Ethereum's cheap but its future is riddled with complexity
Market news and analysis including the massive U.S. stimulus efforts
One of the reasons I think people like to invest in ether is because its price point is lower. Yes, cryptocurrency is divisible to 8 decimal points, so that shouldn't matter, blah blah blah, I get that. However, an asset like bitcoin priced at thousands of dollars, as opposed to a hundred and some bucks for ether (sometimes less if you were making purchases March 13), likely has some psychological effect.
However, if you invested $10,000 into ether Jan. 1, 2019, you're now right back to where you started price-wise. In addition, ether has some fundamental issues looming, including a plan to switch to a totally different technology model.
I kid you not, below is co-founder Vitalik Buterin's plan for moving to "Ethereum 2.0". You don't have to zoom in on this image and read the details to understand this is going to be an arduous technological switch. And ether, the cryptocurrency, sits in the middle of that storm of complexity.
Unlike bitcoin, ethereum effectively has a benevolent leader in Buterin, which leads me to sometimes refer to ether as "vitalikcoin." The plain truth is, like most cryptocurrencies, Ethereum can't scale in the form it in exists now. It must increase its transaction capacity to ever be any kind of programmable financial scaffolding, which is what investors were originally promised.
When crypto markets go crazy, like they did in 2017, cracks started to show. This included slower transactions, higher fees and a market for said fees. That meant the higher fee manually entered, the greater success a transaction would be included in the next block.
In that type of market, smaller transactions get totally screwed as over-the-counter dealers moving millions of dollars in crypto could afford to stuff larger fees into their transactions than anyone else. Just imagine Wall Street's Gorden Gekko, if he had been around, still getting on his 1980s-era Motorola DynaTAC 8000X and yelling to his broker, "I NEED THAT TRADE CONFIRMED IN THE NEXT BLOCK!"
Original investors in Ethereum don't want to switch to a new, more transaction-friendly system with a different token, so the plan is to port the ether cryptocurrency over. Exchanges and other technical participants likely have mixed feelings about this.
Ethereum's transition must happen for the network to grow, but as a result many companies will need to devote software engineering resources to build new wallets and transaction procedures because the system will be totally different.
The new system will also do away with proof-of-work mining. Starting in 2018, daily average hashrate on the Ethereum network began to decline and then stay in a specific range. That's a lot different than bitcoin's daily hashrate over time.
Bitcoin hashing, as a daily average, has been on a steady upward trend as miners continue to purchase new, more powerful equipment. Despite the reward halving event approaching, an absence of drastic changes planned for bitcoin means manufacturers can plan a future around building miners for customers.
Crypto mining itself might be a risky business, and it's not surprising vitalikcoin wants to get away from it – Buterin has long talked about his distaste of proof-of-work. However, the demand for new bitcoin mining machines doesn't seem to be abating. There has been a drop in daily average bitcoin hashrate in March as prices took a dump, but that's likely as less efficient machines are turned off as profitability dropped.
So if you invested $10,000 in bitcoin in January 2019, where would you be today? I'm glad you asked:
A bitcoin investor would be up despite the crypto price crash that has sent ether backwards. Let's chart both:
NFL head coach Bruce Arians, now with all-time great Tom Brady as his quarterback in Tampa Bay, is known for his colorful quotes. "No risk it, no biscuit" is my favorite, and I was thinking about this today. "If you don't try great shots, you won't hit one," Arians says. That's true in football, and it's probably true about bitcoin, despite investors looking at its high price and wondering if there's something cheaper to invest in like ether.
Yes, bitcoin is much more expensive than other digital assets and it does have manipulation issues as well as its own scaling problems. But frankly, what's ahead for ethereum, in comparison, is downright scary. Too many changes, too much meddling, and it just doesn't feel like ether has the commodity-type properties of a "digital gold" like bitcoin has in this uncertain market.
– Daniel Cawrey, Markets Editor
SURVEY: How do you think your government is handling the #COVID19 outbreak? We want to hear from you. Take our five-minute reader survey.
Stimulus Plan Steadying Global Markets, Crypto Takes a Dip
The $2 trillion stimulus deal in the U.S. wasn’t enough to keep many cryptocurrencies from taking a dip Wednesday. Cash injections were the topic of the day as U.S. policymakers try to deal with the coronavirus threat to the economy. After working out a deal on where the money will go, the full Senate is expected to vote on the bill to provide $2 trillion in relief to Americans. The S&P 500 index closed up over 1 percent.
The Overton Window Opens for a Digital Dollar
The coronavirus crisis may help precipitate adoption of novel forms of money, members of the cryptocurrency industry and other observers say. The legislation comes about as U.S. officials look for ways to get much-needed cash into citizens' pockets. According to a Senate bill, using a central bank digital currency (CBDC), the federal government could send direct payments to citizens' wallets held by the Federal Reserve, called FedWallets.
Global Stablecoins May Be Subject to Securities Regulation
The International Organization of Securities Commissions (IOSCO) looked at a hypothetical stablecoin managed by a company’s governance board, backed by a basket of global reserve currencies and settled on its own private blockchain. It could only be issued to “authorized participants” that buy and sell the stablecoin, and could be passed between users’ digital wallets. From its hypothetical analysis, IOSCO found this may fall under securities regulators’ purview.
Bitcoin Rejected Near $7K Despite $2T Stimulus Package
Bitcoin is struggling to maintain its recent upbeat mood on despite the rapidly increasing scope of fiscal stimulus efforts in the U.S. and across the globe. "The U.S. government's cash payments will flow directly into people's pockets. Naturally, some people will buy bitcoin, but far fewer people than others are predicting," Chris Thomas, head of digital assets at Swissquote Bank, told CoinDesk.
Crypto-Friendly Bank Revolut Launches in the US
Launched in 2015, Revolut now has more than 10 million customers, primarily in the U.K. and Europe. As well as banking services, it offers features such as a fiat currency exchange, insurance brokerage and equity trading platform. The bank completed a $500 million Series D in February, valuing the company at more than $5 billion. Revolut has also allowed users to purchase cryptocurrencies directly from the app since adding support for bitcoin (BTC) in 2017.
LISTEN: Struggling
Hosts Adam B. Levine and John Biggs talk about cryptocurrencies struggling to eke out gains, what analysts think about the stimulus package and crypto startups raising money in tough times.
This is a hilarious tweet. However, if there were infinite cash printing, hyperinflation would ensue and create tons of problems for the dollar. Yes, quantitative easing is happening, so it will be interesting to see what happens to dollar purchasing power over time. Grubles should know that, he's associated with Blockstream, and its Liquid technology helps support the murky stablecoin Tether.
Trend: Bitcoin produced a "spinning top" candle on Wednesday, signaling an end of the recovery rally from lows under $4,000 and shifting risk in favor of a price drop. So far, however, dips have been restricted to around $6,570.
However, with the global equity markets struggling to put in a positive performance Thursday, despite the U.S. fiscal stimulus deal, bitcoin buyers will likely have a tough time defending support at $6,465.
A violation there would confirm a rising channel breakdown on the 4-hour chart and could invite stronger chart-driven selling, leading to a drop to $6,000. On the higher side, acceptance above $7,000 is needed to revive the bullish view.
Ethereum-Based MakerDAO Hands Off power To Community (Decrypt) In a move toward further decentralization, the Maker Foundation has given the Maker governance community 100 percent control of the Ethereum-based MKR token contract.
Bitcoin Is Crashing, But Is This Drop Irrational? (Hackernoon) Bitcoin has had an interesting history and one that gives it a reputation for volatility. In many ways, this volatility is understandable; even if the cryptocurrency has a bright future ahead of it.
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
No Risk It, No Biscuit