As Ripple fends off SEC lawyers, XRP enjoys an explosive weekend pump
Amid a weekend pump carrying multiple cryptocurrencies higher, Ripple’s XRP looks to be leading the way with a push as high as 30% on the daily — carried on the back of a string of legal victories and rumors of relisting at some exchanges.
Where Bitcoin and Ethereum are up merely 2.7% and 3.4% respectively on the day, XRP climbed to $1.36 before retreating to $1.32, where it sits at the time of publication. The digital currency is now up 111% on a 7 day basis, and a staggering 544% on the year. The recent push has also buoyed XRP back into the top 10 cryptocurrencies by marketcap, behind only BTC, ETH, and BNB at #4.
The rally flies in the face of a lawsuit from the Securities and Exchange Commission, which charges that XRP’s $1.3 billion ICO was an “unregistered securities offering.” The news led multiple exchanges to delist the currency, and XRP lost its place as the 3rd largest currency by marketcap, at time looking as if it would even fall out of the top ten.
The bad news for XRP didn’t stop with the SEC, either. In March Ripple CEO Brad Garlinghouse announced that the company would be “winding down” its relationship with Moneygram — a once highly-touted partnership that investors often pointed to as proof of the digital currency being on a path towards becoming “the standard” for payments and settlement.
Despite the deluge of negative headlines, it appears all buyers needed was a small ray of hope to jump back in — and they’ve gotten exactly that. Ripple lawyers have notched two victories in their legal battle against the SEC, including winning access to internal SEC discussion history regarding cryptocurrencies, and a court denied the SEC the ability to disclose the financial records of two Ripple execs, including Garlinghouse.
Ripple executives themselves seem heartened by the news, with CTO David Schwartz saying the US isn’t “prepared” to regulate cryptocurrencies (a possible dig at the ongoing legal proceedings).
All in all, it’s just another week for one of the most controversial cryptocurrencies in the space.
According to professional trader Scott Melker, Ethereum’s “tremendous upside potential” could overshadow Bitcoin this year.
Ethereum is likely to outperform Bitcoin, at least in the short term, said veteran trader Scott Melker in an exclusive interview with Cointelegraph.
Alt szn is upon us
Melker sees this period of Bitcoin’s price consolidation as particularly bullish for the second largest cryptocurrency, that recently reached new all time highs. Melker sees Ether’s outstanding performance as the main catalyst of the recent altcoin market bull run.
He also revealed he has been largely switching his dollar-cost averaging strategy from Bitcoin to Ether in the last few months, in order to take advantage of Ethereum’s “tremendous upside potential”.
“It's like investing in the Internet in the early 1990s to me.”, Melker said.
According to Melker, Etherum could reach the $10K price target within the end of 2021.
“ I don't see why that's crazy. It's basically just under a five X from here. [...] Bitcoin did almost three times that last year.”
To find out about Melker’s outlook on Ether, XRP and other large-cap altcoins, watch the full interview on our YouTube channel and don’t forget to subscribe!
Coming every Saturday, Hodlers Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more a week on Cointelegraph in one link.
Top Stories This Week
A bout of long-overdue volatility has hit the crypto markets, propelling Bitcoin to highs of $61,276.67 on Saturday.
A sudden push allowed BTC/USD to exit the $50,000 price range in the early hours of the morning. This move had been weeks in the making, with the digital asset repeatedly trying (and failing) to break $60,000 for most of March.
Analyst Lex Moskovski said Bitcoin is now grinding up to a new all-time high, writing: Being a bear is expensive.
But its unclear how much staying power this rally has, and as weve seen over recent months, erratic market movements over weekends dont always endure.
The favorable market conditions led to new all-time highs for Ether and Binance Coin on Saturday and another altcoin has also been making a comeback, too.
XRP has had a remarkable week, and over the past seven days, its almost doubled in price. On Tuesday, the altcoin smashed through the $1 zone for the first time since March 2018, with its price going from strength to strength in the days that followed.
It is currently trading above the next resistance level at about $1.20, prompting some to set their sights on a macro sell-wall of $2 that dates all the way back to December 2017.
XRP has now regained the coveted position of the fourth-largest cryptocurrency by market cap. The uptick in trading volume may have been linked to Ripple unveiling a new acquisition designed to enhance its cross-border payment capabilities.
There was also some upbeat legal news for Ripple this week. Ripple Labs has been granted access to the SECs documents expressing the agencys interpretations or views on the subject of crypto assets.
Counsel representing Ripples CEO, Brad Garlinghouse, believes it may be game over for the SECs suit should they find any evidence that the regulator has deemed XRP akin to Bitcoin or Ether.
Speaking to Cointelegraph, Ripple Labs chief technology officer David Schwartz urged U.S. regulators to look at the rest of the world, warning America risks falling behind when it comes to crypto and blockchain regulation.
Its been a week of upbeat statistics for the crypto sector. We saw the total market cap hit $2 trillion, meaning that the industry is now worth as much as Apple. There was a big milestone as 100 cryptocurrencies all secured their own $1-billion market cap for the first time. It was also revealed that the crypto industry got more funding in Q1 than all of last year.
Next week is also shaping to be a significant one as Coinbase gears up to make its stock market debut. And ahead of Wednesdays direct listing, we got an insight into the companys finances revealing that revenues hit $1.8 billion from January to March.
The exchanges numbers seem very healthy, indeed, undoubtedly because of the bull run that emerged during the first quarter. Net income has been estimated at between $730 million and $800 million for the period with monthly active users now exceeding 6 million.
But not everyone is cracking open the champagne. Some analysts have warned that Coinbases $100-billion valuation is far too high.
David Trainer, CEO of the investment research firm New Constructs, wrote in a note to clients: Its hard to make a straight-faced argument that the firm can justify the lofty expectations baked into its valuation given increasing competition in a mature cryptocurrency trading market and the lack of sustainability in its current market share and margins.
Paris Hilton has written an impassioned article about NFTs, declaring that she sees them as the future of the creator economy.
The entrepreneur and former reality star appears to be aiming to position herself as an authority on the NFT space, at least for a mainstream audience, as she readies to release a new drop soon.
Celebrating their role when it comes to digital art and fashion not to mention bringing the world of trading cards into the 21st century she wrote:
Some of these applications might even change the way we live. What if we could use NFTs as collateral for physical items? Or as a way to trade for them?
Hilton sold her first NFT in August 2020 before the mania arrived in 2021 an NFT depicting a painting of her cat, which sold for $17,000. She donated all the proceeds to charity.
Coinbase employees Rebecca Rose and Peter Kacherginsky have gotten married using the Ethereum blockchain adding a whole new meaning to the vows for richer or poorer.
In addition to a traditional Jewish wedding ceremony, Kacherginsky wrote an Ethereum smart contract named Tabaat that issued tokenized NFTs, the rings.
The ceremony itself consisted of two transactions: the transfer of the NFT rings from the contract to Rose and Kacherginsky. In total, the ceremony took four minutes to be validated by the Ethereum network and incurred $50 in miner fees.
By contrast, the average physical wedding in the United States costs roughly $25,000.
The NFTs depict an animation of two circles merging to become one and were illustrated by artist Carl Johan Hasselrot.
Rose wrote on Twitter: The blockchain, unlike physical objects, is forever. It is unstoppable, impossible to censor, and does not require anyones permission. Just as love should be. What could possibly be more romantic than that?
Announcement of the week
Its now been a month since Cointelegraph Markets Pro launched bringing professional crypto market intelligence to every investor.
New figures this week showed that 41 of the 42 trading strategies tested by Markets Pro are currently beating Bitcoins investment returns, and 36 of them are winning against an evenly weighted basket of the top 100 altcoins.
Two key features are offered to subscribers. The first is the VORTECS Score, which is derived from an algorithm that examines multiple different variables (including sentiment, tweet volume, price volatility and trading volume) and compares those with historically similar marketscapes.
And the second is NewsQuakes: alerts on events that have historically had a significant impact on an assets price over the following 24 hours.
Cointelegraph Markets Pro is available exclusively to subscribers on a monthly basis at $99 per month, or annually with two free months included.
Winners and Losers
At the end of the week, Bitcoin is at $60,531.89, Ether at $2,165.46 and XRP at $1.31. The total market cap is at $2,054,795,567,223.
Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Bitcoin Gold, KuCoin Token and XRP. The top three altcoin losers of the week are Klaytn, Holo and Dent.
For more info on crypto prices, make sure to read Cointelegraphs market analysis.
Most Memorable Quotations
Fascinating to see that since inception ETH has outperformed BTC by 250%. It only fell below its initial price in BTC for the first 5 months of its existence in 2015.
Raoul Pal, Real Vision co-founder
The pandemic, quite frankly, was a catalyst for institutional adoption, and specifically Bitcoin and the narrative, or use-case, around digital gold.
Tom Jessop, Fidelity
Industries from across the global economy are beginning to decarbonize their operations. We can do the same in crypto. We have the opportunity to decarbonize the industry.
What we need is for the United States to be the leader here. We need to embrace this, so we need to make sure that we use this technology to continue to be a leader on the global stage.
Anthony Pompliano, Morgan Creek Digital co-founder
Even though Im a pro-crypto, pro-Bitcoin maximalist person, I do wonder whether if at this point, Bitcoin should also be thought of in part as a Chinese financial weapon against the U.S.
Peter Thiel, PayPal co-founder
Im not using crypto to buy fiat; Im not using crypto to buy houses. I just want to keep crypto. And I dont plan to convert my crypto into cash in the future.
Changpeng Zhao, Binance CEO
Not for nothing, $XRP technically has taken all necessary strides to be bullish. After the exchange delistings and write-off by most of CT, this essentially left the market short from both a positional and sidelined standpoint. This can move much higher.
Cantering Clark, crypto derivatives trader
If you look at gold as a $10 trillion market cap, Bitcoin is about 10% of that, and if we believe Bitcoin is a 100 times better version than that, then its fairly safe to say that theres a stark chance that Bitcoin captures a lot of gold and market share, and more.
Yassine Elmandjra, Ark Invest analyst
Prediction of the Week
JPMorgan Chase expects Bitcoin to reach $130,000, while Ark Invest anticipates the market valuation of BTC to surpass that of gold.
The optimistic macro prediction from both funds revolves around the scarcity of Bitcoin, which has buoyed its popularity as a safe-haven asset.
Bloomberg Intelligence also has high hopes when it comes to the second quarter of 2021. This week, it predicted that the second quarter was more likely to deliver a further surge to $80,000 than a capitulatory move to $40,000.
FUD of the Week
There have long been doomsday predictions that well see Bitcoin prices plummet to zero, but one person has vowed that this wont happen, not on their watch.
Reddit user u/Substantial-Ad-5012 wrote: Bitcoin will never go to zero in my lifetime. Because I am willing and able to buy all the Bitcoin ever mined at one cent each.
In the unlikely event that Bitcoin does in fact drop to $0.01, it would cost a mere $187,000 to pick up every coin in circulation not accounting for the fact that up to 20% of all Bitcoin are inaccessible.
Theyre not alone. Binance CEO Changpeng Zhao told his followers last March that they shouldnt be worried about BTC hitting zero. So long as I have a penny left, it wont happen, he wrote.
An anonymous online source was recently spotted trying to sell private customer and employee data allegedly obtained from crypto exchange Paxful.
However, a spokesperson from the company has told Cointelegraph that no customer data has been jeopardized.
Explaining that Paxful hasnt fallen victim to a data breach, the spokesperson added: The employee data that the person claims to have was obtained illegally from a third party supplier that Paxful previously used; Paxful terminated its contract with this supplier in September 2020.
The person attempting to sell the information claimed to have phone numbers, names and addresses, as well as other private information belonging to users and the dump purportedly boasted more than 4.8 million entries.
Ledger and Shopify have been hit by a class-action lawsuit over a major data breach that saw the personal data of 270,000 hard wallet customers stolen between April and June 2020.
Phishing scam victims John Chu and Edward Baton filed the lawsuit in California against the crypto wallet provider and its e-commerce partner Shopify on Tuesday.
The plaintiffs alleged that the firms negligently allowed, recklessly ignored, and then intentionally sought to cover up the data breach.
The data was stolen when rogue employees of Shopify accessed the companys e-commerce and marketing database for Ledger, with the hackers then selling the data on the dark web.
Had Ledger acted responsibly during this period, much of that loss could have been avoided, they claim.
Chu lost $267,000 worth of Bitcoin and Ether, and Baton lost $75,000 worth of Stellar in phishing scams that impersonated correspondence from the firms.
Best Cointelegraph Features
Traditional finance is built not on collateral but on reputation, and DeFi will grow by following suit, Rafael Cosman argues.
Since the start of April, the surge in price of XRP has been backed by high tweet volumes, which approached relative highs.
Attacks on digital asset exchanges and trading platforms have decreased drastically in recent years, but data leaks still leave users vulnerable.
Explosive growth in asset tokenization and NFTs is fueling Web 3.0 growth, and testing DeFi resolve.
While blockchain itself provides the technology constructs to facilitate exchange, ownership and trust in the network, it is in the digitization of value elements where asset tokenization is essential. Tokenization is the process of converting the assets and rights to a property into a digital representation, or token, on a blockchain network.
Distinguishing between cryptocurrency and tokenized assets is important in understanding exchange vehicles, valuation models and fungibility across the various value networks that are emerging and posing interoperability challenges. These are not just technical challenges, but also business challenges around equitable swaps.
Asset tokenization can lead to the creation of a business model that fuels fractional ownership, the ability to own an instance of a large asset. While discussing asset tokenization in a previous article, I also mentioned the value of an instance economy in democratizing finance, commerce and global access, as well as in creating a broader global marketplace at a scale never before seen.
With digital assets and their fungibility in a blockchain ecosystem, there are various drivers of valuation. These include: 1) tokens based on crypto economic models that are driven by supply and demand, and the utility of the network; 2) nonfungible tokens, or NFTs, which have an intrinsic value such as identification, diplomas and healthcare records — essentially, tokens that are simple proof validations of the existence, authenticity and ownership of digital assets; and 3) fungible tokens that are valued on various bases, such as the sum total of economic activity in the network (cryptocurrency), its utility (smart contracts and transaction network processing), assigned values (stable coins and security tokens), and so on.
In this article, I address the complex issue of the hyperbolic and rapid rise of NFTs, after a similarly meteoric rise of decentralized finance, or DeFi, creating amazing innovations — with immense promise of democratization, new business models and global marketplaces with global access — all fueled by the basic premise of decentralization and fundamental constructs of tokenization and wallets. While NFTs may be characterized as one-of-a-kind cryptographic tokens with some intrinsic value to a holder or to a market (art, collectibles), the NFT movement is indicative of a larger token revolution that will not only fuel massive innovation and growth in Web 3.0 protocols but also test the resolve of the DeFi movement, along with its ability to intersect and provide platforms and an exchange vehicle for all token types.
Growth in Web 3.0 protocols
The first two generations of web protocols were largely about disseminating information and connecting people. They fueled a massive growth in information and collaboration, and did wonders for connecting the world. However, those web protocols were never designed to move things of value. Also, as the Web 2.0 era reached its fullest potential, vulnerabilities such as “fake news” and the “batched relay” of the movement of assets via a series of intermediaries emerged. Threats to the commerce and financial infrastructure of the system risk destabilizing it.
Web 3.0 promises to safeguard all things we value: information, truth and digital assets — both fungible and nonfungible. Whereas Web 2.0 was driven by the advent of social, mobile and the cloud, Web 3.0 is largely built on three new layers of technological innovation: edge computing, decentralized data networks and artificial intelligence.
The growth of NFTs has not only empowered the ability for artists, skilled professionals and entrepreneurs to encapsulate innovation in a tokenized form but has also fueled the democratization of the platform as one of the promises of blockchain technology. The underlying infrastructure includes decentralized storage technologies, efficient consensus protocols, off-chain computing, and oracle networks to provide connectivity and validation to existing systems.
Collectively, the Web 3.0 set of technologies envisions a connected, trustless, accountable network for efficiently delivering value, thus crafting an infrastructure for things of worth. NFTs represent both transferable entities and nontransferable tokens that we value. The latter include things such as our identification, healthcare records and passports, things that represent us and allow us to participate in the digital economy with our own unique, digital identities.
As we dare to envision a shift toward a world with decentralized control, governance based on distributed technology that challenges every business model, and governance structure built upon centralized business frameworks, we do have to ponder some things. Not only the shift itself, but the motivation, incentive and monetization elements that fuel and power the economic infrastructure to move things that have value — thereby keeping up with our changing perception and subsequent realization of that value.
Intersecting with finance — DeFi
DeFi is the movement in the blockchain applications space that leverages decentralized network technology to disrupt and force a transformation of old financial products into trustless, transparent protocols, facilitating digital value creation and dissemination with few to no intermediaries. It is widely understood and accepted that — due to new synergies and co-creation via new digital interactions and value-exchange mechanisms — blockchain technology lays the foundation for a trusted digital transactional network that, as a disintermediated platform, fuels the growth of marketplaces and secondary markets.
While DeFi aims to deliver the promise of finance democratization, NFTs test the resolve of DeFi by delivering a competitive yet inclusive asset class, plus avenues to provide a medium of exchange, fungibility by other fungible asset classes, and liquidity to a traditionally illiquid market.
Asset classes resulting from DeFi protocols and NFTs avail themselves of the advantages of fractional ownership of the assets, blurring the lines between asset classes and using constructs like digital wallets as a receptacle for them. This is all supported by underlying layers of Web 3.0 that provide security and availability via decentralization, as well as trust and immutability via consensus, extending these principles to basic computer infrastructure like storage and interconnect.
Commercialization of Web 3.0 protocols, which manifest as fungible utility tokens, further blurs the lines with diverse financial innovation products introduced by DeFi (such as base assets and derivatives), products that are also tokenized. So, while decentralization is the underlying theme — and the wallet and the token are fundamental constructs — these blurring lines are quite profound.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Bitcoin broke above $61,000 for the first time since early March and traders are turning bullish.
The price of Bitcoin (BTC) has surpassed $61,000 on April 10 for the first time in nearly a month. Following the breakout, traders are starting to look at new levels of resistance and support in the short-term as optimism returns to the market.
In the near term, besides the all-time high at around $61,800, there are three key Bitcoin price levels to observe: $61,188, $58,387 and $53,000.
As long as the price of Bitcoin stays above $58,387 and keeps attempting to break out above $61,188, it would likely see a new record high in the foreseeable future.
If Bitcoin breaks out to a new record high, traders also anticipate the altcoin market to pullback slightly for the time being, at least until BTC starts to stagnate after reaching a new high.
$58,000 flipping into support is critical for more upside
According to the pseudonymous trader "Rekt capital," the key for Bitcoin to cleanly reach a new all-time high in the coming days is to solidify $58,000 as a support area.
The $58,000 level is an important area because it marks the peak of the initial BTC rally to the $60,000 resistance level in mid-February, as shown in the graph below.
In technical analysis, when the price of an asset stabilizes above the previous peak, it is considered to be a very bullish sign.
The trader noted:
"BTC was able to still keep the red area even though it rejected from orange And in fact, the rejections from orange has been weaker Right now, BTC is pressing beyond orange [$58,000]. Turning orange into a support would bring Bitcoin very close to a new All Time High."
Raoul Pal, the CEO of Global Macro Investor, emphasized that the macro view of Bitcoin remains positive.
Pal emphasized that Bitcoin broke out of a three-month range, which indicates that BTC's technical momentum is starting to regain steam. He said:
"Kind of feels like a big deal to see BTC break a 3 month range and a wedge. It should create a powerful move to the upside. (Axis scrunched on chart to hint at the upside for dramatic effect."
A cryptocurrency derivatives trader "Cactus" also added that on-chain analytics are stronger than ever, considering that large BTC exchange outflows indicate accumulation among high-net-worth investors.
$BTC / USD— Cactus (@TheCryptoCactus) April 10, 2021
Seeing some huge bullish momentum for BTC...
- On-chain analytics are stronger than ever
- We are seeing biggest exchange outflow's ever
- Previous monthly close is now support
- Highest weekly close ever likely to be printed pic.twitter.com/zovWNVrKuS
As Bitcoin rallies, beware of altcoin stagnance
Meanwhile, other traders are expecting the altcoin market to take a breather if Bitcoin enters price discovery once again.
Kaleo, a well-known pseudonymous trader, said that there is a high chance altcoins do not rally nearly as much as expected when the volume is sucked up by Bitcoin.
The trader explained:
"For those that are new, be careful being to deep into alts when $BTC is on the brink of price discovery. Profits from alts tend to flow back into Bitcoin. This doesn't mean the USD price won't go up, just that there's a solid chance it won't go up nearly as much."
In the short term, Bitcoin would likely outperform altcoins if it continues to rally, and the momentum would only shift to altcoins once BTC consolidates as it finds a new range after breaking new highs.
A renewed focus on DeFi could drive traffic for the Oasis Network.
The Oasis Foundation, an offshoot of Oasis Network developers Oasis Labs, announced in a blog post on Friday that decentralized finance (DeFi) insurance and coverage provider Tidal Finance will be implementing a version of their platform on the Oasis Network.
The blog post noted that insurance will be important for users of the platform as Oasis scales its DeFi offerings, and that by working with Oasis’ “confidential smart contracts” Tidal will be able to deploy new claims methods, such as “anonymous, democratized voting” that preserves voters and user privacy.
The move mirrors similar ones being made in Ethereum’s DeFi ecosystem, where multiple projects are launching new insurance platforms or planning to bake coverage directly into their offerings at the protocol layer.
The privacy-focused blockchain, founded by one of Cointelegraph’s Top 100 in Crypto entrepreneur Dawn Song, has pursued various strategies throughout the years in an effort to attract traffic and adoption. In 2018 the company raised a monster $45 million as the rest of the crypto market stalled, and use cases such as medical records and individuals selling personal data were touted as part of a privacy-preserving computational network.
By the time the network’s November 19, 2020 mainnet rolled around, they were instead focused on decentralized finance, promising under collateralized loans using real-world credit checks. The mainnet launch was followed by a November 25 token sale, which netted the company an additional $10 million.
The company’s current strategy consists of a patchwork of initiatives focused on big data, data privacy, and decentralized finance. Last year they announced a project with Binance to allow exchanges to confidentially share threat assessment information regarding fraud and hacks, and earlier this year worked with automaker BMW to enable cloistered information storage to protect privacy while sharing data internally.
The partnership with Tidal may signal a renewed focus on DeFi, however. The press release notes that Tidal’s insurance on DeFi pools will be key for Oasis’ “rapidly expanding” DeFi ecosystem, and that multiple “lending protocols and DEXs that will be integrated into the Oasis Network in the coming months.”
In February Oasis’ Anne Fauvre-Willis weighed in on the Gamestop/Robinhood saga, saying the fiasco “clearly highlighted the need to build systems that are decentralized and put users and individuals in control of their own data and finances.”
DeFi has been on a monster tear as of late, having recently eclipsed $100 billion in Total Value Locked.
The impact of BTC mining on the environment has turned into a debate — here’s what academics think and if “green Bitcoin” is possible.
The debate around the environmental impact of the Bitcoin mining ecosystem is heating up once again as academics have provided a fresh dose of perspective on the subject. In an opinion piece written by Noah Smith, a former assistant finance professor turned columnist, took aim at the Bitcoin (BTC) mining industry in March, suggesting that the constantly growing energy consumption of the network is simply unsustainable. Smith’s belief is that more countries will clamp down on Bitcoin mining as they use more power, given that the increasing price of BTC is always matched by rising hash rates.
While Coin Metrics founder Nic Carter has rebutted some of the points raised in Smith’s column, there still seems to be divided opinion around the amount of energy that Bitcoin mining draws, the sources of this energy and the carbon footprint that the industry has on the planet.
The mining industry is arguably inclined to downplay the extent of its resource-intensive work, and some industry insiders have suggested that talk of Bitcoin’s environmental impact is a non-issue and that data suggests a large share of hash power draws energy from renewable sources. Nevertheless, environmental advocates have aimed their sights at the industry in return, which has created a seemingly never-ending debate on the subject.
Cointelegraph has spoken with several academics in this area to gain an alternative view on the matter, for example, those behind the Cambridge Bitcoin Energy Consumption Index, which has become a trusted point of reference for the estimated power consumption of the Bitcoin network, albeit with some self-confessed limitations.
Furthermore, Aalborg University Ph.D. fellow Susanne Köhler and associate professor Massimo Pizzol co-authored a study titled “Life Cycle Assessment of Bitcoin Mining” that gives some data-driven assumptions about the environmental impact of the industry.
The CBECI was built to eventually answer this question
In an interview with Cointelegraph, Cambridge Centre for Alternative Finance crypto asset and blockchain lead Anton Dek unpacked the history of the CBEC and the methodology used to produce the energy consumption estimates of its Bitcoin Electricity Consumption Index.
The Cambridge research associate said the team had observed that other models that were looking to create accurate estimates of the Bitcoin network’s energy usage had used a top-down approach, using data such as the amount miners spend on electricity as an example.
The CBECI methodology is a “bottom-up approach” that uses data on the available mining hardware to create a lower and an upper bound estimate of the Bitcoin network’s energy consumption. Dek explained that the information is: “Based on assumptions from objective figures like hash rate.” He further added: “These different machines all have known efficiencies, joules of energy they expend to solve hashes. Based on these assumptions, we built the index.”
The index provides an estimated power consumption range, with its current theoretical lower bound annualized electricity consumption at 43.32 terawatt-hours to the theoretical upper bound at 476.18 TWh. The estimate of Bitcoin’s current consumption is based on the assumption that miners use a mix of profitable hardware.
While the CBEC has not made any models on the breakdown of the energy sources powering the Bitcoin network, the original intention for the creation of the CBECI index was to provide a carbon emission model. Dek said that his team is still working on that model, which he hopes to see go live later this year.
The CBECI website also provides a global mining map that essentially gives a breakdown of how the Bitcoin mining network is distributed around the world. The map provides country-by-country hash rates, while China’s 12 provinces are also accounted for, given that more than half of the world’s Bitcoin hash rate is situated in the country.
The breakdown of hash rate locations is derived from data provided by mining pools BTC.com, Poolin and ViaBTC, which contribute to 37% of the overall Bitcoin hash rate. Dek also noted that their data set is now over one year old but still allows researchers to make some accurate assumptions about the energy sources used by miners in specific countries or regions.
“This is self-reported data by mining pools, so we have to trust these guys. But even if it’s all true, we only cover 37% of Bitcoin’s total hash rate from those three pools that provided information to us. If we extrapolate it to the total miners, we assume this is representativeness of this sample, which might not be true, given that we have more data from China. That’s something we’re going to improve on.”
That regional view of China also gives a glimpse of the energy mix that miners are using in different regions. The team hasn’t released that specific data visualization yet because it believes that the current 37% hash rate, which is the basis of their data, is not representative enough to make accurate estimates of the network’s carbon footprint. Dek added: “If we look at the energy mix of every region, and then each country, we’ll be able to assume the energy mix and then we’ll be able to more accurately estimate the carbon emission factor.”
Nevertheless, Dek said that other researchers have arrived at estimates by taking the total annual power consumption of the Bitcoin network, around 130 terawatts-hour, and multiplying that by the average carbon emission factor (~0.5kilograms/carbon dioxide per kWh produced). The Cambridge researcher suggested that such an estimate may not be representative, given some assumptions that can be drawn from regional location data of mining activity:
“It’s more complicated than this because I think the Bitcoin energy mix doesn’t fall in the average world mix. The reason is that they use renewables, not because of their benevolence, but for purely economic reasons. Hydropower exists in abundance in some regions, and if you look on the Bitcoin mining map and China, the Sichuan region is still very important for mining.”
Dek pointed to the widely reported presence of mining facilities in the region that operate on electricity produced by hydroelectric dams in Sichuan. The CBECI data also reflects the increase in the hash rate in the region during the wet season, where excessive rains lead to an abundance of power generated by swollen dams. According to him, Sichuan’s estimated share of global hash power: “In April (2020) it’s 9.66%, in September 2019 it was 37%.”
Perspectives from “Life Cycle Assessment of Bitcoin Mining”
Köhler and Pizzol’s 2019 “Life Cycle Assessment of Bitcoin Mining” study provides an estimate of Bitcoin’s environmental impact using a well-established life-cycle assessment methodology. It estimated that the Bitcoin network consumed 31.29 TWh with a carbon footprint of 17.29 metric tons of CO2 equivalent in 2018 using data, information and methodology from previous studies on the subject.
In a conversation with Cointelegraph, Köhler noted that their study shows that the impact of new capacity being added to the Bitcoin mining network decreases based on two assumptions. The first is that equipment becomes more efficient, which was proven to be true some two years later. The second assumption — that miners would move to regions with more renewable energy sources — did not quite happen as expected: “Even if mining is more efficient, there is much more mining done, and this means a larger impact.” She added further:
“The assumptions in our study were influenced by rumors that China would crack down on their miners. More recent data on mining locations indicates that did not happen as expected. Still, the effect of improving the energy efficiency of the hardware means that the impact per additional TH mined decreases (thus, in relative terms). However, we see now that the hash rate increases at a faster pace leading to larger overall impacts (thus, in absolute terms) in other words.”
As Köhler explained, their initial assumption has been debunked to a certain extent, as the sheer growth of the Bitcoin network’s hash rate has led to higher electricity usage and, therefore, more of an effect on the environment.
Nevertheless, the Aalborg Ph.D. fellow concedes that arriving at an accurate estimate of the energy consumption of the Bitcoin mining ecosystem as well as its carbon footprint is a tall order. This is due to a number of factors, including the exact location and shares of miners, mining equipment being used and the accuracy of data from various sources.
Incentives — the prospect of “green Bitcoin”
Another fascinating point raised by Dek is the interest that his department has received from different players in the cryptocurrency industry. Private firms and fund managers have enquired about data or services that can accurately prove how “green” a Bitcoin is, which is determined by whether or not it was mined using a renewable energy source:
“Fund managers are now interested in things like ‘green Bitcoin.’ More institutional investors are coming in, and lots of them are interested in the ESG (environmental, social and governance) consideration of Bitcoin. The ideal for them would be to have a system that colors the Bitcoin.”
Dek also said that some miners are looking for ways to prove that they used green energy to mine their BTC. This could potentially create a market for “green Bitcoin” being sold at a premium, which could motivate miners to switch to green energy sources. Meanwhile, Köhler believes that many miners are primarily focused on profit margins and that cheap electricity, however it is produced, will override the allure of green energy sources if they aren’t as affordable:
“There are some incentives to use renewable energies as in the case of hydropower in Sichuan that allows miners to use cheap electricity. However, it should be noted that this electricity is seasonal, so the availability is not the same throughout the year. Overall, miners are incentivized to use the cheap electricity to maximize profits. For example, this also includes electricity from coal in Inner Mongolia and electricity from oil in Iran.”
Dek shared these sentiments, saying that miners are typically rational about their business decisions. If there is a cheaper energy source, they’re likely to use it despite how that energy is being created or what incentives are being offered to use green energy sources: “I find that miners, especially big Bitcoin miners, are rational economic players. I think they’ll continue to act this way — if there’s a cheaper option, they will switch, and if not, they’ll stay.”
Data is key
As Köhler aptly summed up, more access to data from industry players could well provide the answers to a debate that is likely to continue for many more years: “Better data and more transparency from the mining industry would allow for better models and less speculations — within the crypto space and in the public,” she added further:
“As long as the impact of Bitcoin mining continues to increase, I do not see an end to this debate.”
Dek agreed with the assessment regarding the debate on Bitcoin’s environmental impact due to the distributed nature of the network, even when more data and tools become available. He also paints a stark reminder that Bitcoin’s protocol was designed this way for a reason: “Bitcoin has to be inefficient by design. If it’s very efficient, it would be very cheap to perform attacks on the network.”
Here’s what crypto and blockchain industry experts from China think about the digital yuan and how it has affected the blockchain space.
This is part one of a multipart series on blockchain and crypto in China.
China has been discussing the possibilities of national digital currency for half a decade, and the Chinese digital yuan project — referred to as the Digital Currency Electronic Payment, or DCEP — has years of history. Back in 2014, the People’s Bank of China set up a research group “to study digital currencies and application scenarios.” The research team was conducting a digital currency study and reportedly considering issuing its own digital currency. In 2016, the PBoC announced plans to develop a digital currency of its own and started to hire blockchain experts. The same year, China’s State Council included blockchain technology in its 13th Five-Year Plan.
In 2017, the PBoC launched the Digital Currency Research Institute, which focused on the development and research of digital currencies. According to China’s National Intellectual Property Administration (formally known as the State Intellectual Property Office), the institute filed more than 63 patent applications related to blockchain and crypto during its first year of existence alone. In 2018, a report — released by the Chinese Institute of International Finance, operated under the People’s Bank of China — indicated that the central bank would institute a regulatory crackdown on all types of digital currencies.
Back in July 2019, Wang Xin, director of the PBoC’s research bureau, stated that Facebook’s plan to launch its own stablecoin, Libra (now known as Diem), had influenced China’s plans to launch a digital form of the Chinese yuan. Back then, some experts predicted that the Chinese government-backed digital currency aimed to be rolled out earlier than the official launch of Libra.
Last year, the DCEP project made significant progress; meanwhile, the details of the project remained limited. While the question of whether being the first in launching a CBDC will be enough to win global reserve currency status remains open, China is clearly moving toward leading the charge into the digital economy.
This year alone, China started testing infrastructure for the digital yuan prior to its official launch and the Chinese city of Shenzhen provided a chance for its citizens to participate in a lottery event that aimed to encourage the adoption of the country’s new central bank digital currency. Also this year, China completed the development of hardware wallets for the digital yuan project; the first one was produced by the Xiong’an branch of the Agricultural Bank of China in Hebei and the second by the Postal Savings Bank of China. And earlier in March, the Bank of Communications and China Construction Bank conducted digital yuan trials at two major department stores in Shanghai.
Digital yuan vs. cryptocurrency
A major concern among experts is that China’s CBDC is unlikely to be a cryptocurrency. As was underlined by Bloomberg in 2019: “The PBOC will, of course, back the digital yuan, making it the opposite of decentralized.” China’s new digital currency will most likely be a centralized digital currency rather than a true cryptocurrency. As Shao Fujun, chairman of China UnionPay and a former PBoC official, said back in August 2019, China’s state-owned digital currency “will have lots of positive impacts, including tracking the money flow in economic activities and supporting making monetary policy.”
Mu Changchun, deputy director of the Chinese central bank’s payments department, said back in 2019 that the forthcoming digital yuan would strike the balance between facilitating anonymous payments and preventing money laundering. He repeated the statement earlier this month, saying that a completely anonymous CBDC “is not feasible” because a national digital currency must meet requirements related to Anti-Money Laundering, Counter-Terrorist Financing and anti-tax evasion. Meanwhile, Chinese authorities are willing to ensure maximum user privacy for the country’s central bank digital currency, according to Mu’s recent statement.
The question of whether the PBoC’s currency will be like decentralized blockchain-based cryptocurrencies or if it will give Beijing more control over its financial system is an important one. Nonetheless, the development of the digital yuan has undoubtedly influenced the development of the digital economy both within and outside of China. Cointelegraph reached out to experts in the blockchain and crypto space from China for their opinions on the following questions: How has the development of the digital yuan affected the entire crypto and blockchain industry in China? Will the Chinese CBDC stay centralized or gradually become decentralized over time?
Chang Jia, founder of Bytom and 8btc:
“The Chinese digital yuan is designed and launched by the PBoC (China’s central bank). It is based on the construction of China’s basic financial network for decades, and it is endorsed by state credit. Therefore, its birth undoubtedly encourages China’s whole blockchain industry, especially those corporations that have been persisting in the underlying technology of blockchain, digital currency infrastructure construction, and industrial blockchain solutions for several years to see their future use, and even realize the great vision of listing on the STAR Market.
At the beginning, the Chinese digital yuan DCEP focused on a trial operation in the CCB (China Construction Bank). After proving its basic operation, it will also get basic feedback from all walks of life and urban people’s livelihood in China. With the gradual clarification and strengthening of DCEP in the national economy and the people’s livelihood, such a huge digital currency system like DCEP certainly needs the joint construction of the state and the people in many aspects to create a new digital yuan network and to actively explore internationalization.”
Daniel Lv, co-founder of Nervos:
“The fact that China is working on a digital yuan is proof that there’s value in digital assets and the underlying blockchain technology. The primary purpose of introducing a central bank digital currency is to protect monetary sovereignty out of concern that Bitcoin and other cryptocurrencies will have an impact. The DCEP will also improve the efficiency of payment systems and enhance the convenience of yuan payments.
Blockchain itself is a combination of many existing mature technologies, such as asymmetric cryptography, consensus algorithm, time-stamping, etc. As seen from its latest disclosed patent, DCEP is integrated with asymmetric cryptography, unspent transaction output (UTXO), and smart contracts.
The digital yuan adopts a two-layered system for issuance and distribution — the central bank issues DCEP to banks or other financial institutions, and then these institutions further distribute the digital currency to the public. While the issuance of DCEP is centralized, the circulation could be based on traditional financial account systems or blockchains.
If DCEP transactions happen on a public blockchain, I assume it will probably help the yuan to internationalize. China’s central bank had previously announced that the DCEP pilot scenario included Winter Olympics venues. Foreign entities can simply open a DCEP wallet to conduct the cross-border transaction, as the requirements to open a DCEP wallet are much lower than those to open a yuan deposit account. Peer-to-peer transactions can be initiated between any two DCEP wallets.”
Discus Fish, co-founder of F2Pool and Cobo:
“Essentially, the central bank digital currency is completely different from Bitcoin and other cryptocurrencies because it is still the centralized fiat currency in essence. However, the CBDC may strengthen the public’s perception of blockchain and cryptocurrency. In the long run, under the education of the central bank, the blockchain industry will attract a large number of new users, especially the young people growing up in the mobile Internet environment, thus leading to the rapid development of the industry. It has a long-term positive impact on the industry.
The essence of CBDC is the centralized fiat currency, which is still the central bank’s debt to the public. Therefore, the central bank will adhere to the centralized management mode. This relationship between creditor’s rights and debt will not change with the change of monetary form. Therefore, I think no matter how the form develops, it is impossible for the central bank’s digital currency to be decentralized.”
Kevin Shao, co-founder of Bitrise Capital:
“The development of the Internet has brought the popularization of electronic payments, especially the applications of Alipay and WeChat payment, which have changed the habits of many people around using cash. Such changes are profoundly affecting China’s financial development. The central bank is also following the trend of digital economic development, starting from the top-level design of the country, and building a complete set of electronic payment infrastructure.
At present, the central bank has not made a final decision on which technical means will be used for the digital currency. However, we have seen that some cities have experimented with digital currencies. But overall, China’s digital currency still serves the central bank’s monetary policy and monetary functions.”
All interviewees were featured in Cointelegraph China’s Top 100 Notable People in Blockchain of 2020. Cointelegraph China contributed to the interviews.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
The quotes have been edited and condensed.
Filecoin’s sudden rise to the top 10 cryptocurrencies by market cap, however brief, points to its potential as it’s driven by community in China.
Filecoin (FIL) is one of the most prominent coins in the storage sector of cryptocurrencies. In the past month, the price and market capitalization of FIL has rocketed to new highs. On April 1, the coin reached $233.68 along with breaking into the top 10 cryptocurrencies by market capitalization.
Basically, Filecoin is a decentralized cloud-based data storage network that allows its users to gain rewards on selling their excess storage on an open-source platform. Filecoin is made by Protocol Labs.
Although FIL’s stint in the top 10 list was short-lived, it’s important to note that Filecoin’s fully diluted market capitalization hit a high of $450 billion. This is nearly half of the hallowed $1-trillion mark that Bitcoin recently held for 10 days in a row.
In the last 30 days, Filecoin has posted unprecedented gains of around 440% from trading around the $42 mark to trading in the $184 range. Even though the price has dropped around 20% from its all-time high on April 1, the fact that it has settled at three times the price before the surge is itself an incredible feat.
On March 17, the FIL token got another push from the market. The benchmark for institutional interest in cryptocurrencies, Grayscale Investments announced new funds that would invest in five cryptocurrencies. These tokens are Chainlink’s LINK, Filecoin, Livepeer (LPT), Basic Attention Token (BAT) and Decentraland (MANA). As a result of this announcement, FIL’s price rose 40% in 48 hours, indicating that the community and the market at large reacted positively to this development.
Speaking about the reasons why Filecoin is garnering institutional interest, Marie Tatibouet, chief marketing officer of Gate.io — a cryptocurrency exchange — said: “Data is the most valuable commodity today, and there is a race going on to figure out cheaper and more efficient methods of storing data.” Martin Gaspar, research analyst at CrossTower — a digital assets exchange — told Cointelegraph of how much of an impact this announcement really had on the markets:
“As of April 5, 2021, the Filecoin trust only had $8.1 million of assets, according to Grayscale. This is a very small amount relative to the recent $1+ billion of 24-hour trading volume CoinGecko shows, suggesting there are other key drivers behind the increase in price.”
Cameron Winklevoss, co-founder of the Gemini Exchange, pointed out that he wasn’t surprised that the token’s price was “rocketing.” He cited the core propositions that the Filecoin project brings like “the amount of network storage power” as the main drivers for the rise. Tatibouet further opined on this, saying: “Bitwise 10 Crypto Index Fund and Grayscale have both added FIL, while The9 Limited and New Universal have both made multi-million-dollar investments in Filecoin mining.”
However, there are many different factors at play here.
China’s market plays a deciding role for Filecoin
A crypto journalist from China, Wu Blockchain, noted on Twitter that on the day FIL reached its all-time high, it saw large volumes coming from China’s largest trading exchange, Huobi, with 24-hour trading volume reaching $24.2 billion. This volume was nearly three times that of Ether (ETH) and Bitcoin (BTC) for the same day. Gaspar further mentioned:
“Filecoin is popular in China and has strong interest from Chinese miners, who are required to pledge the FIL token as collateral, resulting in demand for the token. Moreover, with a shortage of BTC and ETH mining rigs, Filecoin mining seems to be an attractive alternative for these miners.”
According to CoinGecko’s data, as of April 9, Huobi accounted for nearly 40% of Filecoin’s 24-hour trading volume. This data supports the notion that the interest in Filecoin is mainly driven by retail investors and miners based in China. The hype around this token in China is such that there are allegedly even posters in the subway advertising Filecoin.
This is similar to the phenomenon of Bitcoin’s posters being put up in Soho, London, except with the difference that Filecoin’s are obviously an advertisement to push retail investors to buy the token.
Robbie Liu, market analyst at OKEx Insights — the research team at cryptocurrency exchange OKEx — told Cointelegraph: “Filecoin’s market development in China is very strong, and Chinese miners make up more than 95% of Filecoin’s nodes.” With China being the world’s cryptocurrency mining hub, it is only natural that the market will be highly sensitive to mining economics. Tatibouet further stated that the reason for the high demand is that FIL mining “is a lot more affordable than Bitcoin and Ethereum mining.”
In August 2020, the Chinese government announced its new internet infrastructure plan that will be focusing on expanding innovations in 5G, artificial intelligence and the Internet of Things. This plan could potentially have an impact on Filecoin’s ecosystem, as decentralized cloud storage fits into the agenda.
There are also unconfirmed reports that officials in the Chinese government are quasi-officially encouraging Filecoin mining as a decentralized cloud storage solution fits in perfectly with China’s vision for homegrown internet infrastructure.
The future of Filecoin
Another reason for the growing demand for Filecoin is the production cut scheduled on April 15. On the changing supply and demand economics of FIL, Liu stated: “The spike in FIL prices is mainly a result of speculation ahead of the April 15 production cut. The protocol currently releases 648,000 FIL per day, but after April 15, the production will decrease to 365,000 FIL per day.”
Thus, post the mid-year release of Simple Agreement for Future Tokens on April 15, the daily production of FIL will be reduced by 43.2%. At the time of writing, FIL has a circulating supply of 65.33 million tokens, with the maximum supply capped at 2 billion coins. Thus, such a drastic decrease in daily production could lead to a perception of scarcity for the token, in turn, causing retail investors and miners to buy more of the coin to weather the upcoming planned decrease in FIL’s daily influx.
Another interesting feature of FIL’s tokenomics is that it has a built-in mechanism, wherein miners must buy more FIL tokens in order to mine more of the cryptocurrency, which also acts as a utility and governance token for the Filecoin ecosystem. This mechanism prevents FIL from getting dumped in the open market by incentivizing the holders of the token by offering them more mining power.
The nature of Filecoin’s product offering puts it in direct competition with tech giants like Google, Amazon Web Services and Alibaba’s offerings. As Filecoin is a blockchain-based open network, the data store is non-tamperable, and the amount of storage it has access to is theoretically limitless.
Yet it is important to note that services from Amazon, Google and other tech giants are well-established and have been catering to retail and institutional needs since the beginning of cloud storage and computing being offered as a service. Liu believes that it is too early to say if Filecoin can compete with the giants, adding:
“While prospects remain positive, institutional-grade solutions rely on much more than just storage space. There is a need for operational management and tech support to fully host their services on cloud.”
Gaspar also explained the factors that Filecoin’s team would need to consider before really beginning to compete with the industry leaders in this space: “Filecoin will need to ensure its network remains online, files are securely stored and accessible and that the risks and costs of storing data on it are lower than that of a centralized storage solution.”
Although, how the FIL tokens demand sustains beyond the scheduled production cut remains to be seen, it is clear that due to Filecoin’s real-world use cases, the rise in price and market capitalization corresponds with a period of growth for the project and its offerings to compete in a market lead by companies with practically unlimited resources at their behest.
BTC/USD reaches $61,000 for the first time in almost one month in a fresh burst of bullish market action.
Bitcoin (BTC) returned to $60,000 on April 10 as a bout of long overdue volatility hit the market in line with analysts' expectations.
"Being a bear is expensive"
The move had been weeks in the making — a convincing attack on $60,000 resistance, the last before all-time highs, had previously failed to materialize before.
Now seemend different, however, with Bitcoin going on to pass $61,000 before consolidating at around $60,650 at the time of writing.
"$163,745,606 of Bitcoin shorts liquidated in an hour," quant analyst Lex Moskovski noted on Twitter as the market turned.
"While Bitcoin is grinding up to another ATH. Being a bear is expensive."
The picture was indeed a surprising one for traders who had spent weeks in a sideways market which occasionally tapped multi-week lows.
The impetus behind the latest rise was still to become clear on Saturday, as was the true extent of its staying power given the importance of $60,000 as a psychological support level to capture.
One notable change was funding rates across exchanges, which had decreased markedly in previous days, translating to reduced friction at and above $60,000 before spiking as the market rose higher.
No hint of a market top
Some had nonetheless called for an optimistic take on the market setup this week. Among them was Filbfilb, co-founder of trading suite Decentrader, who stated that Bitcoin at $58,000 had a lot in common technically with Bitcoin at $20,000.
"I'm still very bullish above 58K. Structure the same as at 20K IMO; a lot of other market nuances similar too in orderflow and depth," he told subscribers of his Telegram trading channel on Friday.
A day earlier, fellow Decentrader analyst Philip Swift had voiced similar leanings, using the upcoming cross of two important moving averages to suggest that BTC/USD had further to run.
These were the 111-day and 350-day moving averages, the latter multiplied by two, together known as a Pi Cycle.
"My current near-term market outlook for Bitcoin is neutral-bullish, so my personal view is that there is a good probability this is not the market cycle top for Bitcoin when the Pi Cycle Indicator moving averages cross in a few day’s time," Swift wrote in a market update.
"Other indicators and fundamentals are suggesting that we are not yet at the end of the market cycle."
Others agreed but were slightly more cautious, including statistician Willy Woo, who on Friday warned that Bitcoin could be finishing the first of a "double top" price construction.
"Volatility is visibly lower this cycle," he summarized, adding that once cleared, the $1 trillion market cap level — corresponding to a Bitcoin price of around $53,600 — would "unlikely" be broken again.