As crypto continues to mature and grow, its is increasingly running into regulatory challenges from a cacophony of legislative and enforcement bodies around the world. As a result, many high-profile firms have begun to hire senior officials from those agencies. This strategy can pay dividends, but it is not a panacea.
Despite the rough crypto markets, trader Lark Davis says six digital assets have the potential to appreciate by ten times or more by the end of the year.
Davis kicks off the list with layer-2 decentralized exchange protocol Injective Protocol (INJ) which he argues is currently discounted as its team prepares for launch.
“I’m bringing this coin up because it is at a bit of a discount right now. It’s down by about a third in its price from its all-time high. But also injective protocol is going to be going on their mainnet soon.
“…and again that current market cap, it’s only $400 million. This could easily be a 10x or more kind of coin. Once that mainnet launches, we start seeing real demand coming in for the token, we start seeing real users coming in, it’s going to be big.”
The YouTuber names decentralized exchange QuickSwap (QUICK) as the second digital asset that he believes is set to rally. Davis argues that QuickSwap, which exists on the Polygon network, is currently undervalued.
“I think it’s actually an undervalued cryptocurrency right now because the polygon network itself has been going crazy.”
Synthetic asset platform Linear Finance (LINA) is third on Davis’s list of digital assets likely to appreciate by ten times. According to Davis, Linear Finance is currently selling at a bargain.
“[Linear Finance’s] price is actually down around 77% from its all-time high, which is a pretty dramatic fall in price for something that has been delivering on technology, has users, has been actually you know surviving and building and doing things. It is an irrationally oversold asset right now.”
“I think that this has got a lot of room left to grow considering that these big protocols like Synthetix (SNX) have 20x the market cap of what Linear Finance does right now.”
The cryptocurrency analyst and trader says decentralized exchange Bancor Network (BNT) is another digital asset with high upside potential. Per Davis, Bancor is a compelling investment as it stands out in the DeFi space.
“The product that they’ve delivered is really really cool. So what they’ve been able to solve is the impermanent loss problems. So they allow you to do single-sided liquidity provision with no impermanent loss.
“I could even see Bancor again potentially doing a 10x move if the market remains generally bullish throughout the rest of the year.”
Non-fungible token (NFT) platform EpiK Protocol (EPK) comes fifth on the list of digital assets likely to rally by over or up to ten times. Davis argues that EpiK Protocol, which is on the verge of conducting a token sale, possesses ‘very high potential’ due to the niche market it is targeting – gaming.
“What’s interesting too about EpiK is that there’s not really any direct competitors in the crypto space to what they’re trying to do. They’re tapping specifically into the gaming market working with these massive brands. They’re tapping into a userbase here of a hundred million potential users and gamers.”
The YouTuber rounds off the list with Solana blockchain-based DeFi platform Mercurial Finance (MER) which is in the process of undergoing a token sale.
“So if you’re looking to get exposure to an early mover in the Solana ecosystem the Mercurial Finance is definitely one to be checking out.”
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Elliptic (a British blockchain security & analytics company) successfully traced DarkSide’s primary Bitcoin address, which contained over $90M in payments from 47 different victims.
Ransomware As a Service – a Twisted Model
DarkSide designs, creates and markets ransomware software to be sold to other cybercriminals who are able to locate the best targets. This type of software has the ability to lock down an entire system, making files and features on it inaccessible until BTC is paid to unlock it.
Instead of having to find all the targets themselves, DarkSide can outsource this to criminal ‘affiliates’ who are able to target vulnerable systems.
These affiliates can be insiders to a company with elevated access that DarkSide themselves may not have and are thus rewarded handsomely.
According to Elliptic’s report, only about $15M went to DarkSide’s developers themselves – the other $75M went to affiliates. Elliptic’s chief scientist went on to note that this is, in fact, a lower bound since the estimate only consists of confirmed transactions – more might be uncovered in the following weeks.
The Pipeline Attack and its Implications
DarkSide’s attack resulted in gas shortages, high prices, and general panic across the United States. Multiple important infrastructural sites run similar archaic software that the Colonial Pipeline ran on – things like water tanks and nuclear power plants. A gas shortage, although problematic, is relatively benign compared to how bad the situation could have been.
Speculation is rampant about where DarkSide’s funds have gone. Unverified sources claim that the bitcoins were seized by the US government. In contrast, others claim that DarkSide leveraged their newfound wealth to create the massive 10,000 BTC short position that recently appeared on Bitfinex, causing a dip in Bitcoin’s price.
As cybercriminals get more sophisticated, with SIM swap and ransomware attacks on the rise, everybody – both governments and the average consumer – needs to ramp up their security measures. President Biden signed an executive order last week that aims to ramp up America’s cybersecurity defenses, as the US is being left behind by international competitors in that realm.
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The two billionaires suffer from the same fiat illusion that keeps them from accepting and understanding a bitcoin standard.
Why Do Munger And Buffet Criticize Bitcoin?
A breakdown of Berkshire Hathaway’s top-12 portfolio holdings and their high correlation with the existing fiat financial service system.
Have you ever noticed people who criticize bitcoin possess one of two key characteristics? 1) They do not understand at all what bitcoin is or why it has value, and/or 2) bitcoin’s success threatens their wealth in the fiat system. Without fail you can categorize 98% of bitcoin criticism into these two categories. It’s really quite astonishing!
Warren Buffet and Charlie Munger publicly criticized bitcoin at the recent annual Berkshire Hathaway shareholders meeting. Buffett is the fifth richest person in the world (in USD) with a net worth of ~$105 Billion USD. Charlie Munger is also a fiat billionaire with a net worth of over $2 billion in USD terms. Buffet is the chairman and CEO of Berkshire Hathaway, and Munger is the vice chairman. Both Buffett and Munger can easily be classified as two of the most successful investors in the last 50 years. When they talk, people listen and for good reason! They are obviously good investors; being among the richest people on the planet tends to give you credibility in that way. Having said that, Buffett and Munger are dead wrong about bitcoin.
Munger’s Thoughts On Bitcoin
During Berkshire Hathaway’s annual shareholder meeting this weekend, Munger criticized bitcoin by stating: “Of course I hate the Bitcoin success … nor do I like just shuffling out a few extra billions and billions of dollars to somebody who invented a new financial product out of thin air.” To me, this quote is very telling.
1) It illustrates both a lack of understanding of what bitcoin is, and
2) a reluctance or anger to have to adopt a new financial model.
“Of course, I hate the Bitcoin success” is a particularly strange choice of words. Why the hate? What has bitcoin ever done to you? My interpretation: Munger has become a billionaire in USD terms and does not want to all of a sudden have to switch his unit of account. Simply put, Munger is hesitant to adopt the bitcoin standard as he would go from one of the world’s wealthiest (in USD) to owning zero bitcoin.
I liken Munger’s comments to someone who has been playing a sport his entire life. Munger and Buffet have been two of the best at their sport for decades. Suddenly, 13 years ago, the rules of the sport changed (Bitcoin), but nobody told Munger or explained why. Today, Munger looks around and there are now a lot of new people playing the same sport as him. But only playing better because the new rules say so.
For Munger, recognizing bitcoin’s success, would indirectly devalue the USD. He sees bitcoin as a threat to the wealth he and Buffet have made in fiat terms. When people either feel threatened by bitcoin or do not understand bitcoin (or both) they tend to lash out negatively and publicly. It’s human nature; we mock what we do not understand and we fight when we feel threatened.
Berkshire’s Fiat Financial Services Holdings
Why does Munger feel threatened by bitcoin? Because five of Berkshire Hathaway’s top-12 investments (based on percentage of portfolio allocation) are banks or directly related to fiat financing (based on Berkshire’s latest 13F filings). Based on percentage of portfolio allocation, those companies are as follows:
Almost a quarter of Berkshire’s top-12 holdings (let alone their entire portfolio allocation) are invested in either a bank, a credit card company or a financial services company which provides investors with credit ratings, risk analysis and research for stocks, bonds and government entities.
- Bank of America Corporation (BAC), 11.35%
- American Express Company (AXP), 6.79%
- Moody’s Corporation (MC), 2.65%
- U.S. Bancorp (USB), 2.26%
- Bank of New York Mellon Corp (BK), 1.14%
In fiat dollar terms, that is $65.28 billion USD invested toward fiat financial services continuing to excel.
Putting Your Mouth Where Your Money Is
Based on this portfolio allocation, does this seem like a company which stands to gain or lose wealth through the adoption of a new financial system? Based on Berkshire Hathaway’s investments, does bitcoin as an accepted unit of wealth help? Of course not. Berkshire stands to lose wealth with bitcoin’s success. Based on the amount of capital that Buffet, Munger and Berkshire have invested in the fiat monetary system, do their negative comments on bitcoin surprise me? Not at all, frankly if they had come out in support of bitcoin, with that much exposure to fiat financial services, I would have been shocked. My guess is so, too, would their shareholders. This past February, if I had bet $65.28 billion on the Tampa Bay Buccaneers to win the Super Bowl, do you think I would be cheering for the Kansas City Chiefs to get a first down? Heck no.
“Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” — James W. Fick
The next time you read a negative comment toward bitcoin ask yourself: What do they stand to lose with bitcoin’s success? The answer is very telling.
“‘I’ll miss a lot of things that I don’t feel I understand well enough, and there is no penalty in investing if you don’t swing at a ball that’s in the strike zone, as long as you swing at something at some point … We’ll try to stay within our circle of competence, and Charlie and I generally agree on where that circle ends… We’ll try to stay within our circle of competence … We’re going to miss a lot of things.” — Warren Buffett
Like investing, staying within our circle of competence should hold true for criticisms as well. Knowledge is power.
This is a guest post by Drew MacMartin. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
- Senate Banking Committee Chair Sherrod Brown wants the OCC to take a second look at three conditional banking charter approvals.
- Acting Comptroller Michael Hsu has already initiated a review of OCC guidelines issued under Brian Brooks.
Several months after taking control of the US Senate, Democratic lawmakers are signaling a shift in their oversight of financial regulators, which could put so-called “crypto banks” in a precarious position.
Senate Banking Committee Chairman Sherrod Brown yesterday sent a letter to the acting head of the Office of the Comptroller of the Currency (OCC), Michael Hsu, asking the banking regulator to “reassess” the conditional national trust charters given to three cryptocurrency firms: Anchorage, Paxos, and Protego.
“A firm that cannot meet the rigorous requirements applicable to other banks should not be allowed to present itself to the public as a bank,” Sen. Brown wrote. “Paxos, Protego and Anchorage seek to broaden access to cryptocurrencies and other risky and unproven digital assets and emerging technologies to traditional bank customers.”
Sen. Brown argued that the listed cryptocurrency companies are using their charters to advertise their services as “safe, stable and dependable.” But Sen. Brown cites volatility—as evidenced by yesterday’s 30% crash—and market manipulation by power brokers, notably Elon Musk, as reasons why “the OCC is not in a position to regulate these entities comparably to traditional banks.” He also alluded to the fact that House colleagues, most notably House Financial Services Chair Maxine Waters, have called on the OCC to reconsider its rule changes.
OCC trust charters allow the recipients to legally take on some of the duties of traditional banks. While they can’t tap into the Federal Reserve’s payment system for settlements, they can act as qualified custodians of clients’ assets while taking cash deposits through a sub-custodian insured by the Federal Deposit Insurance Corporation (FDIC). Moreover, they need not navigate 50 different states’ money transmitter licenses.
Anchorage, a crypto custodian firm, received conditional approval to become Anchorage Digital Bank in January. That was followed by conditional approvals for crypto lending firm Protego in February and PayPal-partner Paxos in April.
All of those, however, predate Michael Hsu’s appointment as Acting Comptroller by Treasury Secretary Janet Yellen on May 10.
Hsu, a former CEO of Kimberly-Clark and VP at Kraft Foods and H.J. Heinz, has split with his Trump-era predecessor, Brian Brooks, who joined the agency from U.S. cryptocurrency exchange . Brooks has since been named CEO of rival exchange Binance.US.
Under Brooks’ leadership, the OCC aggressively revamped the regulatory landscape for banks to include cryptocurrency firms. In addition to granting banking charters to fintech firms, the OCC in January issued new guidance stating that banks themselves could wade into cryptocurrency by issuing or using technology for payment activities.
On Tuesday, Hsu published written remarks to the House Committee on Financial Services stating that he was calling for a review of the OCC’s actions. “My broader concern is that these initiatives were not done in full coordination with all stakeholders,” he wrote.
That neatly matches with Sen. Brown’s objection. “It is also unclear whether the OCC engaged in the appropriate due diligence to stand behind this ‘seal of approval’ before granting these charters,” he wrote.
Hopes for a continuation of the OCC’s crypto banking policies into the Biden White House are flagging. Though former Treasury official and Ripple advisor Michael Barr was once considered to be the likely pick as Comptroller, Sen. Brown pushed for the nomination of progressive academic Mehrsa Baradaran, a skeptic.
In 2019, Baradaran told the Senate Committee on Banking, Housing and Urban Affairs: “While I share many of the cryptocurrency industry’s concerns with respect to failures of the banking industry, I do not believe cryptocurrency is the best solution to the problems of financial inclusion and equity in banking.”
The Biden administration has yet to put forward an official nominee, though it’s clear that Sen. Brown will have a significant say in who that will be—and how, once confirmed, that person will handle crypto banking.
The bitcoin and cryptocurrency price roller coaster is on its way back up after a tumultuous week that’s wiped $500 billion from the crypto market.
The bitcoin price crashed to $30,000 this week after Tesla billionaire and “dogecoin CEO” Elon Musk appeared to sour on bitcoin due to environmental concerns and fears swirled around a renewed crypto crackdown in China—but it has already made back much of its losses, climbing back over $40,000.
Now, Musk—who has continued to boost the price of dogecoin with tongue-in-cheek tweets—has called on the biggest bitcoin miners to disclose how much of their energy comes from renewables and claimed bitcoin mining “energy usage is starting to exceed that of medium-sized countries.”
“Recent extreme energy usage growth could not possibly have been done so fast with renewables,” Musk said via Twitter in response to a claim bitcoin mining we could allow solar and battery systems to economically scale to provide a larger share of grid energy.
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“This question is easily resolved if the top 10 hashing [organizations] just post audited numbers of renewable energy vs not.”
The debate over bitcoin’s huge energy use has rolled on for years but has been elevated in recent months by bitcoin’s soaring price—which in turn has pushed up the bitcoin network’s electricity demands.
Those that run the computers securing the bitcoin network—known as miners—are rewarded for their computing power with bitcoin tokens. The computers, spread around the world and requiring both power and cooling, are thought to use as much electricity as Sweden, consuming 131.8TWh in 2020, according to Cambridge university’s Bitcoin Electricity Consumption index.
“Bitcoin hashing (AKA mining) energy usage is starting to exceed that of medium-sized countries,” added Musk, replying to a Tesla fan account that claimed “these massive [bitcoin mining organizations] take away the fabric of decentralization. A true ‘for the people crypto’ needs to be realized.”
Musk, who rocked the bitcoin and cryptocurrency market last week when he pulled the plug on Tesla bitcoin payments due to its surging energy use, last week suggested “joke” cryptocurrency dogecoin could be upgraded to rival bitcoin—and continues to signal his support of the meme-based digital token.
“How much is that doge in the window,” Musk posted to Twitter alongside an image sporting a Shiba Inu dog on a $1 bill, subtly suggesting the dogecoin price could more than double from its current 40 cents.
Many dogecoin devotees have long predicted dogecoin, created in 2013 partly to mock bitcoin and other cryptocurrencies, could reach a $1 per dogecoin price. The price has rocketed this year, with social media influencers joining with high-profile investors to talk up dogecoin.
- Elon Musk likes to tweet about Dogecoin and Bitcoin.
- A whale that appears to admire Musk continues to buy DOGE.
Tesla CEO Elon Musk has tweeted that he’s never sold Dogecoin and “won’t sell any DOGE.”
Musk has a knack for pushing the price of cryptocurrencies up—and down—with sixty-character memos to his 55 million Twitter followers.
So, the market for , hungry for any sort of development to spur trading, responded by…doing nothing. Actually, less than nothing. The market for DOGE is down slightly in the hours since the tweet.
At least one whale was buying on the news, however. The person in control of the address with the most Dogecoin today bought another 4.2069 DOGE (a combination of the cannabis-associated numerals and a sexual position because…humor). The purchase, worth $1.70, comes after a May 18 transaction of 420.69 DOGE worth $192.92. Though that wallet did sell 100 million DOGE ($7.3 million) on April 12, there’s nearly $15 billion in it, and speculation is rife that it belongs to Musk–or, at least, to someone who admires him. For instance, the same wallet has a penchant for making transactions of 28.061971 DOGE, an apparent reference to Musk’s birthday: June 28, 1971.
Yet an extra $1.70 coupled with a tweeted response haven’t been enough to move a market worth $52 billion, even one as volatile as Dogecoin. That could be because there’s only so much Musk can pump the markets in one day. After tweeting “How much is that Doge in the window?” early this morning, the asset went from just less to $0.37 to $0.40 in minutes. That’s where it remains.
Musk’s influence is perhaps, maybe, (hopefully?) waning as retail crypto investors tire of the yo-yo and look for other indicators to pin down a price.
For those who haven’t ridden the Crypto Twitter rollercoaster, take Musk’s on-again, off-again relationship with . In January, Tesla announced it had bought $1.5 billion worth of the digital asset. Moreover, it stated it would be accepting BTC for its cars without cashing out the profits for fiat. Bitcoin prices surged by thousands in the course of hours.
But in its Q1 earnings report, the company stated it had sold 10% of its BTC stash to “prove liquidity of Bitcoin as an alternative to holding cash.” Then, on May 12, Musk stated Tesla would no longer accept BTC due to environmental concerns. BTC, which started that day at $57,000, slid to $50,000 by the end of it.
But then yesterday: Musk tweeted diamond and hand emojis next to the name Tesla, suggesting that the electric car maker will not be selling its Bitcoin holdings. As if on cue, the Bitcoin market bounced back up 9% in less than an hour.
But…that came just a few days after Musk obliquely suggested Bitcoin was going to dump its Bitcoin and sent a series of tweets critical of the “centralized” currency.
All of that dovetails with Dogecoin, which has more often been the beneficiary of Musk’s verbal beneficence. Musk, with an assist from Dallas Mavericks owner Mark Cuban, helped push the joke coin into the national consciousness. At its height, DOGE, which until this year had never reached $0.02, was trading for $0.70. It now has a market cap of $52 billion, the seventh-highest in crypto.
Yet while hosting Saturday Night Live on May 8, he took the opportunity to poke fun of the coin in his opening monologue and later, in character, called it “a hustle.” The price of the coin tanked as whales cashed out.
And, of course, now he’s back driving the Doge bus. Musk claims to be working with developers to improve Dogecoin and make it better than Bitcoin. “Ideally, Doge speeds up block time 10X, increases block size 10X & drops fee 100X,” he tweeted on May 15. “Then it wins hands down.”
While that all might sound great to DOGE holders, maybe we’d all be better off if he just sold and put down his iPhone.
China’s blockchain-linked stocks remain undisrupted by the chaos surrounding the general cryptocurrency market. The eight Chinese A-share equities connected to the blockchain technology behind cryptocurrencies are down less than 2% in Singapore on Thursday.
Different from the Rest?
In comparison, there was a more than 5% average plunge for a basket of 24 global crypto stocks outside China on the same day. The comparison is primarily due to Chinese past crypto trading crackdowns, such as the ban on fiat-cryptocurrencies transactions.
There are, therefore, a cohort of mining companies and trading platforms while leading Chinese specialists in digital technology are supporting virtual currencies.
That means that mainland crypto-connected shares are likely to be less affected by digital tokens, said Vijay Ayyar, Asia-Pacific leader with Luno crypto exchange in Singapore.
One of the reasons for this looser partnership is that Chinese blockchain stocks have skipped the glaring path of global crypto in the context of more than one year of digital tokens.
On Thursday, Bitcoin was steadier, trading about $40,000 in Hong Kong from 1:45 p.m. The mid-April record is around $25,000 short. The US exchange Coinbase Global Inc. dropped 5.9 percent to a record low on Wednesday, with MicroStrategy Inc. holding substantial Bitcoin dropping by almost 7 percent, among well-established, exposed crypto stocks.
However, companies like MicroStrategy did well for long-term investment – over the past year, the stock has more than tripled.
China’s Relationship with Crypto
China’s cryptocurrency chilly stance dates back years. Alongside the nation’s failures to outlaw cryptos in their entirety, regulators announced in 2013 that bitcoin was not a real currency. They then referred to the danger of Bitcoin use for money laundering, the need to keep financial stability and protect yuan status as a fiat currency.
Members of the public may keep cryptocurrencies or trade them, but they shut down significant exchanges in mainland China. In 2017, authorities banned initial coin offerings, allowing technology companies to collect money via the publication of crypto tokens.
The growing crackdown may also be partly to improve the Chinese government-supported digital yuan initiative to enforcement authorities to keep money under tight supervision.
Although the 2013 notice only named Bitcoin, some analysts took it to apply to any crypto given the currency disaster in Beijing. The Chinese Times of the state on Wednesday called the latest announcement a risk warning in nature. While it is not national legislation or regulations, it is to a certain degree an “industry practice,” the outlet quoted Zhu Youping, an official at the State Information Centre, as the policymaking think tank.
It reveals, however, that China hasn’t quickly changed its crypto tack – which seemed sufficient to concern traders.
- Celebrity fitness trainer Jillian Michaels disclosed her cryptocurrency investment on Twitter today.
- Michaels says that she holds $500,000 of Cardano (ADA) and $10,000 worth of Dogecoin (DOGE).
- Celebrity endorsements of cryptocurrency are on the rise.
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Celebrity fitness trainer and TV personality Jillian Michaels revealed her cryptocurrency investment via Twitter today.
Michaels Holds Over $500,000 of Crypto
Michaels mentioned that she holds $10,000 worth of DOGE and has staked $500,000 worth of ADA on the Cardano blockchain.
I don’t hate doge – I threw 10k at it for fun. I threw 500k at Ada and staked it.
— Jillian Michaels (@JillianMichaels) May 19, 2021
She endorsed those cryptocurrencies in response to Shark Tank host Mark Cuban, who recently questioned the merits of Cardano and suggested the coin currently has limited commercial use. “Are you, personally, able to use ADA for anything?…That’s the question I ask about all crypto,” he recently stated on Twitter.
Instead, Cuban has repeatedly expressed support for Dogecoin and has even added it to the Dallas Mavericks store as a means of payment. Michaels has criticized his stance, stating that choosing “DOGE over ADA is like choosing a porn star over Sophia Lauren.”
Nevertheless, Michaels herself previously indicated limited support for Dogecoin. She mentioned a “sizable” Dogecoin investment at the end of April, but did not disclose the amount of that investment beyond the fact that it had doubled in value.
I literally recently spent sizable amount of money on a crypto currency involving a dog in a meme – based off the advice of a 28 year old. And then… doubled by money. What is this life 🤯 #DogeDay
— Jillian Michaels (@JillianMichaels) April 20, 2021
Michaels is best known for her work on the reality TV series “The Biggest Loser” and various other series for NBC and CBS.
Cardano Remains a Top Five Coin
Both Cardano and Dogecoin have quickly gained value. Cardano has gained 3,000% year-to-date, putting it among the top five coins. Dogecoin has gained 15,700% year-to-date, putting it at #7.
Dogecoin has seen numerous endorsements from celebrities such as Tesla CEO Elon Musk, KISS frontman Gene Simmons, and rapper Snoop Dog. It has also found significant commercial adoption: there are currently about 1,300 merchants that accept the DOGE cryptocurrency, according to Cryptwerk.
Meanwhile, Cardano has seen very little endorsement outside of the crypto industry. It is accepted at less than 200 stores, and Cardano creator Charles Hoskinson has insisted on reducing fees and ensuring security before ADA is widely used in payments.
If other celebrities in addition to Jillian Michaels endorse Cardano, that could help Cardano maintain its position until it gains traction.
Disclaimer: At the time of writing this author held less than $75 of Bitcoin, Ethereum, and altcoins.
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- Canada’s central bank has warned about “high-risk” assets like Bitcoin in a new report.
- The Bank of Canada sees cryptocurrencies as a threat.
The Bank of Canada today issued a warning on cryptocurrencies, describing such assets as “high-risk.” And if you were among the group of investors who purchased Bitcoin at its peak of $63,000, that assessment likely comes as no surprise.
In its annual review of vulnerabilities and risks in the financial sector, the central bank said that despite their growing popularity, the intrinsic value of assets like Bitcoin and Ethereum is “hard to establish.”
The implication is that these assets are only good for speculation, and the events of the last week only fuel such criticisms. Bitcoin lost more than half of its value from its peak when it dropped to $30,000 yesterday in a crash that saw massive losses incurred across the crypto market. But Crypto believers say that such drawdowns are not uncommon and may even be healthy for the market. Bitcoin is currently trading for around $40,000 per coin.
The bank included the crypto world in its vulnerability report because it is perceived as a threat to the financial status quo in the country. Crypto gets significant media attention and the market cap of all assets has shot up from $200 billion at the start of 2020 to more than US$2 trillion in May 2021, the bank said.
It added that “if a large technology firm—a so-called Big Tech—with a sizable user base decided to issue a cryptocurrency that became widely accepted as a means of payment,” crypto could become more of an asset class and a threat.
The bank mentioned stablecoins, cryptocurrencies designed to have low volatility that are usually pegged to the fiat money like the US dollar, or even gold.
Such currencies could end up hurting the bank, the report said, if they aren’t pegged to the government-backed Canadian dollar. “Notably, unless stablecoins are backed exclusively by Canadian dollars, their widespread adoption could inhibit the Bank’s ability to implement monetary policy and act as lender of last resort,” the Bank of Canada noted.
Cryptocurrencies are very popular in Canada. The country beat the U.S. in launching a crypto-backed exchange-traded fund (ETF) and now there are eight operating in the country.
An ETF is an investment product that allows people to buy shares that represent a certain asset. They are huge in the world of traditional finance, and the Ethereum and Bitcoin ETFs that kicked off in Canada were a sign that the world of digital currencies was going mainstream.
But the Bank of Canada thinks differently. “Despite their growing popularity, these markets are not of systemic importance in Canada, neither as an asset class nor as a payment instrument,” the report read.
Purpose ETF, the first Bitcoin ETF to launch on the Toronto Stock Exchange, was massively popular when it launched on the Toronto Stock Exchange, and broke records with the amount of crypto-backed stocks it sold—$165 million in its first day.
The Bank of Canada previously mentioned the threat of crypto assets to the banking system in its 2019 annual report, saying they have the “potential to create changes in the financial system.” Bitcoin advocates would argue that such changes are precisely the point.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.