Cryptocurrencies Are Coming Back From the Brink. Here’s Why

After months languishing in the doldrums, cryptocurrencies are surging. On Monday, Bitcoin breached the $50,000 mark for the first time since May. Other coins — including Ethereum, Cardano’s ADA and Dogecoin — also edged higher.

And it was only a few weeks ago that some strategists were eyeing a possible drop to $20,000 for Bitcoin, months after it had hit an all-time high near $65,000 in April.

Instead, sentiment is rising across the board. Crypto’s latest swings are a sign that Bitcoin miners are back in business after a recent Chinese crackdown. At the same time, there is continued evidence of more mainstream acceptance. All of this is happening as the delta variant’s surge has muddied the timeline for a normalization of interest rate policy.

“There’s been an accelerating background of accumulation of crypto assets in the past couple months,” Jonathan Cheesman, head of over-the-counter and institutional sales at crypto derivatives exchange FTX, wrote in an email Monday. “Institutional flows in Bitcoin and Ether as well as a lot of retail activity in NFTs and gaming” are likely contributing, he added.

Here is a look at what is driving the increase — and what could come next:

A Shift in Sentiment

The cryptocurrency world is populated by a cast of characters whose voices can really influence prices. Lately, bullish noises have been boosting sentiment.

Take Elon Musk. Earlier this year, the billionaire caused heads to spin — and helped prices to boost and then plummet — when he said in March that Tesla Inc. would accept payment for its electric vehicles in Bitcoin but backtracked in May. He made his reversal on environmental grounds, expressing concern about the use of fossil fuels for cryptocurrency mining. Following those comments, Bitcoin lost about a quarter of its value in a week.

But here’s the latest twist: Over the past few weeks, Musk has been striking a more supportive tone. In late July he said he personally owns Bitcoin, Ethereum and Dogecoin and would like to see crypto succeed.

Superstar investment manager Cathie Wood is another influential voice in this space. A noted crypto bull, she told Bloomberg TV in May that she could see Bitcoin reaching a price of $500,000. More recently, she said she thinks corporations should consider adding Bitcoin to their balance sheets.

Hash Rate Signals

About a month ago, all the talk in the cryptocurrency world was of a Chinese crackdown. A ban on Bitcoin mining meant the abrupt shuttering of millions of computers that had been processing the transactions necessary to keep the crypto currency humming. Before the ban, around 65% of the world’s Bitcoin mining took place in China.

As computers went offline, the hash rate — a measure of the computing power used in mining and processing — halved in just two and half weeks.

As well as the practical implications, the aggressive moves by China laid bare the fact that the decentralized currency is still at the mercy of governments, which hit sentiment. Bobby Lee, one of the country’s first Bitcoin moguls, even said that China’s crackdown on cryptocurrencies will probably intensify and may even lead to an outright ban on holding the tokens. And in the U.S., a recent congressional debate over crypto rules added to the uncertainty.

However, the hash rate has rebounded and is up from its July nadir, according to data from Blockchain.com.

That recovery has helped restore confidence in the market that cryptocurrencies can flourish even in the face of opposition from legislators around the world.

Keep Your Eye on Jackson Hole

Prices of cryptocurrencies, like gold, tend to suffer when there is the prospect of interest rate hikes. The emergence of Covid’s delta variant may scramble plans to remove crisis-level monetary policy.

If Federal Reserve Chairman Jerome Powell were to strike a dovish note in his speech at the Jackson Hole conference this Friday, that could boost the currency, Oanda analyst Edward Moya said in a note.

The Kansas City Federal Reserve’s annual event, being held virtually again, is traditionally scrutinized for hints on upcoming changes in stance. Some Fed leaders have used it as a platform to explain new initiatives, as Powell did last year in unveiling a new monetary policy framework.

Even More Mainstream — and Main Street — Interest

Huge financial and consumer firms over the past year have increasingly been embracing crypto, giving the asset more legitimacy and driving up the price. Banks, brokerages and securities exchanges have been gearing up to meet demand. A watershed moment came in April with the U.S. stock market debut of Coinbase Global Inc., a crypto trading venue that’s shooting to establish a digital-money ecosystem.

This summer, there has been growing speculation that Amazon.com Inc. may become involved in the cryptocurrency sector. An Amazon job posting published online in July said the firm was seeking a “Digital Currency and Blockchain Product Lead.” After people found out about the post, Bitcoin surged to about $40,000. Amazon shares gained about 1% in New York. The company went on to say that the “speculation” about its “specific plan for cryptocurrencies is not true,” but the fact that the world’s largest retailer is exploring crypto has big implications for the shadowy and often hard-to-access market.

Walmart Inc. revealed it, too, was looking for some crypto help, with a job posting on Aug. 15 with responsibilities that would include “developing the digital currency strategy and product roadmap” and identifying “crypto-related investment and partnerships.” (As of Monday morning, visitors to the website were given a 404 error message.)

So… Where to From Here?

In these final days of summer, it’s now back in vogue to make $100,000 predictions.

As with any investment — or anything, really — it’s impossible to predict the future. But analysts do have a few estimations on how breaching $50,000 has changed Bitcoin’s prospects, at least in the short term.

Bitcoin is “getting nearer the higher end of what I expect as a new trading range in the low-$40,000s to low-$50,000s,” said Rick Bensignor, chief executive officer at Bensignor Investment Strategies.

Daniela Hathorn, an analyst at DailyFx.com, thinks that it may be a while before we see any further bullish momentum because $50,000 is a key psychological level for the currency.

“A pullback towards the $48,000 area would be the first sign of trouble,” she wrote in a note on Monday. “But the positive trend isn’t in any trouble as long as Bitcoin stays above its 200-day moving average at $45,750. Looking ahead, the key challenge for buyers will be to cement further gains towards $55,000 without losing momentum along the way.”

By: Emily Cadman / Charlie Wells / Joanna Ossinger

Source: https://www.bloombergquint.com/wealth/bitcoin-price-surge-reasons-why-ethereum-cryptocurrencies-are-rising
Copyright © BloombergQuint

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Top 10 Bizarre Facts About Bitcoin

Bitcoin has fast become a global phenomenon. Since its launch in 2009, the digital currency has won the approval of young, tech-savvy investors. Unlike the dollar or the euro, there is no central government regulating Bitcoin, which has made it particularly popular among anti-authoritarians and libertarians. Elon Musk recently invested $1.5bn (£1.1bn), sending the price skyrocketing. At its peak, one Bitcoin was worth over $48,000.

But the currency has a weird side. A really weird side. Retailers sell sex toys that mirror its fluctuations in value. A co-founder of LinkedIn made a YouTube rap battle to explain its pros and cons. There was even a dodgy action movie starring Kurt Russell about money laundering. Robin Hood hackers, tricksy TikTokers, and Marxist broadcasters. Bitcoin has inspired all manner of weirdness. Here are ten bizarre facts about the contentious cryptocurrency.

Man Accidentally Throws $290 Million Into Landfill

We have all lost a bit of money through thoughtless mistakes. Who among us has not left a banknote in their jeans pocket and accidentally put it in the wash? But imagine throwing an old hard drive into landfill, then finding out it contains over $290 million (£210 million) in Bitcoin. For James Howells from Newport in South Wales, this nightmare scenario is a living reality.

Howells purchased 7,500 Bitcoins shortly after the currency’s launch in 2009. After spilling drink on his laptop, he decided to stash the hard drive away in an office drawer. Years later, Howells had “totally forgot about Bitcoin altogether,” and, in 2013, he binned the hard drive. At the time, it contained around $7.5m (£4.6m).

As you can imagine, Howells is desperate to retrieve his lost hard drive. He has even offered to pay the local council a quarter of the money for permission to excavate the site. But Newport council says this is not possible under their licensing permit. Given the cost and potential environmental damage of excavation, they refuse to do so “without any guarantee of either finding it or it still being in working order.”

‘Robin Hood’ Hackers Donate Stolen Bitcoin

In October 2020, the shadowy altruists announced that they had given $10,000 to The Water Project. The Water Project is a charity that provides clean water to sub-Saharan Africa. They also donated to Children International, but the charity declined their money on moral grounds.

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10 Amazing Facts About Bitcoin http://blockgeeks.com

“We think that it’s fair that some of the money the companies have paid will go to charity,” the group explained. “No matter how bad you think our work is, we are pleased to know that we helped changed someone’s life.

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BitCast Sex Toys

Most investors enjoy the feeling of making a profit from their financial ventures. But now, thanks to BitCast, users can derive sexual pleasure from Bitcoin.

In December 2017, Camsoda launched an online service that allows people to link their sex toys to Bitcoin. BitCast tracks the currency’s market performance and feeds the information in real-time to your vibrator. If Bitcoin suddenly increases in value, you might feel an acute surge of pleasure. But if it drops, BitcCast will tell your toy to dial down its intensity.

7 Journalist Broadcasts The Communist Manifesto Into Space

JORDAN PETERSON Perfectly Explains Why MARXISM Will ALWAYS FailWorkers of the world, unite. You have nothing to lose but your blockchains. In March 2019, a technology journalist used Bitcoin to transmit a short extract from The Communist Manifesto into space. Jordan Pearson beamed his rabble-rousing message up into the atmosphere then back to Earth via a network of satellites.

Blockstream offers a satellite service that broadcasts Bitcoin-related information to most of the world. In 2019, the company updated that service to include messages. So Pearson decided to send a section of Marx and Engels’ famous text because, in his words, “why the hell not?”

With help from journalist Dan Williams, Pearson confirmed that Blockstream had beamed his Marxist message across the globe. As Williams explained, anyone with the right setup can send and receive satellite messages.

6 TikTok’s Misleading Trading Advice

In 2021, the Financial Conduct Authority (FCA) issued a warning about unsound financial advice on TikTok. The FCA alerted users to accounts using the app to push high-risk trading practices. The worry is that TikTok users, many of them young and naive, are being drawn in by get-rich-quick schemes.

Some astrologers are even getting in on the act. Among the most popular is Maren Altman, an influencer with over a million followers. Altman creates surreal content that combines unsound financial advice, horoscopes, and a “sexy, Goth, dominatrix vibe.” In a recent video, she encouraged people to invest in Bitcoin based on the positions of the planets. “Venus is crossing Bitcoin’s sun,” she explained. “The sun is crossing Bitcoin’s Jupiter, and Bitcoin’s Jupiter is still doing cute shit.”

5 Crypto, The Bitcoin-Based Crime Drama Starring Kurt Russell

CRYPTO Official Trailer (2019) Kurt Russell, Luke Hemsworth Movie HDIn 2019, Kurt Russell appeared in a strange financial crime drama based around corruption in the New York Bitcoin market. The movie, Crypto, received a tepid reception from both critics and regular viewers. Some described it as a “so-bad-its-good” tech drama. They said it reminded them of the cheesy Internet movies of The 1990s, like The Net and You’ve Got Mail.

The plot is mostly nonsense. It centers on a lucrative money-laundering scheme set up by a shadowy gang of Russian cybercriminals. And the cringe-worthy tagline—”Fear is the ultimate currency”—does the movie no favors either.

4 Larger Energy Consumption Than Argentina

Bitcoin uses more energy than the whole of Argentina, say analysts at Cambridge University. Bitcoin is created through an energy-expensive process called mining. Mining is a strange mix of puzzle-solving and verifying transactions. Both of these tasks eat up a vast amount of computer power.

In total, mining consumes 121.36 terawatt-hours of energy a year. That same amount could power every kettle in the UK for the next 27 years. Researchers say that if Bitcoin were a country, it would be in the top thirty global energy users.

The amount of energy used depends on the price of Bitcoin. As the price rises, the currency becomes more desirable. Miners are willing to burn through more electricity to get their hands on the next batch.

3 Some Say It Could Save The Porn Industry

The pornography industry is in crisis. Sex workers are increasingly struggling to put food on the table. While major platforms like PornHub generate hundreds of millions of dollars a year, some performers are expected to work for little money or the empty promise of exposure.

Some porn actors say that Bitcoin could hold the solution, but not everyone is convinced. For the last few years, Pornhub has allowed viewers to pay for content in cryptocurrency. For many sex workers, this is a key component of their online revenue. Viewers can pay their favorite performers directly over the internet. Porn actors are profiting from what they see as a more democratic way to sell their content, offering custom videos and live streams to a considerably-sized audience of customers.

But not everyone in the industry has welcomed Bitcoin with open arms. They point out that only a handful of users are prepared to pay for porn using Bitcoin. Many, they argue, are unwilling to pay at all. In 2018, a study by The Next Web found that less than one percent of Pornhub accounts paid in cryptocurrency. With MasterCard and Visa both recently parting ways with the adult platform, online payments are expected to dry up.

“There is no empathy or compassion for creators, at any level. If they are amateurs, then their porn ‘isn’t good enough to be paid for.’ If they are pros, then posting their content for free is ‘fine because they’re hoes with too much money,”’ argues Canadian performer God Ciara. “They view men who make money from porn as geniuses, but the women are just sluts with an iPhone.”

2 India’s Bitcoin Kidnappings

India has been hit by a wave of kidnappers demanding payment in Bitcoin. In December 2020, an eight-year-old boy was kidnapped in Karnataka while walking with his grandfather. They insisted that his father, a wealthy investor, pay 100 Bitcoin ($2.3m) for his son’s return.

Luckily, state police rescued the boy before his father paid. Six people were arrested. This kidnapping was the third case of attempted Bitcoin extortion to take place in the country since 2018. In Gujarat, one businessman even tried to fake his own kidnapping, hoping to scam $3m in Bitcoin.

1 LinkedIn Founder Creates Bitcoin Rap Battle

Bitcoin Rap Battle Debate: Hamilton vs. Satoshi (BITCOIN GIVEAWAY) [feat. EpicLloyd, TimDeLaGhetto]. In September 2019, Reid Hoffman released a Bitcoin-themed rap battle video on YouTube. Hoffman, the co-founder of LinkedIn, was inspired after watching the musical Hamilton. He thought hip-hop would be an excellent way to explore the “vigorous debate raging between cryptocurrency and centralized currencies.”

The video sees Alexander Hamilton go head to head with Bitcoin’s enigmatic creator Satoshi Nakamoto. The unlikely MCs throw a wild array of boasts and insults at each other. “The banks serve Wall Street. Crypto serves all streets,” Nakamoto declares. Hamilton fires back, “Untraceable money—wow, so clever. One typo in your address? Now it’s gone forever.”

Although it seems like a gimmick, Hoffman’s video neatly sums up the conflicting attitudes towards Bitcoin. The rap battle shows how stubbornly some investors reject digital currencies. But it also explains that diehard Bitcoin fans refuse to grasp the currency’s many flaws.

By: Benjamin Thomas

Source: Top 10 Bizarre Facts About Bitcoin – Listverse

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Rock Bottom Interest Rates Are Driving A Boom In Cryptocurrencies

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After a period of time where it seemed like cryptocurrencies and all financial products with a bit of risk were being shelved in favor of low-risk products such as holding cash or government bonds (specifically the US dollar and Treasuries), the actions of the Federal Reserve and other central banks have caused a roarback in equity markets — and a corresponding increase in cryptocurrency values.

Since March, 15th, 2020, when the Federal Reserve cuts rates to zero in an unscheduled rate cut, the S&P 500 had its best quarter since 1998 and bitcoin’s price, about to touch $5,000 USD around that time period, is now roaring back above the $10,000 USD mark.

Understanding the relationship between monetary policy and cryptocurrencies can be a bit tricky, but it’s a worthy exercise. As cryptocurrencies start taking on institutional speculation, their short-term price movements gyrate with the markets. Some of this has been plainly stated before and often observed: some institutional investors think of bitcoin as digital gold.

They’ll use bitcoin as a hedge against the inflation they think will result from excessive unconventional monetary policy. This was the explicit view of Paul Tudor Jones, the billionaire investor loading up on bitcoin.

In this reading, the actions of central banks help create demand for cryptocurrencies by creating the conditions (excessive money supply) wherein a certain class of institutional investors feels the need to hedge their wealth.

But structural changes in monetary policy implementation also auger surprising new developments and support for new cryptocurrencies in ways that go beyond the “cryptocurrency as hedge” narrative.

Witness the new trend of DeFi, decentralized finance companies that are largely behind the growth in ethereum demand as ethereum gets locked into new financial products. DeFi represents alternative financial solutions built on ethereum that are looking to augment or replace traditional loans.

Typically, there’s a “search for yield” that happens when there are very few options to yield money in deposits or low-risk products. DeFi, with interest rates that range as high as 100% annualized on stablecoins looks like a more attractive option than fiat banks that can offer flat ~1% at best.

Within that structure, it’s clear that there are nuances, and perhaps warnings — products that yield that high likely are pure arbitrage situations that might fade away at any time and they carry with them risks (such as exploits) that might be underaccounted for. Yet, even if there are a lot of question marks — there’s no doubt that coordinated monetary policy around the world is driving people to look for new companies and technologies such as DeFi — an important secondary consequence.

The amount of unprecedented monetary support has also created a short-term window for institutional investors to be able to enter cryptocurrencies. Grayscale Investments LLC attracted more than $900 million in the second quarter, which was double any amount it had ever raised before. Most of that interest was spurred by institutional investors, who were supported by monetary policy, and placed in a “search for yield” and hedge-seeking situation.

Some of that was due to arbitrage, but there’s no doubt that institutional investors that were battening down the hatches when COVID-19 lockdowns were happening are back as a force across a variety of economic investments — including cryptocurrencies.

Some of this institutional investment comes on the heels of leading figures in the industry looking for shelter during the largest monetary expansion in history. This helps accentuate this short-term trend, with institutional investors suddenly finding the context, the need and the support to start pouring into investment in cryptocurrencies.

Beyond these factors however, is the potential pending development of a digital dollar. This is not being pushed by monetary authorities, but rather heard in the fiscal halls of power in Congress. Yet, research in this area will spur interest in cryptocurrencies by confirming the digital ascendency of finance into retail cash — and creating a contrast and another item that might highlight cryptocurrency’s usefulness as a hedge.

It is, however, the greater retail adoption of bitcoin and cryptocurrencies that is more interesting than the short-term movements associated with institutional investors pushed by monetary policy in one way or another towards cryptocurrencies.

A new study from Cornerstone Advisors says that 15% of Americans now own some cryptocurrency, with about half of those having invested in the first six months of 2020, among unprecedented monetary policy changes and COVID-19. High income, millennials and Gen Xers were some of the groups spurring this growth. Americans who don’t hold cryptocurrencies and had no plans to do so thought their financial health stayed the same (55%) mostly while a plurality of those that currently hold cryptocurrencies thought that their financial health was much better (44%).

Cryptocurrencies are getting short-term boosts in pricing from a wave of institutional and retail investors with a variety of incentives, many of them brought on by the largest monetary expansion of our age. Some of those incentives are here for the long haul, as monetary authorities struggle with the short-term effects of the COVID-19 pandemic and the longer-haul efforts to fully recover economically. Monetary policy during COVID-19 is acting as a bridge to cryptocurrencies for many new institutional and retail investors skeptical of its effects — and perhaps an enduring reason to stay in the cryptocurrency ecosystem.

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I was one of the first writers in 2014 to write about the intersection of blockchain in remittance payments and drug policy with VentureBeat and TechCrunch. Since then, I’ve been an early long-term HODLer of Ethereum, and I’ve built several mini-projects with blockchain for fun. I’d like to learn as much as possible about our decentralized future while sharing that knowledge with you

Source: https://www.forbes.com

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Bitcoin Just Suddenly Surged Toward $12,000 But Now Might Not Be The Time To Buy Here’s Why

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Bitcoin, after a prolonged period of stability, has suddenly leaped higher—jumping over the closely-watched $10,000 per bitcoin level for the first time since June and surging toward $12,000.

The bitcoin price has added some 20% over the last seven days, hitting highs of $11,420 on the Luxembourg-based Bitstamp exchange, amid equity market jitters and a rally in the price of gold, considered a safe haven asset.

However, some market watchers have warned the recent bitcoin price gains might not last—with the options market signalling just a 7% probability of bitcoin returning to its all-time high of around $20,000 before the end of 2020.

“Our view for the balance of 2020 is still high volatility with a year end of around $7,000 [per bitcoin] with a drive higher to new highs in 2021,” Gavin Smith, the chief executive of bitcoin and crypto consortium Panxora, said via email following the publication of Finder’s latest cryptocurrency prediction report, adding he expects “a short term washout this year before the true rally takes hold.”

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In March, the bitcoin price fell sharply, in line with global stocks and other commodities, as the coronavirus pandemic spread around the world and countries went into lockdown to contain it.

The bitcoin price quickly bounced back, boosted by a highly-anticipated supply squeeze and bullish signals including investment giant Paul Tudor Jones revealing he was buying bitcoin as a potential hedge against the inflation unprecedented central bank stimulus measures designed to prop up coronavirus-hit economies could bring.

Smith’s warning chimes with comments made by Binance chief executive Changpeng Zhao (CZ) last week, who said bitcoin is still tied to the stock market and a future crash could send the bitcoin price lower.

“People should not take the description of bitcoin as a safe haven asset too literally,” CZ told Bloomberg.

Others have also warned the bitcoin price could be heading lower in the short term.

“There won’t be as much money going into bitcoin while people try to survive,” Jimmy Song, author of Programming Bitcoin, said in Finder’s Cryptocurrency Predictions 2020 report.

“Until the prices rise in the grocery store, bitcoin won’t really start taking off. I suspect that’ll take another nine months or so.”

Finder’s report, released last week ahead of bitcoin’s surge toward $12,000, revealed half of the 28 bitcoin and crypto experts surveyed thought it was the right time to buy bitcoin, with 32% recommending investors hold and 18% saying it was time to sell.

Another panelist, University of New South Wales associate professor of finance, Elvira Sojli, said she expects the bitcoin price to be under $10,000 by December 31 2020. The panel’s consensus was for the bitcoin price to climb to just under $13,000 by the end of the year.

“If anything, the second or third wave of Covid-19 may drive [the bitcoin price] down,” Sojli said, pointing to the coronavirus’ devastating economic impact.

Meanwhile, as bitcoin began its rally past $11,000, the bitcoin options market was signalling just 7% probability of the price returning to its all-time high of $20,000 per bitcoin, data from crypto derivatives analytics firm Skew revealed, with the market putting the odds of $10,000 per bitcoin by Christmas at around 50%.

“Options market is repricing quickly the probability of [new highs] by the end of the year, from 4% to 7% over the last week,” Skew chief executive Emmanuel Goh told bitcoin and crypto news site Coindesk.

MORE FROM FORBESVisa, Mastercard And PayPal Are Changing Their Tune On Bitcoin And Crypto

Elsewhere, others are confident the bitcoin price is going to continue to soar.

“There are significant changes since March in the way that institutional investors view bitcoin,” Joe DiPasquale, the chief executive of BitBull Capital, said via email.

“Now that institutions have moved into bitcoin in 2020, the price has shown more support over the last couple of months. We will not see a repeat of the March crash, but bitcoin will still remain somewhat more volatile than equities.”

“I think the price needs to take a bit of breather—it has moved quite a lot in a short-period of time,” Bill Herrmann, the managing partner of hedge fund Wilshire Phoenix, said via email, adding he could see the bitcoin price hit its all-time highs by the end of the year “if we continue to receive regulatory clarity and continued institutional adoption,” pointing to last week’s decision by the U.S. Office of the Comptroller of the Currency to allow banks in the country to custody digital assets as triggering the latest rally.

“It is huge for the space and that should serve as a tailwind for quite some time.”

Trying to forecast bitcoin price moves has proven difficult, however, and some have warned against trying to predict market moves.

“Predicting the price of bitcoin on an exact timeline is a fool’s errand,” Peter Wall, the CEO of UK-listed crypto miner Argo Blockchain, said via email, though adding he is “very optimistic in the medium to long-term, as we believe bitcoin will again be one of the best performing asset classes in the coming months and years.”

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported on how technology is changing business, political trends, and the latest culture and lifestyle. I have covered the rise of bitcoin and cryptocurrency since 2012 and have charted its emergence as a niche technology into the greatest threat to the established financial system the world has ever seen and the most important new technology since the internet itself. I have worked and written for CityAM, the Financial Times, and the New Statesman, amongst others. Follow me on Twitter @billybambrough or email me on billyATbillybambrough.com. Disclosure: I occasionally hold some small amount of bitcoin and other cryptocurrencies

Source: https://www.forbes.com/

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The Coronavirus Cryptocurrency Craze Who’s Behind The Bitcoin Buying Binge

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Trading of Bitcoin, Ethereum, and other cryptocurrencies increased sharply at the beginning of 2020, then jumped to a new high in February—a level that was sustained for the height of the Coronavirus crisis from March through May.

According to Coin Metrics:

“If historical growth rates can be maintained, Bitcoin’s current daily volume would need fewer than 4 years of growth to exceed daily volume of all US equities and fewer than 5 years to exceed daily volume of all US bonds.”

Where is this Coronavirus-fueled trading volume coming from and who will drive the future growth?

Who’s Buying Bitcoin?

A new study from Cornerstone Advisors revealed that 15% of American adults now own some form of cryptocurrency—a little more than half of whom invested in cryptocurrency for the first time during the first six months of 2020.

On average, these new investors obtained roughly $67.5 billion in cryptocurrencies, roughly $4,000 per person. The self-reported value of cryptocurrencies like Bitcoin and Ethereum for Americans who owned these assets prior to this year is about $111 billion, or close to $7,000 per person.

At 15% penetration, the US cracks the top 10 countries with the highest adoption of cryptocurrencies according to data from September 2019 (although a lot has changed since then).

The Demographics of Bitcoin Buyers

Who fueled this Bitcoin buying binge during the crisis?

  • High income, well-educated men. Nearly eight in 10 of 2020 crypto buyers were men with an average annual income of $130,000. Four in 10 have a Master’s degree or higher (70% have a Bachelor’s degree or higher).
  • Millennials and Gen Xers. Millennials (26 to 40 years old) comprised 57% of the consumers buying cryptocurrency in 2020 with Gen Xers (41 to 55 years old) accounting for 30%. Overall, 27% of Millennials and 21% of Gen Xers now hold some form of cryptocurrency, in contrast to 7% of Gen Zers, and 3% of Baby Boomers.
  • Bank of America customers. Overall, 21% of all consumers call Bank of America their primary bank. Of the consumers buying cryptocurrencies during the Bitcoin binge, almost half—47%—are customers of Bank of America. You’d think Bitcoin buyers would be customers of the digital banks, but only 6% of them call a digital bank their primary bank—in line with the population as a whole.

The Bitcoin Benefit

It’s hard to prove that holding cryptocurrencies is the cause of this, but 44% of Americans who have already invested in Bitcoin and other cryptocurrencies said that their financial health is “much better” since the beginning of the Covid crisis. That’s in contrast to just 5% of all other US consumers.

First Time Investors

From a demographic perspective, the first-time investors are very similar to the previous group of crypto holders, but they’re different in at least one significant way: They’re changing up the financial institutions they do business with.

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Among the consumers who invested in cryptocurrency for the first time in 2020, half of them switched their primary banking relationship in the past six months—one-third did so in the past three months alone.

The Apple Effect

Apple Card holders only comprise 5% of all credit card customers, but among those that do have the card, 47% own some form of cryptocurrency—two-thirds of whom purchased crypto in 2020.

The Next Wave of Investors

The 11% of Americans who expect to invest in Bitcoin and other cryptocurrencies are somewhat different, demographically, from the current set of investors. Specifically, they are:

  • Women. Women only make up 22% of current cryptocurrency investors. In the next wave of investors, they account for 35% of the total.
  • Minorities. African-American and Hispanic consumers, who comprise 28% of all Americans, account for 23% of current crypto investors. Among those that anticipate investing in the next 12 months, 37% are from these two ethnic groups.
  • Younger and older. Just 6% of Gen Zers and Baby Boomers already have cryptocurrencies. In the next wave of investors, 17% are Gen Zers and 11% are Baby Boomers.
  • Less educated. Among current crypto investors, just 18% have not earned at least an Associate’s college degree. Among the consumers expecting to invest in cryptocurrencies in the next 12 months, that percentage rises to 36%.

One area of concern regarding the next wave of investors: Just 30% consider themselves to be “very financially literate,” in comparison to 54% of those who already hold cryptocurrencies.

The Crypto Opportunity For Banks

The surge in cryptocurrency investing has been a boon for Square. Bitcoin revenue for its Cash App for Q1 2020 was $306 million, up from $65 million in Q1 2019. Not surprisingly, reports indicate that PayPal intends to offer crypto purchasing through its PayPal and Venmo apps.

While many banks prevent their customers from buying cryptocurrencies using the cards they issue, the mainstreaming of crypto investing raises new questions for bnaks—not just regarding allowing their cards to be used, but whether or not they should provide more cryptocurrency investment-related services altogether.

A new announcement from the Office of the Comptroller of the Currency (OCC) may be opening the door to that. According to an article here in Forbes, the OCC letter:

“Clarifies that national banks have the authority to provide fiat bank accounts and cryptocurrency custodial services to cryptocurrency businesses. This clarification may open the doors for larger financial institutions to be provide bank accounts to cryptocurrency companies, as well as actually provide custodial services for customers’ private keys.”

Among the large banks, a few appear to have a head start over the others. A site called Moon Banking provides a “crypto friendliness” score for banks, with USAA and Ally Bank leading the way in the US.

All banks—in particular, community banks and credit unions—should look at opportunities to provide Bitcoin wallets and other cryptocurrency trading services as a way to differentiate their services.

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Ron Shevlin is the Managing Director of Fintech Research at Cornerstone Advisors. Author of the book Smarter Bank and the Fintech Snark Tank on Forbes, Ron is ranked among the top fintech influencers globally, and is a frequent keynote speaker at banking and fintech industry events.

Source:https://www.forbes.com/

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