Crypto Weekly: From London to Germany Crypto Weekly: From London to Germany Crypto Weekly: From London to Germany

Crypto Weekly: From London to Germany

Summary:  The London update is one step closer to launch on the Ethereum network after being deployed on a testnet. The update will make transaction fees more predictable and burn a part of the fee, to the frustration of miners. From London to a country nearby, a German law comes into effect enabling special funds to invest up to 20% of their asset under management in cryptocurrencies.


The London update is moving closer on Ethereum

The highly anticipated London update is moving closer to launch on Ethereum. The update launched on a testnet on June 24, getting ready to fully launch on the active Ethereum network later in July. The update contains EIP 1559, which dissimilar sides of the community either love or hate. EIP 1559 changes the way users pay transaction fees on the network, making the fee sizes more predictable. Essentially, from being solely based on an auction the fees will in the future be based on a fixed fee with the option to tip miners.

At the same time, part of the transaction fees paid will be burned, limiting the inflation rate for Ethereum. It is estimated that the update would have burned around 2.9mn ETH the past year if implemented, with the total ETH supply stretching to around 116.5mn ETH. As transaction fees are compensation paid to miners in return for confirming transactions, miners are generally not keen on the idea of burning a part of the fee.

Our point of view has not changed; we are still rather positive about the update, sharing the view of most users and holders. Simply, the London update makes Ethereum more user-friendly to interact with as the fees become more predictable. This is especially essential for the growing demand for decentralized finance protocols. Additionally, not only is the burning mechanism good for holders as the inflation rate will be reduced, but it also reduces the impact miners have on the market by compensating them less Ether, thus limiting potential sell pressure from them.

The update acts as a good transition to ETH 2.0 and the world of staking, where miners are completely unnecessary as newly issued Ether and transaction fees will be compensated to holders. The London update also puts pressure on the store-of-value narrative in regards to Bitcoin as the Ethereum inflation will likely fall to the level of Bitcoin, while the Ethereum network is having a higher demand for transactions. With ETH 2.0 expected to be fully implemented in late 2022, the inflation for Ethereum holders will basically fall to zero as they get the newly issued Ether, fundamentally doubling down the pressure on the store-of-value narrative for Bitcoin.

German law allows a potential $415B inflow into crypto

A new German law which came into effect last week allows special funds to invest up to 20% of their asset under management in cryptocurrencies. Special funds are the most popular institutional investment fund in Germany, counting around 4,000 funds. According to CoinDesk, in the case that every special fund would invest 20% of their portfolio in cryptocurrencies, the crypto-market would see an inflow equal to $415bn. Though the potential inflow is fairly optimistic, it shows that German regulators are comfortable in letting German special funds invest in cryptocurrencies. We are often talking about regulation and government intervention being one of the largest risks of the crypto-market. In this case, it appears that it also works the other way around with regulation potentially impacting the market positively.

BTC vs. USD. Source: CoinMarketCap
ETH vs. USD. Source: CoinMarketCap
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.