for a country which has been dealing with severe pollution.Earlier in the week, Chinese authorities warned that financial institutions weren’t allowed to accept it for payment, curtailing hopes further.Many investors and analysts have also blamed mercurial technocrat Elon Musk for the massive volatility in crypto assets. His tweets, sometimes in support and other times criticising the assets, are seen to have an immediate bearing on price movements.Musk has been a fervent supporter of Bitcoin and Dogecoin (which actually started as an internet meme and has no fundamental basis like Bitcoin), but have also termed the mania around cryptocurrencies a “hustle”.Many of Musk’s followers last week blamed him for their losses. In fact, some Twitter users claimed they became homeless after Dogecoin prices crashed following Musk’s advice.As per the latest data, Bitcoin traded at $35,665, down 27 per cent in the last seven days. Ethereum was at $2,124 (down 45 per cent), Cardano $1.35 (down 43 per cent), Binance Coin at $269 (down 55 per cent), Dogecoin at $0.32 (down 40 per cent) and XRP at $0.84 (down 46 per cent).Prices have recovered slightly in the last 24 hours but no one can comment on how they will behave next week. Volatility has been a characteristic property of the crypto assets and it will likely move in a wide range in the future as well, many commentators believe.

The Crypto Daily – The Movers and Shakers – May 23rd, 2021

A mixed start to the day saw Bitcoin fall to a mid-morning intraday low $35,372.0 before making a move.

Steering clear of the first major support level at $33,196, Bitcoin rose to a late morning intraday high $38,956.0.

Falling well short of the 38.2% FIB of $41,592 and the first major support level at $41,942, Bitcoin fell back to $37,200 levels and into the red.

Late in the day, Bitcoin moved back through to $38,000 levels before ending the day at sub-$38,000 levels.

The near-term bullish trend remained intact in spite of the latest slide back to sub-$30,000 levels. For the bears, Bitcoin would need a sustained fall through the 62% FIB of $27,237 to form a near-term bearish trend.

The Rest of the Pack

Across the rest of the majors, it was a bearish day on Sunday.

Polkadot and Ripple’s XRP slid by 10.06% and by 10.11% to lead the way down.

Binance Coin (-8.14%), Chainlink (-9.21%), Cardano’s ADA (-5.59%), Ethereum (-5.65%), Litecoin (-6.02%) also struggled.

Bitcoin Cash SV (-1.06%) and Crypto.com Coin (-1.89%) saw relatively modest losses on the day, however.

In the current week, the crypto total market rose to a Monday high $2,162bn before sliding to a Wednesday low $1,207bn. At the time of writing, the total market cap stood at $1,508bn.

Bitcoin’s dominance fell to a Wednesday low 39.66% before rising to a Saturday high 46.41%. At the time of writing, Bitcoin’s dominance stood at 45.96%.