- Is it realistic to expect crypto to up surp the fiat system by 2030?
- China's mining dominance does not make Bitcoin network centralized
- Mark Cuban's latest put-down of Bitcoin is perfectly valid, for now
- QuadrigaCX punters call for exhumation of the body of the deceased owner
Banks' Unlikely Optimism For Cryptocurrencies Is Born Out Of Resignation
The latter half of this year, ever since Facebook made official their Libra project in June, has seen financial regulators around the world scrambling to come up with ways to stave off a rapidly accelerating monetary phenomenon that defied all existing policies.
If we've learned anything from their efforts, it's that we're not going to have a uniform legal framework for cryptocurrencies. It quickly became apparent to even the most stiff-necked fogey that this new class of money was untameable. There was no handbook for lawmakers to draw from, which has led to them taking several interesting regulatory tacks.
Busied with a farcical impeachment inquiry, we may not soon find out the US approach, but we know that China, Russia, and India have undertaken plans to fob off a digital version of fiat as cryptocurrency. A less devious scheme was ratified by Germany at the end of last month, enabling banks to offer cryptocurrency custodial services. FINMA-licensed SEBA Bank AG, a crypto bank in Switzerland, was launched in November and is in the process of expanding to nine overseas jurisdictions.
It's hardly surprising then that, resigned to its inevitability, banks are now happy to view cryptocurrency favorably, but this is an uneasy alliance of convenience sought in a quest to survive an impending paradigm shift and retain monetary sovereignty, through either issuing digital fiat currencies or offering crypto banking services.
Deutsche Bank published a predictive report for the decade ahead titled “Imagine 2030” which tips cryptocurrencies to replace fiat money by 2030. The paper inspired a heated social media debate last week. Research Strategist Jim Reid, who earlier in the year described the European financial system as “vulnerable”, wrote that the forces holding together a fragile fiat system could unravel over the next decade and in such a scenario, demand for alternate currencies could take off.
The report argues that decades of low labor costs, ever since the US withdrew from the Bretton Woods system in 1971 and instituted fiat money, has enabled central banks to resort to QE to stimulate the economy each time, relying on stagnant labor costs to offset such policies from being inflationary. With the supply of labor from key global regions expected to decline in the next decade, labor costs will begin to rise, leaving central banks in a dilemma between admitting of higher inflation or ramping up interest rates. Given the debt levels globally, the latter would be tantamount to fiscal suicide.
Further in the report, Marion Laboure, Harvard lecturer in Economics and Finance, predicts an obsolescence of plastic cards from broader adoption of mobile payments and expects cryptocurrency to be at the forefront of this change if it can achieve price stability and legitimacy in the eyes of regulators and forge alliances with key stakeholders and retailers to bridge the gap for consumers.
Earlier this month, a study by California-based stockbroker Charles Schwab found that Bitcoin, specifically the FINRA-approved Grayscale Bitcoin Trust (GBTC), was the fifth most popular investment among millennials, who apportioned more of their wealth towards the GBTC investment trust than shares of Berkshire, Disney, Netflix, and Microsoft. Various other such studies have also indicated that millennials, who will be the dominant generation in ten years, are more disposed to investing in Bitcoin than Gen X and baby boomers.
While on the face of it, these are positive indicators and while it's easy to get excited by this new-found optimism for cryptocurrency from central banks and legacy services, if banks have their way, crypto will be subsumed into a dysfunctional debt-financed economic model rather than replace it. Anything but direct user adoption of Bitcoin as peer-to-peer money waters down the concept reduces it to merely another fiat-correlated tradable asset and exposes it to the many Machiavellian machinations which plague the current outmoded system.
China's Organic Hash Rate Hegemony Should Be Cause For Action, Not Worry
A research paper published by UK based digital asset management firm CoinShares last Friday revealed some interesting data regarding Bitcoin mining. Titled “The Bitcoin Mining Network“, the biannual report sheds light on the distribution of hash rate, cost of mining, consumption, and source of electricity powering the network.
Among the findings was the revelation that a lion's share of the Bitcoin network hashrate emanates from China. This wasn't one of those instances where statistical insight dispelled widely held suspicions, yet that didn't stop people from using it as a stick to beat Bitcoin with. Although the report is largely extrapolated and deduced from accessible data and details plenty of other positive findings, news outlets focused exclusively on China's hash rate share of 65%, up 5% since June, with 54% of global hash rate estimated to be domiciled in the tech hub of Sichuan.
With China's Bitmain and MicroBT being the biggest ASIC manufacturers, cheaper cost of electricity and readily adaptable renewables infrastructure, China's burgeoning influence on the industry is very much organic. This is further attested by 31% of the other 35% of network hashrate coming from higher temperate and frigid climes of Canada, Scandinavia, Russia and regions with high renewables redundancy such as Kazakhstan, Georgia, and Iran. Ultimately, the mining industry will flock to regions that make the most economic sense.
The total electricity draw of the network was estimated to be approximately 6.7 GW, a 43% rise from June this year despite an almost 50% price drop. The annualized consumption is estimated to be approximately 61 TWh. By comparison, the annualized electricity consumption for gold mining is estimated to be 135 TWh, more than twice that of Bitcoin. It should also be noted that, unlike gold, which pollutes the physical environment during extraction, Bitcoin mining has no direct impact on the physical environment.
The study also dispels the oft-mooted argument that Bitcoin's energy consumption makes a significant dent on the environment, estimating the share of renewables used for mining to be 73% globally, with Chinese miners, impressively, utilizing just 11%, one-sixth of their 65% network share, of fossil/nuclear sources for their mining operations. Non-Chinese regions have a lot of catching up to do in this regard as nearly half of their power, 16% out of 35%, is sourced from fossil/nuclear sources.
Before complaining about China's mining dominance making the network centralized, the rest of the world needs to address issues such as manufacturing mining equipment internally rather than importing it from China and fostering a power infrastructure that focuses on affordable renewables. Until such time, China's hash rate share will organically continue to scale new highs.
Crypto Community Cannot Take Selective Umbrage With Legitimate Misgivings
Investor Mark Cuban of Shark Tank has had a lot to say about Bitcoin over the years and not a great deal positive. It is therefore understandable that the crypto community doesn't care much to examine the validity of his criticisms. But his latest diatribe particularly seems to have struck a nerve, perhaps because it rings uneasily true for flag-waving Bitcoin firebrands.
Following up on earlier comments made in September, Cuban doubled down last week that he saw no future scenario where Bitcoin became a reliable currency,
“No chance. Not because it can’t work technically, although there are challenges, it could, but rather because it's too difficult to use, too easy to hack, way too easy to lose, too hard to understand, too hard to assess a value,”
and with so many rival crypto assets, “too much work for people to know why BTC over everything else.”
It's easy to dismiss these comments as those of someone whose interests are not best served by Bitcoin's success but that's not the case here. Dallas Mavericks, an NBA team owned by Cuban, started accepting Bitcoin for payments in 2015 briefly and resumed allowing the option of Bitcoin payments for tickets and merchandise in August this year. Cuban says he's happy to accept Bitcoin payments as “my job is to make it easy for our customers to do business with us,” but added that few want to use it, with only 5 customers taking up the option in the last four months.
When the Bitcoin brigade on Twitter challenged Cuban over his remarks, arguing that his views were outdated and the ecosystem has evolved and asked him what it would take to change his mind, he said he'd change his mind when there's actual usage by consumers who opt for Bitcoin over other options,
“You don't have to convince me. You need to convince your neighbors. If they don't see the value, that is the problem you need to solve. I'm not opposed to BTC. I understand every argument being made. The world is littered with great products/services that failed for lack of consumers.”
Let's be clear that Cuban is not a hater and Jack Dorsey, who's often feted a rabid proponent of Bitcoin, its open-source ethos and decentralization, made very similar comments regarding Bitcoin not being efficient as a currency a couple of months ago without inviting nearly as much backlash. Cuban being branded ignorant or dated in his views for saying the same thing reeks of distasteful ad hominem that should be firmly discouraged. Instead, when criticisms are valid, regardless of their source, they should be engaged with a view to dialectical discussion on possible solutions.
Without Recourse To Restitution, QuadrigaCX Users Seek Solace In Closure
Lawyers representing customers of defunct Canadian exchange QuadrigaCX filed a request to the Royal Canadian Mounted Police asking for the exchange's deceased owner, Gerald Cotten's body to be exhumed and a post-mortem autopsy to be performed “to confirm both his identity and the cause of death.”
Since rising to prominence as the largest Canadian cryptocurrency exchange following Bitcoin's frenzied price surge in 2017, QuadrigaCX has been mired in numerous controversies and even continued operating without a bank account using third-party payment processors. Earlier this year, it was revealed that Cotten had been running the business without even an office out of his laptop at home.
In December last year, while on a tour of India with his wife Jennifer Robertson, Cotten died in Jaipur from complications related to Crohn's disease. Everything we've learned from investigations since has been suspicious, to say the least. Cotten, at age 30, had signed his will just twelve days before he reportedly died, leaving Robertson his entire $7.5 million estate.
At the time of Cotten's death, the exchange owed 115,000 of its users a total sum of $190 million. Robertson claimed that these funds were held in the exchange's cold wallet in Cotten's laptop and only Cotten had the private keys to access these funds. Various blockchain analytics firms have been unable to find evidence of such a cold wallet to corroborate this story.
Making this even more likely as a long con were revelations by auditor Ernst & Young that Cotten used users' funds on his exchange to trade under aliases and transferred funds to other exchanges to trade on his accounts. Chainalysis even went so far as to suggest that the funds claimed to be locked up in Cotten's cold wallet never existed.
The circumstances of Cotten's death and various revelations since fully justify the exhumation request. It won't make things right for those who trusted a jury-rigged exchange with their money but it might afford them some much-needed closure. Now while we're on the topic of digging people out of the grave, could we also exhume Jeffrey Epstein?
Defying a bearish engulfing from the week prior, BTC/USD closed last week’s session at 7509 in a promising hammer pattern, rallying towards the weekend to post a 5.5% gain. Despite the promising turn, there is as yet no sign of a strong rally beyond the range-bound levels from the last four weeks.
The longer a chart pattern develops, the greater the momentum upon breakout. Daily chart patterns spanning several months are rare in crypto markets, so while it’s frustrating to see sluggish price action, rest assured there will be nothing sluggish about a breakout from a bullish six-month falling wedge pattern, were it to eventuate.
Despite Ichimoku conversion line shaping to cross above the baseline, while the price remains under the cloud, this is not a valid bullish signal. While RSI shows a slight bullish divergence from price, volume oscillator diverging bearishly as price trends upward indicates a lack of momentum.
The 4-hour chart backs this up, with ADX facing resistance after briefly trending and directional indices sharply reconverging immediately following a bullish divergence, further corroborated by a similar bearish MACD turn. A decisive break below 7200 could lead to another retest of 6600 levels.
It was a disastrous week for altcoins as Ether (ETH/BTC) broke support at 0.02 BTC to slide 12.5% all the way to the next support level at 0.0175 BTC. Ripple (XRP/BTC) fared worse, falling 16% from 3060 sats to 2577 sats. With leading altcoins tumbling, Bitcoin’s market dominance rose significantly from 66.4% to 68.7%.