This week in crypto: Traders exhale as markets stabilize
Bitcoin and Ethereum markets plateau after weeks of unrest, but crypto mining, China, and the environment remain in the headlines
Published on June 2, 2021
After weeks of major volatility, crypto traders finally got a chance to exhale — with prices stabilizing as more positive news took center stage. Bitcoin began and ended this past week with a value around $36,000 while Ethereum hovers near $2,600.
Among the good news? India’s central bank clarified that crypto trading is not banned, for one. Also this week, legendary investor Carl Icahn signalled his intention to invest as much as $1.5 billion, Paypal is working to enable crypto withdrawals, and stablecoins reached a market cap above $100 billion.
The big picture
In a recent interview with Bloomberg TV, Wall Street giant Carl Icahn said that he’s looking to invest in the crypto market “in a big way.” What constitutes “big” to Icahn? “A billion dollars, a billion-and-a-half dollars," said the Icahn Capital chair — adding that investors are “concerned about the value of our currency, and this concern will increase if higher inflation continues.”
Last year, Paypal enabled limited crypto trading — allowing its vast user base to buy or sell a few major tokens. But Paypal hasn’t allowed users to send or spend their crypto outside of the Paypal platform — meaning no ability to move it to a private wallet. Will that change? Recent comments by a company VP suggest it might: “[Customers] want to bring their crypto to us so they can use it in commerce, and we want them to be able to take the crypto they acquired with us and take it to the destination of their choice.”
This month’s volatility was good news for at least one part of the crypto market, as traders appeared to find refuge in stablecoins — which have surged to a combined market capitalization above $100 trillion. Tether (USDT) remains the biggest stablecoin, but USD Coin (USDC) has grown to claim about 20 percent of the total market.
As crypto prices surged this past year, network fees also spiked — creating a barrier to entry for new users and disincentivizing existing investors from making experimental trades (perhaps to test out decentralized finance protocols.) One silver lining to the recent cooling of the market has been a reduction in fees, with average Bitcoin and Ethereum fees falling to about $3 — the lowest they’ve been all year.
Uniswap, the largest decentralized exchange (or DEX) on the Ethereum network, recorded all-time-high trade volume in May — despite market volatility and high gas prices. In an effort to limit the impact of future spikes in gas prices, the DEX will likely deploy a scaling solution called Arbitrum — which involves a dedicated blockchain (also called a sidechain) that can handle transactions, which can then be batched together for settling on the main Ethereum blockchain. Holders of the UNI governance token have voted unanimously in favor of beginning development on Arbitrum.
In March, regulators in India were reportedly looking to ban cryptocurrencies entirely. But this week, the Reserve Bank of India issued a statement that seemed to be supportive of crypto — it removed a 2018 rule restricting banks from facilitating crypto trading. As reported by India Today, the statement gives “an indication that the stance towards cryptocurrencies is softening in India.”
Spotlight: mining and the environment
Last week, MicroStrategy CEO Michael Saylor — one of Bitcoin’s biggest corporate proponents — arranged for top North American mining operations to meet with Elon Musk over the Tesla CEO’s concerns around fossil-fuel-powered mining operations. One result was the formation of the Bitcoin Mining Council, which aims “to promote energy usage transparency and accelerate sustainability initiatives worldwide.”
As reported by Forbes, “the council’s first order of business will involve the creation of a protocol that would standardize energy reporting requirements for the miners and serve as a ‘benchmark versus other industries’.” The idea would be to provide institutional investors “comfort as they enter the space,” according to Saylor.
Some parts of the Bitcoin community expressed concerns about the potential for such a council to create centralized authority over the famously decentralized cryptocurrency.
Also last week, a high-ranking minister in China asked agencies to crack down on crypto. In response, the Inner Mongolia region (where a substantial amount of crypto mining has been powered by coal) announced plans to phase out mining activities, causing local mining operations to move to other regions in China or overseas.
Another provincial Chinese government is taking a different approach. Next week, officials in Sichuan are hosting a seminar to better understand the impact that a mining ban would have on the local hydropower economy — which may actually benefit from crypto miners’ ability to convert excess production into value.
And in Argentina, where cryptocurrencies are especially popular, mining operations have blossomed — ironically aided by government-subsidized cheap energy. As Bloomberg reports, “The return of foreign-exchange controls in recent years have given Argentines banned from buying dollars even more incentive to mine digital tokens.”
Chip-maker Nvidia reported $155 million in revenue from selling processors popular with Ethereum miners last quarter. However this revenue likely won’t be sustainable for long, as Ethereum is in the midst of phasing out mining entirely. The ETH2 upgrade which will shift the second-biggest cryptocurrency by market cap from a mining-based system to a more efficient “proof of stake” system. According to a report from the nonprofit Ethereum Foundation, “Ethereum will see a greater than ~99.95% reduction in energy use post-merge.”
Learn more about crypto and the environment with our recent fact-check.
GameStop is building NFT platform, global crypto funds boom
Funds that allow investors exposure to crypto via traditional markets are proliferating around the globe, but U.S. regulators still haven’t approved any of the growing list of pending crypto exchange-traded fund (or ETF) applications. This week, WisdomTree (which has more than $69 billion in assets under management) applied for the second pending Ethereum ETF, joining a dozen pending Bitcoin ETFs.
Crypto funds for wealthy (or “accredited” investors) point to the demand for crypto ETFs. Fidelity’s Bitcoin fund, which requires a minimum investment of $50,000, has grown to $102 million. Meanwhile, a division of New York investment bank Cowen has raised $46 million (with a $10,000 minimum investment) for a new fund devoted toward digital asset investments — although it’s not clear if the fund will invest in crypto directly or if it will invest in crypto-industry firms.
A one percent stake in a Mexican soccer team, Club Necaxa, is being auctioned as an NFT. An investment group including Kate Upton, Eva Longoria, and ski-racer Bode Miller recently purchased a 50 percent share of the team — the NFT sale, which will take place on OpenSea, is intended to generate buzz. Opening bid is 500 ETH, or about $1.3 million.
GameStop is building an NFT platform. Little is known about the platform, but the Block reports that “prominently featured on the page is a link to an Ethereum address, indicating that GameStop's team will use Ethereum as a technology base.”
A new ‘green’ NFT platform on the Tezos blockchain called OneOf raised $63 million. Investors include John Legend, Quincy Jones, Doja Cat, and Whitney Houston’s estate. As Decrypt reports, “The platform will also feature NFTs from artists including TLC, H.E.R, Charlie Puth, G-Eazy, Jacob Collier, The Kid Laroi, Aurora, and Alesso, with further musicians to come.”
Wondering which cryptocurrencies would have provided the biggest return on investment (or ROI) over the last week, month, and year? Then check out our weekly chart: