Binance and FTX Cut Down Leverage to Just 20x from Over 100x

The average leverage used on FTX is about 2x, says CEO Sam Bankman-Fried, while CZ says this move has been in the interest of Consumer Protection.

“Today, we’re removing high leverage from FTX. The greatest allowable will be 20x,” down from 101x, announced Sam Bankman-Fried, the CEO and founder of cryptocurrency derivatives platform FTX over the weekend. Ceteris Paribus commented,

“No-brainer considering FTX users don’t seem to be ultra degens and puts them on better standing with regulators. IMO the argument about high leverage isn’t even if it’s right or wrong, regulators will not allow it in the long-run. may as well front-run it.”

Just last week, FTX had announced that it had raised $900 million, with a valuation of $18 billion, from many big names, including Coinbase ventures and to whom buying financial giants like Goldman Sachs or CME is “not out of the question” either.

The decision to reduce leverage has come as the crypto market experiences a strong bounce off of lows.

Binance, which has exited its investment in FTX, has also joined in. CEO Changpeng Zhao said on Twitter that they have already started limiting new users to a maximum of 20x leverage a week ago. Previously, it offered a maximum of 125 times leverage.

“In the interest of Consumer Protection, we will apply this to existing users progressively over the next few weeks.”

Meanwhile, several hedge funds have curbed their trading on Binance amidst a growing regulatory crackdown on it, the Financial Times reported.

An Effective Margin System

“After lots of back and forth, we’re going to be the ones to take the first step here: a step in the direction the industry is headed and has been headed for a while,” said Bankman-Fried as he explained in one of his famous Twitter threads.

While some are not happy with this cut-down, especially as the market seems to be getting back in the bull mode, others praised this move, noting that extremely high leverage doesn’t turn out to be positive in the long term. Not to mention, crypto is inherently highly volatile and sees big moves regularly.

“A great move,” said Austerity Sucks, adding, above 20x is “just marketing, and is associated w/shadiness now (“100x group”) there’s no real strategic benefit to such high leverage (except maybe spreads), and can legit hurt retail.”

In the Twitter thread, Bankman-Fried further shared his reasoning behind the same, noting that their product and margin system “tend to attract sophisticated users,” and liquidation on FTX normal orders happens without any extra loss.

He further shared that, much like every other exchange, on FTX as well, liquidations are “a tiny fraction” (less than 1%) of volume and positions. And while “many users have expressed that they like having the option, very few use it,” added Bankman-Fried.

According to him, the average leverage used on FTX is about 2x, and high leverage is not an essential part of the crypto ecosystem.

“An effective margin system is integral to an efficient economic system,” said Bankman-Fried.

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Author: AnTy

ECB Promises to Pump Money; IMF Praises Fed for Being ‘Highly Effective’ at Overshooting 2% Inflation

Amidst this, former BitMEX CEO talks about an investor’s ability to really outperform $4.72 trillion of money created out of thin air in 2021.

European Central Bank (ECB) keeps its monetary policy steady and will continue to be more accommodative for a more extended period.

The central bank has committed to purchasing 1.85 trillion euros ($2.2 trillion) of bonds until March 2022, and policymakers voted to keep this stimulus injection into the market going for the time being.

Interest rates were also left unchanged, with that on the primary deposit facility remaining at 0.5%, the benchmark refinancing rate at 0%, and the marginal lending facility at 0.25%.

Additionally, ECB said it wanted to see inflation stabilizing at 2% over the medium terms adding, this may also imply a transitory period where inflation is “moderately above target.”

Prices rose 1.9% this year to June in the 19-member euro bloc, down from 2% this year to May, which has the ECB expecting inflation to drop, forecasting a decrease of 1.5% – 1.4% in 2022 and 2023, respectively.

The central bank had changed its guidance “to underline our commitment to maintain a persistently accommodative monetary policy stance to meet our inflation target,” said ECB President Christine Lagarde.

“There is still a long way to go before the damage to the economy caused by the pandemic is offset.”

On Friday, ECB member Francois Villeroy de Galhau, who is also the governor of the Bank of France, said it was justified to keep an accommodative monetary policy for now.

Villeroy also said that the ECB sees the midpoint of its forecast horizon for a 2% inflation target coming in around 12-18 months in the eurozone.

Fed “Highly Effective”

As for the US, the Federal Reserve has started to talk about tapering, but Chair Jerome Powell has assured that it is “still a ways off,” and President Joe Biden gave the Fed his blessing to “take whatever steps necessary” to support a strong economy.

The International Monetary Fund’s Executive Board also commended the Fed for being “highly effective” at managing the COVID-l9 crisis and supporting recovery with its commitment to overshoot a 2% inflation target in the near term.

While raising concerns about higher interest rates that will drain capital flows from emerging markets, the board also said that the Fed must carefully communicate its thinking to ensure the eventual withdrawal of monetary accommodation. The IMF said this scaling back,

 “will require deft communications, under a potentially tight timeline, to avoid market misunderstandings, volatility in market pricing, and/or an unwarranted tightening in financial conditions.”

The Fund’s board also said that the US should prioritize spending towards programs that have the most significant impact on productivity and that more could be done to boost tax revenues.

“Don’t Get Shook.”

In 2021, a total of $4.72 trillion has been created out of thin air, collectively in the US, China, and EU. “If the quantum of money increases, it must go somewhere,” noted Arthur Hayes, former BitMEX CEO, in his latest write-up.

“The Fed has removed $1.4 trillion of the highest quality collateral from the system…Whatever anyone says about a taper in the future, in the present, asset managers must replace this collateral with higher risk stuff.”

The Fed’s balance sheet has expanded at a YoY pace of +22.74% and +13.21% YTD. ECB grew its balance sheet by +25.18% YoY, and YTD +13.34%, and China’s most recent 2Q21 YoY GDP print was +7.9% using an 11% growth in credit.

So, how does one outperform this? Bonds are certainly not the answer.

The US GDP forecast for 2021 is +6.60%, vs. the 10-Year bonds that yield 1.20%, equating to a rough negative real yield of -5.40%. In the “strongest Eurozone economy,” Germany, 2021 GDP is expected to print at 4.5%, with real yields approaching negative 5%.

Here, crypto comes as a clear winner, with Bitcoin up 10% YTD and Ethereum 182% and about 250% and 700% YoY, respectively.

“The data is clear – central banks continue to print money. When / if that changes, the data will show us. There is no need to predict when it stops if you own scarce assets that appreciate in fiat terms at least at the same pace of balance sheet expansion. On the past 6-month horizon, crypto underperformed, but from the onset of the COVID pandemic till today, crypto markedly outperformed as central bankers stepped on the gas. Don’t get shook.”

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Author: AnTy

BTC Felt Like A “Somewhat Frothy Market,” says Fed Chair Noting Stablecoins “Growing Really Fast”

While worried about that, the Fed is promising “powerful support” through monetary policy. Jerome Powell also called for “appropriate regulation” of stablecoins and getting the digital dollar right, rather than fast, because the US is “not in danger of losing” the reserve currency status.

On the second day of the testimony before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Federal Reserve Chair Jerome Powell further elaborated on the state of financial markets and commented on the cryptocurrency market.

“Financial conditions are highly accommodative,” said Powell while noting that this is how people are getting things financed like SPACs.

“We see Bitcoin going up in value and down in value… At times it felt like a somewhat frothy market. You do worry about that,” he said, adding, but at the same time, “we’re very focused on the real economy.”

Here, their focus is on maximum employment and price, and financial stability.

“We’ve got a long way to go. So we want to be careful about tending to our main mandate while we also think about financial stability issues.”

“Growing Incredibly Fast”

According to Powell, cryptocurrencies have surely tried but failed to become a viable payment method.

“With cryptocurrencies, it’s not that they didn’t aspire to be a payment mechanism, it’s that they’ve completely failed to become one, except for people who desire anonymity, of course, for whatever reason,” he told Sen. Cynthia Lummis of Wyoming.

The question, he said, is really about stablecoins, which he compared to bank deposits or money-market funds, saying they’re growing incredibly fast but without appropriate regulation.

“It’s growing really fast – we really ought to have appropriate regulation. And today we don’t.”

Following this, the US House of Representatives, the lower house of the U.S. Congress, has proposed a bill to change securities to define and include digital assets as “investment contract assets.”

Congressman Tom Emmer of Minnesota along with Reps. Darren Soto and Ro Khanna introduced the bipartisan bill, called the Securities Clarity Act.

Digital Dollar

Talking about a central bank digital currency (CBDC), Powell told the Senate Banking Committee on Thursday that he hasn’t made up his mind about a digital dollar yet.

“I am legitimately undecided on whether the benefits outweigh the costs or vice versa,” said Powell when asked to clarify his positions on a CBDC.

If the Fed were to issue its own digital fiat, “we would want very broad support in society and in Congress, and ideally, that would take the form of authorizing legislation as opposed to a very careful reading of ambiguous law,” he added.

Powell said the focus with a CBDC is to get it right because the US is the reserve currency with no “good competitor,” as such,

“We’re not in danger of losing it. Certainly not to China which doesn’t have an open capital account.”

Not concerned about competition, the real concern is about getting this right as a CBDC has its benefits and risks, he said.

“It’s quite specific to the institutional context of each country. And I want to get it right. We are the reserve currency. We have a first mover advantage by virtue of that. So I think it’s way more important to get it right than it is to do it fast.”

Stimulus to Continue

Besides crypto and stablecoins, and the digital dollar, Powell acknowledged that inflation had seen a “big uptick, bigger than many expected, bigger certainly than I expected,” but added that inflation may slow in “in six months or so,” as it is tied to the “shock going through the system associated with the reopening of the economy.”

Now, the Fed is trying to understand if this will pass fairly quickly or if they would need to act.

“One way or another, we’re not going to be going into a period of high inflation for a long period of time, because of course, we have tools to address that.”

As for tapering, Powell told the Committee that there is still an “elevated level” of employment and the economy still has “a long way to go.” Also, the purchases have been contributing to the housing market’s strength.

As such, the Fed “will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete,” he said.

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Author: AnTy

Only About 20% of El Salvadorians Approve of Bitcoin Adoption Plan: Poll

Only About 20% of El Salvadorians Approve President Nayib Bukele’s Bitcoin Adoption Plan: Poll

In a poll conducted by pollster Disruptiva, which is affiliated with Francisco Gavidia University, it was found that about 54% of El Salvadorians view Bitcoin adoption as “not at all correct.”

Another 24% described it as “only a little correct,” while about 20% approved of the cryptocurrency plan.

The poll according to Reuters, surveyed 1,233 people across El Salvador between July 1-4 and had a margin of error of 2.8%.

“This is a risky bet on digital transformation,” said Oscar Picardo, head of Disruptiva’s institute of science, technology, and innovation, at an event presenting the results of the survey.

The poll further showed that 46% of respondents knew “nothing” about the leading cryptocurrency, while nearly 65% saying they would not be open to being paid in Bitcoin.

Last month, El Salvador became the world’s first country to adopt bitcoin, alongside the US dollar, as a legal tender. The bill has already been passed by a supermajority and will come into effect in early September.

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Author: AnTy

Bitcoin Block Time Soars to Highest Level Since 2010 After Hash Rate Crashes to 2-Year Low

Bitcoin hash rate has taken a drop and is now down about 70% from its all-time high in mid-May. With this latest drop, the hash rate has fallen to a two-year low last seen in July 2019.

However, it’s just a short-term block-interval inferred hash rate, and the actual drop is about 47%.

Still, this drop resulted in an average block time of more than 23 minutes, up from the regular 10 minutes, to mine a single bitcoin block, “the largest daily mean block interval since the very early Bitcoin days,” in 2010, noted Glassnode.

Only 58 Bitcoin blocks were mined throughout Sunday, representing a drop of 60% from the baseline of 144 blocks per day.

This, of course, led to daily bitcoin miner revenue falling 80% from $70 million in May to about $12.8 million yesterday. Miners were earning the same level of revenue in early November when the price of bitcoin was around $13,000.

The largest drop in hash rate is causing a significant decline in Bitcoin network activity, with the number of active addresses also falling off a cliff, reaching levels not seen since early 2019.

Even fee is extremely low, with average fees now 0.00021 BTC ($7.12), down from over $62 in late April, and able to keep stable during this whole ordeal.

As a result, the difficulty is expected to have a negative adjustment, which reached an all-time high on May 13 and has seen two downward adjustments since.

While one wants a quick difficulty adjustment after such a harsh drop in hash rate, the fact is when the hash rate drops a lot, blocks take longer to mine, so difficulty adjustment takes longer to come.

Adjustments are supposed to happen every 14 days, but the last adjustment was 16 days ago, and there are still 453 blocks to go. The difficulty adjustment is expected to be the largest downward ever, which should lower the block times.

This drop follows China’s crackdown on cryptocurrency mining. Such a big drop means China might have gone “almost entirely off grid already.” As we reported, Chinese miners are moving overseas, but this definitely provides a great opportunity for those with access to cheap energy.

Even JPMorgan strategies can feel the bullishness of it, saying, “the crackdown on mining operations in China should be considered as positive for bitcoin over the medium term as it accelerates a shift away from China’s high share in bitcoin’s hash rate, reducing concentration.”

While a real annoyance, 60-80% drop is “not fatal,” said Balaji S. Srinivasan, former Coinbase CTO, and General Partner at Andreessen Horowitz.

“In general, the global decentralization of Bitcoin mining shows a way to robustify against the famous Thanksgiving Turkey Chart. Even the Chinese state going after mining (not really a surprise) is only causing a temporary rise in block times. So far, pretty antifragile!”

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Author: AnTy

21Shares Launches First SOL ETP, Goldman Sachs Report Talks About the “Faster” Solana Blockchain

21Shares Launches First SOL ETP, Goldman Sachs Report Talks About the “Faster” Solana Blockchain

As Solana (SOL), a $7.7 billion market cap cryptocurrency is behaving better than most of the coins in the cryptocurrency market, down only 50% from its all-time high a month back and still up 1,456% YTD, 21Shares is launching a Solana ETP.

The Switzerland-based investment product provider has launched the world’s first Solana exchange-traded product (ETP) which will begin trading under the “ASOL” ticker early next week.

Each unit of the ETP is backed by 0.667 SOL at launch with a base fee of 2.5% per annum. Coinbase Custody is the main custodian for the SOL ETP.

21Shares, formerly known as Amun, said this week that the Solana ETP will list on Switzerland’s primary stock exchange, the Swiss SIX. It will also be available on the Stuttgart and Dusseldorf multilateral trading facilities (MTFs) in Germany.

“These new ETPs deliver what clients asked for,” said 21Shares CEO Hany Rashwan in a statement. “We expect to add two new crypto ETPs in the next months together with new listing and trading venues.”

Earlier this month, Solana Labs, the team behind the Solana network raised $314 million in a token sale led by Andreessen Horowitz, which launched its biggest ever crypto-focused fund of $2.2 billion this week and Polychain Capital.

The Solana ecosystem is also backed heavily by Sam Bankman-Fried, the CEO and founder of crypto derivatives exchange FTX and quant trading firm Almeda Research.

Elsewhere, a Goldman Sachs report name drops Solana several times.

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Talking about blockchains and related software that has been built, Goldman Sachs mentions Solana and Algorand as faster platforms amidst the first of its kind Bitcoin and most actively used for decentralized applications Ethereum.

Launched in 2020 with “some further improvements,” Solana blockchain uses a proof-of-history feature “which many would consider a significant breakthrough in speed and capacity,” it said.

Completing the proof-of-stake (PoS) process, Solana’s proof-of-history makes it “much more efficient” for validators to confirm each block and allows them to run thousands of smart contracts in parallel.

The report notes that Solana can process 50,000 transactions per second with an interoperability feature that is “enhanced by its own unique bridge to Ethereum called “wormhole.”’ This function allows users to leverage Solana’s speed while having access to interoperability.

Not only, the average transaction cost is very low on Solana, it also allows developers to use popular programming languages such as C/C++ or Rust, which are among the world’s fastest, on the Solana blockchain.

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Author: AnTy

SEC Delays VanEck Bitcoin ETF Decision Again, Another 45 Day Wait Period

The US Securities and Exchange Commission (SEC) seems to be struggling to make its mind up about Bitcoin exchange-traded funds (ETF). The agency has once again extended the review period for the VanEck Bitcoin ETF application by 45 days.

This is the second time the SEC is delaying its decision on the VanEck Bitcoin exchange-traded fund (ETF) application. The regulator first extended its decision in April 2021.

SEC To Accept Comments On The VanEck Bitcoin ETF Application

According to the order filed on Wednesday, the SEC said it would now accept public input on the proposed rule change surrounding the VanEck Bitcoin ETF. This would help guide its decision on whether to approve the fund or not.

The regulator asked the public for comments on the vulnerability of the ETF to market manipulation and if Bitcoin is suitable as an underlying asset for an ETF.

The commission also wants to know commenters’ views on whether the regulatory landscape relating to Bitcoin and other digital assets has changed since 2016.

The regulatory answer to that question could have deep implications for Bitcoin and other cryptocurrencies like Ethereum, which is also yet to get approval to be used in exchange-traded funds.

Interested people who wish to comment on the proposed Bitcoin ETF have until 21 days after the order is published in the Federal Register and 35 days after publication in the same register for rebuttals.

VanEck had filed for the Bitcoin ETF in December 2020. In March, the Chicago Board Options exchange (Cboe) pleaded for VanEck when it filed a request to list and trade shares of the VanEck Bitcoin fund, thereby putting the SEC on the 45-day clock.

The SEC’s 45-days window, which started in April 2021, was expected to end on June 17, 2021. The latest extension means we don’t know the fate of the VanEck Bitcoin ETF until August 3, 2021.

The SEC typically renders a decision on future applications within 45-day windows but can also take up to 240 days to decide.

The US Continuous Delay In Approving A Bitcoin ETF

Despite the change in leadership at the SEC, the agency has so far shown no sign of approving any Bitcoin ETF anytime soon.

The agency has often cited fraud and market manipulation as obstacles to its approval, but applicants have made arguments as to why those issues are blown out of proportion.

Apart from VanEck, there have been at least seven other applications of firms seeking to launch competing funds but none has been approved.

Given the SEC’s continued delay in approving the ETFs of firms like VanEck, WisdomTree, Kryptoin, and Fidelity Investments, many do not expect approval soon.

However, Canada remains one of the most progressive countries in terms of ETFs. Over the past few months, the North American nation has approved both Bitcoin and Ether ETFs.

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Author: Jimmy Aki

Head of Italy’s Stock Market Watchdog Concerned About ‘Savings,’ Calls for ‘Proper Oversight’ of Crypto

The Head of Italy’s Stock Market Watchdog Concerned About ‘Savings,’ Calls for ‘Proper Oversight’ of Crypto

Italy’s Companies and Exchange Commission President Paolo Savona is urging the government for clear regulation as the lack of it can damage the way the market operates, he said.

Like other officials, Savona is also calling for more regulation, arguing cryptocurrencies could facilitate illegal activity such as tax evasion, money laundering, and the financing of terrorism.

Additionally, the technology behind them prevents private and public entities from properly tracking and surveilling the markets. The head of Italy’s stock market regulator said on Monday as he presented the watchdog’s yearly report,

“Without proper oversight, there could be a worsening in market transparency, the basis of legality and rational choice for (market) operators.”

He further noted there were some 4,000-5,000 cryptos in circulation without any form of real regulation. And the push to introduce technological innovation led to a minimization of the effects that a lack of clear rules on the exchange can cause as such leading to the “intertwining of traditional and virtual assets,” which could induce liabilities towards daily savings.

“If we add to this Consob’s recent own experience in closing down in Italy hundreds of websites illegally gathering savings, the picture that emerges is worrying.”

According to Savona, cryptocurrencies could even undermine central banks’ ability to conduct monetary policy.

“If it takes too long at a European level to come up with a solution, (Italy) will have to take its own measures.”

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Author: AnTy

Here’s Why Elon Musk’s Pivot to Cryptocurrency Can Be ‘Net Good’ for the Space

Tesla’s CEO can’t stop tweeting about the unregulated crypto space, as he is not allowed to manipulate share prices with his tweets after his settlement with the SEC, and it is seen by Binance and Lolli CEOs as an advertisement for crypto.

Up until some time ago, Elon Musk was vigorously involved in tweeting about Tesla — remember his infamous tweet of taking Tesla private at 4420 per share — which affected the prices of the shares of the company, which of course, irked the investors a lot.

That stopped after Musk settled a deal on the securities fraud charge brought by the SEC against him in late 2018. The settlement that required him to step down as Tesla’s Chairman, a committee to oversee Musk’s communications, and paying a penalty of $20 million was taken “to prevent further market disruption and harm to Tesla’s shareholders.”

Now that Musk can’t tweet about stocks anymore, although a US securities watchdog found him violating the settlement last year, he has switched his attention to crypto markets which are unregulated and won’t get him rebuked by the regulator. DegenSpartan commented,

“My personal conspiracy theory is that since he isnt allowed to tweet shit that fks around with share prices anymore. He does it for cripto cos “not regulated.’”

Binance.US Chief Executive Officer Brian Brooks meanwhile sees Musk’s impact on the industry as a positive as “it’s a country with free speech,” adding “short-term market panics are never a good reason for anybody to buy and sell.”

“Whether he’s pushing markets up or down, that’s probably good in the long term,” said Brooks, who has been a top banking regulator before taking over Binance.US last month, in an interview with Bloomberg. “If Elon Musk is this interested in crypto, crypto must be pretty important.”

Alex Adelman, co-founder, and CEO at Lolli, a Bitcoin rewards startup, is of a similar opinion who also said, Musk driving attention to the crypto is “net good” for space. Adelman said,

“I think it is great what he is doing, he is driving attention and clearly very influential. Any eyeballs coming to bitcoin making them question money, in general, is a net good for the space, for bitcoin and the people following him.”

As we saw this year, Musk has been aggressively tweeting about cryptocurrencies which have gone beyond Bitcoin now.

While the impact of his tweets on the prices of Bitcoin and Dogecoin has started to slow down, it is still there and irritating the crypto community, especially after his criticisms that sent the prices crashing. DOGE -1.52% Dogecoin / USD DOGEUSD $ 0.37
-$0.01-1.52%
Volume 3.44 b Change -$0.01 Open $0.37 Circulating 129.9 b Market Cap 48.25 b
10 h “I Would Leave Twitter or Square for Bitcoin,” says Jack Dorsey At the Bitcoin 2021 Conference 10 h Here’s Why Elon Musk’s Pivot to Cryptocurrency Can Be ‘Net Good’ for the Space 1 d Elon Musk Can’t Stop Talking About Bitcoin, Now His Reputation is Taking a Hit

This week, after lamenting his breakup with Bitcoin, today, he changed his profile picture bearing the Bitcoin symbol. Just last month, Musk removed Bitcoin from his Twitter profile.

Additionally, he is tweeting about low-cap coin CumRocket (CUMMIES), which surged 110% in response.

In a separate tweet, Musk said he “pretty much agree with Vitalik” in response to Ethereum co-founder Vitalik Buterin’s interview with Lex Fridman, where he talked about Musk’s crypto strategy and support for Dogecoin. But Musk didn’t share exactly which part he is in agreement with as Buterin talked about a lot of things, including Musk and many cryptos. ETH -2.57% Ethereum / USD ETHUSD $ 2,631.01
-$67.62-2.57%
Volume 30.33 b Change -$67.62 Open $2,631.01 Circulating 116.17 m Market Cap 305.65 b
8 h “Ethereum Killer” Raising Up to $450M; Solana Foundation Rolls Out A $20M Fund to Expand Ecosystem 10 h “I Would Leave Twitter or Square for Bitcoin,” says Jack Dorsey At the Bitcoin 2021 Conference 10 h Here’s Why Elon Musk’s Pivot to Cryptocurrency Can Be ‘Net Good’ for the Space

“You would make a mistake if you were to ascribe too much sophisticated malevolence or any deep intentionality to the whole process. He’s just a human being, and he likes dogs just like I like dogs.”

Buterin also said that Ethereum is not opposed to dog coins; in fact, “I kind of want the fans to feel like Ethereum is – at least a little bit – in spirit itself a dog coin,” he said, adding that if doge wants to bridge to Ethereum, “that would be amazing.”

As for whether Tesla and SpaceX will consider Ether in the future, “I’m sure that if they stay in the cryptocurrency system at all, then they have to at some point.”

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Author: AnTy

Ether Flippining Bitcoin a Real Possibility But What’s the Caveat

In less than a month, the price of ETH went from about $2,000 to $4,380.

This new ATH came while Bitcoin price chopped, which helped send ETH to nearly 0.081 BTC, a level not seen since May 2018.

ETH has been enjoying a massive run-up, finally catching up to Bitcoin’s late 2020 rally, and is currently moving towards becoming a half a trillion-dollar crypto asset.

In addition, it’s not just Bitcoin that has been seeing institutional adoption; Ethereum is attracting the attention just as much. Eth investment vehicles have been continuously seeing inflows, and several ETH ETFs are also trading on TSX. Reportedly, a good amount of institutional capital is sitting on the sidelines, waiting to enter ETH.

Furthermore, regular bitcoin futures on CME that were launched in Dec. 2017 have been lagging in volume over the past couple of months, only to hit $4 billion on Wednesday, for the first time since April 22nd, as per Skew. Ether futures, meanwhile, in a matter of three months, have exploded, with volume surpassing over $2 billion on May 13 on CME, up from just $200 million on April 15. Trader CL wrote,

“At the moment, CME participants want ETH, not BTC, it seems, BTC open interest has been stagnant, meanwhile ETH demand from CME has blown my expectation by magnitudes for some reason I thought it was gonna be a dead product.”

Tesla CEO Elon Musk citing environmental concern, which has been gaining a voice for some time, has also put forward a new hurdle in front of Bitcoin.

All of this, combined with the EIP 1559 that burns gas fees, effectively making ETH a deflationary asset, has people seeing Ethereum flipping Bitcoin as the number one crypto asset becoming a reality.

Su Zhu, the CEO of Three Arrows Capital, who believes we are in a supercycle, estimates that there is a 50% probability that the Ether market cap would surpass Bitcoin’s during this bull run.

While brief, it is entirely possible, given that Ether has always outperformed the leading trillion-dollar cryptocurrency, the long term is anyone’s guess.

Former BitMEX CEO Arthur Hayes, who, along with two other exchange executives, are set to appear for trial in the US next spring, sees this probability of the flippening occurring to 30%. This probability is revised from 0%, affected by a lengthy report by Nikhil Shamapant, who sees ETH reaching $150,000 by Jan. 2023.

While Hayes is bullish on Ethereum and sees a big number for the crypto asset himself, in his latest note, he points out the issues in both the cryptocurrencies that they need to overcome.

He pointed out that while the Bitcoin community fears that Ether will one day overtake their beloved currency, “mETH heads” believe Ether can be both the hardest form of crypto money and the world’s best-decentralized computer.

But “the best forms of money have no industrial use case. Fiat currencies are very useful for commerce because they are intrinsically worthless. The demand to use a particular fiat is completely tied to the usefulness of its network,” he wrote.

Ether’s case is not purely monetary, Hayes said, pointing to the DAO hack when the community chose to roll back the blockchain and giving confidence to investors to continue experimenting with DeFi applications rather than upholding the blockchain’s immutability by letting the funds be drained and be more akin to a hard monetary instrument. He said,

“When in doubt, the Ethereum community will always elevate the needs of the decentralized computer over the needs of being a true hard monetary instrument.”

As history presents, the current EIP-1559 inflation schedule will change too because as the platform becomes more useful, more gas is spent and more ETH burned, making it deflationary.

“If we are underestimating the impact of DeFi on human economic interactions, there is a future where there isn’t enough Ether supply to allow the system to function,” he said. And according to him, a high ETH price won’t solve the supply issue because there is “no magic ETH in the ground” to be exploited.

However, scaling, Rollups, L2, sidechains, and sharding, will lower the floor equilibrium. These scaling solutions that the community is currently working on and are increasingly gaining traction are meant to make the network fast and cheap.

The “shortcomings pointed out by Arthur are solved by scaling solutions and dynamic burn rates,” says Tetranode, an early investor in Ethereum.

While Ether can’t be both, the hardest form of crypto money and power the world’s decentralized computer, Hayes said, it doesn’t mean Ether’s market cap cannot eclipse Bitcoin’s.

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Author: AnTy