This week in Crypto: March 2-8
The Kings of Leon and Taco Bell got into NFTs, 61% of Americans don’t quite understand crypto, and institutions keep making Bitcoin moves. All that and more in our weekly report.
Published on March 8, 2021
The big picture
From NFTs going mainstream and a new poll on American crypto knowledge to international institutional investors expanding beyond Bitcoin, it was another big week in crypto news.
NFTs (short for non-fungible tokens) continued to make headlines as everyone from Taco Bell to the Kings of Leon got into the action. (Still not sure you understand what NFTs are or how they work? Our new explainer has you covered.)
Meanwhile, U.S.-based corporations (including Microstrategy, Square, and Tesla) that have been adding crypto to their balance sheets now have company abroad: Hong Kong-based Meitu, a publicly-traded tech company, announced purchases of 379.1 BTC for $17.9 million and 15,000 ETH for $22.1 million and on March 5. As Bloomberg reports: “Those acquisitions are part of an overall plan to use as much as $100 million of its cash hoard to fund crypto purchases.”
Notably, the “beauty app” developer didn’t limit its investment to Bitcoin. Does the move potentially signal future institutional investment in the second-biggest cryptocurrency?
NFTs break out
Jack Dorsey, who has been a vocal proponent of Bitcoin, has begun experimenting with Ethereum NFTs. The Twitter founder, who was the first person to ever tweet, is auctioning the historic (if not poetic) 2006 tweet — “just setting up my twttr” — in the form of an NFT. As of Monday, the top bid was $2.5 million.
Nashville-based band the Kings of Leon announced that their next album will be released as an NFT. Fans will be able to unlock alternate album art, limited-edition vinyl, and VIP concert experiences.
Wish you could buy a collectible digital taco from Taco Bell? Too bad, they sold out.
New moves from institutional investors
After briefly experimenting with crypto in 2017, Goldman Sachs is reopening its crypto trading arm. The Wall Street giant reported nearly 40% of clients have exposure to crypto. Speaking on a podcast, the bank’s global head of digital assets noted “huge” institutional demand and said the bank would initially have a “narrow” focus on areas including Bitcoin futures. Also in the news:
Norwegian oil-industry billionaire Kjell Inge Rokke announced a new Bitcoin-investment company with an initial $58 million purchase. “Bitcoin may still go to zero. But it can also become the core of a new monetary architecture,” he said in a shareholder letter. “People who know the most about Bitcoin believe its future success is nearly inevitable.”
Paypal, which began offering limited crypto trading to U.S. customers last year, announced plans to acquire a Tel Aviv, Israel-based digital-asset startup called Curv that focuses on crypto security. In a statement, Paypal said that the Curv team would become part of a new business unit focused on blockchain and crypto.
Poll: 61% of Americans don’t understand crypto
According to a recent Harris poll, nine out of ten Americans have heard of cryptocurrencies, but 61 percent have little or no understanding of how they work. Some interesting takeaways as reported by Bloomberg:
10 percent of those familiar with crypto regularly make purchases with it.
58 percent of crypto-familiar Gen Z respondents (ages 18 to 24) said “digital currencies were very or somewhat legitimate as a form of payment.”
69 percent of millennials (ages 25 to 40) agreed.
Looking to increase your crypto IQ? Check out Coinbase Learn, our guide for newcomers to the crypto world.
The global picture
India, which has been considering legislation that could ban cryptocurrencies in the world’s second-biggest nation, may be reconsidering. “We want to make sure that there is a window available for all kinds of experiments which will have to take place in the crypto world,” said finance minister Nirmala Sitharaman on March 5. “We are not closing our minds.”
According to a new survey by Visa, 25% of credit-card users in Latin American want to be able to pay with cryptocurrencies. “Latin Americans want cryptocurrencies, and not just as hedges for inflation or savings,” reports Decrypt. “They want to be able to spend them, too.” Over the past year Visa has announced a variety of crypto initiatives, such as working to enable APIs to allow customers to buy and sell bitcoin and connecting USD Coin to its global payments network.
A pair of Bitcoin ETFs (or exchange-traded funds) launched in Canada recently and have been a major success in the first weeks of trading. Via the two competing funds, Canadian investors can gain exposure to Bitcoin via traditional brokerages without having to hold it themselves. As Bloomberg reports, the new funds “helped Canadian ETF managers attract $5.2 billion in February, the second-highest month of inflows on record.” For years, financial institutions in the U.S. have been trying to launch Bitcoin ETFs, but have been unable to gain SEC approval. Many hope that the success of Canada’s Bitcoin ETFs will pave the way for approval here.
Spotlight: Understanding Ethereum’s new protocol
If you were reading Bloomberg on Sunday, you might have seen this headline: Crypto Coin Outperforming Bitcoin Is About to See Supply Reduced. The story was about an upgrade to Ethereum that will go live this summer called the Ethereum Improvement Protocol 1559.
The key takeaway? The protocol improvement will significantly reduce the supply of ETH. Once enacted, whenever ETH is transferred on the network, a small percent will be “burnt” to reduce the total supply. According to a lead developer, the upgrade “fixes a bug in the economics of Ethereum we’ve known about from the start.” The basic idea is to make transaction costs lower and more predictable.
But another impact the new protocol will have is to reduce the amount of ETH that is circulating at any given time. So supply will go down, which means that if demand remains constant, prices should go up.
Unlike Bitcoin, ETH’s supply is theoretically unlimited. Bitcoin’s scarcity (there will only ever be 21 million BTC) helps make it resistant to inflation. When EIP 1559 goes into effect in July, it will give the Ethereum network a method to reduce supply and thus resist inflation — which should help it maintain value over time.
Right now (pre-EIP 1559), Ethereum’s supply grows at an inflation rate of 4.4% annually compared to Bitcoin’s rate of 1.8%. (Learn more about inflation rates.)