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3 Ways Bitcoin Could Impact The U.S. Economy
The narrative around bitcoin, once dominated by speculation and controversy, is gradually evolving. There is a growing interest in exploring its potential to positively impact the U.S. economy, championed by several pro-crypto politicians. Most recently, this perspective has also been actively promoted by the Republican presidential nominee Donald Trump, prompting broader public debate.
This momentum offers a good opportunity to assess whether this idea holds real economic merit. A closer examination reveals that bitcoin holds potential to reduce the U.S. national debt, diversify the countryâs reserves, and help its oil industry.
Bitcoin Bitcoin +1.3% Could Help Reduce National Debt
Speaking at the Bitcoin 2024 conference in Nashville, Republican Senator Cynthia Lummis introduced an ambitious proposal to establish a strategic bitcoin reserve. Her bill, which she described as âour Louisiana Purchase moment,â outlines a plan to acquire 1 million BTC over five years. The senator also claimed that such a reserve would âserve as an additional store of value to bolster Americaâs balance sheet.â
The U.S. balance sheet is indeed in dire need of bolstering. With the national debt now towering at $35 trillion, the country is spending $0.95 trillion annually just to service it. Compounding the problem is the declining dominance of the dollar, which exacerbates the situation by reducing demand for Treasury securities â leaving the government with fewer resources to borrow and refinance the debt.
The recent European Central Bank report highlights this trend. While the euroâs share of global foreign exchange reserves has remained steady at around 20% over the past two decades, the US dollarâs share has dropped from over 70% to below 59%. Meanwhile, the share of âother currenciesâ has surged from 9% to almost 22%.
Rising debt and shrinking borrowing capacity form a troubling trend, and one of these trajectories must be reversed. Reducing debt seems like the more feasible option, as the dollarâs decline is driven by factors beyond economics, notably the U.S. weaponizing the dollar, which has prompted many countries to reduce their over-reliance on it.
Reducing national debt traditionally involves unpopular political decisions, such as raising taxes and cutting social spending, making it seem particularly difficult in the current political climate. So, desperate times call for desperate â or creative â measures, and bitcoin might just be the answer.
Bitcoin appeals to people for the same reasons the dollar does not: free from the influence of any single nation's politics, it is provably scarce and enables borderless and relatively cheap transactions (especially with its layer-2 Lightning Network). Furthermore, with a market cap of just $1 trillion, bitcoin price has room for growth â a potential that could be realized rather quickly if the worldâs largest economic power were to embrace it. By creating a strategic BTC reserve, the U.S. could trigger a bandwagon effect, potentially driving up the coinâs price and enabling the Treasury to pay down part of the national debt through capital gains.
The Impact Of A Bitcoin National Reserve
Diversification is key to financial resilience, whether in personal portfolios or national reserves. From this perspective, bitcoin stands out as a unique asset class that operates independently of traditional financial systems.
As shown by The Block, bitcoinâs correlation with stock indexes and gold fluctuates between 0.9 (highly correlated) and -0.9 (negatively correlated). This variability underscores its diversification potential, which the U.S. foreign reserves could strategically leverage.
Indeed, the U.S. foreign reserves are rather unvaried and modest given the scale of the American economy. Composed primarily of gold, special drawing rights with the IMF, and foreign currencies like the euro and yen, the U.S. official reserve assets now stand at only $246 billion ($908 billion if gold were recalculated at the current market price).
Enter bitcoin. By diversifying the foreign reserves, the leading cryptocurrency could help better manage external economic shocks that might threaten the dollar's stability, such as fluctuations in other reserve assets. A stronger, more diversified reserve would also enhance confidence in the dollar.
Additionally, a more robust foreign reserve would be invaluable in times of crisis. Black swan events often come without warning, and itâs generally wiser to put your eggs in different baskets to ensure you have some for tomorrow.
Sustainable Bitcoin Mining To Boost Oil Industry
The U.S. is probably the country where embracing bitcoin at a national level could produce the most significant catalytic impact. After Chinaâs mining ban in 2021, America became a major hub for bitcoin mining, producing almost 38% of the total hashrate, according to the latest available data from CBECI (2022). Additionally, 13 out of the worldâs 24 largest mining companies are registered in the U.S., as per CompaniesMarketCap.
Bitcoin mining involves using specialized rigs to secure the blockchain with large amounts of electricity in exchange for newly created BTC and transaction fees. Since miners are location-agnostic, they can be set up virtually anywhere with abundant and inexpensive energy. This flexibility drives innovation, and one of the most promising avenues for bitcoin mining in the U.S. today is capturing flared gas, a by-product of oil extraction. American oil producers like ExxonMobile and ConocoPhillips are already partnering with bitcoin mining companies that install their rigs in North Dakota oil fields. The higher bitcoinâs price climbs, the more profitable such operations become, while also reducing harmful emissions, boosting economic activity, and creating an additional wealth source for the country.
The Risks Of Adopting Bitcoin
For a seasoned bitcoiner who has maintained confidence in the asset through marketâs ups and downs, the economic benefits of bitcoin may seem obvious. However, most people would question whether is it wise â or safe â for a country to gamble with its reserves?
These concerns are not without merit, and itâs crucial to map the risks before taking any important decision. Indeed, for the above scenario to hold, bitcoin must fulfill its initial promises. The blockchain must function as intended and real adoption must grow to ensure that U.S. market intervention does not simply inflate the coinâs price. Furthermore, the officials must consider issues like volatility, liquidity, and security very seriously.
While the risks are real, the potential rewards of adopting bitcoin on a national level could be transformative for the economy. Some countries, like El Salvador or Bhutan, have already recognized this.
Bitcoin In El Salvador And Bhutan
El Salvador is famous for becoming the first country to adopt bitcoin as legal tender, integrating it into several national projects aimed at stimulating economic growth and reducing debt. However, shortly after the introduction of the Bitcoin Law, the IMF warned the country of the risks on âfinancial stability, financial integrity, and consumer protectionâ, urging it to remove the legal tender status. El Salvador refused.
Three years in, El Salvador holds 5,875 BTC, now worth 34.5% more than the average purchase price. The country has also begun mining Bitcoin using geothermal energy from its volcanoes and has seen its bonds outperform the Invesco Emerging Markets Sovereign Debt ETF (PCYInvesco Emerging Markets Sovereign Debt ETF 0.0%) in 2023, benefiting from the momentum around Bitcoin spot ETFs. Even the IMF now cannot help but concede that âon bitcoin, many of the risks have not yet materializedâ.
Overall, despite the grassroot bitcoin adoption remaining low at 12%, President Nayib Bukele views the project as a success. âIt gave us branding, it brought us investments, it brought us tourism,â he said in a recent interview for Time Magazine.
With far less fanfare, the Asian nation of Bhutan has been quietly mining bitcoin since 2019. Arkham Intelligenceâs recent research reveals that the country now holds 13,036 BTC - an impressive amount equivalent to over a quarter of its GDP. For one of the world's most isolated countries, bitcoin could be the way to bolster its financial independence, while its abundant hydroelectric resources provide a sustainable way to do so.
The U.S. has different economic goals from El Salvador or Bhutan, but investing in bitcoin aligns with them too. Moreover, given its immense economic power, even a relatively small investment could have an outsized return. While Bhutan holds 27% of its GDP in bitcoin and El Salvador 1%, Senator Lummisâ proposed purchase of 1 million BTC would represent just 0.2% of the U.S. GDP (at current prices). Yet, such a move by the world's largest economy could potentially send bitcoinâs price âto the moonâ and help address some of the country's serious economic challenges.
$BTC
This momentum offers a good opportunity to assess whether this idea holds real economic merit. A closer examination reveals that bitcoin holds potential to reduce the U.S. national debt, diversify the countryâs reserves, and help its oil industry.
Bitcoin Bitcoin +1.3% Could Help Reduce National Debt
Speaking at the Bitcoin 2024 conference in Nashville, Republican Senator Cynthia Lummis introduced an ambitious proposal to establish a strategic bitcoin reserve. Her bill, which she described as âour Louisiana Purchase moment,â outlines a plan to acquire 1 million BTC over five years. The senator also claimed that such a reserve would âserve as an additional store of value to bolster Americaâs balance sheet.â
The U.S. balance sheet is indeed in dire need of bolstering. With the national debt now towering at $35 trillion, the country is spending $0.95 trillion annually just to service it. Compounding the problem is the declining dominance of the dollar, which exacerbates the situation by reducing demand for Treasury securities â leaving the government with fewer resources to borrow and refinance the debt.
The recent European Central Bank report highlights this trend. While the euroâs share of global foreign exchange reserves has remained steady at around 20% over the past two decades, the US dollarâs share has dropped from over 70% to below 59%. Meanwhile, the share of âother currenciesâ has surged from 9% to almost 22%.
Rising debt and shrinking borrowing capacity form a troubling trend, and one of these trajectories must be reversed. Reducing debt seems like the more feasible option, as the dollarâs decline is driven by factors beyond economics, notably the U.S. weaponizing the dollar, which has prompted many countries to reduce their over-reliance on it.
Reducing national debt traditionally involves unpopular political decisions, such as raising taxes and cutting social spending, making it seem particularly difficult in the current political climate. So, desperate times call for desperate â or creative â measures, and bitcoin might just be the answer.
Bitcoin appeals to people for the same reasons the dollar does not: free from the influence of any single nation's politics, it is provably scarce and enables borderless and relatively cheap transactions (especially with its layer-2 Lightning Network). Furthermore, with a market cap of just $1 trillion, bitcoin price has room for growth â a potential that could be realized rather quickly if the worldâs largest economic power were to embrace it. By creating a strategic BTC reserve, the U.S. could trigger a bandwagon effect, potentially driving up the coinâs price and enabling the Treasury to pay down part of the national debt through capital gains.
The Impact Of A Bitcoin National Reserve
Diversification is key to financial resilience, whether in personal portfolios or national reserves. From this perspective, bitcoin stands out as a unique asset class that operates independently of traditional financial systems.
As shown by The Block, bitcoinâs correlation with stock indexes and gold fluctuates between 0.9 (highly correlated) and -0.9 (negatively correlated). This variability underscores its diversification potential, which the U.S. foreign reserves could strategically leverage.
Indeed, the U.S. foreign reserves are rather unvaried and modest given the scale of the American economy. Composed primarily of gold, special drawing rights with the IMF, and foreign currencies like the euro and yen, the U.S. official reserve assets now stand at only $246 billion ($908 billion if gold were recalculated at the current market price).
Enter bitcoin. By diversifying the foreign reserves, the leading cryptocurrency could help better manage external economic shocks that might threaten the dollar's stability, such as fluctuations in other reserve assets. A stronger, more diversified reserve would also enhance confidence in the dollar.
Additionally, a more robust foreign reserve would be invaluable in times of crisis. Black swan events often come without warning, and itâs generally wiser to put your eggs in different baskets to ensure you have some for tomorrow.
Sustainable Bitcoin Mining To Boost Oil Industry
The U.S. is probably the country where embracing bitcoin at a national level could produce the most significant catalytic impact. After Chinaâs mining ban in 2021, America became a major hub for bitcoin mining, producing almost 38% of the total hashrate, according to the latest available data from CBECI (2022). Additionally, 13 out of the worldâs 24 largest mining companies are registered in the U.S., as per CompaniesMarketCap.
Bitcoin mining involves using specialized rigs to secure the blockchain with large amounts of electricity in exchange for newly created BTC and transaction fees. Since miners are location-agnostic, they can be set up virtually anywhere with abundant and inexpensive energy. This flexibility drives innovation, and one of the most promising avenues for bitcoin mining in the U.S. today is capturing flared gas, a by-product of oil extraction. American oil producers like ExxonMobile and ConocoPhillips are already partnering with bitcoin mining companies that install their rigs in North Dakota oil fields. The higher bitcoinâs price climbs, the more profitable such operations become, while also reducing harmful emissions, boosting economic activity, and creating an additional wealth source for the country.
The Risks Of Adopting Bitcoin
For a seasoned bitcoiner who has maintained confidence in the asset through marketâs ups and downs, the economic benefits of bitcoin may seem obvious. However, most people would question whether is it wise â or safe â for a country to gamble with its reserves?
These concerns are not without merit, and itâs crucial to map the risks before taking any important decision. Indeed, for the above scenario to hold, bitcoin must fulfill its initial promises. The blockchain must function as intended and real adoption must grow to ensure that U.S. market intervention does not simply inflate the coinâs price. Furthermore, the officials must consider issues like volatility, liquidity, and security very seriously.
While the risks are real, the potential rewards of adopting bitcoin on a national level could be transformative for the economy. Some countries, like El Salvador or Bhutan, have already recognized this.
Bitcoin In El Salvador And Bhutan
El Salvador is famous for becoming the first country to adopt bitcoin as legal tender, integrating it into several national projects aimed at stimulating economic growth and reducing debt. However, shortly after the introduction of the Bitcoin Law, the IMF warned the country of the risks on âfinancial stability, financial integrity, and consumer protectionâ, urging it to remove the legal tender status. El Salvador refused.
Three years in, El Salvador holds 5,875 BTC, now worth 34.5% more than the average purchase price. The country has also begun mining Bitcoin using geothermal energy from its volcanoes and has seen its bonds outperform the Invesco Emerging Markets Sovereign Debt ETF (PCYInvesco Emerging Markets Sovereign Debt ETF 0.0%) in 2023, benefiting from the momentum around Bitcoin spot ETFs. Even the IMF now cannot help but concede that âon bitcoin, many of the risks have not yet materializedâ.
Overall, despite the grassroot bitcoin adoption remaining low at 12%, President Nayib Bukele views the project as a success. âIt gave us branding, it brought us investments, it brought us tourism,â he said in a recent interview for Time Magazine.
With far less fanfare, the Asian nation of Bhutan has been quietly mining bitcoin since 2019. Arkham Intelligenceâs recent research reveals that the country now holds 13,036 BTC - an impressive amount equivalent to over a quarter of its GDP. For one of the world's most isolated countries, bitcoin could be the way to bolster its financial independence, while its abundant hydroelectric resources provide a sustainable way to do so.
The U.S. has different economic goals from El Salvador or Bhutan, but investing in bitcoin aligns with them too. Moreover, given its immense economic power, even a relatively small investment could have an outsized return. While Bhutan holds 27% of its GDP in bitcoin and El Salvador 1%, Senator Lummisâ proposed purchase of 1 million BTC would represent just 0.2% of the U.S. GDP (at current prices). Yet, such a move by the world's largest economy could potentially send bitcoinâs price âto the moonâ and help address some of the country's serious economic challenges.
$BTC
Bitcoin climbs above $60,000 ahead of Fed rate decision
Bitcoin reclaimed $60,000 on Tuesday as investors awaited details of the Federal Reserveâs rate cutting plans.
The price of the flagship cryptocurrency was last higher by 4.3% at $60,394.41, according to Coin Metrics. At one point, it rose as high as $61,335.83. It got an initial lift on Monday night as former President Donald Trump unveiled his new crypto venture, World Financial Liberty Coin.
Bitcoin breached the $60,000 level Tuesday morning as the Federal Reserve kicked off its two-day policy meeting. The central bank is widely expected to cut interest rates for the first time in four years, which would likely boost risk assets including bitcoin.
Bitcoin âis likely to react to the news of a Fed rate cut with some retrenchment as the short-term market dynamics filter out,â said Philipp Pieper, co-founder of Swarm Markets. âBut the longer-term implications of easing monetary conditions lend themselves to a fresh bull cycle for bitcoin, ether and the rest of the market. In the past, bitcoin has correlated somewhat to major tech indices such as the Nasdaq, and broadly moves in line with monetary conditions, as investors hunt for yield in lower-rate environments.â
The market is divided on whether the Fed would reduce rates by 25 or 50 basis points. Currently, traders are pricing in a 63% chance that the central bank eases rates by 50 basis points, according to CME Groupâs FedWatch Tool. One basis point equals 0.01%.
Bitcoin has been trading in a range between $55,000 and $70,000 this year. Investors have been anticipating Fed rate cuts, the growth of bitcoin ETFs and the outcome of the U.S. presidential election as the next catalysts to shake up the crypto market.
The price of the flagship cryptocurrency was last higher by 4.3% at $60,394.41, according to Coin Metrics. At one point, it rose as high as $61,335.83. It got an initial lift on Monday night as former President Donald Trump unveiled his new crypto venture, World Financial Liberty Coin.
Bitcoin breached the $60,000 level Tuesday morning as the Federal Reserve kicked off its two-day policy meeting. The central bank is widely expected to cut interest rates for the first time in four years, which would likely boost risk assets including bitcoin.
Bitcoin âis likely to react to the news of a Fed rate cut with some retrenchment as the short-term market dynamics filter out,â said Philipp Pieper, co-founder of Swarm Markets. âBut the longer-term implications of easing monetary conditions lend themselves to a fresh bull cycle for bitcoin, ether and the rest of the market. In the past, bitcoin has correlated somewhat to major tech indices such as the Nasdaq, and broadly moves in line with monetary conditions, as investors hunt for yield in lower-rate environments.â
The market is divided on whether the Fed would reduce rates by 25 or 50 basis points. Currently, traders are pricing in a 63% chance that the central bank eases rates by 50 basis points, according to CME Groupâs FedWatch Tool. One basis point equals 0.01%.
Bitcoin has been trading in a range between $55,000 and $70,000 this year. Investors have been anticipating Fed rate cuts, the growth of bitcoin ETFs and the outcome of the U.S. presidential election as the next catalysts to shake up the crypto market.
Trump to unveil crypto project amid scams and fears of âhuge embarrassmentâ
Former US President Donald Trump plans to unveil a brand new crypto project next week that has already been plagued by scams and targeted by cyber criminals.
The Republican candidate will reveal the World Liberty Financial project from his Mar-a-Lago resort in Florida on Monday, claiming it will revolutionise finance and âleave the slow and outdated big banks behindâ.
Former US President Donald Trump plans to unveil a brand new crypto project next week that has already been plagued by scams and targeted by cyber criminals.
The Republican candidate will reveal the World Liberty Financial project from his Mar-a-Lago resort in Florida on Monday, claiming it will revolutionise finance and âleave the slow and outdated big banks behindâ.
The project is being led by his two sons, Donald Jr. and Eric Trump, though little is known about what the venture will entail.
In a recent interview with the New York Post, Eric Trump described it as âdigital real estateâ â referring to either the creation of virtual property within the metaverse, or the digital tokenisation of real-world assets in the form of non-fungible tokens (NFTs).
Earlier this month, tens of thousands of Donald Trumpâs followers were tricked into joining a fake group on the messaging app Telegram that was claiming to offer free cryptocurrency giveaways from the Trump-backed platform.
The group has since been removed, though ads promoting the scam giveaways still continue to appear for its 150,000 members. Telegram did not respond to a request for comment from The Independent.
The X accounts of Mr Trumpâs daughter Tiffany and daughter-in-law Lara were also targeted by cyber criminals, who hijacked their profiles in order to share fake links for the project.
Mr Trump has pitched himself as the pro-crypto candidate in the upcoming presidential elections, recently appearing at a bitcoin conference to outline his plans for the industry if elected.
Having previously dismissed the worldâs leading cryptocurrency as a âscamâ, Mr Trump told the crowd at the Bitcoin 2024 conference in Nashville that he would create a ânational bitcoin stockpileâ from seized criminal funds, as well as âimmediately appoint a bitcoin and crypto presidential advisory councilâ.
The Republican candidate will reveal the World Liberty Financial project from his Mar-a-Lago resort in Florida on Monday, claiming it will revolutionise finance and âleave the slow and outdated big banks behindâ.
Former US President Donald Trump plans to unveil a brand new crypto project next week that has already been plagued by scams and targeted by cyber criminals.
The Republican candidate will reveal the World Liberty Financial project from his Mar-a-Lago resort in Florida on Monday, claiming it will revolutionise finance and âleave the slow and outdated big banks behindâ.
The project is being led by his two sons, Donald Jr. and Eric Trump, though little is known about what the venture will entail.
In a recent interview with the New York Post, Eric Trump described it as âdigital real estateâ â referring to either the creation of virtual property within the metaverse, or the digital tokenisation of real-world assets in the form of non-fungible tokens (NFTs).
Earlier this month, tens of thousands of Donald Trumpâs followers were tricked into joining a fake group on the messaging app Telegram that was claiming to offer free cryptocurrency giveaways from the Trump-backed platform.
The group has since been removed, though ads promoting the scam giveaways still continue to appear for its 150,000 members. Telegram did not respond to a request for comment from The Independent.
The X accounts of Mr Trumpâs daughter Tiffany and daughter-in-law Lara were also targeted by cyber criminals, who hijacked their profiles in order to share fake links for the project.
Mr Trump has pitched himself as the pro-crypto candidate in the upcoming presidential elections, recently appearing at a bitcoin conference to outline his plans for the industry if elected.
Having previously dismissed the worldâs leading cryptocurrency as a âscamâ, Mr Trump told the crowd at the Bitcoin 2024 conference in Nashville that he would create a ânational bitcoin stockpileâ from seized criminal funds, as well as âimmediately appoint a bitcoin and crypto presidential advisory councilâ.
US Spot Bitcoin ETFs See $263M in Inflows, Largest Single-Day Increase Since July 22
On Friday, U.S. spot Bitcoin exchange-traded funds (ETFs) saw a surge in inflows, with net purchases reaching $263 million.
This marks the largest single-day inflow since July 22, driven by renewed interest as Bitcoin climbed above $60,000, a 12% increase over the past week.
Leading the pack was Fidelityâs Bitcoin ETF (FBTC), which attracted around $102 million in fresh capital, bringing its total weekly inflows to $218 million.
The strong recovery followed two consecutive weeks of negative performance, during which $467 million flowed out of the fund.
ARK Invest and 21Shares See Major Inflows
ARK Invest and 21Sharesâ Bitcoin ETF (ARKB) followed closely behind, ending the day with approximately $99 million in net inflows.
Other Bitcoin ETFs managed by companies such as Bitwise, Franklin Templeton, Valkyrie, VanEck, and Grayscale also recorded positive inflows, reflecting a broad trend of renewed interest in the U.S. spot Bitcoin ETF market.
However, not all funds saw the same level of success.
BlackRockâs iShares Bitcoin Trust (IBIT) and WisdomTreeâs Bitcoin Fund (BTCW) reported zero inflows on Friday.
IBIT, in particular, has struggled in recent weeks, experiencing no inflows for several trading days and even seeing net outflows on two occasions, August 29 and September 9.
Since its inception, IBIT has recorded only three days of net outflows, a relatively rare occurrence among Bitcoin ETFs.
Despite the mixed performance across different funds, U.S. spot Bitcoin ETFs closed the week with over $400 million in net inflows, a testament to the overall bullish sentiment surrounding the crypto market.
The surge in Bitcoinâs price, coupled with strong ETF inflows, signals growing optimism among investors.
Crypto Market Rallies
Beyond the U.S., the broader cryptocurrency market also enjoyed gains.
Bitcoin itself saw its price rise from $54,300 at the start of the week to over $60,600 by Friday.
Other major cryptocurrencies followed suit, with Ethereum (ETH) posting an 8% weekly increase, reaching $2,400.
Additionally, altcoins such as Toncoin (TON), Chainlink (LINK), and Avalanche (AVAX) were among the top performers, according to data from CoinGecko.
Despite the recent rally, a report from ARK Invest said that the average cost basis of Bitcoin ETF investors still stands above the current market price.
This suggests that many investors who bought in earlier are currently holding positions at a loss.
However, ARKâs report also pointed out that Bitcoinâs long-term fundamentals remain strong, with the MVRV Z-Scoreâan indicator that compares Bitcoinâs market capitalization to its cost basisâsignaling that the cryptocurrencyâs underlying value is still bullish.
Market speculation suggests that the recent surge in Bitcoin and other cryptocurrencies may be fueled by expectations of a potential interest rate cut by the U.S. Federal Reserve.
With inflation data coming in below expectations at 2.5%, many investors anticipate a rate reduction of 25-50 basis points during the Fedâs next meeting on September 18.
The potential monetary easing, combined with similar moves by the European Central Bank and the Bank of Canada, could continue to drive optimism in the crypto market.
This marks the largest single-day inflow since July 22, driven by renewed interest as Bitcoin climbed above $60,000, a 12% increase over the past week.
Leading the pack was Fidelityâs Bitcoin ETF (FBTC), which attracted around $102 million in fresh capital, bringing its total weekly inflows to $218 million.
The strong recovery followed two consecutive weeks of negative performance, during which $467 million flowed out of the fund.
ARK Invest and 21Shares See Major Inflows
ARK Invest and 21Sharesâ Bitcoin ETF (ARKB) followed closely behind, ending the day with approximately $99 million in net inflows.
Other Bitcoin ETFs managed by companies such as Bitwise, Franklin Templeton, Valkyrie, VanEck, and Grayscale also recorded positive inflows, reflecting a broad trend of renewed interest in the U.S. spot Bitcoin ETF market.
However, not all funds saw the same level of success.
BlackRockâs iShares Bitcoin Trust (IBIT) and WisdomTreeâs Bitcoin Fund (BTCW) reported zero inflows on Friday.
IBIT, in particular, has struggled in recent weeks, experiencing no inflows for several trading days and even seeing net outflows on two occasions, August 29 and September 9.
Since its inception, IBIT has recorded only three days of net outflows, a relatively rare occurrence among Bitcoin ETFs.
Despite the mixed performance across different funds, U.S. spot Bitcoin ETFs closed the week with over $400 million in net inflows, a testament to the overall bullish sentiment surrounding the crypto market.
The surge in Bitcoinâs price, coupled with strong ETF inflows, signals growing optimism among investors.
Crypto Market Rallies
Beyond the U.S., the broader cryptocurrency market also enjoyed gains.
Bitcoin itself saw its price rise from $54,300 at the start of the week to over $60,600 by Friday.
Other major cryptocurrencies followed suit, with Ethereum (ETH) posting an 8% weekly increase, reaching $2,400.
Additionally, altcoins such as Toncoin (TON), Chainlink (LINK), and Avalanche (AVAX) were among the top performers, according to data from CoinGecko.
Despite the recent rally, a report from ARK Invest said that the average cost basis of Bitcoin ETF investors still stands above the current market price.
This suggests that many investors who bought in earlier are currently holding positions at a loss.
However, ARKâs report also pointed out that Bitcoinâs long-term fundamentals remain strong, with the MVRV Z-Scoreâan indicator that compares Bitcoinâs market capitalization to its cost basisâsignaling that the cryptocurrencyâs underlying value is still bullish.
Market speculation suggests that the recent surge in Bitcoin and other cryptocurrencies may be fueled by expectations of a potential interest rate cut by the U.S. Federal Reserve.
With inflation data coming in below expectations at 2.5%, many investors anticipate a rate reduction of 25-50 basis points during the Fedâs next meeting on September 18.
The potential monetary easing, combined with similar moves by the European Central Bank and the Bank of Canada, could continue to drive optimism in the crypto market.
SECâs Aggressive Crypto Stance Resulted in $15 Billion Loss, Claims John Deaton
John Deaton, a well-known pro-crypto attorney and U.S. Senate candidate, has accused the Securities and Exchange Commission (SEC) of causing significant financial harm to small investors through its regulatory approach to cryptocurrencies.
In a recent post on X, Deaton said the SECâs actions have led to losses exceeding $15 billion for retail investors.
Deaton, who has represented thousands of XRP holders in legal proceedings, claimed the SECâs enforcement practices amounted to âgross overreach,â significantly impacting small investors.
âThe SECâs misconduct and gross overreach caused small investors over $15 billion. On behalf of those 75K small investors I represented, we do not accept the SECâs apology,â Deaton wrote.
SEC Faces Scrutiny for its Aggressive Regulatory Stance
His criticism comes at a time when the SEC has faced increasing scrutiny for its aggressive regulatory posture toward the crypto industry.
Deaton, who won the Republican nomination for the U.S. Senate in Massachusetts, is set to challenge Democratic Senator Elizabeth Warren in the upcoming November election.
The critique of the SEC coincides with a surprising shift in the agencyâs stance regarding cryptocurrencies.
In a court filing shared by Coinbaseâs Chief Legal Officer, Paul Grewal, the SEC acknowledged that it no longer views cryptocurrencies themselves as securities.
âThe SEC regrets any confusion it may have invitedâ by previously suggesting that tokens themselves were securities,â the SECâs amended complaint against Binance included a notable statement.
This represents a departure from the SECâs earlier position, particularly regarding XRP, which had been classified as a security in past legal disputes.
Deaton has long advocated for clarity in how the SEC regulates cryptocurrencies, arguing that the agencyâs actions have often been inconsistent.
He pointed to the SECâs refusal to provide clear guidance on XRP, which led to a prolonged legal battle.
âAll I asked was for the SEC to honor the law and make clear that the token itself (XRP) was NOT the security. The lawyers at the SEC not only refused to do so, but they attacked me personally,â Deaton remarked.
SEC Settles with eToro
Meanwhile, the regulator recently settled a case with trading platform eToro, forcing its U.S. operations to cease trading in nearly all crypto assets and imposing a $1.5 million fine.
This is just one example of the SECâs ramped-up enforcement efforts in 2024.
According to a Sept. 9 report from Social Capital Markets, the SECâs total monetary enforcement actions against crypto firms in 2024 had surged to $4.7 billion, a 3,000% increase from the previous year.
The regulatorâs largest action came in June, when it reached a $4.47 billion settlement with Terraform Labs and its former CEO, Do Kwon, marking the SECâs most substantial crypto enforcement to date.
Just recently, a coalition of seven U.S. states came together to challenge the SECâs regulation of cryptocurrency.
Led by Iowa Attorney General Brenna Bird, the states have filed an amicus brief arguing that the SECâs attempt to regulate cryptocurrencies constitutes a âpower grabâ that would stifle innovation, harm the crypto industry, and exceed the agencyâs authority.
In a recent post on X, Deaton said the SECâs actions have led to losses exceeding $15 billion for retail investors.
Deaton, who has represented thousands of XRP holders in legal proceedings, claimed the SECâs enforcement practices amounted to âgross overreach,â significantly impacting small investors.
âThe SECâs misconduct and gross overreach caused small investors over $15 billion. On behalf of those 75K small investors I represented, we do not accept the SECâs apology,â Deaton wrote.
SEC Faces Scrutiny for its Aggressive Regulatory Stance
His criticism comes at a time when the SEC has faced increasing scrutiny for its aggressive regulatory posture toward the crypto industry.
Deaton, who won the Republican nomination for the U.S. Senate in Massachusetts, is set to challenge Democratic Senator Elizabeth Warren in the upcoming November election.
The critique of the SEC coincides with a surprising shift in the agencyâs stance regarding cryptocurrencies.
In a court filing shared by Coinbaseâs Chief Legal Officer, Paul Grewal, the SEC acknowledged that it no longer views cryptocurrencies themselves as securities.
âThe SEC regrets any confusion it may have invitedâ by previously suggesting that tokens themselves were securities,â the SECâs amended complaint against Binance included a notable statement.
This represents a departure from the SECâs earlier position, particularly regarding XRP, which had been classified as a security in past legal disputes.
Deaton has long advocated for clarity in how the SEC regulates cryptocurrencies, arguing that the agencyâs actions have often been inconsistent.
He pointed to the SECâs refusal to provide clear guidance on XRP, which led to a prolonged legal battle.
âAll I asked was for the SEC to honor the law and make clear that the token itself (XRP) was NOT the security. The lawyers at the SEC not only refused to do so, but they attacked me personally,â Deaton remarked.
SEC Settles with eToro
Meanwhile, the regulator recently settled a case with trading platform eToro, forcing its U.S. operations to cease trading in nearly all crypto assets and imposing a $1.5 million fine.
This is just one example of the SECâs ramped-up enforcement efforts in 2024.
According to a Sept. 9 report from Social Capital Markets, the SECâs total monetary enforcement actions against crypto firms in 2024 had surged to $4.7 billion, a 3,000% increase from the previous year.
The regulatorâs largest action came in June, when it reached a $4.47 billion settlement with Terraform Labs and its former CEO, Do Kwon, marking the SECâs most substantial crypto enforcement to date.
Just recently, a coalition of seven U.S. states came together to challenge the SECâs regulation of cryptocurrency.
Led by Iowa Attorney General Brenna Bird, the states have filed an amicus brief arguing that the SECâs attempt to regulate cryptocurrencies constitutes a âpower grabâ that would stifle innovation, harm the crypto industry, and exceed the agencyâs authority.
Experts Warn Slow Regulatory Moves May Stifle Crypto Growth in Hong Kong
As Hong Kong seeks to establish itself as a global cryptocurrency hub, experts are warning that the cityâs cautious regulatory approach could hinder its growth in the rapidly evolving digital assets sector.
In a recent interview, First Digital Trust, a Hong Kong-based crypto firm, expressed concerns over the slow pace of regulation, emphasizing the need for faster progress to keep up with industry developments.
Currently, only two fully licensed virtual asset trading platforms, Hash Blockchain and OSL Digital Securities, are operational in Hong Kong.
Crypto Exchanges in Hong Kong Wait for Regulatory Approval
Several other cryptocurrency exchanges are still awaiting their licenses, reflecting the cityâs careful approach to regulating the industry.
Vincent Chok, CEO of First Digital, explained the rationale behind this measured pace, stating that Hong Kong prioritizes investor protection over swift regulatory action.
âIt is understandable that Hong Kongâs regulatory approach is more conservative and slower compared to other jurisdictions, given its focus on safeguarding investors,â Chok said.
âWe hope to see regulation move faster to ensure Hong Kong does not fall behind the fast-paced development of the industry.â
In an effort to tighten its grip on the sector, Hong Kong has made it a criminal offense to operate an unlicensed virtual asset trading platform (VATP) as of June 1.
The Securities and Futures Commission (SFC) also issued an âalert listâ of suspicious and unlicensed trading platforms that may be targeting Hong Kong investors.
The move is part of broader efforts to ensure the integrity of the market while protecting consumers.
On the regulatory front, progress has been made in stablecoin oversight.
The Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) recently published findings on local stablecoin regulation.
Shortly after, Jingdong Coinlink Technology Hong Kong Limited, a subsidiary of JD Technology Group, announced its intention to issue a stablecoin pegged 1:1 to the Hong Kong dollar (HKD), with recognition from the HKMA as part of its sandbox program.
Hong Kong Faces Growing Competition
However, Hong Kong faces competition from other jurisdictions like Dubai, which has been making strides in the stablecoin sector.
Tether, the worldâs largest stablecoin provider, revealed plans to launch a stablecoin pegged to the UAE dirham in collaboration with UAE-based partners.
It is worth noting that some companies have already stepped up to offer crypto custody services in the region.
Just recently, the United Arab Emirates recently allowed Standard Chartered to offer such services, beginning with Bitcoin and Ether.
As reported, Hong Kong has launched its first batch of ETFs focused on cryptocurrencies, marking potential competition for the popular Bitcoin products in the United States.
Harvest Global Investments Ltd., the local unit of China Asset Management, along with a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co., listed Bitcoin and Ether ETFs in the city on Tuesday.
In a recent interview, First Digital Trust, a Hong Kong-based crypto firm, expressed concerns over the slow pace of regulation, emphasizing the need for faster progress to keep up with industry developments.
Currently, only two fully licensed virtual asset trading platforms, Hash Blockchain and OSL Digital Securities, are operational in Hong Kong.
Crypto Exchanges in Hong Kong Wait for Regulatory Approval
Several other cryptocurrency exchanges are still awaiting their licenses, reflecting the cityâs careful approach to regulating the industry.
Vincent Chok, CEO of First Digital, explained the rationale behind this measured pace, stating that Hong Kong prioritizes investor protection over swift regulatory action.
âIt is understandable that Hong Kongâs regulatory approach is more conservative and slower compared to other jurisdictions, given its focus on safeguarding investors,â Chok said.
âWe hope to see regulation move faster to ensure Hong Kong does not fall behind the fast-paced development of the industry.â
In an effort to tighten its grip on the sector, Hong Kong has made it a criminal offense to operate an unlicensed virtual asset trading platform (VATP) as of June 1.
The Securities and Futures Commission (SFC) also issued an âalert listâ of suspicious and unlicensed trading platforms that may be targeting Hong Kong investors.
The move is part of broader efforts to ensure the integrity of the market while protecting consumers.
On the regulatory front, progress has been made in stablecoin oversight.
The Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) recently published findings on local stablecoin regulation.
Shortly after, Jingdong Coinlink Technology Hong Kong Limited, a subsidiary of JD Technology Group, announced its intention to issue a stablecoin pegged 1:1 to the Hong Kong dollar (HKD), with recognition from the HKMA as part of its sandbox program.
Hong Kong Faces Growing Competition
However, Hong Kong faces competition from other jurisdictions like Dubai, which has been making strides in the stablecoin sector.
Tether, the worldâs largest stablecoin provider, revealed plans to launch a stablecoin pegged to the UAE dirham in collaboration with UAE-based partners.
It is worth noting that some companies have already stepped up to offer crypto custody services in the region.
Just recently, the United Arab Emirates recently allowed Standard Chartered to offer such services, beginning with Bitcoin and Ether.
As reported, Hong Kong has launched its first batch of ETFs focused on cryptocurrencies, marking potential competition for the popular Bitcoin products in the United States.
Harvest Global Investments Ltd., the local unit of China Asset Management, along with a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co., listed Bitcoin and Ether ETFs in the city on Tuesday.
New Crypto Mining Hub? Russian Region to Build 15 New Data Centers
Crypto MiningRussia
First two centers in Mikun and Sindor will cost a combined total of $27.6 million
Russiaâs crypto pivot is continuing apace, with the northeastern region of Komi Republic announcing plans to build 15 new crypto mining data centers.
Per a report from TASS, the Komi regional governor Vladimir Uyba said the first two of the 15 new data centers will be built in Mikun and Sindor.
Crypto Mining Hub: Russia Ready to Welcome More Miners?
Uyba said that investors have backed the building project. The first two centers are set to cost a combined total of $27.6 million.
He did not mention which coins would be mined at the center. However, the vast majority of Russian miners tend to focus their efforts on Bitcoin
The regional chief said the two parties had already signed a âcollaboration agreement.â
âThe project will help us develop the IT industry and digital technologies. [Energoresource-K] is committed for the long term. It is ready to invest about 35 billion rubles [$386.2 million] in the project.â
Vladimir Uyba, Head of the Komi Republic
TASS added that âin the future,â Komi would begin on the construction of more âdata processing centersâ in âother cities and regions of the republic.â
Komiâs Mining Advantages
Komi is situated to the west of the Ural Mountains. While it is not known as a major location for crypto miners, it boasts abundant oil and gas reserves.
It is also home to several newly opened hydrocarbon fields and thermal power plants. Like many more popular Russian mining hotspots, Komi has long, cold winters and shorter summer periods.
First two centers in Mikun and Sindor will cost a combined total of $27.6 million
Russiaâs crypto pivot is continuing apace, with the northeastern region of Komi Republic announcing plans to build 15 new crypto mining data centers.
Per a report from TASS, the Komi regional governor Vladimir Uyba said the first two of the 15 new data centers will be built in Mikun and Sindor.
Crypto Mining Hub: Russia Ready to Welcome More Miners?
Uyba said that investors have backed the building project. The first two centers are set to cost a combined total of $27.6 million.
He did not mention which coins would be mined at the center. However, the vast majority of Russian miners tend to focus their efforts on Bitcoin
The regional chief said the two parties had already signed a âcollaboration agreement.â
âThe project will help us develop the IT industry and digital technologies. [Energoresource-K] is committed for the long term. It is ready to invest about 35 billion rubles [$386.2 million] in the project.â
Vladimir Uyba, Head of the Komi Republic
TASS added that âin the future,â Komi would begin on the construction of more âdata processing centersâ in âother cities and regions of the republic.â
Komiâs Mining Advantages
Komi is situated to the west of the Ural Mountains. While it is not known as a major location for crypto miners, it boasts abundant oil and gas reserves.
It is also home to several newly opened hydrocarbon fields and thermal power plants. Like many more popular Russian mining hotspots, Komi has long, cold winters and shorter summer periods.
Is Bitcoin a Millionaire Maker?
Bitcoin (CRYPTO: BTC) has minted a lot of millionaires. The world's leading cryptocurrency soared 12,590% over the past decade -- and that blistering rally would have turned a modest $10,000 investment into $1.27 million. That same investment in an S&P 500 index fund would only be worth about $28,000 today.Bitcoin crushed the market because it grew from a niche token into a mainstream asset which was bundled into its own spot price exchange-traded funds (ETFs). It was even adopted as a national currency in El Salvador and the Central African Republic, and other inflation-wracked countries might follow that example over the next few years. So could Bitcoin generate even more millionaire-making gains over the next decade? Let's review its long-term catalysts and challenges to find out.
Bitcoin (CRYPTO: BTC) has minted a lot of millionaires. The world's leading cryptocurrency soared 12,590% over the past decade -- and that blistering rally would have turned a modest $10,000 investment into $1.27 million. That same investment in an S&P 500 index fund would only be worth about $28,000 today.Bitcoin crushed the market because it grew from a niche token into a mainstream asset which was bundled into its own spot price exchange-traded funds (ETFs). It was even adopted as a national currency in El Salvador and the Central African Republic, and other inflation-wracked countries might follow that example over the next few years. So could Bitcoin generate even more millionaire-making gains over the next decade? Let's review its long-term catalysts and challenges to find out.
Make Bitcoin great again â what Donald Trumpâs backing of crypto could mean for the industry
Bitcoin, a cryptocurrency infamous for its price volatility and environmental impact, has become a focal point of the US presidential campaign.
On July 27, the former US president and Republican nominee for the upcoming election, Donald Trump, headlined the biggest Bitcoin conference of the year in Nashville. In his speech, Trump claimed he will make the US the âcrypto capital of the planet and the Bitcoin superpower of the worldâ if returned to the White House after Novemberâs election. His comments were met with rapturous applause from the crowd.
Trumpâs courting of the crypto industry is almost certainly a political move. The Trump campaign has raised US$25 million (ÂŁ19.6 million) from the sector since it started accepting cryptocurrency donations in May, and it is expected to receive even more following the event in Nashville.
His public backing of crypto undoubtedly boosted investor optimism. The price of Bitcoin surged to almost US$70,000 on July 29, its highest level in more than six weeks, before dropping back to US$62,000 a few days later.
But questions remain about the feasibility of Trumpâs promises if he becomes president. And, even then, it is unclear whether Trumpâs pro-crypto agenda will have a sustained effect on the price of Bitcoin in the long term.
Bitcoinâs price surged and fell within a week
In his speech, Trump pledged to keep â100% of all the Bitcoinâ the US government currently holds or acquires in the future if he is elected.
Many countries, including the US, hold Bitcoin. A large part of these holdings are Bitcoin that has been seized from criminals. The question of how to handle this confiscated cryptocurrency is complex.
Not selling it may send a conflicting message to victims of cryptocurrency crime. Chinese fraud victims, for example, have previously urged the UK government to return £3 billion in Bitcoin held by London police.
Bitcoin, a cryptocurrency infamous for its price volatility and environmental impact, has become a focal point of the US presidential campaign.
On July 27, the former US president and Republican nominee for the upcoming election, Donald Trump, headlined the biggest Bitcoin conference of the year in Nashville. In his speech, Trump claimed he will make the US the âcrypto capital of the planet and the Bitcoin superpower of the worldâ if returned to the White House after Novemberâs election. His comments were met with rapturous applause from the crowd.
Trumpâs courting of the crypto industry is almost certainly a political move. The Trump campaign has raised US$25 million (ÂŁ19.6 million) from the sector since it started accepting cryptocurrency donations in May, and it is expected to receive even more following the event in Nashville.
His public backing of crypto undoubtedly boosted investor optimism. The price of Bitcoin surged to almost US$70,000 on July 29, its highest level in more than six weeks, before dropping back to US$62,000 a few days later.
But questions remain about the feasibility of Trumpâs promises if he becomes president. And, even then, it is unclear whether Trumpâs pro-crypto agenda will have a sustained effect on the price of Bitcoin in the long term.
Bitcoinâs price surged and fell within a week
In his speech, Trump pledged to keep â100% of all the Bitcoinâ the US government currently holds or acquires in the future if he is elected.
Many countries, including the US, hold Bitcoin. A large part of these holdings are Bitcoin that has been seized from criminals. The question of how to handle this confiscated cryptocurrency is complex.
Not selling it may send a conflicting message to victims of cryptocurrency crime. Chinese fraud victims, for example, have previously urged the UK government to return £3 billion in Bitcoin held by London police.
What drives Bitcoin price volatility?
Regardless of uncertainty about who will take office in November, there are other concerns for cryptocurrency users about government Bitcoin holdings.
Bitcoinâs volatility is in part driven by governments selling their Bitcoin holdings â the price of Bitcoin has fallen by 15% since Germany started selling off approximately âŹ2.5 billion of confiscated Bitcoin at the beginning of June. But Bitcoin is also a highly speculative asset that is extremely sensitive to media coverage, news and even social media announcements.
The stance of the US government on Bitcoinâs environmental issues, which are the subject of much media criticism, would also affect its price in the long term.
Bitcoin mining typically uses vast amounts of computing power to solve various mathematical puzzles and add new tokens to the blockchain. It is a process that consumes an astonishing amount of electricity and water, and produces large quantities of electronic waste.
The US government had launched an initiative in January 2024 aimed at surveying the energy use of mining operations. However, the move was blocked by a federal judge in Texas who said the industry would suffer âirreparable injuryâ if the new requirements were imposed.
Trumpâs promise to support Bitcoin mining in the US may well be received negatively by communities suffering from Bitcoinâs vast resource consumption. In Texas, for example, households are already facing higher electricity costs in areas where Bitcoin is mined on a large scale.
The future of Bitcoin depends on the global political agendas of key countries, including the US. But there are multiple factors driving Bitcoinâs price irrespective of government regulation, so any promises should be interpreted with caution.
For Trumpâs pledges to affect Bitcoinâs price in the long term, they must be backed by substantial and consistent measures. Otherwise, they will simply cause temporary price fluctuations like those seen over the past week.
Regardless of uncertainty about who will take office in November, there are other concerns for cryptocurrency users about government Bitcoin holdings.
Bitcoinâs volatility is in part driven by governments selling their Bitcoin holdings â the price of Bitcoin has fallen by 15% since Germany started selling off approximately âŹ2.5 billion of confiscated Bitcoin at the beginning of June. But Bitcoin is also a highly speculative asset that is extremely sensitive to media coverage, news and even social media announcements.
The stance of the US government on Bitcoinâs environmental issues, which are the subject of much media criticism, would also affect its price in the long term.
Bitcoin mining typically uses vast amounts of computing power to solve various mathematical puzzles and add new tokens to the blockchain. It is a process that consumes an astonishing amount of electricity and water, and produces large quantities of electronic waste.
The US government had launched an initiative in January 2024 aimed at surveying the energy use of mining operations. However, the move was blocked by a federal judge in Texas who said the industry would suffer âirreparable injuryâ if the new requirements were imposed.
Trumpâs promise to support Bitcoin mining in the US may well be received negatively by communities suffering from Bitcoinâs vast resource consumption. In Texas, for example, households are already facing higher electricity costs in areas where Bitcoin is mined on a large scale.
The future of Bitcoin depends on the global political agendas of key countries, including the US. But there are multiple factors driving Bitcoinâs price irrespective of government regulation, so any promises should be interpreted with caution.
For Trumpâs pledges to affect Bitcoinâs price in the long term, they must be backed by substantial and consistent measures. Otherwise, they will simply cause temporary price fluctuations like those seen over the past week.
New Research Model Sheds Light on Cryptocurrency Market DriversÂ
A recent research paper by prominent crypto companies and a Danish university has provided insight into how traditional financial factors affect crypto market movements.Â
The new study has delved into cryptocurrency prices, particularly bitcoin, revealing that markets are significantly influenced by both conventional financial factors and crypto-specific factors.
The paper by Austin Adams from Uniswap Labs, Markus Ibert from the Copenhagen Business School Department of Finance, and Gordon Liao from Circle Internet Financial was published earlier this week.
What Drives Crypto Markets?
The researchers used a âsign-restricted vector auto-regressive (VAR) modelâ enabling them to examine crypto price fluctuations that come from spillovers from traditional financial markets versus risks inherent to crypto assets.
The new model broke bitcoin returns down into various shocks, including monetary policy, conventional risk premium, adoption, and crypto risk premium shocks. It revealed that monetary policy shocks have a substantial impact on bitcoin prices, especially over longer time horizons.
For example, contractionary monetary policy when the Federal Reserve was raising interest rates accounted for over two-thirds of bitcoinâs sharp decline in 2022 when the asset retreated around 65%.
The crypto contagion caused by the collapse of the Terra/Luna ecosystem and FTX later in the year also contributed to that big bear market.
The research noted that while conventional shocks can have large lower-frequency impacts on crypto prices, âmost day-to-day movements in bitcoin prices are left unexplainedâ by these disruptions.
It also found that when there is turmoil in the crypto market, people tend to move their money into stablecoins, exhibiting behavior similar to how investors might buy gold or government bonds during stock market turbulence.
A recent research paper by prominent crypto companies and a Danish university has provided insight into how traditional financial factors affect crypto market movements.Â
The new study has delved into cryptocurrency prices, particularly bitcoin, revealing that markets are significantly influenced by both conventional financial factors and crypto-specific factors.
The paper by Austin Adams from Uniswap Labs, Markus Ibert from the Copenhagen Business School Department of Finance, and Gordon Liao from Circle Internet Financial was published earlier this week.
What Drives Crypto Markets?
The researchers used a âsign-restricted vector auto-regressive (VAR) modelâ enabling them to examine crypto price fluctuations that come from spillovers from traditional financial markets versus risks inherent to crypto assets.
The new model broke bitcoin returns down into various shocks, including monetary policy, conventional risk premium, adoption, and crypto risk premium shocks. It revealed that monetary policy shocks have a substantial impact on bitcoin prices, especially over longer time horizons.
For example, contractionary monetary policy when the Federal Reserve was raising interest rates accounted for over two-thirds of bitcoinâs sharp decline in 2022 when the asset retreated around 65%.
The crypto contagion caused by the collapse of the Terra/Luna ecosystem and FTX later in the year also contributed to that big bear market.
The research noted that while conventional shocks can have large lower-frequency impacts on crypto prices, âmost day-to-day movements in bitcoin prices are left unexplainedâ by these disruptions.
It also found that when there is turmoil in the crypto market, people tend to move their money into stablecoins, exhibiting behavior similar to how investors might buy gold or government bonds during stock market turbulence.
Bitcoin bulls predict new record highs following worst rout since FTX collapse
Bitcoin (BTC-USD) backers are doubling down on their predictions of new all-time highs for the worldâs largest cryptocurrency after shaking off a rout that sent the digital asset tumbling as much as 20% between Sunday and Monday.
After crashing over the weekend to below $50,000 â a low not seen since February â bitcoinâs price has regained roughly $6,000, putting it down 14% for the last seven days.
As the dust settles on the worst week for bitcoin since the collapse of the FTX cryptocurrency exchange in 2022, bulls said they still expect another leg in a rally that would put the cryptocurrency above $100,000 by the end of 2024. It set an all-time high of $74,000 last March.
Bitcoin (BTC-USD) backers are doubling down on their predictions of new all-time highs for the worldâs largest cryptocurrency after shaking off a rout that sent the digital asset tumbling as much as 20% between Sunday and Monday.
After crashing over the weekend to below $50,000 â a low not seen since February â bitcoinâs price has regained roughly $6,000, putting it down 14% for the last seven days.
As the dust settles on the worst week for bitcoin since the collapse of the FTX cryptocurrency exchange in 2022, bulls said they still expect another leg in a rally that would put the cryptocurrency above $100,000 by the end of 2024. It set an all-time high of $74,000 last March.
Why Bitcoin price drop below 50k inside 24 hours?
Bitcoin bin collapse more during Asian trading hours on Monday, 5 August as e fall below $50,000 bifor e recover to around $51,000.
Di price of di cryptocurrency fall sake of fear say United States fit enta recession.
Dis na di lowest wey Bitcoin plus oda cryptocurrencies don fall since middle of February.
Di world biggest cryptocurrency fall for four straight days till e drop to as low as $49,112, data from TradingView show.
Ether (ETH), wey be native token of Ethereum blockchain, sink to as low as $2,060. Dis na im lowest price since January 3.
âą Crypto danger and tips for investors as Davido meme coin crash ova 90%
âą Tapswap, Notcoin, Hamstar Kombat - di dangers of tap-to-earn crypto platforms wey dey trend for Nigeria
âą We go block any Loan App wey harass customers - FCCPC
Ether nearly 25% fall na di worst single-day hit for di token since May 2021.
Different kain reasons from economic to security na im make investors to rush comot dia money from dis risk assets.
Pipo begin sell dia Ether sake of rumours say crypto market maker Jump Trading sell dia assets.
On-chain sleuth spotonchain bin identify one wallet be dey claim say belong to Jump Trading wey bin transfer 17,576 ETH, worth over $46 million, to centralised exchanges, sign of say dem fit wan sell dem.
Dis rumour lead to selling of over $1 billion for crypto futures market, as Ether register over $350 million for liquidated bets.
Add dis to di rising tensions for Middle East plus concerns say US economy fit enta recession, investor rush remove dia money risk assets.
E also don lead to di rise in bonds wey be safer investment options.
Nigeria na crypto powerhouse for Africa
Nigeria na powerhouse for Africa crypto landscape. As of 2023, di kontri represent more dan 66% of pipo wey dey trade am for di continent.
For 2020, di kontri trading volume score number three position for di whole world afta united States and Russia.
Bitcoin bin collapse more during Asian trading hours on Monday, 5 August as e fall below $50,000 bifor e recover to around $51,000.
Di price of di cryptocurrency fall sake of fear say United States fit enta recession.
Dis na di lowest wey Bitcoin plus oda cryptocurrencies don fall since middle of February.
Di world biggest cryptocurrency fall for four straight days till e drop to as low as $49,112, data from TradingView show.
Ether (ETH), wey be native token of Ethereum blockchain, sink to as low as $2,060. Dis na im lowest price since January 3.
âą Crypto danger and tips for investors as Davido meme coin crash ova 90%
âą Tapswap, Notcoin, Hamstar Kombat - di dangers of tap-to-earn crypto platforms wey dey trend for Nigeria
âą We go block any Loan App wey harass customers - FCCPC
Ether nearly 25% fall na di worst single-day hit for di token since May 2021.
Different kain reasons from economic to security na im make investors to rush comot dia money from dis risk assets.
Pipo begin sell dia Ether sake of rumours say crypto market maker Jump Trading sell dia assets.
On-chain sleuth spotonchain bin identify one wallet be dey claim say belong to Jump Trading wey bin transfer 17,576 ETH, worth over $46 million, to centralised exchanges, sign of say dem fit wan sell dem.
Dis rumour lead to selling of over $1 billion for crypto futures market, as Ether register over $350 million for liquidated bets.
Add dis to di rising tensions for Middle East plus concerns say US economy fit enta recession, investor rush remove dia money risk assets.
E also don lead to di rise in bonds wey be safer investment options.
Nigeria na crypto powerhouse for Africa
Nigeria na powerhouse for Africa crypto landscape. As of 2023, di kontri represent more dan 66% of pipo wey dey trade am for di continent.
For 2020, di kontri trading volume score number three position for di whole world afta united States and Russia.
Last week's drop in stocks was tied in part to disappointing earnings, a weaker-than-expected jobs report, higher unemployment and a declining manufacturing sector. The U.S. Federal Reserve opted to hold its benchmark rate steady and didn't promise a rate cut in September, which many market experts had baked into their forecast. Lower interest rates tend to correlate with better performance for risky assets.
Bitcoin's price has reached its lowest level since February and briefly fell below the $50,000 price threshold to $49,111.10. The world's largest cryptocurrency is trading just below $51,000. It's still up almost 17% this year.
The price of ether, the native token underpinning the ethereum blockchain, fell to around $2,200 and has erased its gains for the year. Binance's BNB token was down 20% and solana is trading 22% lower.
Investors are also looking out for new trade data from China and Taiwan this week, as well as central bank decisions in both India and Australia.
The latest crypto wipeout will be felt by a broader base of investors after the SEC this year approved new spot exchange-traded funds for bitcoin and ether. The ETFs have seen hundreds of millions of dollars flow into the coins.
Bitcoin's price has reached its lowest level since February and briefly fell below the $50,000 price threshold to $49,111.10. The world's largest cryptocurrency is trading just below $51,000. It's still up almost 17% this year.
The price of ether, the native token underpinning the ethereum blockchain, fell to around $2,200 and has erased its gains for the year. Binance's BNB token was down 20% and solana is trading 22% lower.
Investors are also looking out for new trade data from China and Taiwan this week, as well as central bank decisions in both India and Australia.
The latest crypto wipeout will be felt by a broader base of investors after the SEC this year approved new spot exchange-traded funds for bitcoin and ether. The ETFs have seen hundreds of millions of dollars flow into the coins.
Crypto selloff wipes out $367 billion in value as bitcoin, ether plunge
KEY POINTS
âą The cryptocurrency market plunged on Monday, shedding around $367 billion in value over a 24-hour period, before recovering some later in the day.
âą Bitcoin and ether each saw dramatic drops as investors sold out of risky assets.
âą The slide comes after the Nasdaq wrapped up its worst three-week stretch in two years.
The cryptocurrency market plummeted in value on Sunday and continued tumbling into Monday morning, as investors dumped risky assets.
Led by a drop of 15% in bitcoin in the past 24 hours and a 22% plunge in ether, the overall value of cryptocurrencies sank by about $367 billion, according to CoinGecko data, the the market recovered some later in the day. The drop in crypto prices led to more than $1.13 billion in liquidations in the derivatives markets, crypto data firm Coinglass says.
The selloff in the crypto market coincided with a broader slide in equities in Asia-Pacific markets. Japan's Nikkei 225 dropped over 12%, extending losses that began last week, after the Bank of Japan announced it would hike its benchmark interest rate to the highest level in 16 years. It was the worst day for the index since the "Black Monday" crash in 1987.
In the U.S. the Nasdaq slid 3.4% last week into correction territory, capping off the tech-heavy index's worst three-week stretch since September 2022, when the market was in freefall. Amazon and Nvidia contributed to the declines. The index fell another 3.4% on Monday.
Bitcoin and ether lead selloff in cryptocurrency market.
Last week's drop in stocks was tied in part to disappointing earnings, a weaker-than-expected jobs report, higher unemployment and a declining manufacturing sector. The U.S. Federal Reserve opted to hold its benchmark rate steady and didn't promise a rate cut in September, which many market experts had baked into their forecast. Lower interest rates tend to correlate with better performance for risky assets.
KEY POINTS
âą The cryptocurrency market plunged on Monday, shedding around $367 billion in value over a 24-hour period, before recovering some later in the day.
âą Bitcoin and ether each saw dramatic drops as investors sold out of risky assets.
âą The slide comes after the Nasdaq wrapped up its worst three-week stretch in two years.
The cryptocurrency market plummeted in value on Sunday and continued tumbling into Monday morning, as investors dumped risky assets.
Led by a drop of 15% in bitcoin in the past 24 hours and a 22% plunge in ether, the overall value of cryptocurrencies sank by about $367 billion, according to CoinGecko data, the the market recovered some later in the day. The drop in crypto prices led to more than $1.13 billion in liquidations in the derivatives markets, crypto data firm Coinglass says.
The selloff in the crypto market coincided with a broader slide in equities in Asia-Pacific markets. Japan's Nikkei 225 dropped over 12%, extending losses that began last week, after the Bank of Japan announced it would hike its benchmark interest rate to the highest level in 16 years. It was the worst day for the index since the "Black Monday" crash in 1987.
In the U.S. the Nasdaq slid 3.4% last week into correction territory, capping off the tech-heavy index's worst three-week stretch since September 2022, when the market was in freefall. Amazon and Nvidia contributed to the declines. The index fell another 3.4% on Monday.
Bitcoin and ether lead selloff in cryptocurrency market.
Last week's drop in stocks was tied in part to disappointing earnings, a weaker-than-expected jobs report, higher unemployment and a declining manufacturing sector. The U.S. Federal Reserve opted to hold its benchmark rate steady and didn't promise a rate cut in September, which many market experts had baked into their forecast. Lower interest rates tend to correlate with better performance for risky assets.