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Crypto Digest — October 17th, 2021

Week in short:
Bitcoin is getting closer to the all-time highs (reaching almost $63k) on the news of SEC approving the first Bitcoin-ETF. Indeed it is a big deal for the crypto economy, and we can expect even more such information coming in the following weeks.

This week’s digest:

  1. Bitcoin-ETF: the beginning of a new era?
    The moment we’ve been waiting for many years is finally here. While there is currently a robust list of applications for issuance of the Bitcoin-ETF (including VanEck, Grayscale, Invesco, Galaxy, Valkyrie, and many others), one of them is already approved and going to start trading already next week. It will be the ProShares Bitcoin ETF based on the BTC futures rather than on the asset itself.
    So what? Another traditional financial instrument is coming to crypto, which means new investors and capital flows. An ETF is a convenient instrument that could attract many institutional investors as well. If you remember the case with BTC futures, the market reacted with a considerable price increase when they were introduced. I would expect even more significant growth in case of an ETF approval as it is more accessible instrument (both to retail investors and institutions) compared to derivatives. However, we should remember that it is only a partial victory as the spot ETF applications are still under consideration, so it is unclear how soon we will see ETFs with Bitcoin itself as an underlying asset.
    *Link [read, 3 min]
  2. G7 has published the global CBDC Guidelines
    The leaders of G7’s Ministries of Finance and Central Banks have published the document with 13 policy principles for Retail Central Bank Digital Currencies (CBDCs). Obviously, it’s a recommendation rather than a regulation, but it might be useful for policymakers worldwide as it contains some comprehensive explanations and reviews of the current best practices.
    So what? Even though many of these principles and recommendations are somewhat vague, it is still a good sign that we see policymakers working on the digital currency legislation. I think at this moment we can almost be certain that in the following years we’ll see many countries (including the major ones) introducing CBDCs. Of course, they are just a new form of cash rather than true cryptocurrencies, but still they do share some of the cryptocurrencies’ nice features such as transparency and accessibility while lacking decentralization with just transferring some power from commercial banks to central banks and regulators. Anyway, we definitely should be ready for a new form of money entering the economy.
    *Link [report, 27 pages]
  3. Mining landscape change: the USA is the new leader
    After China’s successful crusade against crypto, its miners have left the country, leaving the Chinese global hashrate share close to zero (instead of almost 50% as before). Currently, the leaders are the USA (35%), Kazakhstan (18%), and Russia (11%).
    So what? I believe this is good news for the crypto economy because the crypto is meant to be decentralized. While before, China had a major share in the Bitcoin hashrate, now this market is much more competitive, which is definitely good for several reasons. First of all, network safety — the more centralized is the network, the more it is prone to 51% attack when one major players hijacks the whole network. Second, a more competitive landscape could lead to more favorable conditions for miners in different countries as these countries might be interested in attracting the new capital inflows by providing miners with cheaper electricity, reasonable regulation, or even some tax benefits. Moreover, we already see the USA doing it by actively discussing the regulations for the crypto economy and potential energy sources (preferably, renewable ones) for miners.
    *Link [visualization]



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