Crypto Weekly: GameStop-worthy volatility and prominent names
Summary: The fourth-biggest cryptocurrency, XRP, has experienced GameStop-worthy volatility over the past days. Bitcoin was mentioned positively by Elon Musk and Ray Dalio - but negatively by environmentally oriented people.
From GameStop to XRP comes with volatility
The fourth-biggest cryptocurrency, XRP, has experienced some volatile months, culminating in the previous days with a degree of volatility not often seen with cryptocurrencies of that size. From being traded at around $0.29 on Saturday, the cryptocurrency surged to an intra-day high of $0.74 on Monday, resulting in an over 100% increase in only two days. However, since yesterday, the surge has corrected significantly as XRP is currently trading at $0.38. We have earlier reported on XRP’s legal issues with the SEC on whether it is perceived as a security, recently leading to multiple delisting’s of the cryptocurrency. According to numerous sources, the price fluctuation resulted from low liquidity on XRP pairs due to the delistings. Simultaneously, various dump-and-pump attacks allegedly targeted XRP, supposedly inspired by the GameStop surge, resulting in high volatility. Speaking of XRP’s ongoing battle with the SEC, the cryptocurrency denied last week the allegations of having sold XRP as a security in a 93-page filing.
Prominent names in the space
The current second richest person in the world according to Forbes, Elon Musk, has for a long time intermittently been tweeting about Bitcoin. This hit a climax last week when Elon Musk updated his Twitter-biography to only subsist of #bitcoin. The market immediately responded well to the updated biography as Bitcoin spiked with 13% minutes after. On Sunday, Musk specified his opinion on Bitcoin in a discussion on the newly popular social network Clubhouse. On the talk, he clarified his belief in Bitcoin as being a good thing - and said that he is a supporter. However, Musk was not the only prominent person last week with supportive thoughts on Bitcoin. Ray Dalio - the founder of the world’s biggest hedge fund, Bridgewater Associates - described Bitcoin as “one hell of an invention” in a public note on the hedge fund’s website. He furthermore described Bitcoin as an alternative gold-like asset. On the other hand, he added that cryptocurrencies are incredibly vulnerable to cyberattacks and regulations by respective governments.
Bitcoin is - still - not optimal for the environment
For years, it has been a topic that mining - and thereby, processing transactions on the Bitcoin network - demands a significant amount of electricity and equipment. When compared to traditional financial services, Bitcoin requires substantially more electricity. A recent article by Bloomberg estimates that one Bitcoin transaction generates the CO2 equivalent to over 700,000 Visa transactions. Additionally, it adds that only a fraction of the electricity used comes from renewable sources. For example, it estimates that coal-fired powerplants account for 38% of the mining operation's energy consumed. Other consensus mechanisms behind alternative cryptocurrencies demand significantly less electricity when compared to Bitcoin. This is the case with the newly launched Ethereum 2.0, where the validation framework is changed to one consuming significantly less power. However, the question is whether governments in mostly the western world see the environmental issues as one way toward heavily regulating the industry.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.