All Been Crypto — Week 7 Jan 2022
Not the happiest start into the year as we saw prices continue to slip and market cap fall to 2.1tr with BTC dominance falling below 38%. Cosmos, LINK and Fantom the only major out-performers. The bearish tone seems to be driven by a general risk of mode after the FEDs comments on rate outlook and a drop in BTC hashrate due to the political situation in Kazakhstan. Sentiment indicators are pointing at Extreme Fear and you start to see more bearish voices popping up in the headlines. Just to put things into perspective though, historically January has usually been one of the most challenging months. Let’s not lose the bigger picture - I’ve included in this week’s news Aave’s launch of permissioned DeFi, explanation on why we are watching the situation in Kazakhstan and the also highlight China’s rollout of the ERMB App launch ahead of the Olympics. Enjoy reading and to a prosperous 2022
Bat Tai Chi — btc21@mail.com
HEADLINES:
Bitcoin Hashrate Drop due to Kazakhstan Turmoil
Bitcoin network turned 13 on 3rd Jan and had just managed to regain the hashrate we lost after the China Miner Exodus mid last year. Ironically a lot of that relocated ot Kazakhstan and now we saw a drop again due to the political situation there. They accounted for some 18% of total hashpower this summer and so power curbs and internet blackouts do affect the network. But as we have seen with China the impact is only temporary and difficulty will adjust in the short term and miners will relocate should there be persistent issues. So using this as an excuse for price drops has been a losing strategy in the past. If anything it shows the robustness of the network and the value of a truly globally decentralized proof of work chain.
China launches digital yuan app in pilot cities nationwide
2022 will be the year of the ERMB or digital Yuan, the CBDC of the PBOC. China is by far the leading country with regards to CBDC development and the plans are very ambitious. We were always told pilots will happen ahead of the olympics (starting in less than a month) and so this is also a great platform to showcase ‘innovation’ on the currency front. I believe if successful this could also open the door for a less draconian stance on crypto onshore as long as things are built within guardrails (think of the great wire wall for internet). This week they launched the official app in 12 pilot cities PBOC Gov. Yi Gang said in November that at the current stage, the use of digital yuan would focus on domestic retail payments but we all know that’s only the first step. The bigger goal is to promote the ERMB as a global settlement currency for international trade.
Aave Rolls Out Institutional Offering
On the way of institutional adoption we will see more of this ‘permissioned DeFi’. White listed institutions that can interact with the DeFi protocol. They call it Aave Arc and it will cater to financial institutions and corporates, giving them the means to borrow digital assets and capture the high yields DeFi offers within a sandboxed regulatory environment. Unlike its regular non-custodial protocol, the liquidity pools in Aave Arc are permissioned, meaning that any institution looking to use the service must be whitelisted first. Fireblocks is responsible for completing the necessary checks to onboard each firm by following KYC/CDD/EDD principles and the Financial Action Task Force’s guidelines. They’ve announced this a while back but launch was only this week. Let’s see how it affects TVL which is already at $26bn.
QUOTES:
The point of this Bitcoin price history lesson is to tee up a discussion about how I’m positioning my portfolio this year, in advance of what I believe will be a string of trading days as disastrous as 16 March 2020. As usual, this relates to the Fed reducing the growth of their balance sheet to 0%, and subsequently raising rates one to three times in 2022.
Arthur Hayes — Co-Founder of 100x (ex BitMEX)
I’m optimistic about it (the price of Bitcoin), And the things that make me optimistic basically are (related to) more regulatory clarity in the US and globally, -which I think could help a ton- and institutional adoption. And I think those are also related to each other.
FTX CEO, Sam Bankman-Fried
Ethereum today, the Layer 1, is not a system that is ready for direct mass adoption
Vitalik Buterin
