Category Archives: Bitcoin
NFL Defensive End Alex Barrett Is Taking 100% Of His Salary In Bitcoin – Bitcoin Magazine
Alex Barrett, defensive lineman for the San Francisco 49ers, has officially partnered with Bitwage to receive 100% of his paycheck in bitcoin, according to an exclusive press release sent to Bitcoin Magazine.
I stumbled across Bitwage in a Twitter Spaces room a few months ago when they announced that they were supporting UFC fighter Matheus Nicolau and his journey to get paid in bitcoin, Barret said. I was amazed by how Bitwage set this guy up so easily and with VIP service. I thought, why not me?
Shortly after that Twitter Space, Barrett began having meetings with Bitwage, a bitcoin payroll service provider, who then offered the NFL player tickets to Bitcoin 2022 the largest bitcoin conference in the world where the partnership was solidified.
When I came down to Miami, I saw the Bitcoin revolution in-person. I was bullish before, but something shifted in me, Barrett explained. I was completely sold, and getting to meet the Bitwage team was great. They treated me like their number-one priority, even before I was technically their client.
Bitwage allows anyone in the world to get paid in bitcoin without needing to onboard their employer. Users register with Bitwage and receive an account number linking to a bank account which is then given to their employer. Once money is paid to the account, Bitwage converts the money to BTC, in the amount determined by the user, and sends it to a bitcoin address the user controls.
The in-person onboarding made me feel like a valued part of the company, said Barrett. This personal touch was unlike anything Ive ever seen before. I definitely recommend them. But most importantly, I learned a lot. The company takes their time in helping athletes and influencers truly understand Bitcoin.
Barrett joins the ranks of professional athletes such as Matheus Nicolau, Achara Ifunanyachi, and Alex Crognale, who now accept their paychecks in bitcoin.
Its vitally important that we spread the knowledge and educate our VIPs so they become true sovereign individuals, said Jonathan Chester, CEO of Bitwage.But this treatment isnt exclusive to athletes and VIP customers: its available to anyone who signs up to our service.
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NFL Defensive End Alex Barrett Is Taking 100% Of His Salary In Bitcoin - Bitcoin Magazine
Bitcoin Gives Users Total Control Of Their Money – Bitcoin Magazine
The below is a direct excerpt of Marty's Bent Issue #1210: Bitcoin gives you control. Thats the fundamental value. Sign up for the newsletter here.
We're at the part of the bitcoin bear cycle where those in the mainstream who have derided the new monetary asset running on its own distributed network as nothing more than a ponzi for degenerate speculators and drug addicts are coming out of the woodwork to claim victory. If you've been paying attention to the headlines and talking heads you've likely heard phrases like:
"See, this is proof that bitcoin is too volatile and can never work as a store of value. Who wants to store value in an asset that fluctuates so violently?"
"It can't even work as a proper medium of exchange due to slow confirmation times and the amount of transactions per second that are supported by the blockchain."
"I told you so!"
These are nothing more than vapid phrases uttered by individuals looking to confirm their flawed biases while hoping that this is truly the bear market that sends bitcoin to zero. The problem for this class of critic is that their view of bitcoin is myopic, wholly focusing on the price at any given time and how rapidly it has fluctuated. While price is certainly an important aspect and a higher price can be viewed as much better than a lower price for bitcoiners, price alone does not capture the fundamental value of the network. A fundamental value that cannot be replicated by any other asset on the planet. As I said in the tweet at the top of this page, bitcoin provides individuals the world over with the ability to easily receive, save and send money in a self-sovereign fashion.
The fundamental value proposition of the network is control over those three functions. Every other monetary asset on the planet falls short of providing individuals with the type of control that bitcoin can provide. Short-term price volatility at the beginning stages of bitcoin's monetization phase is something I am more than happy with stomaching. Knowing that I actually control my money is a type of peace of mind that a fully stable monetary good being controlled by corrupted middlemen simply cannot provide.
I know I own x/21,000,000 of the total supply.
I know how my private-public key pairs were created because I made them myself.
I can verify that the bitcoin being sent to my wallet is actually bitcoin.
I can hold that bitcoin for as long as I want without the risk of a bank or payment processor denying me access to my funds because of the particular time of day, my political views or the need for a bail-in of the failing central banking system.
This level of control is extremely powerful. Despite recent and historical price volatility, I believe that more and more individuals across the planet will slowly but surely come to recognize the fundamental value proposition of this level of control over one's money. No amount of pundit screeching or schadenfreude will change the inherent control that the Bitcoin network gives an individual over their money. They can screech and laugh. I'll continue to preach and stack.
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Bitcoin Gives Users Total Control Of Their Money - Bitcoin Magazine
Kwik Trip To Offer Bitcoin ATMs – WJON News
UNDATED -- Youll soon be able to trade Bitcoin at Kwik Trip.
Texas-based Coinbase has announced plans to put Bitcoin ATMs in the more than 800 Kwik Trip locations across Minnesota, Wisconsin, Illinois and Iowa.
According to a news release Monday, officials from Coinbase say theyll offer record low rates for transactions with no hidden or miner fees. Sheffield Clark, CEO of Coinsource, is happy with the partnership.
Partnering with Kwik Trip made perfect sense as it enables us to continue our mission of making crypto accessible to every American at phenomenally low rates, especially at a time when traditional economic systems have shown weaknesses. It is our top priority to place our machines in essential, convenient locations, because Bitcoin is becoming increasingly essential to Americans.
In addition, Kwik Trip Rewards members will receive even lower rates. Dave Wagner, Controller of Kwik Trip explains
We are delighted to be partnering with Coinsource and facilitating simple access to Bitcoin for our customers. We understand Coinsources aim of providing the fastest, easiest and most secure way to buy and sell cryptocurrencies and how a key part of this is placing the Bitcoin ATMs in convenient and easily accessible locations. As an added benefit, we know our customers are getting the best deal since Coinsource has the lowest proven rates plus industry-leading compliance, which really sealed the deal.
The Bitcoin rollout has already begun, including some stores in St. Cloud offering the new service.
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Kwik Trip To Offer Bitcoin ATMs - WJON News
Yield Curves, Inversion, The Eurodollar And Bitcoin – Bitcoin Magazine
Link to tweet thread.
As Lyn Alden explains in this thread: the 10-2 curve is saying, we're probably getting close to a possible recession, but not confirmed, and probably many months away...
Lets break that down a bit, shall we?
First of all, what exactly is the yield curve that everyone seems to be talking about lately, and how is it tied to inflation, the Federal Reserve Board and possible recession?
The yield curve is basically a chart plotting all the current nominal (not including inflation) rates of each government-issued bond. Maturity is the term for a bond, and yield is the annual interest rate that a bond will pay the buyer.
A normal yield curve (this one from 2018) chart will typically look like this:
SOURCE: FRED, Federal Reserve Bank of St. Louis
The Fed sets what is called the federal funds rate, and this is the shortest interest rate you can get a quote on, as it is the rate (annualized) that the Fed suggests commercial banks borrow and lend their excess reserves to each other overnight. This rate is the benchmark that all other rates are priced from (or so, in theory).
As you can see, in a normal economic environment, the shorter the maturity of the bond, the lower the yield. This makes perfect sense in that, the shorter the time committed to lending money to someone, the less interest you would charge them for that agreed lockup period (term). So, how does this tell us anything about future economic downturns or possible recessions?
Thats where yield curve inversion comes into play and what we will tackle next.
When shorter-term bonds, like the 3-month or the 2-year, start to reflect a higher yield than longer-term bonds, 10-year or even 30-year, then we know there is expected trouble on the horizon. Basically, the market is telling you that investors are expecting rates to be lower in the future because of an economic slowdown or recession.
So, when we see something like this (e.g., August 2019):
SOURCE: FRED, Federal Reserve Bank of St. Louis
where the 3-month and 2-year bonds are yielding more than the 10-year bonds are, investors start to get nervous.
You will also sometimes see it expressed like below, showing the actual spread between the 2-year and the 10-year interest rates. Notice the momentary inversion back in August 2019 here:
SOURCE: FRED, Federal Reserve Bank of St. Louis
Why does it matter so much, if it is just an indication and not a reality yet?
Because inversion not only shows an expected downturn, but can actually wreak havoc in the lending markets themselves and cause problems for companies as well as consumers.
When short-term rates are higher than long-term, consumers who have adjustable-rate mortgages, home equity lines of credit, personal loans and credit card debt will see payments go up because of the rise in short-term rates.
Also, profit margins fall for companies that borrow at short-term rates and lend at long-term rates, like many banks. This spread collapsing causes a sharp downturn in profits for them. So they are less willing to lend at a reduced spread, and this only perpetuates borrowing problems for many consumers.
Its a painful feedback loop for all.
No surprise, the Fed has an answer to all this dont they always? In the form of what we call yield curve control (YCC). This is basically the Fed setting a target level for rates, then entering the open market and buying short-term paper (1-month to 2-year bonds, typically) and/or selling long-term paper (10-year to 30-year bonds).
The buying drives the short-term bond interest rates lower and the selling drives the long-term bond interest rates higher, thereby normalizing the curve to a healthier state.
Of course, theres a cost to all this with the likely expansion of the Feds balance sheet and further expansion of the money supply, especially when the open market does not participate at the level necessary for the Fed to achieve its targeted rates.
Result? Possible exacerbated inflation, even in the face of a contracting economy. Which is what we call stagflation. Unless the control of the curve helps head off a pending recession and economic expansion resumes: a big if.
A eurodollar bond is a U.S. dollar-denominated bond issued by a foreign company and held in a foreign bank outside both the U.S. and the issuer's home country. A bit confusing, as the prefix euro is a blanket reference to all foreign, not just European companies and banks.
More importantly, and in our context here, eurodollar futures are interest-rate-based futures contracts on the eurodollar, with a three-month maturity.
To put it simply, these futures will trade at what the market expects U.S. 3-month interest rate levels will be in the future. They are an additional data point and indicator of when the market expects interest rates to peak. (This is also known as the terminal rate of the Fed cycle.)
For instance, if the December 2023 eurodollar contract shows an implied rate of 2.3% and the rates declining to 2.1% in the March 2024 contract, then the expected peak for the fed funds rate would be at the end of 2023 or early 2024.
Simple as that, and just another place to look for clues of what investors are thinking and expecting.
Lets say youre watching rates closely and hearing that the Fed is going to start using YCC to manage the rate curve, thereby printing more money and, in turn, likely causing more long-term inflation. And what if inflation somehow gets out of control? How can you protect yourself?
It doesnt matter when you are reading this, as long as the world is still operating primarily with fiat (government-issued and backed) money, bitcoin remains a hedge versus inflation and insurance against hyperinflation. I wrote a simple but thorough thread about that here:
Link to tweet thread.
To identify the inflation hedge attributes of Bitcoin, its simple really. Because Bitcoin is governed by a mathematical formula (not a board of directors, CEO, or founder), the supply of bitcoin is absolutely limited to 21 million total.
Furthermore, with a truly decentralized network (the computers that collectively govern the Bitcoin algorithm, mining, and transaction settlements), settled transactions and total number of bitcoin to be minted will never change. Bitcoin is therefore immutable.
In other words, Bitcoin is safe.
Whether or not the price of bitcoin (BTC) is volatile in the short term does not matter as much as the fact that we know the value of the U.S. dollar continues to decline. And in the long term and in total, as the dollar declines, BTC appreciates. It is therefore a hedge against long-term inflation of not just the U.S. dollar, but any government-issued fiat currency.
The best part? Each single bitcoin is made up of 100 million pennies (actually the smallest unit of bitcoin - 0.00000001 btc - is called satoshis, or sats), and one can therefore buy as much or as little they can or want to in a single transaction.
$5 or $500 million: You name it, Bitcoin can handle it.
This is a guest post by James Lavish. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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Yield Curves, Inversion, The Eurodollar And Bitcoin - Bitcoin Magazine
African Nations Resisting Bitcoin Only Delay The Inevitable – Bitcoin Magazine
There are two forward-looking countries on Earth when it comes to Bitcoin: El Salvador and the Central African Republic. These two very different countries on different sides of the globe have both come to the same conclusion: Bitcoin is the best money ever invented and embracing it early will be beneficial both for the people of the adopting nation and to the benefit and preservation of the concept of the nation-state itself.
There are other countries on the other hand, that are not led by gifted and insightful people. Uganda may be one such example, the central bank of which has just made this very ill-advised, ill-timed announcement, demonstrating a complete lack of understanding of all the matters to do with money and the great changes that are coming to how it is accounted for.
Their first error is to believe there is such a thing as a crypto asset. This term does not describe a real thing and their insertion of this phrase into their announcement shows that their thinking is not original at all, but gleaned from what theyve read on the internet or what they've been told to say by the Bank of International Settlement or the International Monetary Fund.
Compare and contrast with the statements, plans and laws passed by El Salvador, demonstrating a complete understanding of Bitcoin and what it means to the future of that country. There is a clear divide here; on the one hand, profound ignorance and, on the other, deep insight, responsible stewardship, future-oriented thinking and ethics.
Future-oriented governments will be desperate to fully embrace Bitcoin and its dynamics, knowing that the probability that it will become the worlds reserve currency is one. (That means an absolute certainty, math-challenged readers.)
Bitcoin was designed to protect everyone on Earth from stupid people, but before Bitcoin can protect you from stupid people, it needs to be adopted by those same stupid people that are the threat to you. This is the conundrum. How can you get stupid people to buy and hold and use bitcoin? And what happens when theyre running the government?
The answer for people living in ethically run countries is that people like President Nayib Bukele and President Faustin-Archange Touadra must take the reins of power and use them responsibly to free their countries from the yoke of penury entrenching Western fiat currencies.
The Central African Republic is symbolically placed on the continent to become the center of African bitcoin based ecommerce, being roughly equidistant from all points on the continent. That country could be transformed from being one of the poorest to one of the richest in very short order, should it harness the transformation made possible by adopting Bitcoin and then become a continental hub for Bitcoin. This is no more strange than El Salvador becoming a focus for Bitcoin, for those of you with a goldfish memory who believe this is unimaginable.
Doing business on the continent of Africa is very difficult. It is difficult to get payments in and very difficult to get payments out. For example, there is a black market exchange rate, and the government sanctioned exchange rate in Nigeria, meaning that there are two economies running in parallel, on top of the difficulty of moving money out. Bitcoin fixes all of this because anyone can send and receive bitcoin in any amount at any time, without permission, and its price is determined by the market, not the State.
Saying without permission or permissionless as Bitcoiners do, is a phrase loaded with so much benefit that it is hard to describe to Westerners who have no idea of what it is like to do business on the continent of Africa. They take for granted that doing business and sending and receiving fiat money is a matter of pressing a button.
In Nigeria, for example, real life is not so.
Moving money is fraught with difficulties and multiple ways of making a loss on a transfer. These piled up losses can make it impossible to earn a profit, and if you do, impossible to spend or recycle it where you need to spend or recycle it. Bitcoin makes all of this go away, as well as adding extraordinary speed to all transactions that are without precedent for Nigerians and many people living on the African continent.
Given all of the advantages of Bitcoin, an intelligent person would ask, Why then hasnt Nigeria officially embraced bitcoin as a means of payment? This is the correct question, and there are many answers to this, some cultural, that are preventing the Nigerian government from embracing reality and acting boldly like a leader nation as El Salvador and the Central African Republic has.
Trying to do any sort of Bitcoin business in Nigeria very often involves the invocation of the Central Bank of Nigeria (CBN), which has a stranglehold on all businesses and bank accounts in Nigeria. Bitcoin would abolish their societal status and the reign of terror that theyve unleashed on the great people of Nigeria. It is a sure bet that this is one of the key reasons why theyre trying so hard to stamp out Bitcoin, rather than do their duty to serve the Nigerian people by embracing this new tool.
That the most populous country on the continent of Africa is the number two nation on Earth for Bitcoin adoption (one-third of all Nigerians use it) in the face of withering and unethical restrictions is a testament to the powerful and resourceful character of the Nigerian people who are born futurists, natural capitalists and extraordinary entrepreneurs: highly intelligent, capable and motivated.
What is holding back the Nigerian people is the totally corrupt, protectionist and anti-Nigeria CBN, which is preventing the flow of money and flourishing of innovation there, for no good reason other than a nauseating lust for power and a cargo cult mentality about the role of the State and necessity for a central bank. In Nigeria, more than any other country Bitcoin fixes this by removing the need for the naira from peoples lives as they switch to bitcoin.
Nigeria could become the African capital of Bitcoin if the Nigerian people used it without permission en masse, squeezing out the naira as the peoples money, exposing their businesses and personal finances to the free flow of money bitcoin facilitates. It could become the African capital of Bitcoin with an El Salvador-esque embracing of reality if Nigeria made bitcoin legal tender.
Were the Nigerian government to do this, it would be the most powerful signal imaginable, and establish them as the absolute leader nation on the continent. It would not only signal that Bitcoin is changing the world, but that the so called third-world countries are taking their destinies into their own hands, opting for sound money over sycophancy, for reliability over rapaciousness, for transparency over tyranny, for clarity over corruption, for freedom over fiat.
The choice is simple. Nigeria must go full Bitcoin by law. The Nigerian people desire and deserve it.
But it appears that the backwards actors and cargo cultists in Nigeria may not presently be prepared to hear these words.
The Nigerian governments version of a Securities and Exchange Commission, a cargo cult imitation of the American SEC, has just released a totally absurd document on the offering and custody of Digital Assets. In it, is one of many hilarious sections on the issuance of initial coin offerings (ICOs) which are already dead everywhere else on earth, and were they not, would never be issued in Nigeria by anyone. This shows that the people who authored this regulation are simply copying text from the internet or have been spoon-fed it; in fact, everything about them is copied all the way down.
They even have a totally insane section mandating the publishing of white papers. It is obvious by this that they dont know the origin of the white paper phenomenon in the space and are simply making things up as they go along, regulating and mandating anything that moves without any understanding of how anything works or why it exists.
Remember also, that every novel offering made available over the internet is now fully accessible by every Nigerian citizen, whether the Nigerian government likes it or not, because these offers are freely accessible and usable on commodity mobile phones. All these ridiculous copycat regulations do is ensure that Nigerians are excluded from writing and releasing software inside their own country. And the Nigerian government doesnt have the technical capability to prevent Nigerians from using Bitcoin or any other communication tool.
In effect, this means that Nigerians (presently one-third of them) are openly rejecting the system there and voluntarily opting into a nongovernmental system of money and finance because it is better and more suited to the Nigerian character of innovation.
To a foreigner, the idea that Nigerians have a character of innovation may seem odd, but there is no other explanation for that great country being number two in the world for Bitcoin adoption. It is the Nigerian government that is Luddite and getting in the way of Nigerians and their inevitable joining of the global network as leaders and peers.
Finally (and thankfully), the position of the Nigerian government appears to be open to change. It is attending the extraordinary meeting in El Salvador with the governments of central bankers from Angola, Armenia, Bangladesh, Burundi, Congo, Costa Rica, Egypt, Gambia, Ghana, India, Namibia, Senegal, Sundan, Uganda, Zambia and 25 other developing countries flying in to find out how to embrace Bitcoin.
Nigeria being on this list of countries is highly significant. As a group, countries on this list are bigger than BRICS. If they all go Bitcoin, it will be one of the most significant events in modern history and the removal of the yoke of the dollar from the necks of billions of people.
Bringing them together outside the U.N./U.S. context is a stroke of genius. Now, together with common cause, common complaints and common animus, Bitcoin will serve as the basis for a new pole in the emerging multipolar world: one where financial coordination doesn't require trust and there is no leader, just the absolutely fair, transparent and totally ethical Bitcoin.
This is a guest post by Beautyon. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
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African Nations Resisting Bitcoin Only Delay The Inevitable - Bitcoin Magazine
Is Vitalik Buterin about to jump from Ethereum to Bitcoin? – CryptoSlate
Ethereum co-founder Vitalik Buterin posted a tweetstorm this week revealing contradictions in his thoughts and values.
Buterin listed ten distinct contradictions, including reducing reliance on people versus building lasting systems and his love of decentralization and democracy versus a tendency to agree with intellectual elites over the people.
Surprisingly, several of the contradictions mentioned suggest Buterin is not happy with Ethereum, specifically, its protocol design. Whats more, he also spoke about his desire to make his project more Bitcoin-like.
Some have taken this to mean Ethereums transition from Proof-of-Work (PoW) to Proof-of-Stake (Pos) is proving more difficult than expected.
Speculation is mounting that Buterin wants to develop on Bitcoin instead.
Last month, Ethereum Protocol Dev Tim Beiko said the Merge would not happen in June, as previously announced.
The Merge refers to merging the concurrently running PoW and PoS chains. This event represents a significant milestone in completing the ConsenSys layer (ETH 2.0). Current estimates put a rollout date of between Q3/Q4 2022.
Considering the constant delays, Its clear that devs are struggling with the scale of the task at hand.
Buterins tweetstorm talks about a desire to turn Ethereum into a robust protocol capable of withstanding extreme circumstances. Perhaps events at Terra reminded him of whats at stake if things go wrong.
Nonetheless, he continues by saying this desire belies the reality that crucial ETH dApps are vulnerable to attack. Additionally, this situation falls below what is acceptable from a security perspective.
Contradiction between my desire to see Ethereum become an L1 that can survive truly extreme circumstances and my realization that many key apps on Ethereum already rely on far more fragile security assumptions than anything we consider acceptable in Ethereum protocol design.
Taking this in, Input-Output CEO and former colleague Charles Hoskinson responded by saying, its not too late to come to Cardano.
Last month, Buterin posted a blog in which he discussed Bitcoin maximalism.
Bitcoin maxis are often accused of being toxic and narrow-minded. But Buterin argues that a healthy dose of intolerance is excusable in defending the ideology of the most honest cryptocurrency.
What if Bitcoin maximalists actually deeply understand that they are operating in a very hostile and uncertain world where there are things that need to be fought for, and their actions, personalities and opinions on protocol design deeply reflect that fact?
The post goes into great depth on the topic, covering issues such as developing sound money, first movers being the most genuine, and intolerance being necessary to counter bad actors. Buterin ended by advocating for more maximalism.
Its fair to assume the Ethereum co-founder is a strong proponent of Bitcoin and those who uphold its ideology at the expense of all others.
When taken in conjunction with his recent tweetstorm, specifically the post in which he wished for Ethereum to be more Bitcoin-like, some suspect Buterin wants to leave Ethereum to work on Bitcoin.
The CEO of Bitcoin Magazine, David Bailey, commented that such a move was far from being on his 2022 Bingo card.
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Is Vitalik Buterin about to jump from Ethereum to Bitcoin? - CryptoSlate
If Bitcoin Fails To Hold a Crucial Support in Relation to the Price of Gold, the Ensuing Carnage Might See Its Price Fall to Around the $15,000 Level…
Markets can remain irrational for long periods of time, and this is doubly true for Bitcoin (BTC), an esoteric cryptocurrency that continues to divide the wider financial community on its utility and intrinsic value.
Whatever your opinion around Bitcoin, it is a near certainty at this stage that BTCs bullish calculus has been severely dented in the past few weeks as the worlds largest cryptocurrency fell to December 2020 price levels, helped along by the utter implosion of Terras UST stablecoin.
Terra Bets the House on a New Fork as the Zero-bound LUNA Coin Cant Resurrect the UST Stablecoin
Against this backdrop, Bitcoin is about to undergo another test. To wit, the worlds premier cryptocurrency is now nearing a crucial support level against the price of gold. Bear in mind that many analysts value Bitcoins relationship with gold, especially in light of the store-of-value narrative around both assets.
As can be seen on the BTCUSD/Gold chart above, Bitcoin is nearing a multi-year support. If the cryptocurrency fails to hold this level, its price is likely to undergo further correction. After all, the next major support zone is located at the 9 - 11 ratio level, corresponding to a theoretical Bitcoin price of around $16,000, based on the low end of this range and the current gold price of around $1,800.
Readers should note that Bitcoin usually falls around 80 percent relative to its all-time high in bearish cycles. This relationship held during the last three bearish phases, and there is a hefty probability that the current phase of weakness might also entail similar losses, corresponding to a low of around $13,000.
Combining these two factors, we believe that Bitcoin might feasibly touch the $15,000 price level should it fail to hold its proximal support in relation to gold.
Of course, Bitcoin is also enjoying secular tailwinds that can play an important role in stabilizing the sentiment around the worlds largest cryptocurrency.
Cryptos Lehman Moment Eviscerates Terras UST, Pummels Bitcoin, and Shakes up Tether
For one, long-term holders of Bitcoin also called HODLers are currently holding steady. The absence of any capitulation among this hardcore set of investors is a major tailwind for the cryptocurrency.
Moreover, recent weeks have seen major developments around spot Bitcoin ETFs. Bear in mind that the SEC has only permitted futures-based BTC ETFs. However, these suffer from a major flaw contango.
Contango is the norm in the futures market and refers to a situation where the forward price of a commodity increases as contract expiration time increases. This leads to a forward curve that is upward sloping. ETFs that invest in futures have to roll over the front-month contract as it approaches expiration by buying one at the tail end. For example, consider a scenario where an ETF retains exposure to six consecutive monthly contracts. Also, assume that the January contract is nearing expiration. Consequently, the ETF would buy the July contract, with the February one becoming the front-month contract. However, due to contango, the ETF would be buying the July contract at a price that is at a substantial premium to the spot price. Over time, should contango persist, this practice leads to higher costs and ETF underperformance relative to the spot price. Due to this phenomenon, the futures-based Bitcoin investment avenues are not conducive to large-scale institutional adoption.
Nonetheless, Canada recently approved the Purpose Bitcoin ETF, which has now commenced trading and currently holds over 36,000 Bitcoins. Additionally, Australia has also allowed the trading of two spot-based ETFs: the 21 Shares Bitcoin ETF and the Cosmos Purpose Bitcoin Access ETF, which allows Australian investors access to Canadas spot-based Bitcoin ETF from Purpose Investments.
These are major developments that can play an important role in facilitating greater financialization around Bitcoin. However, as with almost all good things in life, there is a downside to this. As most of our readers would know, weve been consistently highlighting Bitcoins growing correlation with US equities in recent months, which we believe is a function of greater institutional adoption. This correlation regime has prevented Bitcoin from acting as a true store of value in light of the ongoing inflationary impulse. Nonetheless, financial trends never last, and we do believe that the current high-correlation regime will end once enough secular demand around Bitcoin materializes.
This brings us to the growing headwinds around the worlds premier cryptocurrency.
Our readers would remember that China had unleashed a crypto destabilization wave back in 2021 when it completely banned the mining of Bitcoin and other cryptocurrencies, heralding a mass migration of mining activity into the US and other parts of the world.
Well, we have bad news on that account now. Chinas role in the mining of Bitcoin is again gaining ascendancy, having clinched the second spot in terms of the hash rate in recent days.
Given Beijings penchant for dropping the hammer on Bitcoin at anytime the cryptocurrency begins to gain prominence in the Asian country, we do believe that Bitcoin miners are setting themselves up for another regulatory crackdown under the auspices of Chinas Communist Party.
On the other front, the stablecoin universe continues to contend with the fallout from the implosion of Terras algorithmically adjusted UST. To wit, the Fantom stablecoin (DEI) recently became the latest stablecoin to lose its dollar peg. Moreover, Tethers (USDT) circulating supply has slipped by $7 billion in recent days amid soaring redemptions. Stablecoins act as the engine oil in the crypto world, allowing liquidity to flow seamlessly from one corner of the market to another. Tether is by far the largest player in this sphere. Even though USDT is fully backed by reserves, there are pockets of investors and analysts who continue to question whether Tether indeed holds sufficient reserves.
Under these conditions, if Tether were to suffer a black swan event, the implications for Bitcoin and the wider crypto universe would be truly horrific.
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If Bitcoin Fails To Hold a Crucial Support in Relation to the Price of Gold, the Ensuing Carnage Might See Its Price Fall to Around the $15,000 Level...
$3 billion in bitcoin was sold in a last-ditch attempt to save UST stablecoin from collapse – CNBC
Bitcoin fell below the $26,000 level since December 2020. (Photo credit should read CFOTO/Future Publishing via Getty Images)
CFOTO | Future Publishing via Getty Images
Investors have been eager to find out what happened to the $3 billion in bitcoin bought up by crypto firm Terra to back its failed stablecoin. Now, they've got their answer.
Luna Foundation Guard, a fund set up by Terra creator Do Kwon, said Monday it spent almost all of the bitcoin in its reserve last week in a futile attempt to save terraUSD or UST, for short.
The foundation had accumulated a total of more than 80,000 bitcoins, which was worth nearly $3 billion last week, as well as other tokens including BNB, tether, USDC and avalanche. Kwon had promised to use the bitcoin in the event of a dramatic fall in the value of UST.
In a series of tweets, Luna Foundation Guard said it transferred 52,189 bitcoins to "trade with a counterparty" as UST fell below its intended $1 peg. A further 33,206 bitcoins were sold by Terra directly in a last-ditch effort to defend the peg, the foundation said.
As of Monday, Luna Foundation Guard had just 313 bitcoins left in its reserve, worth approximately $9.3 million. The firm said it would use the remainder of its $85 million in crypto assets including some BNB and avalanche to "compensate remaining users" of UST.
"We are still debating through various distribution methods, updates to follow soon," Luna Foundation Guard said.
UST is what's known as an "algorithmic" stablecoin. Unlike tether and USDC, which hold fiat assets in a reserve to back their tokens, UST relied on a complex set of code, coupled with a floating token called luna, to balance supply and demand and stabilize the price.
When UST began to drop below $1 last week, luna also started to sell off, resulting in a vicious cycle that caused UST to plunge to less than 30 cents while luna became worthless. UST is now worth just 9 cents, according to CoinGecko data.
"The big problem when you're dealing with a partially collateralized stablecoin like UST is that your hard collateral bitcoin, in this case is going to be considerably more valuable to [investors] than your governance token," or luna, said Frances Coppola, an independent economist.
Blockchain analytics firm Elliptic estimates holders of UST and luna have lost a total of $42 billion over the past week. Analysis from the company shows that 52,189 bitcoins were moved to a single account at crypto exchange Gemini, while a further 28,205 bitcoins were transferred to Binance. Tom Robinson, chief scientist at Elliptic, said it was "not possible" to trace the movement of funds beyond these wallets.
The debacle rippled through crypto markets, wiping out more than $200 billion of wealth in a single day. Bitcoin on Thursday briefly fell below $26,000, its lowest level since December 2020. The world's biggest cryptocurrency was last trading at $29,526.75, down 1.4% in the last 24 hours.
"There's not a whole lot of outstanding sell pressure," said Dustin Teander, analyst at crypto research firm Messari.
"In a sense, the market is going to take that as kind of bullish."
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$3 billion in bitcoin was sold in a last-ditch attempt to save UST stablecoin from collapse - CNBC
Market Mayhem and Calling the Bitcoin Price Bottom – Bitcoin Magazine
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Listen To The Episode Here:
In this episode of the Fed Watch podcast, Christian Keroles and I, along with the livestream crew, discuss macro developments relevant to bitcoin. Topics include the recent 50 bps rate hike from the Fed, a consumer price index (CPI) preview the episode was recorded live on Tuesday, before the CPI data was released and a discussion on why owners equivalent rent is often misunderstood. We wrap up with an epic discussion of the bitcoin price.
This could be a pivotal episode in the history of Fed Watch, because Im on the record saying that bitcoin is in the neighborhood of the bottom. This is in stark contrast to the mainstream uber-bearishness in the market right now. In this episode, I rely heavily on charts that didnt always line up during the video. Those charts are provided below with a basic explanation. You can see the whole slide deck that I used here.
Fed Watch is a podcast for people interested in central bank current events and how Bitcoin will integrate or replace aspects of the traditional financial system. To understand how bitcoin will become global money, we must first understand whats happening now.
On this first chart, I point to the Feds last two rate hikes on the S&P 500 chart. I wrote in a blog post this week, What I'm trying to show is that the rate hikes themselves are not the Federal Reserves primary tool. Talking about hiking rates is the primary tool, along with fostering the belief in the magic of the Fed. Remove the arrows and try to guess where the announcements were.
Same goes for the next chart: gold.
Lastly, for this section, we looked at the bitcoin chart with quantitative easing (QE) and quantitative tightening (QT) plotted. As you can see, in the era with No QE, from 2015 to 2019, bitcoin experienced a 6,000% bull market. This is almost the exact opposite of what one would expect. To summarize this section, Fed policy has little to do with major swings in the market. Swings come from the unknowable complex ebbs and flows of the market. The Federal Reserve only tries to smooth the edges.
Its hard to write a good summary of this part of the podcast, because we were live one day prior to the data dropping. In the podcast, I cover Eurozone CPI going slightly higher, to 7.5% in April year-over-year (YoY), with a month-over-month rate of change dropping from a staggering 2.5% in March to 0.6% in April. That is the story most people are missing on CPI: month-to-month changes rapidly slowed in April. I also covered CPI forecasts for the U.S. on the podcast, but now, we have hard data for April. U.S. headline CPI dropped from 8.5% in March to 8.3% in April. Month-to-month change fell from 1.2% in March to 0.3% in April. Again, a big decline in the rate of CPI increase. CPI can be very confusing when looking at YoY figures.
It looks like inflation in April was measured at 8.3%, when in fact, it was measured at only 0.3%.
Year-over-year CPI, month-over-month CPI (source)
Next topic we cover in the podcast is rent. I very often hear misunderstandings of the CPI measure on shelter and specifically owners equivalent rent (OER). For starters, its very hard to measure the impact of increases to housing costs on consumers in general. Most people do not move very often. We have 15- or 30-year fixed-rate mortgages that are not affected at all by current home prices. Even rental leases are not renewed every month. Contracts typically last a year, sometimes more. Therefore, if a few people pay higher rents in a certain month, that does not affect the average persons shelter expenses or the average landlords revenue.
Taking current market prices for rentals or homes is a dishonest way to estimate the average cost of housing, yet not doing so is the most often-quoted critique of the CPI. Caveat: Im not saying CPI measures inflation (money printing); it measures an index of prices to maintain your standard of living. Of course, there are many layers of subjectivity in this statistic. OER more accurately estimates changes in housing costs for the average American, smooths out volatility and separates pure shelter costs from investment value.
The rest of the episode is talking about the current bitcoin price action. I start my bullish rant by showing the hash rate chart and talking about why it is a lagging and confirming indicator. With the hash rate at all-time highs and consistently increasing, this suggests that bitcoin is fairly valued at its current level.
Bitcoin hash rate (source)
The history of bitcoin drawdowns (source)
Recent years have seen shorter, smaller rallies and shorter, smaller drawdowns. This chart suggests that 50% drawdowns are the new normal, instead of 85%.
Now, we get into some technical analysis. I concentrate on the Relative Strength Index (RSI) because it is very basic and a fundamental building block of many other indicators. Monthly RSI is at levels that typically signal cycle bottoms. Currently, the monthly metric shows that bitcoin is more oversold than at the bottom of the corona crash in 2020. Weekly RSI is equally as oversold. It is as low as the bottom of the corona crash in 2020, and before that, the bottom of the bear market in 2018.
The Fear and Greed index is also extremely low. This measure is showing Extreme Fear that typically registers at relative bottoms and at 10, ties for the lowest rating since the COVID-19 crash in 2020.
In summary, my contrarian (bullish) argument is:
That does it for this week. Thanks to the readers and listeners. If you enjoy this content please subscribe, review and share!
This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
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Market Mayhem and Calling the Bitcoin Price Bottom - Bitcoin Magazine
Luna Foundation Tried to Prop Up Terras Crumbling Base With Billions in Bitcoin, But It Still Failed – Gizmodo
You could probably call it a luna eclipse, but perhaps only in reference to a celestial body suddenly blinking out of existence.Photo: Maurice Norbert (Shutterstock)
As a kid, I remember when my father tried to use a broom handle in a last ditch effort to support a roof that was collapsing from the weight of nearly three feet of snow. You can guess how well that went. In a similar vein, Terra blockchain reportedly spent $3.5 billion to keep the roof from collapsing in on itself. Now were seeing just how much it cost the once-popular cryptocurrency for its faulty broom handle.
The nonprofit Luna Foundation Guard, who oversees and supports the TerraUSD stablecoin and its blockchains native coin Luna, said in a tweeted statement Monday that on May 7 it had over 80,000 bitcoin in its wallet alongside many thousands of other various coins. The reserve was built to support Terra if it ever dropped below $1. After TerraUSD started to falter May 8, the LFG reported it loaned and traded its many thousands of reserve coins to maintain the peg it had in its stablecoin.
A stablecoin system like TerraUSD is tied to a currency, which in this case was the U.S. dollar, to provide financial security. One TerraUSD was equivalent to $1, but unlike other stablecoins Terra was algorithmically stabilized rather than being backed with assets, and it worked with its sister coin Luna in a kind of closed ecosystem to support each other to maintain the price of the currency. However, Terra started to falter around the weekend of May 8, which ultimately made people sell off their Luna in droves, creating a death spiral for both tokens. Now TerraUSD is being traded at 9 cents on the dollar.
After the rush to trade its reserves last week, the LFG said it is left with just 313 bitcoin alongside other coins. It has 222,700,000 Luna coins in its reserves as well, though currently the vast majority is staked with validators, meaning theyre being used to support the Terra blockchain which uses a proof of stake model. LFG stated that the Luna is unbonding and should be returned to stakers within 20 days.
Researchers at The Block estimated that the foundation had gone from $3.1 billion in reserves to just $87 million. Meanwhile, the foundation said it is compensating users of TerraUSD with its remaining tokens starting with smallest holders first.
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Conspiracies were on the move from the starting gun after the stablecoins price cratered last week. Some users baselessly claimed that the foundation and Terra were supporting the whales, AKA the largest holders of Luna and Terra, first. The LFG denied this.
Terra founder Do Kwon had previously said that they would be providing documentation of the use of reserves, but the LFGs latest tweets leaves several questions unanswered. CoinDesk has reported on some skeptical analysts who were confused by why much of the bitcoin ended up in major crypto exchanges Gemini and Binance, though its hard to determine what happened to the coins after that.
What likely didnt help Luna support itself was the rapidly declining price of practically all crypto around that time, including bitcoin. CNBC reported last Thursday that bitcoin was hitting price lows it hasnt seen in well over a year, and that investors lost a total of $200 billion during the rapid selloffs. Ether, the second biggest cryptocurrency next to bitcoin, has struggled to keep above trading at $2,000, compared to when it was going for over $4,400 at the end of 2021.
Luna and other cryptocurrencies fall these last two weeks has regulatory hounds ready to pounce. The International Organization of Securities Commissions is considering bringing a centralized regulatory body to what has traditionally been called decentralized finance.
This post was updated May 16 at 5:15 to amend the name of the stablecoin.