Tag: inflation

Venezuelans Will Love Bitcoin Even More with 10,000,000% Inflation

Bitcoin’s trading volume has set a record high in Venezuela, thanks to the 10,000,000% inflation rate in 2019 as shown in Statista.

Source: Coin.dance

The data shows Bitcoin’s trading activity in P2P exchanges LocalBitcoins, Paxful and Bisq from Coin.dance. Bitcoin’s trading volume in LocalBitcoins hit a record high of 57 million bolivars on 20 July, beating the previous high of 49 million on 13 July. Venezuela’s inflation rate in 2018 was 929,789.5%, and the projected Venezuelan inflation rate from 2019 to 2024 will be at least 10 times higher. With the weakening of Venezuelan Bolivar, citizens turned to hold Bitcoin as alternate storage of value. Despite President Maduro’s urge towards the Bank of Venezuela to trade Petro crypto nationwide, the adoption of Petro remained poor and Venezuelans appreciate Bitcoin much more than the country-issued crypto.

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Are Ethereum Nodes Ready for a New Hard Fork on New Year’s Day?

The Ethereum network is expected to undergo a scheduled upgrade,named Muir Glacier at block number 9,200,000, predicted to occur on New Year’s Day 2020.  

As Ethereum has faced the dilemma of moving to proof-of-stake in the usual way, delaying in the mining “ice age,” developers have voted to disable the difficulty time bomb for miners to be able to seek block rewards with the use of some time. 

The developers forgot to diffuse the difficulty creep during the Istanbul hard fork earlier this month, leaving exchange employees and node operators awake even after the New Year celebrations. 

Although the crypto markets may be quite inactive on New Year’s Day, any mistakes with the hard fork may result in the worst day of the year for its recovery.  

Around 63.2% of nodes are ready for the changes, according to Ethernodes. 40% have been slightly changing their protocols, as the difficulty creep started to affect mining in the past three months, leading to a drop of around 20%.  

Ethereum prices have been falling since mining has become more difficult. Although the Istanbul hard fork faced a similar issue regarding readiness, most nodes left it to the last minute to update, although still resulting in passing the fork successfully. Unlike the Istanbul hard fork, nodes may get ready this time for the Muir Glacier hard fork. 

The developers from the Ethereum Foundation also confirmed that the hard fork would increase the inflation of Ethereum, resulting in a further decrease in the ETH price.  

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Cryptocurrency Giving People in Africa the Power Against Rising Inflation

Andy Cheung, OKEx’s Head of Operations, had recently revealed that cryptocurrency provides several people in Africa with an opportunity to control their purchasing power against rising inflation. 

He said that the OKEx’s Africa Cryptotour’s mission is to promote blockchain across the world. So far, the cryptocurrency exchange has visited five cities across four countries in Africa and met thousands of people on their tour.  

Based on talks and interactions with Africans, Andy sees true the transformative power of blockchain in the continent. 

The rise of Cryptocurrency in Africa 

Africa is currently facing economic turmoil.  The value of its local currencies is on a decline against the US Dollar in nations like Ghana, South Africa, and Nigeria. This has led to increased use of cryptocurrencies in the continent. 

In Africa, Tunisia became the first nation to “go blockchain” in 2015 after it decided to provide its national currency for money transmittance through cryptographic technology. Senegal became the second by issuing blockchain-based ECFA in 2016. 

BitcoinAfrica’s report indicatedthat the Paxful crypto exchange had experienced tremendous growth with more than three million subscribers majorly from the African nations. Its subscriber base is rising at a rapid pace. Together with the United States, nations like Ghana, Nigeria made more than 15 million trades in 2018, which is 65% year-on-year growth. 

Crypto not bound by geography 

Cryptocurrency is internet-based, and therefore not restricted to a particular geographical location. Interest in cryptocurrency has been increasingsteadily in Africa. Some economists recognize it as a disruptive innovation, which is blossoming in the continent. Bitcoin is a major cryptocurrency leading the pack in the continent. 

Meanwhile, cryptocurrency is different from Mastercard or Visa as it doesn’t need intermediaries and not regulated by governments. Crypto transactions rely on the internet, which means they can occur anywhere in the world. 

Although Africa is rarely recognized among the largest market for cryptocurrency, it sets to steal a march over other markets. 

A hedge against inflation 

Africa still has the highest inflationin the world. Many African countries like Zimbabwe, South Sudan, Liberia, Sudan, Sierra Leone, and Angola are battling high inflation. For example, annual inflation in Zimbabwe hits highs of 175.66%. This is the highest inflation rate record since 2009, when the nation was forced to abandon its currency.  

Other nations with double-digit inflation rates include Nigeria, Ghana, Egypt, Malawi, Zambia, and Mozambique. It’s, therefore, not surprising to see that some of these nations are among the leading Bitcoin economies in Africa. The main Bitcoin nations are Zimbabwe, Nigeria, Kenya, Ghana, Botswana, South Africa, and Uganda. 

African central banks have consistently adopted policies, which have eroded the buying power of their citizens’ money. Bitcoin may provide Africans an option for money as a store of value. 

Africa’s economic stability is worrisome for many. But cryptocurrency remains unaffected by the African economy’s inconsistencies and therefore offers a more stable option for several citizens across the continent. 

Cryptocurrency’s benefits are widely evident, and this explains why its popularity continues to rise in Africa. 

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BitMEX Research: Inflation Aftermath of Coronavirus Financial Crash Will Be Bitcoin's Greatest Test

In the aftermath of the current Coronavirus market crash and the subsequent incoming inflation that will be caused by the response of the Federal Reserve and Central banks, Bitcoin will face its truest test and be presented its biggest opportunity to prove itself in its short lifetime, according to new research from global crypto exchange BitMEX.

Bitcoin Could Anchor the New Economy

BitMEX Research published their analysis , Inflation is Coming, on March 17, outlining that the global response to the pandemic and disruption will, “mark a significant economic regime change from monetary policy to central bank funded fiscal expansion” from which intolerable market inflation will rise. It will be within this oncoming financial environment that Bitcoin’s true nature should finally be revealed.

Central banks and governments have been fast to respond to the disruption caused by the Coronavirus. The analysis highlighted, “In the US the Federal reserve has lowered interest rates to near zero (0% to 0.25%), announced the purchase of at least $500bn of treasuries and $200bn of mortgage backed securities, and also reduced the commercial bank reserve requirement to absolute zero.”

Bitmex believes that there are further measure to come, but it is clear that these attempts to restabalize the broken system are, “the last major throw of the dice from central bankers. Monetary policy will not be enough.”

The researchers claim that not only will inflation come, “it will be a shock” as inflation has been low and stable for 30 years and our collective memory does not nor recall the consequences of digging ourselves into such a financial hole. Although they do not specify exactly when the inflation will hit, BitMEX predict it will be “similar to the 1970s where it went as high as 15%.”  

US Consumer Price Inflation YoY 

Source – Bloomberg

The analysis by BitMEX’s research arm stated, “ In our view, in this changed economic regime, where the economy and financial markets are set loose, with no significant anchor at all, not even inflation targeting, it could be the biggest opportunity Bitcoin has seen, in its short lifetime.” 

Bitcoin’s Value and Trading in CrisisIn a recent interview with Blockchain.News, FXCM’s Managing Director Michael Kamerman addressed Bitcoin’s potential to be an alternate store of value to gold, He said, “There are two parts to this question. First, is Bitcoin a “safe haven?” My answer is, no, not yet. It has the characteristics of what would be a “safe haven” asset but if you look at the way it moves on a chart, it is not a “safe haven” instrument.” He added, “I think as Bitcoin is more widely adopted, investors and traders will wake up to its “safe haven-like” qualities – but it is too early now.”

Prior to the recent stock market crash which sent equities plummeting, traders hardly had a trouble-free environment to operate within. Over the last year, market participants have also had to contend with a China-US trade war, Brexit uncertainty and Coronavirus disruption, making investment anything but straightforward.

On his observations regarding traders’ movements over the last year of rising uncertainty, Kamerman said, “I would not say our customers are shifting their investment sentiments, but instead remain opportunistic. If forex is moving, they trade forex. If Bitcoin is moving, BTC/USD is all the rage. Recent volatility has benefitted our cryptocurrency product line in that our number of active crypto traders is up. Data does not show our customers choosing crypto over forex or vice versa.  Customers just want to trade what is moving.”

China's Central Bank Says Digital Yuan Will Not Raise Inflation

China’s central bank has been secretive and silent when it comes to the testing of its national digital currency, which has piqued the curiousity of its citizens. A bank representative recently appeared at a state-owned television company responding to such public curiosities and gave an explanation of how the digital yuan would function.

Race to Ramp Up China’s Digital Yuan Progress 

The representative confirmed that the digital yuan, commonly recognized as Digital Currency Electronic Payment (DCEP), has had a pilot test conducted. The testing has been carried out in several cities such as Beijing, Chengdu, Xiongan, Shenzhen, and Suzhou, and future testing is intended to take place in the winter Olympics.

The researcher put great emphasis that such current tests do not mean that the DCEP has been officially issued for public use.

The representative further said that this closed test of the national digital currency would not negatively affect the commercial operation of the listed institutions. The spokesperson stated that it would have no adverse effect on the traditional fiat currency (renminbi) system of circulation and issuance. The representative further mentioned that no effect would be caused on the financial market or social economy of China outside of this testing environment.

As a countermeasure against overselling the digital yuan, the bank mentioned that commercial institutions would be required to pay a 100% reserve to the central bank, first. In other words, the national digital currency would act as a kind of stablecoin, with the central bank first exchanging the virtual currencies to relevant operating agencies and various commercial banks. Such agencies will then release the digital currencies for public circulation. It is an organized system that works well to prevent any inflation because the digital yuan being staked to the traditional fiat yuan at a 1:1 ratio.

Concerning technical designs, the central bank has officially completed the top-layer of the design. The digital yuan will soon adopt a two-layer architecture as well as a two-tier delivery system besides that. The central bank also gave an important explanation with regards to connectivity. It revealed that if payment functions for payment platforms and online banking were to go offline because of weak signals, the Digital Currency Electronic Payment incorporates dual offline technology to compensate. Therefore, the digital yuan will be just as efficient as paper yuan. The bank also said that so long as two mobile phones touched with the Digital Currency Electronic Payment wallet incorporated into both, a transfer of payment can be conducted.

The bank says that the national digital currency is not tied to any kind of bank account and is free from the control of the traditional banking system. Unlike other cryptocurrencies, the national digital currency is launched by China’s central bank and backed by the country’s credit. This is similar to the electronic version of the traditional fiat renminbi. However, it remains to see how accurate the technicality of the DCEP would be.

China’s Digital Yuan to Be Operational for Local Government Employees Starting in May

China could be set to introduce its national digital currency in the market by May 2020. The Chinese administration plans to release the central bank digital currencies for its local government employees. It will be a real test to examine the usage of digital currencies among its government workers. However, it will be a pilot test of using the Digital Currency Electronic Payment for government workers’ transportation allowance. The country will also be testing the use of its digital currency electronic payment for paying salaries to its government employees.

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Stablecoin On-Chain Activity at Record Highs but Will Crypto Market Inflation Follow?

On-chain activity for stablecoins has surged over the last year, increasing by 800% according to the latest market intelligence, but could the increase in stablecoin issuance create inflation in the cryptocurrency markets as past allegations against Tether and Bitfinex have suggested ?

In 2018, research published by John Griffins of the University of Texas and Amin Shams of Ohio State University investigated whether Tether, a stablecoin pegged to the US dollar, influenced Bitcoin and other cryptocurrency prices during the 2017 ICO boom.

Using algorithms to analyze blockchain data, the pair of researchers concluded that purchases with Tether were timed to follow market downturns which resulted in sizable increases in Bitcoin prices. They wrote, “ Rather than demand from cash investors, these patterns are most consistent with the supply-based hypothesis of unbacked digital money inflating cryptocurrency prices.”

Their research ultimately lead to Tether and Bitfinex being investigated by the Department of Justice for potentially using stablecoin issuance to inflate the price of Bitcoin.

Stablecoins On-chain up 800%

Lead researcher of TokenAnalyst, Ankit Chiplunkur announced in a tweet that the overall combined marketcap of stablecoins currently sits a $6.7 billion dollars. He wrote, “In the last 12 months, $290B worth of stablecoins were moved onchain, growing by 8.2 times in 12 months, from $6.2B in Apr 2019 to $50.9B in Mar 2020.”

Source:TokenAnalyst

So what could this mean for the crypto market with stablecoins at an all time high?

U.C Berkeley: Stablecoin issuances Do Not Inflate BTC Price

A new report issued last Friday by the University of California Berkeley’s Haas Blockchain initiative appears to directly contradict the crypto inflating stablecoin conclusion by Griffin and Shams.

Richard Lyons, U.C Berkeley’s Chief of Innovation along with Ganesh Viswanath-Natraj, a Professor at the Warwick Business School said that stablecoins are being leveraged by investors to react to market movements quickly but found no evidence that they are drivers of inflation or cause cryptocurrencies to collapse.

From the report, “We find no systematic evidence that stablecoin issuance affects cryptocurrency prices. Rather our evidence supports alternative views; namely, that stablecoin issuance endogenously responds to deviations of the secondary market rate from the pegged rate, and stablecoins consistently perform a safe-haven role in the digital economy.”

The new research presented by Lyons and Vishwanath-Natraj concludes that investors are using stablecoins as a store of value during periods of economic downturn or uncertainty, as well as tools of arbitrage when the stablecoins move from their pegs, which is consistent with recent market movement in this Covid crisis. 

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Elon Musk and Joe Rogan Slam US Stimulus Money Printing and Incoming Inflation

Elon Musk appeared on the Joe Rogan Experience for the second time and had a few choice words regarding the coming inflation and creative monetary issuance coming into play due to the COVID market meltdown.

While a clear Bitcoin advocate, Musk did not mention the pioneer crypto despite its ability to fix inflationary money issuance.

Musk believes that given the current US stimulus money being sent to US citizens and small businesses on lockdown, that the population is starting to view the economy as a limitless source of support regardless of the loss in production and rising unemployment.

Appearing on the Joe Rogan podcast on May 7, Musk said, “This notion though, that you can just sort of send cheques to everybody and things will be fine, is not true.”

Endlessly Printing Money

The coronavirus pandemic lockdown has created a huge financial chasm and the US government has put a $2 trillion stimulus package in play with the belief that they can endlessly print more.   

“If you don’t make stuff, there’s not stuff. You can’t just legislate money and solve these things.” Elon Musk explained the basis for a working economy seemingly unknown to US Lawmakers who only recently suggested having the US Treasury mint a couple of $1 trillion coins and force the Federal Reserve to recognize them so they could back the stimulus “debt-free.”

Elon Musk and Bitcoin and Inflation

As stated in the original Bitcoin white paper, there can only ever be a maximum of 21 Million Bitcoin and does not allow for inflation.   

Although Musk and Rogan did not mention Bitcoin during the lengthy two- hour podcast, Musk has appeared bullish on the cryptocurrency recently on Twitter and reportedly owns around 0.25 BTC himself.  

In terms of what havoc the coming inflation could have, a positive note for Bitcoin believers are recent reports like that from Bitmex, which highlights that in the aftermath of the current Coronavirus market crash and the subsequent inflation that will be caused by the response of the Federal Reserve and Central banks, Bitcoin will face its truest test and be presented its biggest opportunity to prove itself in its short lifetime.

BitMEX Research outlined that the global response to the pandemic and disruption will, “mark a significant economic regime change from monetary policy to central bank funded fiscal expansion” from which intolerable market inflation will rise.

Recently the Bloomberg April 2020 Crypto Outlook also revealed that the creative financial measures of the US Lawmakers and Central banks around the world appear to be accelerating the status of Bitcoin to a new type of digital gold.

How do you pronounce  X Æ A-12?

On May 4th, 2020, Elon Musk and his partner Claire Boucher welcomed their first child together and soon after revealed the baby’s name: X Æ A-1

Musk was immediately questioned by Rogan on how to correctly pronounce the boy’s name.

Musk said his son’s name is pronounced “X Ash A 12.” The X is just “X” and the A-12 is just “A 12.”

Billionaire Paul Tudor Jones Looks to Buy Bitcoin as A Portfolio Hedge Against Inflation – Here's Why

According to a Bloomberg report, billionaire hedge fund manager Paul Tudor Jones is buying Bitcoin to hedge against inflation as central banks across the world print money to relieve economies affected by coronavirus pandemic.

Jones is one of Wall Street’s most seasoned and successful hedge fund managers. He is the CEO and founder of Tudor Investment Corp, which is a hedge fund company that managed $8.4 billion as of March 30, based on data from the SEC (Securities and Exchange Commission).

Looking to insulate assets from the market downturn  

In a market outlook note, Jones told his clients that he thinks Bitcoin will serve as a potential hedge against a rise in inflation he believes is coming because of central banks sharply expanding their balance sheets and printing money amid the COVID-19 epidemic.

According to the report, Jones compared Bitcoin to gold by saying that the leading cryptocurrency reminds him of the role that gold played in the 1970s.

In the client note, Jones said, “The best profit-maximizing strategy is to own the fastest horse. If I am forced to forecast, my bet is it will be Bitcoin.”

The hedge fund manager commented that one of his funds, Tudor BVI, holds a low single-digit percentage of its assets in Bitcoin futures to assist in protecting against an increase in inflation. Bitcoin (BTC) traded up more by 6.5% to $9,911 on Thursday.

Interest in Bitcoin has increased amid trillion-dollar rescue packages from central banks around the globe as nations seek to improve economies, which are experiencing tremendous GDP contraction because of the coronavirus outbreak.

Jones has achieved legendary status on Wall Street after making the correct prediction of the 1987 economic crash and correctly predicted shorting Japanese equities several years later before Japan’s economy crashed.

Jones told CNBC in March that he believed the stock market could be back higher by June if COVID-19 cases started to peak. He commented that at the time when he expected stocks to endure a choppy April, saying that these equities would eventually climb again.

His current announcement came when central banks, including the US Federal Reserve, begin working on significant monetary policy initiatives aimed to help businesses keep lights during the coronavirus crisis. The Fed already has created two emergency interest cuts, which lowered borrowing costs to near zero like they were during the 2008 financial crisis. But some investors are worried by the Fed’s move to print money and inject it into the US economy as this would zoom higher prices in the future.

Bitcoin price and the global financial crisis: Everybody’s looking at the wrong markets

While everyone obsesses over unemployment, inflation, bailouts, and stock markets, the biggest global financial risk comes from debt markets. Such opaque and complicated markets hold trillions of dollars worth of household, government, and corporate debt, including all the derivative financial products based on such debt. Since September last year, the US federal reserve has supported banks with overnight loans to cover a shortfall in cash. A collapse in the debt market is likely to ruin the global financial system.

Currently, people have so many problems in such markets, and it is difficult to figure out where to begin solving the problems. No amount of money printing could fix these problems. While the financial system of the world teeters on the edge of collapse and deflationary depression, the crypto sphere is hyping Bitcoin as a way to capitalize on inflation from all the money that governments are printing in response. Many people increasingly see Bitcoin as a safe haven in the financial crisis. People appear to flee the sinking fiat currency in favor of the digital currency with no central control.

Image via WSJ

US-China Cold War Could Benefit Bitcoin

An internal Chinese report presented to Chinese Leader Xi Jinping and his top party members on May 4, concluded that anti-China sentiment is currently at its highest since the 1989 Tiananmen Square crackdown according to Reuters.

The report was created by China’s top intelligence agency, the China Institutes of Contemporary International Relations (CICIR), a think tank affiliated with the Ministry of State Security. People close to the report’s content said that Beijing will face a US-led wave of anti-China sentiment in the aftermath of the COVID-19 pandemic and must be prepared for a worst-case scenario which could include a military showdown between the two superpowers.

China has been heavily criticized on the world stage for its alleged  lack of transparency of information on the COVID-19 pandemic and now appears to be doubling down on its censorship efforts. With the US-China trade war already well underway, there are now signs that things could escalate into a full-blown Cold war.

Following the Tiananmen Square incident in 1989, China was heavily isolated and sanctioned by international powers. But China is not the poor toothless nation it once was, it has now grown to the second-largest economy and a base for the majority of manufacturing in the world, and is unlikely to yield to any foreign powers demands.

Bitcoin and the Cold War

According to an article by Forbes on May 11, a source close to the letter compared it to the Novikov telegram, a warning letter sent by a Soviet Amassodar in 1946 to the Soviet Union of American foreign policy which is reported as a major catalyst for the subsequent decades-long Cold War between the USA and the USSR. 

For Bitcoin, there are some notable downsides should the US-China tensions escalate to that of a Cold War scale. A larger break in economic ties could be a catalyst for stricter China imposed capital controls on the Chinese population and an even greater acceleration into the development of its own central bank digital currency or DCEP in attempt to completely dissociate from the broader crypto industry.

But there is potential for cryptocurrencies and Bitcoin to shine. Notably there would be significant disruption and roadblocks placed in front of existing fiat gateways been China and the US which could drive further adoption of peer-to-peer transactions of Bitcoin and crypto. China’s economy is still driven largely by exports and there will be a need to build new bridges for capital to flow, and cryptocurrency was designed for such a role. 

A Cold War could see China and the US effectively divide up the world economy according to their ability to economically influence them. China most likely will retrench towards the Belt and Road countries of Asia, Africa and parts of Europe while the US will follow suit with the Americas and European allies.

Both sides are expected to suffer greatly from the lack of free trade and will likely result in a further decrease in global economic growth which is already buckling under the strain of the COVID-19 disruption and lockdown.

Billionaire investor Paul Tudor Jones, has made the argument that the effects of these stimulus policies will help highlight the strength of deflationary cryptocurrency economics in contrast to the current inflationary policies of world monetary authorities.

While a Cold Trade War between the largest economies in the world is unwanted, the long term effects for Bitcoin look quite positive. Recently the Bloomberg April 2020 Crypto Outlook also revealed that the creative financial measures of the US Lawmakers and Central banks around the world appear to be accelerating the status of Bitcoin to a new type of digital gold.

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Trump Pushes Federal Reserve For Negative Interest Rates, Bitcoin's Anti-Inflation Mechanism Shines

Trump tweeted out his support of negative interest rates as European Central Banks and the Bank of Japan take their interest below zero.Bitcoin basher and gold advocate, Peter Schiff was quick to respond to the President with a tweet of his own, explaining what a bad idea negative rates would be as they trigger mass lending from banks who could be penalized for hoarding cash. 

The billionaire bond king Jeff Gundlach also responded with the tweet below, stating that negative interest rates would be fatal for the US economy. 

Bitcoin was Made to Curb Central Bank Inflation

While some have suggested the dive below zero may be necessary to kickstart the economy, the potential for negative interest rates on the US dollar highlights the strength of cryptocurrencies like Bitcoin which has an anti-inflationary mechanism built-in to its code.

Bitcoin experienced its Third Halving this week, which effectively reduced the block rewards for miners from 12.5 BTC to 6.25 BTC.

Figure 1: Snapshot of Bitcoin Network Source: Bitcoinblockhalf.com, Data as of May 13 2020

The rationale of the Bitcoin halving stems from the currency design of Bitcoin. In the email thread between the mysterious Satoshi Nakomoto and Mike Hearn, Nakamoto stated that the total supply of Bitcoin is capped at 21 million. This is opposite to the inflationary nature of fiat currencies in which their supply is controlled by central banks.

Guy Hirsch, the US Manager for the eToro exchange told Forbes, “The bitcoin protocol has a monetary policy built into the code and it is therefore not bound by political or other external manipulation.” He continued, “Every 210,000 blocks bitcoin will hold a stronger stock-to-flow ratio, which makes bitcoin a real source of value. Central banks have now made printing trillions of dollars a normal occurrence, which is not sustainable.”

Many bitcoin and cryptocurrency exchanges have seen users and trading volumes soar since the coronavirus crisis began—Brian Armstrong, CEO of Coinbase even revealed an interesting data set which looked like Americans were investing their stimulus checks.

As the US counts the cost of the coronavirus pandemic, alternative assets like bitcoin could begin to look more attractive and the stimulus and creative monetary theory even seems to be accelerating the asset into a type of Digital Gold.

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