Category Archives: Cryptocurrency

ETH Inflation Rate: 5%

Source: TrustNodes, Jan 2020

an inflation rate of circa 5% a year which will increase a bit further potentially this summer once hybrid Proof of Stake (PoS) launches.

Then onwards it looks probable it will stay around these levels until around September 2021 when the difficulty bomb is to kick-in again.

Around that time full Proof of Stake might launch, at which point the Proof of Work (PoW) chain is set to be discarded.

This 5% inflation from the PoW chain will be discarded with it, leaving an inflation rate of only 0.22%.

These timings however are an estimate as are future inflation levels as packaging the PoW chain into a PoS first shard is very complex and something to be done with great care.

Yet the aim is to eventually get down to this 0.22% inflation level, but in the meantime ethereum’s inflation will stay at 5%.

90% of All ETH Wallets Now ‘Out-of-the-Money’

Source: CoinDesk, Jan 2020

The second-largest cryptocurrency, which powers ethereum’s blockchain, is currently trading at $131, representing a 90 percent drop from the all-time high of $1,431 reached in early January 2018, according to CoinDesk’s ether price index.

The relentless price slide has pushed 90 percent or 31.31 million ether addresses “out-of-the-money,” according to blockchain intelligence firm IntoTheBlock.

An address is said to be out-of-the-money if the current price of ether is lower than the average price at which the coins were acquired or sent to an address.

So, the 31.31 million ether addresses have acquired coins at an average price higher than the ether’s current value of $131.

A major chunk of out-of-the-money addresses purchased coins in the range of $211 to $530. Notably, the biggest cluster, some 4.77 million addresses, is in an average cost range of $262 to $352.

Meanwhile, a mere 8 percent or 2.79 million addresses are “in-the-money” – the cost of acquisition is lower than the current price of ether – and 1.78 percent addresses are “at-the-money,” with an average purchase purchase price almost equal to the current spot price.

The majority of the in-the-money addresses have acquired coins in the range of $0 to $130, while 4,120 addresses have an average cost of $0. These could be early buyers who bought ether in the period between August  2015 and December 2015, when the cryptocurrency was trading in cents.

While the number of addresses in-the-money is small, the volume of ether these addresses are holding is quite significant.

Only 8 percent of addresses are in-the-money, but hold 31.24 percent of the total ether held in all addresses. That amounts to 34.05 million ethers ($4.5 billion).

These investors have already seen their massive profits evaporate in the last 23 months and may offload their holdings if prices find acceptance under $100, adding to bearish pressures around ether.

Out-of-the-money addresses are holding 73.13 million ethers. Clusters of addresses with an average price in the range of $144-$170, $212-$262, or $262-$352 are holding a total of 36.24 million ethers.

A few observers believe ethereum’s persistent scalability issues likely dented investor confidence, leading to a price drop.

Ethereum has consistently missed deadlines for protocol upgrades,” said Connor Abendschein, research analyst at Digital Assets Data, to CoinDesk. “Ethereum 2.0 was supposed to have already gone into effect earlier this year, and it still hasn’t gone through.”

Ethereum 2.0 is a major network upgrade that will shift the blockchain’s current proof-of-work consensus algorithm to proof-of-stake and transfer validation function from miners to special network validators.

Under proof-of-work, miners compete with each other to solve a difficult puzzle (algorithm) to add each block to the chain. Under proof-of-stake, there is no competition as the block creator is selected based on the user’s stake in the project – in other words, ether holdings.

The market is expecting the first upgrade to be rolled out in January 2020. Ryan Selkis, CEO of Messari, however, thinks the transition won’t happen until 2022.

Bitcoin Gained Almost 9,000,000% (90,000X) in the Last Decade (2010-2019)

Source: Bitcoin.com, Dec 2019

Netflix gained +4,177%, Amazon (+1,787%) Apple (+966%), Microsoft (+556%), Disney: (+423%) and Google (+335%), gold only saw a +38% gain. Bitcoin rose by +8.9 million percent between January 2010 up until now.

China Dominates Bitcoin Mining (Hashrate) – 65%

Source: ZeroHedge, Dec 2019

In June, China’s Bitcoin miners controlled 60% of the global hash rate, and now the figure is up to 65% in December.

Mining crypto has become more difficult over the last several years as profitability sags. The overall Bitcoin hash rate has risen 80% since June, which in recent times, has created stronger profitability for miners who have access to cheap electricity.

China Dominates Hashrate Processing

Source: ZeroHedge, Dec 2019

China’s Bitcoin miners now control a whopping 66% of the world’s crypto network’s processing power. This could be bad news for US miners as it signals China is quickly advancing.

Also known as “hashrate,” it’s the speed at which a computer is performing an operation in Bitcoin code to unlock coins, China has been steadily gaining hashrate share this year.

Was Bitcoin’s 2017 Tremendous Price Appreciation Manipulated?

Source: Bloomberg, Nov 2019

A Texas academic created a stir last year by alleging that Bitcoin’s astronomical surge in 2017 was probably triggered by manipulation. He’s now doubling down with a striking new claim: a single market whale was likely behind the misconduct, seemingly with the power to move prices at will.

One entity on the cryptocurrency exchange Bitfinex appears capable of sending the price of Bitcoin higher when it falls below certain thresholds, according to University of Texas Professor John Griffin and Ohio State University’s Amin Shams. Griffin and Shams, who have updated a paper they first published in 2018, say the transactions rely on Tether, a widely used digital token that is meant to hold its value at $1.

Griffin and Shams’s hypothesis that Bitcoin was manipulated is based partly on the theory that new Tethers are created without the dollars to back them and then used to buy Bitcoin, leading to rising prices.

The authors examined Tether and Bitcoin transactions from March 1, 2017 to March 31, 2018, concluding that Bitcoin purchases on Bitfinex increased whenever Bitcoin’s value fell by certain increments. Griffin and Shams didn’t name the entity on Bitfinex that they think was responsible. They shared their updated research with Bloomberg News.

Related Resource:  Bitcoin.com, Nov 2019

Circle CEO Jeremy Allair labeled the WSJ’s story on the matter “extremely weak reporting” and explained that “in 2017/2018 there was demand for buying BTC and a massive alt coin rally. The majority of that demand came from Asia and China, and since there were no CNY ramps into BTC, everyone went to offshore USDT processors. These processors would then generate large prints of USDT. The only thing this supposed analysis shows is that Asia traders demanded fiat to buy BTC.”

Bitcoin Futures Popped the Bitcoin Bubble

Source: Coindesk, Oct 2019

The Trump administration acted to deflate the bitcoin bubble of 2017 by allowing the introduction of futures products, a former official said Monday.

Christopher Giancarlo, who left the U.S. Commodity Futures Trading Commission (CFTC) at the end of his five-year term as chairman in April, told CoinDesk in an interview:

“One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the [National Economic Council] director at the time, Gary Cohn, believed that the launch of bitcoin futures would have the impact of popping the bitcoin bubble. And it worked.”

Bitcoin futures listed by the Chicago Mercantile Exchange (CME) and the CBOE Futures Exchange (CFE) were announced by the CFTC on Dec. 1, 2017 and went live on Dec. 18. Bitcoin’s price peaked at nearly $20,000 one day earlier, on Dec. 17, before falling dramatically in subsequent weeks.

Giancarlo cited research by the San Francisco Federal Reserve that also credits the introduction of bitcoin futures for reining in a market driven by optimists.

Without shorts, a market has no pessimists. “If you do believe it’s a ridiculous price but you don’t own, there’s no way to express that view,” Giancarlo told CoinDesk, adding:

“If you don’t have that derivative, then all you’ve got are believers [and] it’s a believers’ market.”

The lack of easy ways to short has been cited by other researchers as propping up prices in other crypto assets.