Financial services giants Visa, PayPal, and Western Union are among the notable firms that filed new trademark applications involving crypto and Web3-related products and services in the past week. Visa is planning to create a crypto wallet and explore its options in the Metaverse. Paypal aims to launch a “downloadable software” for storing and trading all types of crypto tokens.
Crypto prices today: Bitcoin falls 2%, ETH down 3.2%
Bitcoin is currently trading at $20,494.3, a decline of 2% over the previous day. Ethereum fell 3.23% over the last 24 hours to $1,583.87. Solana is up 0.12% to $33.22, while Cardano is trading lower by 4.55% at $0.401. Avalanche (AVAX) fell 0.55% to $18.58. The global crypto market cap stands at $1.01 trillion, a 2.02% decline over the previous day.
Binance to help Elon Musk use crypto to battle Twitter bots
Binance is creating an internal team to help Twitter fight bot accounts using blockchain and crypto. The crypto exchange is pledging $500 million towards helping bridge social media and news to Web3. Elon Musk completed a $44 billion acquisition of Twitter last Thursday. The world’s richest man has repeatedly complained about spam accounts on the social media platform.
El Salvador and Lugano sign agreement to spread BTC adoption
El Salvador and the city of Lugano, Switzerland, have signed a Memorandum of Understanding on economic cooperation aimed at spreading Bitcoin (BTC) adoption. The partnership will support “initiatives to drive the adoption of Bitcoin and other cryptos across their respective regions.” Tether, the company behind USDT, is working to make Lugano a crypto hub where people can spend BTC and stablecoins.
Dogecoin jumps 98% in a week following Musk’s Twitter acquisition
Popular meme coin Dogecoin surged more than 98% in a week after Tesla CEO Elon Musk sealed a $44-billion deal to take over Twitter last week. The rise in popularity of Dogecoin can be partly attributed to Musk’s multi-year relationship with the token. He has referenced the coin in numerous tweets and adopted it as a method of payment for some products and services offered by his companies.
Ethereum’s shift from proof-of-work to environment-friendly proof-of-stake (called ‘The Merge’) will result in sizeable dumping of graphic cards (GPUs). It will also hit manufacturers such as Nvidia and AMD. GPUs are no longer needed on a mass scale and will go for a significant discount, said experts.
Crypto prices today: Bitcoin falls 8%, ETH crashes 11%
Bitcoin is currently trading at $18,447.87, a decline of 8.05% over the previous day. Ethereum is down sharply by 11.32% over the last 24 hours to $1,291.30. Solana fell 7.67% to $3.18, while Cardano is trading lower by 9.85% at $0.436. Polkadot (DOT) fell 10.9% to $6.15. The global crypto market cap stands at $902.16 billion, a 7.3% decline over the previous day.
Dogecoin now 2nd largest proof-of-work coin after Ethereum Merge
With the Ethereum merge completed (switching to a proof-of-stake system), Dogecoin is now the second largest proof-of-work coin after Bitcoin in terms of market capitalisation. Dogecoin is currently the tenth-largest crypto with a market cap of $7.95 billion.
DOGE is mined using proof of work. Miners use computers and a massive amount of energy to solve complex mathematical equations, validate transactions, and receive DOGE as a reward.
Yuga Labs hires Chief Gaming Officer for Web3 gaming push
Yuga Labs, the company behind the Bored Ape Yacht Club NFT collection, has hired Spencer Tucker as its first Chief Gaming Officer (CGO). Tucker will supervise the development of the firm’s Web3 gaming projects, starting with Yuga’s “Otherside” metaverse. Earlier this year, Otherside saw a massive surge of transactions and NFT land sales worth $561 million within 24 hours.
ECB picks Amazon, four others to pitch digital euro prototype
European Central Bank (ECB) has chosen Amazon, Spain’s CaixaBank, France’s Worldline SA, and Italy’s Nexi SpA to develop a prototype for a digital euro. This exercise aims to test how well the technology behind a digital euro integrates with prototypes developed by companies. ECB is likely to be among the first advanced-economy central banks to issue a digital form of its currency.
Bitcoin is now legal tender in El Salvador. One can now use Bitcoins to make day-to-day transactions. There was quite some stir in the crypto market after the announcement was made. There are some aspects of this move by El Salvador that are of serious concern. In this piece, we talk about why cryptos crashed after Bitcoin was legalized in El Salvador, how this move could affect the country’s economy, and if this move is possible in other countries.
El Salvador, Crypto Crash, and More
El Salvador made Bitcoin legal tender on Tuesday, September 7, 2021. The crash was anticipated, as the announcement was made way back in June 2021. After the decision was finalised, the entire crypto market came tumbling down. Bitcoin, which had hit $52,000 on Tuesday, tumbled close to ~11% after a sporadic bull run lasting months. Bitcoin’s rivals Ethereum (ETH) was down ~10%, Cardano was down ~11%, XRP by Ripple tumbled ~17%, Dogecoin slumped by ~15%.
All currencies tumbled, but there was ONE that defied the crash. Solana, another cryptocurrency, defied odds and rose by ~5% after the move was announced. Solana token has zoomed by ~400% in 30 days. Solana is a blockchain network (similar to Ethereum) that seeks to develop crypto-based products and services with more than 400 projects under it.
Social media handles were anticipating the crash a day before El Salvador finalized its bid to legalize Bitcoin. The crash was triggered by traders booking profits in a move powered by overpriced crypto markets. Additionally, uncertainty arose on the implementation of the system in the country. Chivo, a widely used crypto wallet in El Salvador, crashed after the announcement was made. Right after global cryptos crashed, Salvador’s President Nayib Bukele tweeted that the country is buying 150 Bitcoins. ‘Buying the Dip. 150 new coins added’, read Bukele’s tweet. As of September 9, 2021, El Salvador holds 550 Bitcoins in total.
Sustainability and Suspicion
El Salvador’s move to make Bitcoin a legal tender was seen with suspicion. According to a Central American University (CAU) survey, close to 70% of Salvadorians has opposed the move. The sustainability of the move is also questionable. El Salvador uses the US Dollar as its official currency. In a country where only 30% of the total population has bank accounts, Bitcoin benefits only the rich and not the marginalized.
The World Bank had rejected El Salvador’s request for implementing the Bitcoin system in the country, citing ‘environmental and transparency concerns’.
El Salvador’s Gross Domestic Product (GDP) relies on foreign remittances from Salvadorians living abroad who send back money home. In 2020, Salvadorians sent back $6 billion home in the form of remittances. President Bukele argues that sending money home in Bitcoins will help Salvadorians save on ‘remittance fees.’
The country has budgeted $203 million for the implementation of Bitcoin in the country. It has also set aside incentives for its citizens to use bitcoins. It has set aside $150 million to guarantee the convertibility of Bitcoin into US dollars and close to $23 million for financing the rollout. The country has set aside $30 million for a $30 bonus for new users of Bitcoin.
Conclusion
The idea of a cryptocurrency as an asset or an investment class is widely accepted. Yet, the use of cryptos as a mode of payment is seen as a blunder. First is the problem of cryptos being widely used to finance illicit or illegal activities. Second, comes the issue of taxation of cryptos. A currency that cannot be tracked or regulated cannot be taxed efficiently. The third issue is the volatility of cryptos. They are an extremely volatile asset class, and one might risk losing their savings in case an unprecedented change comes in its exchange value. The latest news is that Ukraine has also legalized and regulated Bitcoins in a law passed by the parliament. Only six lawmakers opposed the implementation of Bitcoin.
Coming to the crypto trading space. Cryptos managed to bounce back as traders across the globe ‘bought the dip’. Bitcoin currently has a support level of $45,000 and a resistance at $50,000. Its fall from $52,000 has eased selling pressure off the market. The next big move that crypto traders need to watch out for is the quantitative easing or interest rate cuts that the US Fed plans to introduce by October-end or November-mid.
Cryptocurrencies have crashed. This time in a manner never seen before. The last time we saw Bitcoin was down ~32%, Ethereum down by ~40%, and Dogecoin down by ~41%.
The crash has wiped out nearly USD 1 trillion of investor wealth globally. That is nearly Rs 73 lakh crore to speak in Indian Rupee(INR) terms. Let’s dig right into what caused the global crypto market to crash and find out how investors around the world perceive the future of cryptocurrencies.
Why Did The Crypto Market Crash?
To summarize, the crash happened because of a bunch of tweets by Elon Musk, and restrictions by China on cryptocurrencies.
Over the last year, cryptocurrencies all around the world were having a ball. Bitcoin gained more than ~400%, Ethereum gained ~1300%, Dogecoin came into the picture and doubled in less than a month. Other small-time cryptos came into the picture with Initial Coin Offerings, which is the crypto version of an IPO. Throughout the period, cryptos around the world gained clout on social media and some volatility in the markets. Major institutional investment firms started investing in Bitcoin. The bull run was never-ending, while the crypto prices refused to correct themselves. This seemingly never-ending bull run induced fear in the market which led to frequent ups and downs.
Speaking of Elon Musk, who has been in the news for the popularity of a popular meme-based cryptocurrency, Dogecoin. While Musk made some tweets on Dogecoin, the price of the meme coin went skyrocketing until his appearance in the US talk show Saturday Night Live. Then, his comments on the coin sent Dogecoin crashing. Musk was publicly supportive of cryptocurrencies and continues to be so.
Musk’s company Tesla Motors even had a sizable investment in Bitcoin. Tesla has announced that they were going to start accepting payment in Bitcoin but later changed their position. According to Musk, Bitcoin mining requires electricity which mostly comes from fossil fuels. This might be unsustainable for the environment. A series of tweets by Musk and Tesla’s decision to not accept Bitcoin payments contributed to the crash. All this information about high energy consumption was previously known as well.
Now coming to the major reason behind the crash. China has always moved its policy towards restricting cryptocurrencies in the country. The People’s Bank of China, National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China released a joint statement restricting the trade of cryptocurrencies almost completely. The directive said that companies offering crypto-related information, saving or pledging services stood banned. Additionally, any company offering crypto-related trading, insurance, and derivatives services would also be banned. China had previously almost completely banned crypto mining along with Initial Coin Offerings(ICOs) in 2017.
What is surprising about China’s lockdown on cryptocurrency is that almost a month ago People’s Bank of China Deputy Governor, Li Bo had given a progressive statement on cryptocurrencies as an ‘investment alternative’. The associations responsible for the ban, justify the move by stating that cryptocurrencies are risky due to the volatility.
Exit Or Stay?
Cryptocurrency like any other traded security has the strategy of ‘Buy The Dip’, in which a trader accumulates cryptocurrencies after a fall in price. This is what would happen soon after the crypto crash, as is the case with any other traded security.
Zerodha Co-Founder Nikhil Kamath tweeted on the crash saying “Averaging down or buying more of an asset, be it stock or crypto, as the price keeps going down and hoping that the price bounces to recover losses or make profits faster is a common behaviour among retail investors. While it is tempting to average down, the odds of this strategy working are significantly low in the long run.” He went on in saying, “I have zero knowledge or exposure to Crypto, but the rules for investing are the same: Reduce % exposure if the risk is high, & don’t Average down.”
There is also a high chance that institutions will rethink their exposure to cryptocurrency as the high volatility continues.
The crypto market right now is in chaos, from Tesla not accepting Bitcoins, to China restricting cryptocurrency trade and operations. In a market like this, one should neither be too optimistic nor be too pessimistic, one should stick to the fundamental rules of trading. Which in this case would be reducing exposure to cryptocurrencies as they get riskier and increasing it only as they get more stable. In case a majority of your portfolio is just cryptos, all it would take is one crash to wipe out a significant portion of your wealth, so give rebalancing a thought.
Dogecoin is a familiar name in the meme world and the cryptocurrency market. It is an alt-coin or an alternative coin. However, its humorous purview shouldn’t be taken for granted. After all, the meme cryptocurrency is worth more than the auto-manufacturer Honda. Backed by Elon Musk, the currency is bigger than his own company, SpaceX. Just a while ago, the combined market capitalization of Dogecoin was more than that of Infosys. A 33-year-old in the USA invested all his savings in Dogecoin almost instantly became a millionaire after a good bull run in the currency. So is the currency a joke? Or is it not? Let us explore the journey of Dogecoin.
The Journey Of Dogecoin
It was the year 2013, a spiral of innovative memes had hit the social media market. One such meme was of the ‘Shiba Inu’, a Japanese breed of dog. The dogecoin is designed to have the face of the Shiba Inu dog on it.
The Dogecoin Design and the Original Meme Picture.
It was around this time when an engineer at IBM, Billy Markus from Portland, Oregon decided to come up with a ‘fun’ alternative to the famous cryptocurrency, Bitcoin. He created the design and the website which was then noticed by Adobe engineer Jackson Palmer who contacted Markus and they joined hands to create the protocol for Dogecoin. Dogecoin wasn’t intended to be taken seriously.
Dogecoin wasn’t the only other alternative cryptocurrencies available at the time. Litecoin, Namecoin, Peercoin, Luckycoin were some others to name a few. Dogecoin is quite different from the rest in terms of its concept, protocol, technology, value, and mining. For Bitcoin, a maximum of 21 million Bitcoins can be mined. It is estimated that the limit will be reached somewhere around the year 2140. As of May 7, 2021, Dogecoin has a market capitalization of $99.3 Billion, which is higher than almost all of India’s Nifty 50 companies.
Price Action Over The Years
Till January 2021, Doge was like any other not-so-big cryptocurrency in the market. It picked in discussion group forums like Reddit and Discord. One day in January, Elon Musk, the founder of companies like Tesla and SpaceX put out a tweet with a single word, ‘Doge’. Dogecoin gained some chatter on discussion forums like Reddit. The chairman of WallStreetBets, which was also responsible for the GameStop Short Squeeze Fiasco earlier, tweeted “Has Doge ever been to a dollar?”. What followed was a massive ~99% increase in the value of Dogecoin by early May 2021. What followed was a number of tweets made by Elon Musk just patronizing Dogecoin. Every time he did, the price of the cryptocurrency saw a fluctuation. Soon Dogecoin for its humorous tweets made by Elon Musk and some other influencers became a centre of memes and jokes.
Dogecoin In Feb-May 2021(Source: CoinMarketCap)
Doge And Other Coins, Are They Safe?
Bitcoin, the of the first cryptocurrencies to come into existence, is quite different from Dogecoin. Dogecoin has an unlimited supply. Bitcoin on the other hand has a fixed supply of 21 million bitcoins. The limited supply of Bitcoin causes an inflationary effect that leads to an increase in price. A sustainable price rise is not possible in Dogecoin, supply almost always replenishes demand. Bitcoin is backed by solid technology, unlike Dogecoin. In 2013-14, there were a series of cyberattacks on Dogecoin wallets and users where they lost almost 21 million coins to the theft. However, members of the Dogecoin community came together, chipped in, and donated the lost amount to the respective individuals.
Should You Invest In Dogecoin?
A simple answer, no. It is an extremely risky asset. Predicting the price movement of Dogecoin is a very difficult task. It might be a short-term investment option, but definitely not good for a long-term investment. The crypto is controlled by very few entities like popularity, memes, statements by Elon Musk, etc. Close to 90% of the cryptocurrencies are controlled by 99 cryptocurrency wallets, meaning there is a high concentration of the asset.
Prices of cryptocurrencies like Bitcoin and Ethereum are impacted by different indicators like price action, halving period, volume, and other technical indicators. Dogecoin on the other hand is impacted by how funny it is. As silly as it sounds, Dogecoin has seen rallies only after it is patronized by influencers on social media. Elon Musk was to appear on the famous American talk show Saturday Night Live(SNL). People were expecting Elon Musk to ‘hype’ the alt-coin. Instead, Elon Musk joked about it and called Dogecoin a “hustle”. The price of Dogecoin slumped shortly after the show. Essentially, a single person was controlling the value of the coin which is actually dangerous for an investor.
It is advised that a person researches and gets to know the basics of trading, technical analysis, and fundamental analysis of cryptocurrencies before trading them.
