Energy Efficient

We’ve aggregated the massive torrent of Bitcoin and cryptocurrency news of late below, with a market update and a summary of The Economist’s special report on GovCoin and CBDCs

Originally published on Efficient Frontiers Substack on January May 15th

Is this real life? The latest crypto headlines have been Elon Musk (Tesla’s CEO) swearing not to make Bitcoin transactions, the CEO of Facebook naming his pet goat Bitcoin and the CEO of Geometric saying “SpaceX have solidified DOGE as a unit of account for lunar business in the space sector” (for more serious news see the news & links section). In addition to the market overview we’ve added a summary of The Economist’s special report on GovCoin and CBDCs. Enjoy!

The Economist’s special report on GovCoin and CBDC

The Economist magazine is one of the oldest and most respected financial magazines on the planet, owned by the Agnelli, Rothschild, Cadbury and Schroder families, it is considered by many to represent viewpoints of the European establishment. So what does The Economist think about the future of currency?

The main narrative of the issue, besides envisioning CBDCs, is ‘canceling’ banks. Banks instability, antiquity, increasing irrelevance and their upcoming demise are emphasized throughout the report. The issue starts by pointing out the antiquity of the banking system compared to Bitcoin, DeFi and FinTech, and says digital central bank currencies are the next step.

The Economist’s vision of the future is this: “digital money and deposits provided by central banks, financial transactions carried out by tech firms and capital markets providing credit.”

Central bank’s high-tech monopoly on banking, brought forth by CBDC’s and the end of retail banks, will provide the essential interface between the state and the economy. It will also preventing the tyranny of international tech conglomerates (“FAANG Coin”) and problems stemming from unregulated cryptocurrencies like Bitcoin.

The report acknowledges CBDC’s drawbacks — the dangers in giving more power to bureaucrats, totalitarian surveillance and control, and cyber attacks on centralized infrastructure. The Economist suggests ”beefing up privacy laws, reforming how central banks are run and preparing retail banks for a more peripheral role.”

The report also attempts to debunk the claims that the digital yuan will challenge the dollar’s prominence, noting that China’s strong capital controls and global mistrust in their political system means the e-yuan is not likely to become the new global reserve currency, no matter how good the tech may be.

Interesting quotes:

• “[Govcoins] are to be treated with optimism, and humility.”
• “Central bank digital currency may be even more radical than cryptocurrency”
• “Small countries fear that, instead of using local money, people might switch to foreign e-currencies, causing chaos at home.”
• “Your money would be guaranteed by the full faith of the state, not a fallible bank.”

Market wrap

We sent our last newsletter while Bitcoin was still dipping under $50,000, and here it is again. Elon Musk’s latest announcement helped crash Bitcoin’s price by $8,000 in 3 hours on May 13th. But despite the fear induced by the volatility, Bitcoin enjoyed its third month above $43,000.

Bitcoin’s Fear & Greed index reached a yearly low of 26 on April 26th, now at 31, but its relative stability in the previous weeks has been a perfect backdrop for Alt Season.

Memecoin enthusiasm also reached a fever pitch this week before the market lost its confidence .“ TikTok influencers have jumped into the space promoting investments in highly questionable projects…The driving forces seem to be a mix of the anti-establishment uproar seen from the WallStreetBets community following the infamous GME squeeze, in addition to a very high risk tolerance with the hopes of financial independence looming.” wrote Arcane Research on Tuesday.

It promises to be an interesting summer for the crypto market. Until new regulations are in place by the US authorities, the cryptocurrency market will keep attracting entertainers and others with large online audiences to influence prices. The latest example of entertainment and speculation activity merging was ofocurse last Saturay when cryptocurrency fans tuned into SNL to see Elon Musk’s appearance. DogeCoin’s price rose in anticipation of the event, as many hoped Musk would take his heavy promotion of the coin from Twitter to television. They were disspaointed.

Ether seems unstoppable as it broke to new dollar all-time highs this week, reaching almost $4,400 before correcting, representing an almost 100% rise against the dollar in 3 weeks, but still below its all-time-highs against Bitcoin, reaching record futures and options volumes.

Ethereum is very attractive to both retail and institutional investors right now for several reasons: The supply reduction coming in July (known as EIP 1559), Ethereum 2.0’s promised move to POS later this year, high on-chain activity and the hopes of achieving a similar price run to that of Bitcoin’s over the last year.

News & links

• HotBit exchange halts trading for over a week following cyber attack
• Japanese gaming firm Nexon has purchased~ $100 million worth of Bitcoin,
• Latin American e-commerce giant Mercado Kibre buys $7.8 million worth of Bitcoin, Microstrategy buys $15 million more, Palantir starts accepting Bitcoin
• Going mainstream 1: Dogecoin trends on CNBC, Chair Powell asked about Dogecoin and Gamestop, comedian Bill Maher mocks Bitcoin
• Going mainstream 2: World’s largest MMA association, UFC, announced $UFC Fan Token, Mark Cuban promotes DogeCoin on The Ellen Show, Head of SEC calls Bitcoin a volatile store of value
• Bad miner: US Bitcoin miner mines AML censored block
• US gasoline pipeline shut down in ransomware attack. Bitcoin mixer operator arrested by US Authorities
• China’s government conducts study on Chinese mining electricity consumption
• Crime: Turkish cryptocurrency exchange Thodex accused of exit scam, CEO flees to Albania, 6 arrested in Turkey. South Korean cryptocurrnecy exchange raided by police and $214 million in assets frozen due to MLM scheme
• Coinbase acquires data analytics platform Skew, CoinMetrics raises $15 million lead by Goldman Sachs, crypto payments firm Simplex acquired for $250 million
• Binance allegedly faces investigation by IRS, CFTC
• Bitfarms’ Canadian mining operations to be listed on Nasdaq