Tag: bitcoin

Crypto versus gold debate rages on Wall Street as flows reverse, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


Gold is back with a vengeance this month just as the crypto rally falls apart, refueling the Wall Street debate over the link between the two putative hedging assets.

Bullion funds have seen the biggest two weeks of inflows since October and prices are edging closer to $1,900 an ounce. In contrast, Bitcoin has plunged by almost 40% from a $63,000 peak and funds are recording outflows.

Yes, the weaker dollar and falling inflation-adjusted yields are big reasons for the gold revival. Elon Musk-spurred volatility, meanwhile, has snuffed out some of the speculative euphoria in Bitcoin, while undermining its ambition to attract the institutional crowd.

Yet, all this fascinates a market cohort that point out the parallels between digital gold and the real deal. They’re both viewed as inflation hedges, commodities in scarce supply and capture the cultural divide between young, tech-obsessed traders and boomer traditionalists.

Meanwhile, the likes of JPMorgan & Chase & Co. and ByteTree Asset Management say gold’s recent ascent appears to have come at least partly expense of Bitcoin as investors rotate between the two.

“There is still so much confusion between Bitcoin and gold,” wrote Charlie Morris, founder of ByteTree in a note. “They coexist, and they both thrive in an inflationary environment.”

In a report on shifting gold and Bitcoin trends, Morris suggested that fund flows are having an unusually large impact in boosting the gold price, and vice versa Bitcoin’s outgoing flows are depressing prices.

Past may be prologue: Earlier this year, Bitcoin funds pulled in institutional cash as money managers extolled a case for digital currencies to creep into gold’s spot in a portfolio. With the economic growth in full swing, more than $20 billion then left bullion-backed ETFs in the six months to April.

For some strategists, the bullion market is a starting place to divine their price forecast for Bitcoin. In a world where investors allocate gold and Bitcoin evenly to their portfolios and the two assets converge in volatility, it would imply a valuation of Bitcoin at $140,000, JPMorgan has previously estimated.

“Needless to say such convergence or equalization of volatilities or allocations is unlikely in the near future,” strategists led by Nikolaos Panigirtzoglou wrote.

Since the Covid-19 vaccine breakthrough triggered an economic rebound in November, exchange-traded funds tracking gold sold almost 12 million troy ounces through to the start of May, worth about $22.5 billion at today’s price.

Investors pulled almost $14 billion from the SPDR Gold Shares ETF (ticker GLD) in the period, helping cut total assets in the world’s largest gold ETF by 29%. Some $1.6 billion has flowed back into the fund to put May on course for the best month since July.

In day-to-day action, the direct link between gold and Bitcoin is hard to pin down, suggesting the connection is more about market psychology than real-money flows. The threat of price pressures and weakening dollar are good reasons for the metal’s current rally.

And while predictions for Bitcoin prices have been chastened by the selloff, the enthusiasm hasn’t gone away. Bloomberg Intelligence strategist Mike McGlone, who has a price target of $100,000 for Bitcoin, says there’s still a chance crypto can become a digital reserve asset and that makes it worth the risk.

“Gold may be losing its significance, so it may be simply prudent to diversify,” wrote McGlone. “The human nature of acknowledging a new asset class is what we see as a primary Bitcoin support.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Iran bans cryptocurrency mining for 4 months amid power cuts, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


DUBAI: Iran has banned the energy-intensive mining of cryptocurrencies such as Bitcoin for nearly 4 months, President Hassan Rouhani said on Wednesday, as the country faces major power blackouts in many cities.

“The ban on the mining of cryptocurrencies is effective immediately until September 22 … Some 85% of the current mining in Iran is unlicensed,” Rouhani said in a televised speech at a cabinet meeting.

Bitcoin and other cryptocurrencies are created through a process known as mining, where powerful computers compete with each other to solve complex mathematical problems. The process is highly energy intensive, often relying on electricity generated by fossil fuels, which Iran is rich in.

As next month’s presidential election approaches, the blackouts have been widely criticised by Iranians. The government has blamed the power cuts on cryptocurrency mining, drought and surging electricity demand in summer.

According to blockchain analytics firm Elliptic, around 4.5% of all Bitcoin mining takes place in Iran, allowing it to earn hundreds of millions of dollars from cryptocurrencies that can be used to lessen the impact of US sanctions.

Iran’s economy has been hit hard since 2018, when former President Donald Trump exited Tehran’s 2015 nuclear deal with six powers and reimposed sanctions.

US President Joe Biden‘s administration and other global powers have been in talks with Iran to revive the deal.

Iran has accepted crypto mining in recent years, offering cheap power and requiring miners to sell their bitcoins to the central bank. Tehran allows cryptocurrencies mined in Iran to be used to pay for imports of authorised goods.

The prospect of cheap power has attracted miners, particularly from China, to Iran. Generating the electricity they use requires the equivalent of around 10 million barrels of crude oil a year, or 4% of total Iranian oil exports in 2020, according to Elliptic.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

Suddenly Bitcoiners and Ethereans just swapped talking points, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Everything’s getting weird in the crypto world. But to understand what’s going on, I want to go back to our recent podcast episode with Aaron Lammer, an Ethereum true believer, who was asked what he thought about Elon Musk going after Bitcoin over green concerns.

Tracy: OK. Just one more, but on a day like today, when, you know, Elon Musk tweeted, Bitcoin fell 16%. Although, you know, as we’re recording this, it’s pared some of those losses, but all the crypto coins, all the crypto-related stocks are all falling. What was today like for you? Like what did your yield-farming portfolio look like?

Aaron: You know, I honestly didn’t even check like most of this yield stuff, just kind of happening in the background, I’ll look and see how much I’ve made, but I’m looking more at the prices of the tokens than yields. I think that there are people who are just seeking yield out there, but those are people who have a lot more capital to start with than I do and are, like, not wanting to risk it, but want to just earn yield on like stable coins. I’m primarily holding Ethereum and other DeFi tokens. So when I saw that I actually was happy because I’m in Ethereum. I’m a true believer. And I believe that Ethereum will pass Bitcoin at some point. And I am fine with accelerating that if it can pass Bitcoin by going up or by Bitcoin going down. And I love the hostility and the space between the two camps. It’s getting ugly out there.

So basically a couple of weeks ago, when Elon Musk went after Bitcoin and tanked the entire market, the reaction among (at least some) Ethereans was that it was good, because Ethereum has a plan to go green (which Matt Leising wrote about today) and Bitcoin will always be proof of work (which is electricity intensive). So if proof of work becomes vilified, then that’s good for Ethereum in the long run, even if in the short run they all collapse. That’s the theory anyway.

Except now Musk is sounding warm to Bitcoin again, talking about his discussions with miners regarding renewable-energy mining in North America. Actually, the full context is that Michael Saylor, the Microstrategy’s chief executive officer, is convening a meeting between Musk and various miners. And note he specifically cites ESG considerations in the second tweet:

So now you have at least some Bitcoin industry leaders trying to make a point of sounding “green” or ESG-friendly.

What’s interesting, too, is that while Bitcoin leaders start to tout their green bonafides, the Ethereum world is starting to sound like hard-money types.

A lot of people are talking about this Packy McCormick blog post about upcoming changes to the Ethereum protocol, one of which includes a plan to slowly shrink the available number of coins out there.

Substance aside, this is part of the new Ethereum rhetoric:

But EIP 1559 and Eth2 flip that. With Eth2, new issuance to reward validators is expected to drop dramatically versus Proof of Work rewards. With EIP 1559, by burning ETH in every transaction, assuming a conservative amount of daily transaction fees and that 70% of the gas fee is burnt and 30% is sent as a tip, then more ETH will be burnt than issued every day. Together, the supply of ETH will actually begin decreasing after EIP 1559 and the Eth2 merge. It’s better than sound money. It’s Ultra Sound Money.

So you have Michael Saylor talking about ESG, and you have Ethereum bulls talking about “Ultra Sound Money.” Not sure what it means, but it sounds like the End Times.

Meanwhile, both Bitcoin and Ethereum are surging today after a horrible weekend. So for all of the ostensible disputes between the two camps, they still trade more or less in unison.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

Musk jolts Bitcoin higher with push to burnish miners’ image, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


Elon Musk continued to toy with the price of Bitcoin Monday, taking to Twitter to indicate support for what he says is an effort by miners to make their operations greener.

Musk and Michael Saylor, another long-time Bitcoin booster, tweeted that they held a call with major North American miners, including Michael Novogratz’s Galaxy Digital and publicly traded Hut 8 Mining Corp., on Sunday to discuss “energy usage transparency.” Saylor said the group agreed to form the Bitcoin Mining Council “to standardize energy reporting.”

The world’s largest cryptocurrency advanced as much as 19% to trade around $39,944 following the tweets. It has slumped to as low as $31,132 on Sunday.

The latest was at least the fourth tweet by Musk that has sent Bitcoin prices running one way or another in the past two weeks. The volatility, almost unprecedented in an asset known for its wild swings, has raised concern among Wall Street veterans and regulators alike that Bitcoin might not be ready for the prime time its backers envision.

“If the market continues to see wild swings based on Elon Musk tweets, it’s going to be a big set back for this asset class. The fact that it sees such wild swings to the tweets from one person takes away the legitimacy of the asset class,” said Matt Maley, chief market strategist for Miller Tabak + Co.

A spokesperson from Galaxy confirmed that a company mining representative participated in the call. Hut 8 Mining tweeted that it also was on the call, and would be part of an effort to “educate the market that sustainable mining is possible and a priority.”

The timing is conspicuous. Two weeks ago, Musk roiled the crypto world when he said Tesla Inc. wouldn’t accept Bitcoin for cars because of its energy-intensive proof-of-transaction process. While the creation of a mining industry council might standardize energy-usage reporting, it will take years for many of the largest miners to recalibrate where they source their energy.

Pledges to make the industry more green picked up since Musk’s tweet, with several miners joining the Crypto Climate Accord, a private-sector initiative to decarbonize the crypto industry by 2030. The group was inspired by the Paris Climate Agreement.

Energy usage — a long-known problem — had not seemed to bother Musk as he hyped crypto and earlier this year plowed $1.5 billion of Tesla’s corporate cash into it. Miners use hundreds of computers that run around the clock to verify Bitcoin transactions in exchange for new coins. While some have hooked into energy sources powered by hydroelectric dams or solar and wind farms, much of the power comes from coal-fired plants.

Musk’s tweet criticizing the energy usage sent Bitcoin tumbling the most in years, wiping more than $500 billion from its market value. He later tweeted that he still believed in Bitcoin, helping the token recoup some of its losses. The volatility persisted through the weekend before a modest rebound Monday got supercharged by his latest online missive.

Saylor, CEO and founder of Microstrategy Inc., announced last week that his enterprise-software company bought more Bitcoin as prices fell, bringing its holdings to approximately 92,079 Bitcoins, which it says were acquired for about $2.25 billion at an average of about $24,450 per token.

A host of crypto bulls are lining up to hype the industry as it holds one of its biggest conferences of the year this week. Federal Reserve Governor Lael Brainard noted at the Consensus conference that a big issue for central banks with regard to a digital currency is the impact on the financial system.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

HSBC CEO says Bitcoin not for us, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


HSBC has no plans to launch a cryptocurrency trading desk or offer the digital coins as an investment to customers, because they are too volatile and lack transparency, its Chief Executive Noel Quinn told Reuters.

Europe’s biggest bank’s stance on cryptocurrencies comes as the world’s biggest and best-known, Bitcoin, has tumbled nearly 50% from the year’s high, after China cracked down on mining the currency and prominent advocate Elon Musk tempered his support.

HSBC’s stance also contrasts with rival banks such as Goldman Sachs, which Reuters in March reported had restarted its cryptocurrency trading desk.

“Given the volatility we are not into Bitcoin as an asset class, if our clients want to be there then of course they are, but we are not promoting it as an asset class within our wealth management business,” Quinn said.

“For similar reasons we’re not rushing into stablecoins,” he said, referring to the digital currencies that seek to avoid the volatility associated with typical cryptocurrencies by pegging their value to assets such as the U.S. dollar.

Bitcoin traded at $34,464 on Monday, down nearly 50% in just 40 days from its year high of $64,895 on April 14.

Pressure on the currency intensified after the billionaire Tesla Chief Executive and cryptocurrency backer Musk reversed his stance on Tesla accepting Bitcoin as payment.

‘Difficult questions’

China, which is central to HSBC’s growth strategy, said last Tuesday that it had banned financial institutions and payment companies from providing services related to cryptocurrency transactions.

Reuters reported in April that HSBC had banned customers in its online share trading platform from buying shares in bitcoin-backed MicroStrategy, saying in a message to clients that it would not facilitate the buying or exchange of products related to virtual currencies.

Quinn said his sceptical stance on cryptocurrencies partly arose from the difficulty of assessing the transparency of who owns them, as well as problems with their ready convertibility into fiat money.

“I view Bitcoin as more of an asset class than a payments vehicle, with very difficult questions about how to value it on the balance sheet of clients because it is so volatile,” he said.

“Then you get to stablecoins which do have some reserve backing behind them to address the stored value concerns, but it depends on who the sponsoring organisation is plus the structure and accessibility of the reserve.”

The soaring popularity of cryptocurrencies has posed a problem for mainstream banks in recent years, as they try to balance catering to clients’ interest with their own regulatory obligations to understand the source of their customers’ wealth.

HSBC’s stance against offering cryptocurrencies as an asset class marks it out against European rivals such as UBS, which is exploring ways to offering them as an investment product according to media reports earlier this month.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

Bitcoin down 10% to $33,747, ether slips 14%, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


Bitcoin fell 13% on Sunday after the world’s biggest and best-known cryptocurrency suffered another sell-off that left it down nearly 50% from the year’s high.

Bitcoin fell to $32,601 at 1800 GMT (2 p.m. ET), losing $4,899.54 from its previous close. It hit a high for the year of $64,895.22 on April 14.

Ether, the coin linked to the ethereum blockchain network, dropped 17% to $1,905 on Sunday, losing $391.31 from its previous close.

Bitcoin markets operate 24/7, setting the stage for price swings at unpredictable hours.

“Many point to bitcoin’s volatility as untenable,” wrote RBC Capital Markets’ Amy Wu Silverman in a research note published on Saturday. “Indeed, Bitcoin makes severe and dizzying swings.”

Bitcoin had been under pressure after a series of tweets last week by billionaire Tesla Chief Executive and cryptocurrency backer Elon Musk, chiefly his reversal on Tesla accepting bitcoin as payment.

In addition, on Friday China cracked down on mining and trading of the largest cryptocurrency as part of ongoing efforts to prevent speculative and financial risks.

China’s Financial Stability and Development Committee, chaired by Vice Premier Liu He, singled out bitcoin as the asset it needs to regulate more.

The statement, which came days after three Chinese industry bodies tightened a ban on banks and payment companies providing crypto-related services, was a sharp escalation of the country’s push to stamp out speculation and fraud in virtual currencies.

China’s latest campaign against crypto came after the U.S. Treasury Department on Thursday called for new rules that would require large cryptocurrency transfers to be reported to the Internal Revenue Service, and the Federal Reserve flagged the risks cryptocurrencies posed to financial stability.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

US regulators signal stronger risk, tax oversight for cryptocurrencies, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


WASHINGTON: US Federal Reserve chief Jerome Powell turned up the heat on cryptocurrencies on Thursday, saying they pose risks to financial stability, and indicating that greater regulation of the increasingly popular electronic currency may be warranted.

The Treasury Department, meanwhile, flagged its concerns that wealthy individuals could use the largely unregulated sector to avoid tax and said it wanted big crypto asset transfers reported to authorities.

The back-to-back announcements came in a week when Bitcoin, the most popular cryptocurrency, took a wild ride, falling as much as 30% on Wednesday after China announced new curbs on the sector, underscoring the volatility of the sector.

Powell underlined cryptocurrency risks in an unusual video message that also laid out a clearer timetable as the Fed explores the possibility of adopting a digital currency of its own.

While highlighting the potential benefits of advances in financial technology, Powell said cryptocurrencies, stablecoins and other innovations “may also carry potential risks to those users and to the broader financial system.”

As the technology advanced, “so must our attention to the appropriate regulatory and oversight framework. This includes paying attention to private-sector payments innovators who are currently not within the traditional regulatory arrangements applied to banks, investment firms, and other financial intermediaries.”

Powell’s comments signaled how seriously the Fed has been forced to reckon with the surge in popularity and market values of non-traditional currency options such as Bitcoin, especially as it looks at developing a digital version of the U.S. dollar, the world’s reserve currency.

Speculative Assets
The Fed and Treasury consider cryptocurrencies, which now have a market capitalization of about $2 trillion, to be more like art, gold or other highly speculative assets.

A central bank digital currency, though, offers whoever holds it – a person, a business, even another government – a direct claim on that central bank, which is exactly what holding a paper dollar bill does now.

Powell said the Fed would release a discussion paper this summer on digital payments, with a focus on the benefits and risks of establishing a central bank digital currency, and will also seek public comment.

He noted that “to date, cryptocurrencies have not served as a convenient way to make payments, given, among other factors, their swings in value.”

The Treasury also flagged cryptocurrency risks, including opportunities for wealthy individuals to move taxable assets into the largely unregulated crypto sector.

“Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion,” the Treasury said.

Its proposal, disclosed as part of a policy report https://home.treasury.gov/system/files/136/The-American-Families-Plan-Tax-Compliance-Agenda.pdf detailing the Biden administration’s $80 billion IRS enforcement proposal to boost revenue collection, would provide additional resources for the IRS to address crypto assets,

In addition to the reports of $10,000-plus cryptocurrency transfers that would parallel bank reports of similarly sized cash transfers, the Treasury also proposed that crypto asset exchanges and custodians also report transactions to the IRS related to bank interest, dividend and brokerage transactions.

The reporting requirements, depending on how they are structured, could also allow the government to gain insight about US companies that are extorted to pay hackers ransoms, almost invariably in cryptocurrency, to regain control of their IT systems.

Law enforcement and private sector cybersecurity experts alike have complained that a lack of transparency around these ransomware incidents contributes to their continued occurrence.

The Treasury disclosure took the wind out of a rally in the dollar value of Bitcoin on Thursday that followed steep plunges for Bitcoin and etherium on Wednesday. Bitcoin was up 8.7% in afternoon trade after an earlier gain of 10%.

While the Fed and some other developed economies are still conducting research on what a central bank digital currency would look like, China is moving ahead at a fast clip and is currently piloting a digital version of the yuan, with plans to ramp up usage before the 2022 Winter Olympics in Beijing.

Powell said last month that the Fed would not rush its efforts in response to China’s more aggressive pace, noting that the approach taken there would not work in the United States.

“It is far more important to get it right than it is to do it fast,” Powell said after the April policy setting meeting.

The Boston Fed is currently working with the Massachusetts Institute of Technology to research the technology that could be used for a central bank digital currency and will be releasing those findings in the third quarter.

Congressional action would be required before a digital currency could be developed.

Also on Thursday, U.S. Securities and Exchange Commission Chair Gary Gensler said he would like to see more regulation around cryptocurrency exchanges, including those that solely trade bitcoin and do not currently have to register with his agency.

“This is a quite volatile, one might say highly volatile, asset class, and the investing public would benefit from more investor protection on the crypto exchanges,” he said at the Financial Industry Regulatory Authority’s annual conference.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

What’s the endgame of all the speculation & hoarding in Bitcoin, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


LONDON: Bitcoin‘s wild ride this week is far from unusual for the largest crypto token – but the rollercoaster is also its inherent contradiction.

Speculators betting for years on bitcoin becoming a stateless digital currency that’s widely used for online retail and payments are largely responsible for its parabolic price rises. But they also seed the sort of blinding volatility that makes that ambition almost untenable.

Bitcoin’s 30 per cent plunge on Tuesday after another Chinese government crackdown is not unique. Daily moves of more than 20 per cent have been frequent during the past 6 years. At almost 4.5 per cent, median daily price swings over that time period are more than 6 times that of the main Transatlantic euro/dollar exchange rate.

And while some online retailers might accept bitcoin as payment for goods priced in dollars, few could manage the potential accounting chaos of sticker pricing in bitcoin if its value can routinely shift by a fifth in just hours.

The flipside is true for buyers. If you think bitcoin’s price keeps on rising over time – much like the latest quadrupling over the past 12 months – then why would you surrender those gains by paying for anything with bitcoin today?

And so if that role as a transaction currency or stable store of value remains elusive, it’s essentially just a game of hoarding a finite number of tokens by small groups of people that routinely involves wild, illiquid swings whenever regulators pounce, backers tweet support or big players cash in.

As ever, arguments about pros and cons of crypto tokens divide among believers and non-believers – blind faith versus instant dismissal, cheer-leading versus scorn.

Deutsche Bank this week likened bitcoin belief structures to the so-called “Tinkerbell effect” – a theory drawing from childrens’ book character Peter Pan‘s claim that the fairy only exists because the kids believe she does.

“In other words, the value of Bitcoin is entirely based on wishful thinking,” wrote Deutsche analyst Marion Laboure.

Laboure estimates that less than 30 per cent of transactions in bitcoin are currently related to payments – the rest is trading, speculation, investment or related activities.

And she reckons its liquidity as an investment asset is low. With about 28 million bitcoins changing hands last year, that’s 150 per cent of all those in circulation – almost half the equivalent metric for Apple shares.

TINKERBELL, ARK AND MUSK
With a market capitalisation still about $1 trillion, governments can’t ignore bitcoin, even if central banks continue to dismiss its wider systemic importance. They may even welcome the fact its emergence over the past decade has spurred so-called “fintech” innovation as they gradually develop their own central bank digital currencies over the coming years.

But Deutsche’s Laboure reckons more crackdowns will come – and most likely the whenever bitcoin even looks like rivalling their currencies for payment.

“It is no surprise that governments are not inclined to give up their monetary monopolies. Throughout history, governments first regulate and then take ownership.”

If so, what’s the endgame of all the speculation and hoarding – which just further limits bitcoin supply and drives the price higher? Is it just “pass the parcel” while the music keeps playing? Or are people with money to burn punting for quick gains and trading strategically by timing entry and exits?

Some argue there is genuine demand for crypto transfers within the half trillion dollars per year of global remittances, as migrant workers often need to funnel money back to poorer countries with strict formal exchange controls.

Others claim crypto privacy features draw in demand from criminals, as per this month’s ransomeware hack at Colonial pipeline. But that will just hasten more regulation. Investment arguments beyond simply punting it ever higher range from a lack of “correlation” with other assets to a potential role as an inflation hedge – an odd assertion given its latest reversal comes amid all the post-pandemic inflation scares.

Powerful backers have a outsize say too, but are increasingly erratic.

Tesla billionaire Elon Musk drove the price skywards earlier this year by saying Tesla would accept bitcoins as payment for its dollar-priced electric vehicle and add bitcoin to the company balance sheet – only to backtrack last week by warning about excessive energy usage in bitcoin mining.

With no obvious rationale, star tech stock investor Cathie Wood of Ark Invest claimed this week that bitcoin would rise another tenfold again after it registered a 50 per cent loss in a month.

At the $500,000 level she posits, the market cap of bitcoin would then be $10 trillion – or a third of the entire M1 money supply of G20 economies.

London School of Economics‘ Jon Danielsson reckons that as a result of the concentration of bitcoin ownership, that sort of move would create new multi billionaires – or even the first trillionaire. And that would wildly exaggerate existing wealth skews as the gap between bitcoin haves and have-nots soars to intolerable levels, making a mockery of claims of crypto “democratisation”.

As a result, he thinks co-existence of bitcoin and so-called fiat currencies is impossible. It’s all or nothing.

If it replaces all G20 currencies in circulation, that would then see each bitcoin priced at $1.5 million.

Reality or fiction?

“Bitcoin is a bubble,” Danielsson concludes. “It makes sense to ride the bubble as long as possible – just get out in time.”

(By Mike Dolan, Twitter: @reutersMikeD)



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

Industry watchers, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


By Samuel Shen & Andrew Galbraith

Shanghai: China‘s latest salvo against cryptocurrencies has driven a brutal selloff in bitcoin markets but retail traders, miners and even crypto finance firms reckon Beijing’s bark is louder than its bite.

China extending its crypto ban to include banks and payments companies offering crypto-related services furthered a selloff that briefly wiped $1 trillion off crypto market capitalisation.

But fears that the rules would cripple cryptocurrency markets and mining on the Chinese mainland appear baseless. Cryptocurrencies could still be bought from China on Thursday and investment schemes promising juicy returns for mining them remained operational.

Bobby Lee, founder and chief executive officer of Ballet, a cryptocurrency wallet app, said he thought the announcement was merely an attempt by regulators to protect retail investors from volatile markets, but that it would be a challenge for banks to identify crypto-related dealings.

“If you look at the banking activity in China, millions or maybe billions of transactions happen on a daily basis. From all that…how many are actually really crypto services versus dining or e-commerce? It’s almost unknowable,” said Lee, formerly CEO of BTC China, China’s first bitcoin exchange.

It’s not the first time China has banned crypto-related financial and payment services. Beijing issued similar bans in 2013, and in 2017, though the latest one has expanded the range of prohibited services. The repeated bans highlight the challenge of closing the loopholes.

On Thursday, Reuters found it was still possible for Chinese individuals to buy bitcoin and other cryptocurrencies and trade them on overseas crypto exchanges such as Binance. Yuan payments for these purchases could be made via banks or commonly-used online payment platforms in over-the-counter (OTC) markets.

“If you have bitcoin or ethereum, and I want to buy some, I can just send money to you through banks. Just don’t write down anything like bitcoin or ethereum,” said Mr Li, who sells cryptocurrencies on behalf of miners.

“Of course, banks have internal risk-management. If the transaction volume is too big, you might be caught,” said Li, who was unwilling to give his full name because of the sensitivities of the issue.

Miners Undaunted

Players in China’s crypto mining industry were also broadly unfazed by the latest crackdown, again citing the difficulties regulators would have in identifying transactions.

China-based miners have the opposite problem to investors, as they already have bitcoin which they need to change for yuan to pay their electricity costs.

Mining is big business in China, which accounts for as much as 70% of the world’s crypto supply, according to some estimates, although others say that proportion has come down in recent years.

“The Chinese government does crack down from time to time, but currently it is not overly challenging to convert mined coins to RMB for Chinese miners,” said Thomas Heller, chief business officer of Compass Mining, using another word for China’s currency.

Although the new China crypto ban curtails cryptocurrency-related investment products, such schemes are still sold online. One platform offering retail investors a chance to quadruple their money over three years by buying computing power for miners of a smaller cryptocurrency, Filecoin, which has surged in popularity in China, still seemed to be accepting money on Thursday.

Flex Yang, chief executive officer of Babel Finance, a cryptocurrency financing firm, remained bullish. “Bitcoin prices dropped more than 50% last year in March but eventually rebounded back to a new record high,” Yang said. “In the long run, bitcoin still makes for an excellent asset class for portfolio managers seeking growth.”

Reuters’ Kevin Yao in Beijing contributed to this story.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

Why has the price of Bitcoin been falling?, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


Even by Bitcoin‘s standards, Wednesday was pretty wild.

The price of the famously volatile digital currency fell nearly 30% at one point after the China Banking Association warned member banks of the risks associated with digital currencies. The decline narrowed to below 10% in the afternoon, but Bitcoin had still lost about $70 billion in market value in 24 hours.

Bitcoin has lost about 38% of its value since April 13 when it hit a high of more than $64,600. The China warning was just the latest headwind: Before Wednesday, Tesla’s decision to not accept the digital currency as payment for cars – after it said it would – and murmurings in Washington about tighter regulation of digital currencies had put pressure on Bitcoin. The price is still up about 31% in 2021 and nearly 300% from a year ago.

Here’s a look at Bitcoin and digital currencies in general:

___

HOW BITCOIN WORKS

Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who “mine” them by lending computing power to verify other users’ transactions. They receive Bitcoins in exchange. The coins also can be bought and sold on exchanges with U.S. dollars and other currencies. Some businesses take Bitcoin as payment, and a number of financial institutions allow it in their clients’ portfolios, but overall mainstream acceptance is still limited.

Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators – and criminals.

Bitcoins have to be stored in a digital wallet, either online through an exchange like Coinbase, or offline on a hard drive using specialized software. According to Coinbase, there are about 18.7 million Bitcoins in circulation and only 21 million will ever exist. The reason for that is unclear, and where all the Bitcoins are is anyone’s guess.

___

WHAT HAPPENED TO THE PRICE?

On Wednesday, a statement posted on the Chinese Banking Association’s website said financial institutions should “resolutely refrain” from providing services using digital currencies because of their volatility.

Virtually every cryptocurrency fell after the industry group’s statement.

As of 4:15 p.m. eastern time Wednesday, Bitcoin was down more than 7% at around $40,310 per coin. Most cryptocurrencies lost between 7% and 22% of their value and shares of Coinbase dropped 5.4%.

It’s not unusual for the value of Bitcoin to change by thousands of dollars in a short time period, though swings totaling around $20,000 in one day are extreme. On the last trading day of 2020, Bitcoin closed just under $30,000. In mid-April, it flirted with $65,000.

___

DOESN’T ELON MUSK HAVE A ROLE HERE?

Yes, and a fairly big one. Musk announced in February that his electric car company Tesla had invested $1.5 billion in Bitcoin. In March, Tesla began accepting Bitcoin as payment. Those actions contributed to the run-up in Bitcoin’s price, and Musk also promoted the digital currency Dogecoin, which also spiked in value.

However, Musk reversed course in just a short time, saying last week that Tesla would stop accepting Bitcoin because of the potential environmental damage that can result from Bitcoin mining. The announcement sent Bitcoin falling below $50,000 and set the tone for the big pullback recently in most cryptocurrencies.

A number of Bitcoin fans pushed back on Musk’s reasoning. Fellow billionaire Mark Cuban said that gold mining is much more damaging to the environment than the mining of Bitcoin.

A 2019 study by the Technical University of Munich and the Massachusetts Institute of Technology found that the Bitcoin network generates an amount of CO2 similar to a large Western city or an entire developing country like Sri Lanka. But a University of Cambridge study last year estimated that on average, 39% of “proof-of-work” crypto mining was powered by renewable energy, primarily hydroelectric energy.

___

BUT SOME COMPANIES ARE USING BITCOIN?

The digital payment company Square and its CEO Jack Dorsey – also the CEO of Twitter – have been big proponents of Bitcoin. Overstock.com also accepts Bitcoin, and in February, BNY Mellon, the oldest bank in the U.S., said it would include digital currencies in the services it provides to clients. And Mastercard said it would start supporting “select crypto currencies” on its network.

Bitcoin has become popular enough that more than 300,000 transactions typically occur in an average day, according to Bitcoin wallet site blockchain.info. Still, its popularity is low compared with cash and credit cards.

___

THERE IS SKEPTICISM AROUND BITCOIN?

Yes, plenty of it. Tracking Bitcoin’s price is obviously easier than trying to figure out its value, which is why so many institutions, experts and traders are skeptical about it and cryptocurrency in general. Digital currencies were seen as replacements for paper money, but that hasn’t happened so far. Federal Reserve Chair Jerome Powell has said the central bank prefers to call crypto coins “crypto assets,” because their volatility undermines their ability to store value, a basic function of a currency.

While some banks and financial services companies are getting in on it, others are staying away.

___

COULD A DIGITAL CURRENCY SELL-OFF CAUSE WIDESPREAD DAMAGE?

Regulators aren’t very worried about a possible crash in digital currencies dragging down the rest of the financial system or economy.

Even with the recent sell-off, digital currencies have a market value of about $1.72 trillion, according to the website coinmarketcap.com. But that pales compared with the $46.9 trillion stock market, $41.3 trillion residential real estate market and nearly $21 trillion Treasury market at the start of the year.

The European Central Bank said Wednesday that the risk of cryptocurrencies affecting the financial system’s stability looks “limited at present.” In large part, that’s because they’re still not widely used for payments and institutions under its purview still have little exposure to crypto-linked instruments.

Earlier this month, the Federal Reserve said a survey of market contacts found roughly one in five cited cryptocurrencies as a potential shock to the system over the next 12 to 18 months. That’s a turnaround from the fall, when a similar survey found none mentioning cryptocurrencies.

HOW MUCH OVERSIGHT IS THERE?

Washington officials have been talking about regulating digital currencies more, and worries about a heavier hand have played a role in the recent swoon in prices.

Gary Gensler, who took over as chairman of the Securities and Exchange Commission last month, has said that cryptocurrency markets would benefit from more oversight to protect investors.

In a hearing before the House‘s financial services committee earlier this month, Gensler said neither the SEC nor the Commodity Futures Trading Commission, which he used to head, has a “regulatory framework” for trading on cryptocurrency exchanges yet. He said he thought Congress would ultimately have to address it because “there’s really not protection against fraud or manipulation.”

___

HOW BITCOIN CAME TO BE

It’s a mystery. Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto. Bitcoin was then adopted by a small clutch of enthusiasts. Nakamoto dropped off the map as bitcoin began to attract widespread attention. But proponents say that doesn’t matter: The currency obeys its own internal logic.

___



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,
1 … 10 11 12 13 14 … 19