Blockchain Bites: Bitcoin Bubble, Toil and Trouble

Bitcoin shed a few thousand dollars in overnight trading, while larger wallet addresses appeared to consolidate their holdings. Meanwhile, Treasury Secretary nominee Janet Yellen said crypto was a “particular concern” and that Web 3.0 had developed with IPFS Brave integration.

At roughly the height of the 666920 Bitcoin block, President-elect Joe Biden will take office. During his final night at the White House, President Donald Trump announced a list of pardons including Ken Kurson, a former Ripple board member and crypto media man. Notably absent was Ross Ulbricht, founder of the Silk Road darknet market and anti-hero figure among Bitcoiners.

The top shelf

Yellen’s concerns
Cryptocurrencies are “primarily for illegal financing” and terrorist financing, Treasury Secretary nominee Janet Yellen said Tuesday at a Senate hearing. The position comments echo those of the regulators, though they indicate that an overhaul of crypto regulation may be on the dock during its tenure. My colleague Nikhilesh De wrote about what to look for during the Biden administration.

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

A series of disappointments, the technology startup that raised $ 4 billion through an initial coin offering to offer the EOS blockchain network and its basic EOSIO software, was hit when a key executive stepped down 10 days ago. CoinDesk’s Brady Dale plunges into the disappointments and power struggles at the company, including one over what to do with his 140,000 BTC stash. It’s well worth reading in full.

Quick bites

COINBASE BOUGHT: Bison Trails sticker service. (CoinDesk)

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

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

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

51% ATTENDANCE: Privacy piece Firo saw 300 blocks rolled back. (Decrypt)

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

JOON JANUARY WIN: Explores the future of media and social tickets. (The Block – op-ed)

GREEN ENJOY: How to make bitcoin mining eco-friendly. (CoinDesk Opinion)

Intel market

Wall of wallets
With bitcoin in the red, throwing up some $ 2,600 on Wednesday, traders are consolidating. The number of addresses holding at least 1,000 BTC, has risen from 2,407 to a new age peak of 2,438 in the past seven days, according to a Glassnode data source. “It remains to be seen if continued buying by major investors translates into a rapid recovery,” CoinDesk markets reporter Omkar Godbole writes. “However, the odds seem to be stacked against a notable fall in prices.

At stake

Will and trouble?
The question on everyone’s mind is whether this rally is sustainable. After a parabolic ascent that brought bitcoin above $ 40,000, a level greater than a previous all-time high of double set in 2017, the cryptocurrency seems to have settled in a new normal at around $ 35,000.

Daily trading has seen a level of volatility typical for digital assets, with 5% market movements prevalent on the intraday charts. But it remains an open question whether bitcoin will continue to set new highs above $ 40,000 in the near term.

JPMorgan analysts have quoted a long-term price target of bitcoin of over $ 146,000, based on a comparison with gold. Although bears still think the decade-old crypto could collapse to $ 0. That’s quite an opinion!

In a recent survey of “market professionals,” Deutsche Bank found that 87% believe that investments across asset classes are overheating. More than half believe bitcoin is more likely to halve than double during the year. While even more think the same of Tesla, one of the best performing bets in 2020.

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

For this reason some keen observers believe that bitcoin is not just a bubble, but the entire financial system. Jeremy Grantham, co-founder of GMO, a large investment firm, said “this event will be recorded as one of the big bubbles of financial history,” in a letter to investors. He cited, “extreme overvaluation, explosive price increases, fierce publishing and the behavior of speculative speculative investors.”

Still, many crypto analysts think there’s something different about bitcoin. Driven by growing institutional investments – from like hedge funds and publicly traded companies – the recent market cycle sets itself apart from the retail boom experienced three years ago.

As CoinDesk Research Director Noelle Acheson noted in a recent newsletter, “It could also be argued that bitcoin is the anti-bubble, that its price is rising due to bubbles in other parts of the economy. Many investors are buying bitcoin in response to what they consider a huge sovereign bond bubble, which they believe the government will try to deflate by printing money. ”

Acheson argues that the label “bubble” implies that there is a discrepancy between the price of an asset and the underlying value. The question with bitcoin determines its intrinsic value. That’s a tricky proposition, given that bitcoin users are still working out the cause of using the cryptocurrency, she writes.

Over the past year, the belief in bitcoin as a hedge against inflation has steadily grown in popularity. Even if this notion is true, it would not undermine the usefulness of bitcoin as a payment tool to block financial gatekeepers, nor as a way for anyone to speculate on macro trends.

Bitcoin’s open system is non-discriminatory. It can be whatever you want it to be. As Bloomberg journalist Tracy Alloway said, “[T]here will always be a fresh bull case for Bitcoin waiting in the wings. In that sense, it is the perfect postmodern financial asset for a postmodern financial economy. ”

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

Who Won’t Crypto Twitter?

Subscribe to receive Blockchain bites in your inbox, every day of the week.