development of the blockchain’s most important features and functionalities.

Few projects have managed to maintain the level of successful output Cardano did last year. The ambitious third-generation blockchain finally introduced its staking era after almost five whole years of development—an event that put IOHK into overdrive when it comes to releasing new functionalities of the blockchain.

With the first month of 2021 almost over, the company doesn’t seem to show any signs of stopping. The extended holiday season and unfavorable work conditions due to the ongoing pandemic haven’t slowed down IOHK and the teams working on Cardano, with a significant amount of work regarding Cardano’s smart contract era almost entirely done.

Charles Hoskinson, the CEO of IOHK, shared details about the progress made in the past several weeks in his latest YouTube video.

The biggest developments in the past few weeks have certainly been the release of the Cardano devnet and the launch of Fund3. Hoskinson focused more on the news about the new Project Catalyst fund in the video, saying that all information about the devnets will be covered in weekly or bi-weekly videos coming directly from IOHK.

The launch of Fund3 followed a hugely successful lifespan of Fund2, which saw 12 different entities receive funding for various projects on Project Catalyst. While the new fund will work exactly the same as the two previous ones, it will be much larger in scope—both in terms of the funds offered and community participation rate.

Testnets have always been a cornerstone of Cardano’s development, which is why IOHK is working on releasing the Plutus testnet very soon. Hoskinson said that Plutus will be the last of the testnets released for Cardano, which include the KEVM and IELE testnets. He also revealed his unorthodox plans for the testnet—namely, he plans on bringing aboard companies that would focus only on writing Plutus contracts. These companies, he explained, will receive no guidelines from IOHK or any of its partners and will be left to their own devices.

Hoskinson explained that this approach will be very effective at exposing any problems with the Plutus tooling. This way, the companies writing the Plutus contracts would be performing double duty—implementing the language and doing a security audit of the devnet.

When it comes to Prism, Cardano’s identity solution, Hoskinson said that the teams were currently busy doing compliance work. While he noted that this wasn’t necessary to ensure Prism was functional, it will enable business owners looking to utilize the solution to comply both with financial and security regulation in an easy and streamlined way.

Goguen, the era of the Cardano blockchain set to unlock smart contract functionality, has been the focus of most of the company’s work since the launch of Shelley in July 2020.

However, launching Goguen is set to be a much more technically challenging feat for IOHK.

While Shelley represented a much more aggressive update to the protocol, Goguen will affect a significantly larger number of shareholders in the Cardano ecosystem. Aside from the people holding ADA, the update will bring massive changes to everyone from stake pool operators to partners utilizing the network and exchanges listing its native token.

“We have a lot of stuff we need to test,” Hoskinson said.

He explained that Goguen will be physically changing every transaction on the network, which is why the blockchain’s entire infrastructure needs to be carefully and thoroughly tested. Aside from providing the teams with the assurance of security and stability, the extensive testing is also set to appease Cardano’s many partners.

That’s why Goguen will be implemented through three different Hard Fork Combinator (HFC) events. The first event, called Allegra, took place on 16. Dec last year and saw the introduction of token locking. The second HFC event, according to Hoskinson, is scheduled for February this year and has most of the details behind it largely sorted out.

The third and final event set to bring Goguen live is yet to be scheduled.

Hoskinson said that he hopes the update will be able to go through sometime in the second quarter of the year, but added that he wasn’t sure whether this would be at the beginning or at the end of the quarter.

The very last chance IOHK will have to make sure everything is okay with Goguen is during the Plutus devnet, which is why it puts so much emphasis on the network. And it’s not just IOHK giving importance to the devnets—the Cardano community also seems to value the isolated developer playgrounds the company puts out.

During the AMA, dozens of questions about the technicalities of these devnets were asked, with the most popular topic by far being the KEVM. The Ethereum Virtual Machine (EVM) running on Cardano implements the K-verification process, making it possible for developers in Cardano to write dApps in Solidity, Ethereum’s native programming language.

According to Hoskinson, KEVM is currently running on the devnet, but there are plans to release it as a full chain that runs alongside Cardano. However, the network will need to launch a CIP to decide on when to go through with this process as it requires a fair amount of preparation. Hoskinson’s goal is to launch KEVM in the second quarter of the year as well. He did note, however, that the exact launch date will depend on how fast the work on Plutus integration is being done. This makes it more likely that KEVM will launch after the third HFC event.

The massive structural change coming to U.S. politics with the arrival of the Biden administration has left a large part of the crypto industry worried. With the heads of most regulatory agencies set to change with the new administration, the future of crypto regulation seems rather blurry at the moment.

Hoskinson, however, doesn’t seem worried about it.

When asked what he thought of the newly appointed head of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, he gave a refreshingly positive outlook. He explained:

“The way that the SEC is currently structured, I honestly believe that it is probably in a productive positive dialogue with the entire industry.”

He believes that there is currently no indication that the new establishment will bring about an anti-crypto SEC, especially given Gensler’s background. A former MIT professor on crypto and blockchain technology, Gensler is hugely competent and has a deep understanding of the industry, Hoskinson said.

His worries about the future of the industry lie with the structure of SEC’s laws, not the people running the agency. He explained that the biggest problem the Commission has is having “too large of a hammer.”

Current securities laws are too broad and force the Commission to punish entire networks and their user bases instead of the individuals that have facilitated behaviors it sees as illegal. He illustrated this with the example of Ripple, which recently found itself at the receiving end of SEC’s many lawsuits.

“If securities laws were slightly different, there could have been a reality where they could have punished Chris [Larsen] and Brad [Garlinghouse] at XRP without trying to say that XRP is a security.”

According to Hoskinson, this approach would accomplish two important things—it would be much easier for the SEC to implement and would not harm XRP investors overall.

Gensler’s arrival at the Commission has the potential to change this, he said, as he believes that he’ll be more capable of working with the administration to find a healthy compromise when regulating the crypto industry.

The incoming chairman is said to hold a favorable view of Bitcoin and other cryptocurrencies.

Charles Hoskinson, the CEO of IOHK, called on Jack Dorsey not to create a decentralized social media standard within Twitter.

With more than 69 percent of its total circulating supply now staked, Cardano has surpassed Polkadot as the most decentralized network in the world.

The number of new ADA wallets has skyrocketed in the past month, with an average of 64 wallets created every hour between December 16 and January 4.

Commitment to Transparency: The author of this article is invested and/or has an interest in one or more assets discussed in this post. CryptoSlate does not endorse any project or asset that may be mentioned or linked to in this article. Please take that into consideration when evaluating the content within this article.

Disclaimer: Our writers' opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.

Today sees the Bitcoin bulls mounting a fightback following the weekend slide.

The price of Bitcoin is hovering under $37,000 after the correction from $40,000 in the past 72 hours.

A large narrative over the past few months is the introduction of institutional capital to the Bitcoin space.

beat all odds and surged beyond $1,400, recording a new all-time high at $1,423.38 .  At press time, the coin is trading at $1,345.23, trying to maintain its domain around the $1,400 mark.

In the last 5-6 sessions, Ethereum started a sharp surge above the $1,200 zone, outperforming Bitcoin. The top altcoin’s price broke a significant barrier near 1,245 USD and 1,250 USD to move further into the bullish area.

The bulls struggled to maintain the uptrend causing a rally above $1,280 resistance. At the beginning, there was a break above a sharply shrinking triangle with resistance approaching $1,245 on ETH/USD’s hourly chart. The price of Ether is now over 10% and is trading well above its 100-hour moving average.

ETH was previously set to form a maximum at around the $1,346 zone, while the price continued to consolidate gains. An initial support on the downside is near $1315 level. It is approaching the 23.6% Fib correction level of the last wave from $1,215 to $1,346.

To the upside, $1345 and $1350 levels had initial barriers. A sharp break above the $1,350 level opened the door for a quick advance. In this case, Ether’s price went on to exceed $1400 and $1420, and beyond before its minor correction. Consequently, the next significant resistance is near the $1500 level.

In a recent tweet, one analyst stated that he closely monitors Ethereum for $1,250 in support before seeing significant short-term growth.

Currently my thoughts on ETH at the moment in terms of lower timeframe momentum. I will get a newsletter out later today going into more detail and what to expect with PA.

The best long R:R right now is PA flipping $1250 into support, looking to remain above $1170. pic.twitter.com/XImruhNHYV

— Cactus (@TheCryptoCactus) January 17, 2021

He noted that a break above this level could result in an all-time test and that the bulls should survive a break below $1170.

Ethereum is currently trading at significant points. The way it continues to respond to crucial levels just above and below the current price will provide some vital insights in the medium term.

However, not everyone is in such a bullish position. For example, Mike McGlone, BI’s head of strategic strategy for Bloomberg Intelligence, said in his latest report that the advantages of Bitcoin, Ethereum, and Ripple in 2020 show the resilience of fintech in a world increasingly dominated by zero or negative values quantitative help.

According to McGlones, Ether, the coin will trade in the $500-700 range by 2021.

Although most forecasts look somewhat optimistic, cryptocurrency remains volatile as usual. The crypto bull market is known for its quick fixes. With that said, you need to be prepared for a bumpy ride even if ETH is about to hit new record highs.

it's pushing $40,000.

Whether it's trickle-down cryptonomics, a rising tide lifting all boats, a newly launched proof-of-stake chain, or something else, Ethereum has been making moves too.

The price of Ethereum has increased 14% in the last 24 hours, according to data from CoinMarketCap, to hit $1,400. That's above Ethereum's all-time high of $1,396, according to the data site.

The coin has been on a tear recently, rallying from $730 at the start of the year up to $1,270 in little over a week. Since then the coin saw a price correction to the $900 mark before pressure starting building back again.

Trading volumes have been growing rapidly. More than $37 billion in Ethereum has been traded in the last 24 hours, as traders rush to get in on the action.

The growing price has pushed Ethereum's market cap up. It now weighs in at $159 billion—that's around 23% of Bitcoin's market cap size.

The rest of the market has been performing well today, with XRP up 7%, Litecoin (LTC) up 14% and Bitcoin Cash (BCH) up 9%. Some coins have fared particularly well in the last week too, with Polkadot (DOT) up 105% in the last seven days and Chainlink (LINK) up 50%.

The growing price has, in part, pushed up the amount of value that's moved across the Ethereum blockchain per day. According to Money Movers, just shy of $20 billion is moved across the network per day. On this metric, Ethereum and Bitcoin are neck and neck.

over the previous all-time high of $1,432.88 registered on CoinDesk’s price index on Jan. 13, 2018. The digital asset rallied nearly 12% Tuesday to reach the new peak.

The cryptocurrency has topped its previous bull market peak nearly two months after bitcoin surpassed its December 2017 record price to hit a new high above $41,900 earlier this month.

While ether has trailed bitcoin in its journey to new lifetime highs, it has outpaced the top cryptocurrency on a year-to-date basis with a 92% gain. Bitcoin has risen 27% so far this year.

Ether is also up well over 1000% since the initial public sale of ETH in 2015, according to Messari.

Ethereum is a blockchain for decentralized applications (dapps) such as prediction markets or trading venues.  Dapps operate similarly to regular applications, but inherit features of blockchain-based technologies such as censorship resistance.

The Ethereum blockchain was co-founded and originally described by Russian-Canadian developer Vitalik Buterin, who remains the project’s most well-known personality.

Decentralized finance (DeFi) is widely regarded as the best Ethereum use case to date. DeFi markets enable permissionless and automated lending, trading and borrowing to anyone with an internet connection. The market recently surpassed some $22 billion in total value locked (TVL) – a metric similar to assets under management (AUM).

DeFi applications typically have their own tokens as well, generally based on Ethereum. That market has enjoyed a second bull run of its own following surging popularity this past summer.

In the long run, Ethereum proponents are positioning the blockchain project to be a censorship-resistant base layer operating in the background of tomorrow’s internet. This concept is generally referred to as Web 3.0, and will knit today’s social networks with integral money systems.

Ethereum took a significant step towards this goal on Dec. 1 with the release of a new blockchain, the Beacon Chain, which brought in staking – pledging funds to support the network, rather than mining. That upgrade is part one of three in a series of transitions to upgrade the current Ethereum network towards a blockchain capable of handling an entire financial system.

EDIT (15:30 UTC, Jan. 19 2021): Corrected the figure for CoinDesk’s previous all-time high for ether and removed some other price references in the second paragraph.

Hegelianism: a view which says that there are no facts, but that truisms are the products of the constant debate of opinions. Without fundamental truths, the culture becomes mired in postmodernism with ethereal ideas replacing useful ones and endless debate replacing proof of work. 

Bitcoin has been heavily victimized by the Hegelian Dialectic redefining it to the whims of software developers and anonymous users on social media. To the small blocker Hegelians, “bitcoin” means something different every year, and they constantly remake the BTC protocol to bear and reflect their own image as their values change over time. Changes in mempool management, finality of transactions, signature rules, definition and role of nodes: all up for debate! 

This is why “Bitcoin Core” is a node implementation held together by piles of code that have to lie to legacy Bitcoin nodes in order to keep them on the network; pretending to validate blocks of truly invalid signatures. 

Hard facts in a soft (fork) world

Bitcoin is just a networking and database protocol. Implementations of that protocol which do not follow Bitcoin rules are not Bitcoin networks. If an operating network splits or changes protocol without a new genesis block, the coins which do not follow Bitcoin rules are air-dropped replacements. If an airdrop claims to be a Bitcoin, it is being passed off as a bitcoin in name while not truly being a Bitcoin in function.  

The reason people refer to some blockchains (such as Bitcoin SV or BCH) as “forks” is because of chain splits occurring due to an open source repository being forked for separate development and then being deployed with rules that cannot come into consensus—causing a chain split. However, a fork of the Bitcoin repo does not necessarily create a fork of Bitcoin, and some forks do not cause splits even when they should!

So, what are the differences between forks, splits, airdrops and some of the other misunderstood terminology in the Bitcoin economy? To truly discuss these things with due clarity requires we take a few steps back and learn about conventions, rights and law in regards to open source software. The legal aspects of ownership and licensing rights to database and networking protocols can be reviewed here, for extra context. The importance of understanding definitions clearly and concisely is crucial to understanding (academically and legally) that common terminology in the blockchain and digital currency space is widely used in a way which is (note: “hard fork” and “fork” are synonyms. “Soft fork” is a concept invented after bitcoin, and will be discussed separately) A repository can be forked in order to create a new development path from a master repository. Litecoin, for example, is a fork of the Bitcoin source code; implemented with modified rules to create a unique development path. 

If a forked repository is used to deploy a new network from scratch, it is a forked network. If a forked repository is used to split away from Bitcoin, the resulting new coin is an “airdrop” from a split. One side is likely the valid Bitcoin chain and the other coin constitutes an airdrop of a non-Bitcoin token. 

Split: In a consensus network, such as Bitcoin, if nodes compete with one another, sometimes chain splits can occur and compete until one side is orphaned. This occurred on Bitcoin in 2010 and 2013 when bugs in the code caused consensus-breaking changes on newly updated nodes. In both cases, there were several hours during which there were two competing Bitcoin chains out of consensus. In both instances, miners and developers acted quickly to roll back the global state of the ledger by choosing which chain was “the real bitcoin” based on fundamentals, rather than committing to following the longest chain. This is important to remember! When Satoshi was in charge, he organized the orphaning the longest chain with the most proof of work in order to return to bitcoin rules. 

In 2017, BCH split from BTC due to the small blockers in BTC signaling that they would renege on their agreement to hard fork bitcoin to update the maximum block size and implement Segwit protocol. The split occurred on August 1, 2017, in order to maintain an unbroken chain of Bitcoin signatures. For nearly four weeks, BTC and BCH competed for hash rate and proof of work. Neither chain orphaned, and things progressed until the 24th of August when BTC began to accept Segwit signatures on UASF sybil nodes; creating an airdrop across all nodes for anyone who sent their bitcoins onto the portion of the network which no longer enforced bitcoin signatures. 

Airdrop: Any chain which does not enforce Bitcoin rules from the genesis block to the present day with an implementation of bitcoin software is an air dropped coin passing itself off as a bitcoin. This includes the portion of BTC which has been overtaken by the Segwit protocol which obfuscates itself from validation by Bitcoin nodes. 

Soft Fork: Soft forks are a malicious way to subvert consensus from occurring to enforce Bitcoin rules. Legacy Bitcoin nodes are programmed to enforce Bitcoin rules on every transaction in every block before accepting them by working to build blocks atop the most recent, valid block. With a soft fork, new non-Bitcoin rules are wrapped into an envelope which tells legacy nodes to trust the rules enforced by newer nodes without actually validating the content within. As such, a soft fork is a type of malware which creates a de facto air dropped coin without splitting the network because newer nodes perform a sort of sybil attack upon legacy nodes by not allowing them to see inside the envelope which contains the invalid transactions. So, old nodes become slaves to the new rules without any way to split away, thus forcing them to participate in an airdrop without their knowledge. 

So what does this all mean? 

Well, BTC transactions are mostly airdropped coins tricking legacy nodes with malware. The current “Bitcoin Core” protocol is a soft fork of a 2013 hard fork which was a 2010 hard fork of the original Bitcoin protocol. It is out of consensus with major Bitcoin rules except through social subversion and sybil nodes governing the network. 

BCH was a 2017 hard fork of the Bitcoin protocol, which split in 2018 creating an airdrop of BCH which containing non-Bitcoin op-codes and invalid transaction ordering rules. 

Bitcoin BSV has had hard fork upgrades to the software, but is a restoration of the original Bitcoin rule set, including all the original script language and unbounded limits. With parentage back to the original Genesis block of Bitcoin, BSV is the only chain which has not ever subverted Bitcoin signatures or Bitcoin rules by arbitrary or malicious use of software, social engineering or sybil nodes. Governed strictly by proof of work, the protocol was restored completely in February 2020, differentiating itself from BTC and BCH which are not governed purely by honest nodes conducting proof of work. Both networks have heavy influence from “the community” guided by the developer intelligentsia. 

In accordance with the Bitcoin license held by Satoshi Nakamoto and defined by the Bitcoin white paper, any valid BTC unspent transactions created between January 2009 and August 1, 2017 and any valid BCH unspent transactions created between August 1, 2017 and November 15, 2018 has valid Bitcoins with valid keys on the BSV ledger which synchronizes back to the genesis block and enforces all time locked and valid rules across the entire history of bitcoin, while BTC is riddled with invalid air dropped Segwit coins and BCH has been split into oblivion. 

Why is this not more widely understood? 

Satoshi Nakamoto has been maliciously and thoroughly wiped from the history of Bitcoin and rewritten by the censorship board of BTC Core. There is no more communist a phrase than “we are all Satoshi,” but that has been the prevailing rhetoric since the project was overtaken starting in late 2010 with Nakamoto’s exit. Nakamoto was very clear about the nature of the protocol from the very beginning, but other developers wanted to turn it into a “community project.” Bitcoin was originally created to be able to implement boundless scaling atop a fixed protocol. Software development still needed to be done, but the rule set of the base layer was deemed complete, so there was no reason to bring in a large community of developers, according to Satoshi:

The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime. – Satoshi Nakamoto, 2010. Bitcoin.org (later reposted to BitcoinTalk.com) 

Nakamoto’s now famous response to Gavin Andresen’s query clarified that since bitcoin “was set in stone,” any conceivable transaction type needed to be made available in script from the beginning. He went on to specify some of what he had envisioned, and that he had a largely unstated vision for the future:

The design supports a tremendous variety of possible transaction types that I designed years ago. Escrow transactions, bonded contracts, third party arbitration, multi-party signature, etc. If Bitcoin catches on in a big way, these are things we’ll want to explore in the future, but they all had to be designed at the beginning to make sure they would be possible later. – Satoshi Nakamoto, 2010. Bitcoin.org (later reposted to BitcoinTalk.com)

Due to the subterfuge of the small blockers at Bitcoin Core, few people know that Bitcoin was released as open source software on Sourceforge, which is notable for its focus on centralized development, because of Nakamoto’s commitment to the nature of the protocol being complete.

In order to avoid any notion of the need to change or modify the protocol Nakamoto designated himself the sole admin to the Sourceforge repository, and Dr. Craig Wright recently stated in an email for this article, “GitHub existed when I launched Bitcoin. I chose Sourceforge for a reason. It was not supposed to be a community project.” He very clearly was not interested in open development, and wanted sole discretion about who was allowed to even contribute code.

Furthermore, the original code was issued as “BitCoin” with a patent-friendly MIT license, making it very clear that BitCoin was not intended to be modified, upgraded or manipulated. Nakamoto spent years planning and implementing a long term rollout of his database and networking protocol to issue a sound and unchanging, decentralized money for the world – safe from the meddling of tyrants at any level.

Unfortunately for bitcoiners, the BTC Core developers started on their path of destruction of the protocol, the license and the creation of an airdropped token retaining the “Bitcoin” name, but not its unique features almost immediately upon Satoshi’s exit from Bitcoin. Removing tools from script, adding P2SH, RBF and other abominations would come, but the first step was moving the source code from the centralized Sourceforge repo to the communal development platform, GitHub. They quickly altered the naming conventions across the code, and they had their way with the protocol from 2011 forward until big blockers took bitcoin back in 2017-2020 with the restoration of Bitcoin SV.  

But it was not without many lost battles. Without permission from the copyright holder, “The Bitcoin Core developers” also named themselves the license holders for the bitcoin protocol—presumably as a pretext to justifying their modification of bitcoin into the abomination of bitcoin commonly referred to as “BTC.” So, they seized Satoshi Nakamoto’s property, his copyright of the protocol, his closed repository and turned it into an open source free-for-all of Hegelian debate about how to constantly redefine bitcoin forever.  

So, what the fork happened to Bitcoin?

Grand theft. Coup d’etat. A Bitcoin Bolshevik Revolution… Software developers and a community which did not understand or respect Bitcoin or Satoshi Nakamoto overtook the project, and they remade it. In the process, they redefined terms, steered the culture and sold out to Silicon Valley and old world venture capitalists, while undermining the entire bitcoin mission in the process and churning out a pile of confusing problems for the market to figure out. 

But Bitcoin has survived. It has won the protocol war, and now needs to win the war for business adoption and global hash power! 

In closing, Bitcoin is not arbitrary, open to debate, or in need of any fundamental modification. It also only exists as Bitcoin SV. Satoshi Nakamoto appreciated help with the software from guys like Hal, and he appreciated help from guys like Martti for running nodes to help bootstrap the peer network. But amid the fray, and even in the earliest days preceding the Bitcoin Civil War, there was a fundamental misunderstanding about Bitcoin. In their ignorance, developers became obsessed with changing the game theory of the network—creating a cascade of problems. They gutted the protocol and created the necessity for the political battles which allowed Bitcoin SV to emerge as the only complete implementation of Bitcoin. As BTC, BCH and every other forked digital asset is caught up in the central-planning phase of their alpha and beta-level development, Bitcoin SV is now the only complete and fully decentralized blockchain network. Only in Bitcoin SV has the position of the “protocol developer” been made obsolete to the network—handing governance to honest nodes who enforce Bitcoin rules for the security of the users, and allowing the long term planning of generational business to be planned for the network. 

The software will continue to be improved at the direction of its rightful copyright owner, with protocol set in stone, and bitcoin will continue its path—righted and restored by proof of work!

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.

Coincidentally, this mirrors the hype between October and December of 2017 when the cryptocurrency surged +341% in two months to hit a then high of US$18,985.

Is there still room to get in on the bandwagon? Or does the post-hype crash in 2018 provide a cautionary tale of what is to come?

Before getting overly enthusiastic for either camp, it is important to understand what Bitcoin is, besides being the most prolific cryptocurrency in the market.

At its core Bitcoin is a digital currency that is tradeable and can be used to perform transactions. It was launched in 2009 with the original aim to be a means of securing transparent payments over the internet as e-commerce grew. Every Bitcoin transaction that is performed requires verification, and this is achieved via a network of miners who are incentivised with Bitcoin payments for every successful verification.

This entire process essentially creates a long chain of verified transactions which is transparent and immutable. This account of transactions is also called a distributed ledger, or blockchain.

Based on the mathematical model that underpins the creation of new Bitcoins for every successful transaction that is verified by miners, the supply of Bitcoin is limited to 21 million coins.  As of 12 January 2021, the supply of Bitcoins in the market stands at 18.6 million.

Just as with any asset, demand and supply for Bitcoin drives its price. In Bitcoin’s case, the 21-million-coin theoretical supply limit cements its scarcity.

On the demand side, there seems to be a few major players: 1) Bitcoin agents and proprietors, 2) billionaires, and 3) retail money.

In December 2020, however, financial news reports have been increasingly suggesting that a fourth major player has emerged: institutional money. British fund manager Ruffer Investment Management and U.S. Insurer MassMutual revealed that they bought US$745 million and US$100 million in Bitcoin respectively. This revelation has coincided with the recent surge in prices.

More interestingly, a note from JPMorgan strategists revealed that if pension and insurance funds in the U.S., eurozone, UK and Japan each allocated 1% of their portfolios to Bitcoin, that would amount to an additional US$600 billion inflow. As of 12 January 2021, Bitcoin’s market capitalisation stood at US$657 billion which means its current price could roughly double, assuming supply remains relatively constant post-inflow.

While the longer-term argument towards institutional ownership seems plausible, at least for now, the spectacular rise in the price of Bitcoin points towards speculation rather than a sustained increase in institutional support. The current astronomical rise could be a case of frenzied retail money being crowded in by the wrapper of institutional support.

More worryingly, I would be cautious with Bitcoin being the avenue for the typical pump and dump scheme. Data from Flipside Crypto, a digital currency research firm, reveals that Bitcoin ownership is highly concentrated. The firm notes that 2% of anonymous ownership accounts control 95% of Bitcoin holdings. These owners can easily act in concert to create the impression of a bubble not to be missed, which crowds in unsuspecting retail accounts, before selling at the top to leave retail owners to bear the ultimate losses. To all the newly minted owners of Bitcoin, I say: ‘Buyer beware’.

One of the commonly cited reasons for buying Bitcoin is that it acts as a good hedge against traditional asset classes such as equities and fixed income, assets that one would typically have in a portfolio of financial assets. For any asset to act as a good hedge, its value should ideally not move in the same direction as the value of the rest of the portfolio.

The traditional asset that performs this hedge is gold, whose value is typically uncorrelated to the movement in value of traditional financial assets such as equities and fixed income. Commentators have increasingly taken to naming Bitcoin the digital gold. For Bitcoin to act as a good hedge, its value should therefore not move in tandem with traditional financial assets.

I am not convinced that Bitcoin’s value is uncorrelated with traditional financial assets. The data to date is patchy, in part because Bitcoin does not have a long track record given its launch only in 2009. In addition, taking the S&P 500 to be the measure of the traditional financial asset whose value one is looking to hedge against, the correlation of Bitcoin with the S&P 500 (between Oct 2013 and Jan 2021) is +0.88, while that for gold in the same period stands at +0.75.

In addition, based on price data for rolling 90-day correlations in the past seven years, Bitcoin exhibited zero or negative correlation to the S&P 500 index in 30% of all observations, compared with 50% for Gold. Therefore, I am not certain if I am convinced by the portfolio hedge argument particularly if one compares it with the existing role of gold.

Another reason proponents of Bitcoin cite to buy it is that it is a good store of value. As a digital currency without control over by central banks, Bitcoin is the anti-thesis to the widespread money printing taking place today which threatens the underlying value of fiat currency. With Bitcoin’s limited supply and assuming a stable core of demand, buyers of the cryptocurrency posit that its value can be retained.

While that may be true, my view is that Bitcoin yet remains too volatile to be a good store of value which one can expect to maintain a stable value through time. In that regard, gold, with its longer track record and relatively more stable prices, still proves to be a more reliable store of value.

Personally, buying Bitcoin is no more than a gambling punt. If you have spare change and can afford to lose that entire sum of money, then by all means place it in Bitcoin. However, at current prices, I will hesitate to enter if I have not yet done so.

My topmost concern is the possibility that the price of Bitcoin is being manipulated to facilitate the enrichment of a few concentrated owners, at the expense of the masses. Perhaps when and if prices fall dramatically, I might consider purchasing it. But it will not be any more than 1% of my overall financial portfolio. For now, though, I will be avoiding it with a ten-foot pole.

a straight line. They move in waves, creating peaks and troughs along the way.

Before the recent correction, Bitcoin simply continued to make peaks over with barely any throughs. As the market turned euphoric, it was only a matter of time before a significant price correction would deliver a bit of a reality check. 

This is not to say that the Bitcoin bull run is necessarily over. It is just to say that a correction was needed before the market can make a push higher again. The type of bullish momentum displayed by Bitcoin recently is pretty much impossible to sustain over a longer period.

It seems this type of sentiment is beginning to gain traction within the market. Before the price correction happened, venture capital investor Chris Burniske warned that the market seemed to be in a state of euphoria, and that a pullback was necessary.

He continued with the following analogy:

He states that after the breakout wave occurs, the water in the ocean needs to dissipate as it must gather its resource to let another wave roll through - that is what is known as the pullback in markets.

Burniske also pointed out that in previous bull-cycles, the pullbacks represented 20-40% declines - which look relatively small today.

We only need to take a look at the weekly chart to look at how parabolic the recent bull trend was:

In fact, if you take a look at the weekly RSI on the weekly chart above, you might notice that the RSI was the most overbought it has been since late-2013 - surpassing the levels seen in the late-2017 market surge. This shows how overextended the bullish momentum was within the market.

There are some other concerns that current BTC investors should be keeping in mind.

Firstly, it seems that mainstream media has noticed that Bitcoin is not “dead,” and headlines are dominating the feeds talking about the extraordinary growth. This is likely to attract amateur retail investors into BTC again. Those that buy and sell without much thought behind their actions. We can already see this in the Google Search Trends for “Bitcoin”:

After months of zero interest, there has suddenly been an uptick in Bitcoin searches as retail investors look to catch up with what has been occurring. Furthermore, it seems that Bitcoin price volatility is starting to rise again.

When markets become highly volatile, it is likely to discourage institutional investors from entering any new positions until the volatility dies down. Financial institutional investors mainly drove this latest BTC price boom, so we will likely see a huge pullback if that dries up.

Lastly, data from The Block (sourced from Skew) shows that the open interest for Bitcoin Futures passed the $10 billion threshold and continues to rocket:

The aggregated open interest shows the number of open positions on all of the futures exchanges for Bitcoin. The majority of this open interest is sitting on the CME exchange for professional investors, with Binance Futures and OKEx following closely.

As a result of this overwhelming open interest, BTC Futures contracts’ funding rates have gone through the roof. It was estimated that traders were paying over $5 billion in annualized interest fees to keep their long positions open.

The funding rate is the cost that the long traders have to pay the short traders to balance the market. The cost of the funding rate has increased by over 15 times from 0.01% to 0.15%. This is because the majority of the market is overwhelmingly long.

The problem with the majority of the market being long is it gives rise to the probability of a long squeeze occurring. This is a scenario in which long traders (traders with “buy” positions open) have to close their positions when the market starts to fall slightly - usually taking a loss in the process. 

To close their positions, these traders need to “sell,” causing a cascade of selling on the futures market, which floods onto the spot market. This leads to a domino effect of Long positions closing by selling the market, usually leading to a large drop in Bitcoin price. 

According to Bitcoin market analyst Willy Woo, issues at the Coinbase cryptocurrency exchange played an important role in the recent sell-off. The fact that the Bitcoin price was lower on Coinbase compared to other exchanges due to technical difficulties impacted cryptocurrency derivatives exchanges that use Coinbase as one of their sources for pricing Bitcoin.

In conclusion, I am not trying to bring fear into the market—quite the contrary. I believe Bitcoin will eventually hit $100K per coin in the very near future. This article is just intended to highlight the level of euphoria within the market right now. There is a great deal of greed within the market and many indicators were pointing to the fact that it was extremely overextended. 

After a market turns parabolic, there is only one possible outcome - a large pullback. We need to manage our funds wisely to cover ourselves for when this pullback eventually does occur.

its December 2017 high, with the number of Twitter users mentioning Bitcoin already surpassing its old peak, based on data from Arcane Research’s chart on Bitcoin tweet Activity.

Despite the temporary free fall in price, the rise in activity on Twitter underlines a positive sentiment among retail traders. In fact, the last time this surge was noted was back in 2017.

It should be highlighted, however, that as far as Google Trends is concerned, the levels for Bitcoin are still way below the levels seen back in December 2017.

The surge in positive sentiment on Twitter was shared by PayPal as well. On PayPal, the volume doubled to $240 million in a single day. While the trade volume on PayPal started off at $100 million in December 2020, it is now closing in on $250 million as the demand for Bitcoin is increasing.

Not just institutional demand, but retail traders are generating higher demand on spot exchanges too. This surge in the volume of tweets and trade volume on PayPal is in sharp contrast to what’s happening on derivatives exchanges. On derivatives exchanges, traders have been experiencing a drop in momentum and volatility lately.

In fact, a total of $410 million in $BTC long positions in Futures contracts were liquidated on leading exchange Binance. This marked the largest daily value of liquidations to date. This mass liquidation event may have had a direct and negative impact on derivatives traders’ BTC sentiment. 

With increasing active supply, Bitcoin activity on Twitter is expected to increase further if the price rallies or suffers further corrections. Since the current Bitcoin supply is more active than it has been in the past 3 years, especially when compared to the Bitcoin supply of 2017, a positive sign for new entrants can be noted.

Retail traders on exchanges may see this as the right vantage point, one that sets a lowered barrier of entry to the cryptocurrency market. Though Bitcoin is trading above $33,000 now, relative to this phase of the market cycle and its recent ATH, this is a dip. Trading at this price may drive Bitcoin’s demand higher than the current level on spot exchanges. 

Tezos Price Analysis: 13 January

Cardano, Synthetix, Cosmos Price Analysis: 13 January

Ekta is a full-time journalist at AMBCrypto and her specialization lies in spot markets. Currently pursuing her MBA, she is passionate about trading, fintech, and everything decentralized.

Bitcoin Cash Price Analysis: 17 January

Why Bitcoin denominated payments won’t be mainstream anytime soon

Cardano, Cosmos, BAT Price Analysis: 17 January

Ethereum Price Analysis: 17 January

Was Bitcoin’s rally overextended? If yes, what next

Polkadot, Ontology, FTX Token Price Analysis: 17 January

was nearly 8% lower than its ATH of $41,941, based on data from CoinMarketCap.

While BTC has repeatedly attempted to breach the $40,000-level, these attempts have either been brief or unsuccessful. It would therefore seem that the increasing active supply on exchanges has posed a challenge to Bitcoin’s price rally.

While some HODLers and retail traders are selling, many other retail traders and institutions who bought Bitcoin above the $30,000-level have accumulated and instead, may be protecting the asset from a cascading sell-off. As Bitcoin continues to leave exchanges and hit wallets or reserves, there is a possibility that reserves may continue to drop till they hit December 2020 levels. 

Based on the attached chart, the cryptocurrency’s price has ranged between the $37,000 and $40,000-level for the past 24 hours. While there is enough volatility, despite the increasing volume, Bitcoin’s price hasn’t sustained itself above the $40000-level for over a few hours. The rebound is a signal of the positive sentiment in the market, but based on data from Skew charts, Bitcoin is rebounding toward $40,000 backed by relatively low volumes. 

A drop in spot exchange reserves and an increase in the trade volume suggest that the sentiment is positive on spot exchanges. In addition to the activity on spot exchanges, there has been a sharp movement in the Options market.

Skew charts highlight that short-dated calls in Bitcoin are in high demand right now. In fact, on a top derivatives exchange like the CME, nearly 35,000 calls were traded earlier this week, a level which was already above breakeven with Bitcoin trading $38,600.

Further, volatility in price has risen, with the same inching closer to its 2017-level, supporting further price discovery above $40,000. 

On Crypto-Twitter, many on-chain analysts have predicted drops and corrections in the price rally ever since price discovery started beyond the $35,000-level. However, after a few drops in volatility and momentum, institutional buying has notably supported the price rally and with increasing non-zero Bitcoin addresses, there is a change in sentiment among retail buyers as well.

If the buying continues through the weekend, there is a high probability of pursuing the rally to $41,000 in the coming week.

Cardano Price Analysis: 15 January

Polkadot, Dash, Uniswap Price Analysis: 15 January

Ekta is a full-time journalist at AMBCrypto and her specialization lies in spot markets. Currently pursuing her MBA, she is passionate about trading, fintech, and everything decentralized.

How can the CME’s rise affect Bitcoin’s spot prices?

Bitcoin: Why CME might take a U-turn in 2021

Are the prospects for a Bitcoin ETF high in 2021?

Yet another signal to indicate why Bitcoin’s price peaks will continue

CME Bitcoin Futures open interest hits ATH

Bitcoin at $20,000: what to expect?

hackers who try to do away with the honest and hard-earned money of the investors and traders? The malicious acts of the Bitcoin thieves have stirred the regulators into stern actions. The developers of Bitcoin are striving hard as well to keep the thieves and hackers at bay. Find out more about Bitcoin thieves and their unethical tricks.

Bitcoin is highly encrypted by advanced Blockchain technology. The team behind Blockchain technology strives to encrypt every Bitcoin transaction that takes place over the Bitcoin Blockchain. The encryption mechanism ensures the confidentiality of private information of the parties so that hackers are not able to embezzle anything of value.

There are Bitcoin servers all over the world, with thousands of nodes that keep track of every Bitcoin transaction over the Blockchain. The network of nodes prevents any kind of malicious attack and creates an impossible situation for hacking into the system. A hacker can only get access to valuable information and Bitcoin if he gains control over more than 50% of the nodes, which is impossible.

The public nature of Bitcoin refers to the transparency of Bitcoin transactions. Even if the parties to the transaction remain anonymous, the transaction information is available for the public. This has been done to prevent scam and fraud of Bitcoin transactions. A bitcoin transaction is also irreversible, and the wallet is highly protected.

Despite the topnotch encryption mechanism of Bitcoin by Blockchain technology, it is still not too difficult to hack Bitcoin. The developers are working hard to protect the system against malicious attacks. Here are some of the most popular tricks that hackers resort to for embezzling Bitcoin.

The Bitcoin wallet consists of two keys that are public key and private key. Bitcoin users usually store the private key in the computer or mobile devices, and the hacker accesses the computer to steal the private key. Bitcoin security specialists suggest to the users to maintain the private key in hard copy. You can also employ hot wallet services offered by Blockchain.com or Crypterium, and Wirex to store the private keys most securely.

Hackers employ the tactic of sending phishing emails to entrap innocent Bitcoin users. The hacker impersonates a familiar service and sends an email to ask the receiver to furnish the sender with confidential details like private key data and personal information. When the receiver of the phishing email responds to the email, his Bitcoin wallet gets hacked. Stay alert of such fake emails and keep in mind that no official company email will ever ask for the private key.

 A keylogger is a malware that can record every PIN, password, and seed that the Bitcoin user introduces in his computer, and then transfer the recorded info to the Bitcoin hacker. Do not download any suspicious email attachment and scan every email before clicking on it. Do not insert virus-infected USB or pen-drives into the computer and run the anti-virus software every day to prevent the installation of keyloggers.

The Trojan virus can infiltrate into your computer, monitor the behavior of the user, and steal every information that remotely resembles a private key of the Bitcoin wallet. A good way to prevent the attack of the Trojan virus is regular antivirus checks.

The 2FA is an additional security layer that makes sure of the authenticity of transactions and operations. 2FA is crucial for protecting users against unsolicited Bitcoin transactions, but there are cases of bypassing the 2FA security layer. So, be alert of the notifications and take action whenever you notice any suspicious activity.

Bitcoin hackers have been reported to have stolen millions from cryptocurrency exchanges. Despite the high level of security of Blockchain technology, Bitcoin is still an easy target for Bitcoin thieves and hackers. That is because the cryptocurrency wallet or the crypto exchange may not be secure at all. The Bitcoin trading platform may be phony as well. And these platforms and wallets become easy targets of Bitcoin heist.

Bitcoin cannot be hacked as it is secured by the highly advanced and robust Blockchain technology. But Bitcoin gets hacked when the hacker gets access to the private key of the user’s Bitcoin wallet. The Bitcoin thief hacks into the user’s devices by sending phishing emails and employing other tactics to steal the confidential wallet information.

The biggest and most shocking Bitcoin hacks include:

Be wary of Bitcoin hacks and maintain the utmost security of the Bitcoin wallet. Adopt every security measure necessary to protect the private keys and do not respond to suspicious emails. Run antivirus checks every day to make sure that the system is protected against Bitcoin hackers. Apart from that, When you are choosing a platform for Bitcoin trading then you check its legitimate, safety and security features. One such most trusted and secured platform is the Bitcoin Aussie System that gives you profit on Bitcoin trading. It is an automated trading platform which is also called as Bitcoin Robots.

ago. 

Overseen by Bitcoin Core lead maintainer Wladimir van der Laan, this latest major release was developed by well over a hundred contributors in a span of about six months. The result of over 600 merged pull requests, Bitcoin Core 0.21.0 is one of the biggest Bitcoin Core releases in recent years, introducing various new features as well as privacy and performance improvements, while taking a big step towards the Schnorr/Taproot protocol upgrade.

Below are some of the more notable changes.

When coins are sent to a Bitcoin address, what actually happens under the hood is that they are “locked up” in an unspent transaction output (UTXO), to only be “unlocked” (spent) in a later transaction if the conditions hidden in the UTXO are met. A typical condition is the inclusion of a valid signature corresponding to a specific public key. But conditions can for example also consist of the inclusion of a secret code, the lapse of a timelock or a combination of signatures (multisig).

Until now, Bitcoin Core was designed to manage the UTXOs in its wallet around their corresponding private keys — even though private keys are just one of several potential conditions for spending coins. Bitcoin Core 0.21.0 instead introduces “descriptor wallets.” Descriptor wallets let users categorize their UTXOs based on the types of conditions that are required to spend them. (For example: one wallet for UTXOs that just require a valid signature, and one wallet for multisig UTXOs.)

Descriptor wallets are especially useful for application developers who design software on top of Bitcoin Core. A particular application can now easily be designed to utilize only a specific type of UTXO, like multisig UTXOs, and ignore any non-multisig UTXOs.

Regular users may also notice a difference now that descriptor wallets are implemented. Perhaps most notably, no default wallet will be created when a new Bitcoin Core node is started up. Instead, a new wallet is only created when a user specifically chooses to do so, allowing them to create only the specifically desired type of wallet. Descriptor wallets also better support Watch Only wallets: wallets that keep track of certain UTXOs even though the node doesn’t have the private keys needed to spend them.

Bitcoin Core users that upgrade to Bitcoin Core 0.21.0 will still be able to use their legacy wallet for now. (Legacy wallets will eventually be deprecated, meaning users will need to migrate their legacy wallet to a descriptor wallet, but this won’t be strictly necessary until a future Bitcoin Core release.)

“Light clients” are Bitcoin wallets and applications that don’t download and validate the entire Bitcoin blockchain, but instead only download and validate parts of blocks and transactions that concern them specifically. This is not optimally secure, but is much less resource intensive.

One popular way to do this is with Bloom Filters. In short, Bloom Filters are a cryptographic trick to request relevant data from more or less random peer nodes on the network. Unfortunately, however, it has become clear over the years that Bloom Filters are rather privacy-unfriendly: they essentially reveal all of the user’s addresses to the (more or less random) peer node, which could of course be operated by a privacy-invading snoop.

A newer and much more privacy-preserving alternative to the Bloom Filter solution is called “compact client-side block filtering” (BIP 157/158). Compact client-side block filtering essentially turns the Bloom Filter trick on its head. Instead of light wallets creating filters to send to full nodes, full nodes create filters for each block and send these to light clients on request. Light clients then use these filters to figure out if transactions relevant to them may have been included in a block. If so, the light wallet will fetch the whole block and pick any relevant transaction data out of it. (There will be some false positives; blocks that won’t have relevant transaction data in them even though the filter suggested they might.)

Existing Bitcoin Core releases could already create the filters locally, and make them available through a remote procedure call (RPC) for applications running on top of the node (like wallets). Bitcoin Core 0.21.0 now also includes the option to make these filters available over Bitcoin’s peer-to-peer network on request. This makes it possible to now operate standalone light clients that use bloom filters.

Besides Bloom Filters, snoops can also break the privacy of Bitcoin users through network analysis. If they can figure out from which node a particular transaction originated, that node’s Bitcoin address(es) can be tied to its IP address, which can in turn be associated with a real-world identity.

Until now, when Bitcoin Core nodes broadcasted a transaction to the Bitcoin network, they’d try to re-broadcast the transaction every fifteen minutes, until the transaction was included in a block. This meant that if these Bitcoin Core nodes were connected to a snooping peer, it would be obvious for the snoop that the Bitcoin Core node trying to re-broadcast a certain transaction every 15 minutes was also the node where that transaction originated.

Bitcoin Core 0.21.0 greatly diminishes the frequency with which it tries to re-broadcast transactions: only once every 12 to 36 hours. Having to re-broadcast less frequently makes it much more likely that the transaction has been confirmed since the initial broadcast, so the node is less likely to have to re-broadcast at all.

In future Bitcoin Core releases, this privacy leak will be fixed entirely. A Bitcoin Core node will then only re-broadcast transactions that should have been confirmed based on its own mempool and fee calculations. Furthermore, it will re-broadcast other transactions as well, not just its own.

Due to a recent upgrade to the privacy-preserving Tor protocol, new V3 (version 3) Tor-addresses are longer than the V2 (version 2) addresses that came before them. V2 addresses are still in use, but will be deprecated in about a year from now.

Deprecation of V2 addresses would have posed a problem for Bitcoin Core users who want to use Bitcoin over the privacy network. Bitcoin Core nodes find peers by sharing with each other Tor addresses of known Tor-using Bitcoin nodes. They shared this through the same message they use to share other nodes’ regular IP addresses. While Tor V2 addresses could be “hidden” in the regular IP address format (IPV6), Tor V3 addresses are too long for that; in other words, the current messages are too limited to be compatible with the Tor upgrade.

Bitcoin Core 0.21.0 therefore introduces a new format to share IP/Tor addresses with peers. These messages can be big enough to share the Tor V3 addresses.

The Schnorr/Taproot code is now included in Bitcoin Core 0.21.0. Barring unexpected developments, this means it will not be subject to any more change, which for example means that application developers could start designing software around the upgrade. In addition, Schnorr/Taproot is now available on Signet (a newer and more reliable variant of testnet, used by developers to test new Bitcoin software) and potentially also on Regtests (additional local testnet variants).

Schnorr/Taproot will not, however, be available on Bitcoin’s mainnet just yet. For this, the upgrade will first need to activate, which requires activation logic that isn’t yet included in this Bitcoin Core release. Activation logic is expected to be included in a minor Bitcoin Core release, possibly somewhere in the next months.

On top of the changes above, Bitcoin Core 0.21.0 includes various bug fixes and performance improvements that won’t be as apparent for regular users. The Bitcoin Core wallet will for example switch from using the Berkeley DB to the SQLite database, which is better suited as an application data file and offers several guarantees in regards of compatibility, support and testing. Of interest is also that Bitcoin Core 0.21.0 includes a transaction request overhaul: the new message protocol that Bitcoin nodes use to learn about new transactions is better tested, better specified and easier to maintain and review.

For a more extensive list of upgrades, also see the Bitcoin Core 0.21.0 release notes, or see this blog post by Bitcoin Core contributor Andrew Chow for a more extensive explanation of descriptor wallets (as well as legacy wallets) and SQLite (as well as Berkeley DB).

Thanks to John Newbery for information and feedback.

Ethereum offer a number of benefits, and one of the most fundamental is not requiring trust in an intermediary institution to send payments, which opens up their use to anyone around the globe. But one key drawback is that cryptocurrencies’ prices are unpredictable and have a tendency to fluctuate, sometimes wildly. 

This makes them hard for everyday people to use. Generally, people expect to be able to know how much their money will be worth a week from now, both for their security and their livelihood. 

Cryptocurrency’s unpredictability comes in contrast to the generally stable prices of fiat money, such as U.S. dollars, or other assets, such as gold. Values of currencies like the dollar do change gradually over time, but the day-to-day changes are often more drastic for cryptocurrencies, where the value jumps up and down regularly.

The following graph shows the price of bitcoin vs. the U.S. dollar (USD) compared to another fiat currency, the Canadian dollar (CAD), to see how much each currency fluctuates in relation.

Stablecoins were worth more than $10 billion as of May 2020. In countries like Brazil, many people are turning to stablecoins as an alternative to their national currencies in uncertain economic conditions. Meanwhile, in Hong Kong, some people are using stablecoins to avoid new internet censorship in a tumultuous political climate.

Stablecoins try to tackle price fluctuations by tying the value of cryptocurrencies to other more stable assets – usually fiat. Fiat is the government-issued currency we’re all used to using on a day-to-day basis, such dollars and euros, and it tends to stay stable over time. 

Usually the entity behind the stablecoin will set up a “reserve” where it securely stores the asset backing the stablecoin – for example, $1 million in an old-fashioned bank (the kind with branches and tellers and ATMs in the lobby) to back up one million units of the stablecoin. 

This is how a digital stablecoin and a real-world asset are tied together. The money in the reserve serves as “collateral” for the stablecoin. A user can theoretically redeem one unit of a stablecoin for one unit of the asset that backs it. 

There is a more complex type of stablecoin that is collateralized by other cryptocurrencies rather than fiat yet still is engineered to track a mainstream asset like the dollar. 

Maker, perhaps the most famous stablecoin issuer that uses this mechanism, accomplishes this with the help of Collateralized Debt Positions (CDPs), which lock up a user’s cryptocurrency collateral. Then, once the smart contract knows the collateral is secured, a user can use it to borrow freshly minted dai, the stablecoin.

A third variety of stablecoin, known as an algorithmic stablecoin, isn’t collateralized at all; instead, coins are either burned or created to keep the coin’s value in line with the target price. Say the coin drops from the target price of $1 to $0.75. The algorithm will automatically destroy a swathe of the coins to introduce more scarcity, pushing up the price of the stablecoin. 

This type of stablecoin is much less popular so far. One of the most popular stablecoins following this model, basis, shut down in 2018 due to regulatory concerns. 

Using this framework, stablecoins come in a range of flavors, and the collateralized stablecoins use a variety of types of assets as backing:

To give you a taste of the experimentation happening in stablecoin land, let’s run through some of the most popular stablecoins.

Diem (formerly known as Libra) is a stablecoin in the works, originally conceived by the powerful, worldwide social media platform Facebook. While libra hasn’t launched, it’s had more psychological impact than any other stablecoin. 

Governments, notably China’s, are now exploring their own crypto-inspired digital currencies, in part because they’re worried Diem would be a competitive threat since Facebook is a multinational company with billions of users from across the globe.

Initially, the Diem Association, the consortium set up by Facebook, said Diem would be backed by a “basket” of currencies, including the U.S. dollar and the euro. But due to global regulatory concerns, the association has since backed off from its ambitious original vision. Instead, it is now planning to focus on developing multiple stablecoins, each backed by a separate national currency.

Its first stablecoin, the Diem dollar, is expected to launch as early as January 2021.

Tether USDT is one of the oldest stablecoins, launched in 2014, and is the most popular to this day. It’s currently one of the most valuable cryptocurrencies overall by market capitalization. 

The primary use case for USDT is moving money between exchanges quickly to take advantage of arbitrage opportunities when the price of cryptocurrencies differs on two exchanges; traders can make money on this discrepancy. But it has found other applications: Chinese importers stationed in Russia have also used USDT to send millions of dollars worth of value across the border, bypassing strict capital controls in China.

Tether Ltd., the company that issues USDT, is embroiled in a legal battle with the New York Attorney General concerning providing financial documents that would illuminate its financial relationship with the cryptocurrency exchange Bitfinex.

Launched in 2018, USD Coin is a stablecoin managed jointly by the cryptocurrency firms Circle and Coinbase through the Centre consortium. 

Like tether, USD Coin is pegged to the U.S. dollar. It is the second-largest stablecoin by market capitalization.

Running on the MakerDAO protocol, dai is a stablecoin on the Ethereum blockchain. Created in 2015, dai is pegged to the U.S. dollar and backed by ether, the token behind Ethereum.

Unlike other stablecoins, MakerDAO intends for dai to be decentralized, meaning there’s no central authority trusted with control of the system. Rather, Ethereum smart contracts – which encode rules that can’t be changed – have this job instead.

There are still problems with this innovative model, however; for example, if the smart contracts underpinning MakerDAO don’t work exactly as anticipated. Indeed, they were gamed earlier this year, leading to losses of $8 million.

There are a few drawbacks to stablecoins to keep in mind. Because of the way stablecoins are typically set up, they have different pain points than other cryptocurrencies.

Crypto publication The Capital, for instance, argues that while stablecoins are called “stable,” they are only as stable as the asset that the stablecoin is tied to. Traditionally, the price of the dollar is very stable, but if that were to change, any fluctuations in the value of the dollar would be reflected in the stablecoin. 

If the reserves are stored with a bank or some other third party, another vulnerability is counterparty risk. This boils down to the question: Does the entity really have the collateral it claims to have? This has been a question frequently posed to Tether, for instance, without clear answers. Tether has yet to provide a full open audit of its reserves.

Many stablecoin issuers don’t provide transparency about where their reserves are held, which can help a user determine how risky the stablecoin is to invest in. Knowing where their money is held, users can see if a stablecoin is operating without a license in the region where the reserves are held. If the stablecoin operators don’t have a license, a regulator could potentially freeze the stablecoin’s underlying funds, for instance.

Further, it’s possible the reserves backing a stablecoin could turn out to be insufficient to redeem every unit, potentially shaking confidence in the coin.

Cryptocurrencies were created to replace intermediary companies that are typically trusted with a user’s money. By their nature, intermediaries have control over that money; for example, they are typically able to stop a transaction from occurring. Some stablecoins add the ability to stop transactions back into the mix. 

USD Coin openly has a back door to stop payments if coins are used in an illicit manner. Circle, one of the firms behind USD Coin, confirmed in July 2020 that it froze $100,000 of USD Coin at the behest of law enforcement. 

unprecedented gains except in Europe.

Nonetheless, the economic outlook in the world’s biggest economy is worsening. COVID-19 cases in the US are surging, retail sales are down, and the unemployment claims have exploded.

The investors expect a period of pain for around six months before the vaccine gets administered to a majority of the population and the wider economy begins a huge recovery. In these times, it is always expected for investors to look at alternative options as hedges for their portfolio and investments.

Through the years, the smart hedge move against market volatility has always been gold. Nonetheless, the pandemic has seen the emergence of a new alternative: Bitcoin. The crypto, launched in 2009, has a lot of properties of a fiat currency but it also has many qualities that qualify it to be an excellent hedge.

Gold as an asset has quite minimal connection to assets like oil, stock markets, and currencies. It is seen as a haven asset. Gold demand is quite high but the supply is low. It is not easy to mine and it cannot be manufactured on a central bank’s printer. Notably, gold prices have traditionally taken off in recessions as investors flock to it when stock markets implode.

Bitcoin is seen to share lots of qualities with gold. There is a finite supply of bitcoin in the world set at 21 million. Moreover, bitcoin is not owned by any central bank or country just like the precious yellow metal. Moreover, bitcoin has to be mined and the new bitcoin stipulations have guaranteed that rewards for mining bitcoin have halved and this will mean that the last bitcoin will be mined in 2140.

Bitcoin’s finite supply is comforting to investors who expect that the value of the crypto will surge further as supply runs out. Between 2016 and 2017, bitcoin prices were on the rise and by December 2017, one bitcoin was valued at $19,873.

The crypto went into a downside correction after that which pushed it to $3,300 by December 2018. Bitcoin has made a massive comeback from July 2020 where it traded at $10,944. Within seven months, bitcoin crossed $41,000. At the time of writing, it is consolidating just below $36,000.

Bitcoin analysts and experts explain that there is a major difference between the 2017 rally and the current one. Back in 2017, the rally was spearheaded by retail investors. This time around, the rally is dominated by big names in the institutional space including MassMutual, MicroStrategy, Paul Tudor Jones, and many more. According to Forbes:

“Nearly 20 institutions already filed paperwork with the U.S. Securities and Exchange Commission last quarter [April-June 2020], showing they invested in the Grayscale Bitcoin Trust (OTC: GBTC), a product of Barry Silbert’s New York-based Grayscale Investments, LLC. These include storied mutual funds like Ark Invest with $4.5 billion in AUM (assets under management) and Horizon Kinetic with $5.3 billion in AUM.”

SkyBridge Capital, Anthony Scaramucci’s firm, is the latest traditional fund manager to join the bitcoin space and announced on January 4, 2021, that it had launched the Skybridge Bitcoin Fund with around $310 million in AUM invested from its $3 billion flagship fund.

Gold is well known to have existing standards and benchmarks throughout the world. Notably, the system for weighing and tracking gold is perfectly defined. It is challenging to pass off any fake gold as the original.

On the other hand, bitcoin is safe as a cryptocurrency. It is decentralized and almost impossible to access it due to many levels of algorithms. Nonetheless, the same cannot be said about the storage for bitcoin. Bitcoin history is dominated by stories of heists, mostly Mt. Gox. If gold is stolen, there is a probability that one can recover it. Nonetheless, bitcoin is a different ball game.

It is known that the bitcoin supply globally will run out in 2140. But for now, it is not clear when all gold on earth will be mined. While both of these assets are finite, bitcoin comes out as the winner since there is the possibility of a new gold mine being discovered.

Today, gold is accepted as an asset all over the world. There are many countries where bitcoin is still illegal or there are banking bans like in Canada and China. Bitcoin’s potential as a currency for people who have no access to traditional banks is still untapped. There is a major challenge here. In most cases, the people who have no access to banks also do not have any access to the digital world.

Gold is not volatile. The trend with gold is that it moves up whenever the other markets are down. On the flip side, bitcoin is highly volatile currently.it has become the norm for bitcoin to surge by 20% in a day and then fall 15% the next.

As the coronavirus continues to roll out, it is likely that gold prices may stabilize and remain flat for a longer period or may even drop slightly. Gold is trading above $1,930 currently, which is a decent level for the asset.

On its part, bitcoin moves according to the fancies and whims of speculators. Since the bitcoin supply is limited and concentrated in the possession of a few large players, bitcoin prices will see massive amounts of volatility,

Gold is more democratized than bitcoin. For example, Indian women are known to own 23,000-25,000 tonnes of gold which translates to 11% of the total gold reserves in the world. Gold prices will not see the levels of fluctuations that bitcoin does.

For now, just based on fluctuation and volatility, gold is a safer hedge than bitcoin.

cryptocurrency’s price action began to taper off heading into the weekend. This culminated in a strong flush lower over the past few hours that brought the leading cryptocurrency from the $40,000 region to lows at around $34,500 on some exchanges.

There appears to have been a large divergence between the price of Bitcoin on spot exchanges versus the price of Bitcoin on futures exchanges. It appears that there were spot sellers leading the dip, resulting in this divergence, as those on the futures market began to bet on a rebound.

This is made apparent by the high futures funding rate. The funding rate is the fee that long positions pay short positions on a recurring basis to ensure the price of the future is around that of the spot market.

Related Reading: Wall Street Veteran Kickstarts Own BTC Fund With $25m Investment

Crypto-asset analysts argue that there is too much panic over this one move. One noted that the cryptocurrency is now only trading at prices seen 4-5 days ago.

Others note that the ongoing bounce seen in the Bitcoin price is a sign that there remains buying pressure on the sidelines that should maintain current price levels.

This move up has been so crazy we're all losing grip on reality.

— DonAlt (@CryptoDonAlt) January 10, 2021

Related Reading: 3 BTC On-Chain Trends Show a Macro Bull Market Is Brewing

Article source

season.

I think most of us will be glad to see the back of 2020, a real ‘Annus Horribilis’. But as each door closes a new one opens and 2021 gives us hope that things will improve for people, their health, their jobs, and the economy.

But what does the future look like for Blockchain? Has it already peaked, will it fulfill its potential, where and how will it evolve? It is fair to say the future is unclear (just look at 2020 again!).

According to Gartner here are a few interesting comments from their recent insights:

The complexity of blockchain and the many roles it can play create challenges, but the benefits and value continue to boost the variety and number of projects. Gartner expects the technology to generate significant business benefits and value. Projections are for $176 billion by 2025 and more than $3.1 trillion by 2030 (see “Forecast: Blockchain Business Value, Worldwide, 2017-2030”).

My New Year resolutions for improving and expanding the Blockchain universe:

If you are reading this, the chances are you are a 101 Blockchains community member or at least have a passing interest in Blockchain. To this end I encourage you all to add your Blockchain aspirations via comments so we can share our ideas and experience to help move this great 101 Blockchains community onward and upward.