BigONE Weekly Recap
Ally or suspect? The war in Ukraine as a stress test for the crypto industry
Crypto execs signal their readiness to comply with sanctions, but decentralization itself puts crypto in a vulnerable position. Up to this point, it has been going relatively well. The money came from more than 120,000 individual donations.
On March 7, Coinbase published a blog post by its chief legal officer, Paul Grewal, in which he called for using cryptocurrencies to help ensure compliance with economic sanctions. In his opinion, nations imposing financial sanctions see any potential to circumvent sanctions as a reduction of their sovereignty: “In my view, the Ukraine crisis and related sanctions pose a massive challenge to the crypto industry.
He is not convinced by arguments pointing to the traceability of decentralized assets, doubting that the new digital economy has many advantages over the established offshore system in terms of its transparency: “In the absence of a centralized coordinator of the industry, I cannot see how cryptocurrencies as a whole won’t be used to circumvent the sanctions and thereby provoke a strong regulatory backlash.”
23-year-old Australian buys $314k property via planned crypto investments
Loi Nguyen started his journey as an investor back in 2017 by purchasing a few hundred dollars worth of BTC, ETH and traditional stocks. In November 2021, his crypto investments outweighed his entire stock portfolio. However, his interest in crypto reached new heights while pursuing an Economics degree: “Crypto came back into my life when I did a course at the uni on inflation. By following a dollar-cost averaging (DCA) investment strategy, the young investor continued to diversify his portfolio into cryptocurrencies amid the temporary bear market of 2018: “I recognize I took on a lot of risks. The federal advisery recommends the exploration of four key areas that can “help ensure the safe adoption of cryptocurrencies in Australia,” which are minimum cybersecurity standards, capability (awareness through specialized training) and the follow-the-lead approach and operator transparency.
Crypto vs. physical: Musk-Saylor inflation debate boils down to scarcity
Musk acknowledged that predominantly scarce assets such as physical property and company stocks help investors maintain their purchasing power against high inflations. Joining this discussion online, Tesla CEO Elon Musk asked publicly about the probable inflation rate over the next few years to gauge the notion of global investors.
In the last six months, major economies including the United Kingdom, Turkey, Russia and the United States have witnessed unprecedented inflationary pressure owing to global uncertainties and disruptions fueled by cross-border conflicts and the COVID-19 pandemic. While the general public joined in on the discussion, dismissing Saylor’s suggestion of using BTC as a hedge against inflation due to personal investments, Musk acknowledged that predominantly scarce assets such as physical property and company stocks help investors maintain their purchasing power against high inflations.
As a part of the advice, Musk shared his intent to continue hodling BTC, Ether (ETH) an Dogecoin (DOGE) amid rising inflation “for what it’s worth.” As Cointelegraph reported, Dogecoin executive board member Jens Wiechers stated that the move was made to weed out the attempts of unaffiliated people to register the names and use the trademarks as tools of extortion.
While Bitcoin price starts 2022 with a slump, mining difficulty is on the rise
Bitcoin difficulty for miners has been increasing to all-time high levels this year amidst price volatility. The Bitcoin network seems to be at its peak in terms of security, as the more hashing power the network uses, the more distributed the work is for each transaction that takes place on-chain. Historically, price follows the hash rate. If the price is below cost, then production slows down.
Historic data around pivotal dates like previous Bitcoin halvings tells us that unless an unexpected black swan event occurs like the one experienced last year when China banned Bitcoin mining, Bitcoin difficulty and hash rate will continue to increase. Bitcoin will continue to increase its difficulty and hash rate as long as miners receive economic incentives that keep their operations profitable.
Four Threats Facing Cryptocurrency Investors in 2022
Last year was a very good year for cryptocurrencies, but in comparison 2022 has experienced a relatively poor start. Indeed, the US Government, Federal Reserve, and the Financial Stability Board (FSB) recently raised concerns about stablecoins, suggesting they could be a major risk to the global economy.
DeFi is one of the most exciting areas of the wider cryptocurrency ecosystem, presenting huge opportunities to entrepreneurs and cryptocurrency users alike,” but it’s “unlikely to realize its full potential if the same decentralization that makes it so dynamic also allows for widespread scamming and theft,” Chainalysis argued in its 2022 Crypto Crime report.
It has made both institutions and individual investors more cautious when dealing with cryptocurrency investments. On the one hand, we have benefited from cryptocurrencies that have changed the way we use money and how the internet works. This approach is correct, but it is essential to have a long-term investment plan that takes account of the wider context.
