Blockchain Bites: Bitcoin Bubble, Toil and Trouble

Bitcoin lost a few thousand dollars overnight while larger wallet addresses appear to be consolidating their holdings. Meanwhile, Treasury candidate Janet Yellen said crypto was a “special concern” and that Web 3.0 had driven Brave’s IPFS integration.

At the height of the Bitcoin block 666920, the elected President Joe Biden will take office. During his final night at the White House, President Donald Trump issued a list of pardons, including Ken Kurson, a former Ripple board member and Crypto Media man. Ross Ulbricht, the founder of the Darknet marketplace on the Silk Road and antihero among Bitcoiners, was particularly absent.

Top shelf

Yellen’s concerns
Cryptocurrencies are “mainly used for illegal financing” and terrorist financing, Treasury Secretary Janet Yellen said at a Senate hearing on Tuesday. The constant comments are a matter of course for the regulators, but suggest that a revision of the crypto regulation could be the order of the day during their tenure. My colleague Nikhilesh De wrote about what to look out for during the Biden administration.

Web & Internet redesign
Brave, the privacy-conscious web browser used by 24 million, has been integrated with the InterPlanetary File System (IPFS), which is essentially a redesigned Internet protocol with censorship-resistant properties. Brave users can now more easily access IPFS sites and even run a node on the distributed system.

A number of disappointments, the tech startup that raised $ 4 billion through an initial coin offering to develop the EOS blockchain network and underlying EOSIO software, saw a hit when a senior executive resigned 10 days ago . CoinDesk’s Brady Dale addresses the disappointments and power struggles within the company, including what to do with the 140,000 BTC stash. Well worth a full read.

Fast bites

COINBASE PURCHASED: Bison Trails stake out service. (CoinDesk)

RETAIL INTEREST: India’s largest crypto exchange has launched an app to make small crypto purchases easier. (CoinDesk)

CBDC PITFALLS: The European Commission has joined the European Central Bank to study a digital euro before development begins. (CoinDesk)

DOCUMENT DUMP: Bitfinex will complete the overturning of documents related to a $ 850 million Tether loan to prosecutors in New York in the coming weeks. (CoinDesk)

51% ATTACK: Privacy coin Firo saw 300 blocks rolled back. (Decrypt)

PORN NUMBERS: Pornhub added XRP, BNB, USDC, and DOGE as payment options. (The block)

JOON IAN WONG: Explore the future of media and social tokens. (The block – op-ed)

GREEN MINING: Here’s how to make bitcoin mining environmentally friendly. (CoinDesk opinion)

Market information

Wall of wallets
With Bitcoin in the red, which lost around $ 2,600 on Wednesday, traders are consolidating. According to the data source Glassnode, the number of addresses with at least 1,000 BTC has risen from 2,407 to a new high of 2,438 in the last seven days. “It remains to be seen whether a sustained buy from major investors translates into a rapid recovery,” writes CoinDesk’s market report, Omkar Godbole. “However, the opportunities seem to be stacked against a remarkable drop in prices.

On the game

Trouble and trouble?
The question everyone is asking is whether this rally is sustainable. After a parabolic rise that brought Bitcoin over $ 40,000, a level more than double its previous all-time high of 2017, the cryptocurrency has apparently adjusted to a new normal of around $ 35,000.

Daily trading exhibits volatility typical of digital assets, with 5% market movements common on the intraday charts. However, it is still open whether Bitcoin will continue to hit new highs above $ 40,000 in the near future.

JPMorgan analysts have given a long-term Bitcoin price target of over $ 146,000 based on a comparison to gold. While bears still think the decade-old crypto could collapse to $ 0. That’s a whole range of opinions!

In a recent survey of “market professionals”, Deutsche Bank found that a whopping 87% believe that investing in various asset classes is overheated. More than half believe that Bitcoin will halve rather than double within a year. Think even more of Tesla, one of the top performing bets of 2020.

It’s no secret that traditional and digital assets are on the rise due to an unprecedented amount of dollars poured into the financial system as part of a coronavirus recovery plan. Money is cheaper than ever. Interest rates are nothing and about 23% of the US dollar in circulation was printed last year.

Because of this, some keen observers think that not only Bitcoin is in a bubble, but the entire financial system. Jeremy Grantham, co-founder of GMO, a major investment firm, said in a letter to investors, “This event is recorded as one of the great bubbles in financial history.” He quoted: “Extreme overvaluation, explosive price increases, frenzied issuance and hysterical speculative investor behavior.”

Still, many cryptoanalysts think Bitcoin is something else. Driven by increasing institutional investments – like hedge funds and public companies – the recent market cycle differs from the retail exuberance observed three years ago.

Noelle Acheson, Research Director of CoinDesk, noted in a recent newsletter: “One could also argue that Bitcoin is the anti-bubble and that the price is rising because of bubbles in other areas of the economy. Many investors are buying Bitcoin in response to what they believe is a massive government bond bubble that they believe the government will try to purge by printing money. “

Acheson argues that the label “bubble” implies that there is a discrepancy between the price of an asset and its underlying value. The question with Bitcoin is the determination of the intrinsic value. This is a difficult proposition considering that Bitcoin users are still figuring out what the cryptocurrency use case is, she writes.

Over the past year, the belief in Bitcoin as a hedge against inflation has steadily grown in popularity. Even if this idea were true, it wouldn’t detract from the usability of Bitcoin as a payment instrument against financial goalkeepers or as a way for anyone to speculate on macro trends.

Bitcoin’s open system is non-discriminatory. It can be whatever you want. As Bloomberg journalist Tracy Alloway put it: “[T]A new bull case for Bitcoin will always be waiting in the starting blocks here. With that in mind, it really is the perfect postmodern financial tool for a postmodern financed economy. “

So is Bitcoin in a bubble? Well it depends on what you mean by bubbles and what you mean by bitcoin.

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