Russians have invested 5 trillion rubles, or around $67 billion, in crypto. Some of these people may lose all their money as cryptocurrencies aren’t backed by anything, Anatoly Ashakov, a deputy who plays a crucial role in Russia’s regulation of the crypto space, recently stated. These people are not qualified investors, so pyramid schemes are possible, said Aksakov, who is the head of the Financial Market Committee at State Duma.
In an interview with Duma TV, the Russian lawmaker reiterated previous warnings and stated that the market for digital currency is unstable. Aksakov pointed out that crypto prices can move quickly by 20-30% in any direction.
It is therefore important to regulate the cryptocurrency market to protect our citizens and to provide taxation as well as certain rights to owners of cryptocurrency. They must however be identified.
This statement follows a similar call made by Alexander Bastrykin, the head of Russia’s Investigative Committee. Bastrykin, who answers directly at President Putin, stated last week that cryptocurrency should not be anonymous and suggested that mandatory identification for all crypto users in Russia should be established.
Anatoly Aksakov believes that crypto holdings should be reported to the government to stop their misuse to finance terrorist financing, drug trafficking and weapons acquisitions. He also mentioned taxation. While Russians are required to pay taxes on crypto profits under current legislation, a separate law on crypto taxation has yet to be passed by the Duma.
High-ranking members of the House also spoke out about the need for regulation of cryptocurrency mining. This is a lucrative business that has spread in Russia and a source of income for private citizens.
Aksakov stated that, if Russian authorities decides to legalize mining it should be registered and taxed. He also argued that different tariffs should be applied to the energy used by mining companies in accordance with Russia’s cross-subsidization program. This would result in higher electricity rates for miners.
Sergei Mironov (leader of Aksakov’s ‘A Just Russia-For Truth’ social-democratic group) urged Bank of Russia last month to legalize cryptocurrency markets and speed up the introduction of the virtual ruble. He believes that the regulator’s strict stance in the matter hampers the development and makes crypto technology dependent on Western payment system.
Many aspects of cryptocurrencies, such as mining, trading, and taxation, are still unregulated in Russia despite the January 2021 law “On Digital Financial Assets”. The Duma has set up a working group to prepare regulatory proposals.
In Kazakhstan, authorities are considering implementing a decade-old plan for building a nuclear power station ( NPP). This is to address the country’s growing electricity shortage. The former Soviet republic attracted many Chinese miners to the country, despite having capped tariffs in place and a crypto-friendly attitude. This was due to Beijing’s offensive launched in May this year. Some of them have since left the country, as their hardware is idle.
According to Magzum Mirzagaliev, Kazakhstan’s Energy Minister Magzum Mirzagaliev, two locations are being considered as possible sites for a new nuclear station. These include the Alma-Ata’s village of Ulken and the East Kazakhstan city of Kurchatov. Mirzagaliev, a Russian news agency Tass, elaborated:
We have the production and consumption balance in place until 2035. We see the necessity to build a nuclear power station to supply electricity to our people and economy.
Kazakhstan is a world leader in uranium mining. It has been contemplating building a nuclear power plant for more than a decade. Mirzagaliev acknowledged that it will take another ten years to build it. Now, the government of Nur-Sultan has been in discussions with Russia’s State Atomic Energy Corporation Rosatom. This corporation has built NPPs in China and India as well as Belarus. According to the official, the nuclear power plant will help Kazakhstan achieve its carbon neutrality goals for 2060.
In the third quarter of 2018, the country experienced electricity shortages due to the influx of Chinese miners. The country’s energy-hungry data centres were quickly criticized for the electricity shortages. Authorities estimated that one crypto farm requires as much as 24,000 homes to generate enough energy. To fill the deficit, Kazakhstan, a major source of fossil fuels, had to purchase expensive electricity from Russia.
The attitude of Kazakhstan towards crypto has been generally positive. It has welcomed crypto miners and taken steps to regulate this sector. Recent estimates show that crypto mining could bring in $1.5 billion to the country’s economy over the next five-years. Tax revenue is expected to be more than $300 million. In January, a $0.0023 fee will be levied for each kilowatt hour of electricity that registered mining companies use.
Russian citizens have exchanged 5 trillion of their national fiat (over $67.5billion) for cryptocurrencies, according to a member of the State Duma. The information was not disclosed by him but he did not specify a time period. Anatoly Aksakov, head of Financial Market Committee, stated this Monday during hearings in the Russian lower house.
Some reports claim that 5 trillion rubles has been invested in cryptocurrency by Russians.
Russia has yet to fully regulate Bitcoin and other digital assets. The law “On Digital Financial Assets”, which came into effect earlier this year, only introduced rules for a few related activities, such as coin issuance. However, key areas like mining and taxation are still outside the reach of Russian legislation.
Aksakov noted that investors and ordinary Russians have been interested in the crypto market. According to the Tass news agency he also stated that it was time for Moscow authorities to make a decision in this regard. He elaborated:
It is important to decide how we will treat this phenomenon.
According to media reports , Russian government institutions have differing views about how to regulate cryptocurrency. Aksakov, quoted by Interfax, stated last week that a variety of approaches are being considered and weighed. These range from legalizing crypto investments and trade to imposing a blanket ban.
Reuters reported that the Central Bank of Russia (CBR) is considering prohibiting crypto purchases, despite its current position of ‘complete rejection’. Elvira Nabiullina, Governor of Russia, reiterated her skeptical attitude toward crypto and insists that Russia’s financial infrastructure shouldn’t be used for crypto transactions.
Other officials also voiced their opinion on the subject. Alexey Moiseev , Deputy Finance Minister, stated in October that Russia is not planning to follow China’s lead and prohibit its citizens from purchasing cryptocurrency abroad or keeping it in crypto wallets based overseas.
Estimates cited by Bank of Russia in their recently published Financial Stability Overview Q2 and Q3 of 2020 showed that Russians make around $5 billion annually in digital currency transactions. The monetary authority noted that cryptocurrency transactions pose risks to investors and financial stability in Russia.
Landsvirkjun, Iceland’s largest utility has been forced by the government to restrict energy supplies to industrial customers, including fish processing plants and aluminum producers. Consumers with short-term curtailable contracts were also affected. The company has been refusing new bitcoin miners and data centers that mine digital currencies.
Bloomberg reported that Landsvirkjun explained why the reduction was necessary citing a problem at a power plant and low water levels. A delay in sourcing electricity from an outside producer also caused problems for the supplier. On Tuesday, the utility announced that the cuts would be effective immediately.
Tinna Traustadottir (executive vice president of sales, customer service and sales at Landsvirkjun) noted that the deficit has also been influenced by an unusually high demand for electricity. While Iceland’s huge smelters have been a significant consumer for many decades, a growing number cryptocurrency miners attracted to the island’s low energy are also playing a part.
Among the crypto mining companies that have already established coin minting facilities in the country are the Canadian Hive Blockchain Technologies and Bitfury Holding, both listed in Hong Kong. Landsvirkjun stated that it is now refusing to accept new requests from the mining sector.
Further, the company explained that it could not serve load points at Karahnjukavirkjun, Iceland’s largest power station, due to Iceland’s distribution system limitations. The plant is in the country’s eastern region, while the island is predominantly the one with deficits.
News of Iceland’s electricity problems comes after Norway and Sweden, two Nordic countries, expressed concern about rising energy costs and the growing environmental impact of cryptocurrency mining. In November, Swedish regulators demanded an EU-wide ban of crypto mining. A few weeks later, the Norwegian government stated that it might support Sweden’s proposal.
Bloomberg reported that El Salvador is exploring bitcoin further and intends to issue sovereign bitcoin bonds.
According to the report, the country will issue $1 billion worth of tokenized U.S. dollar denominated 10-year bonds that pay 6.5% through Liquid Network.
The funds will be converted into bitcoin for half of the amount. According to the report, half of the funds will go towards infrastructure and bitcoin mining.
According to the report, after a five year lockup, the government will sell its bitcoins and pay additional dividends to investors.
Blockstream, a software development company, stated that at the end the 10th anniversary of the bond, the annual percentage yield will be 146% due to the anticipated bitcoin appreciation.
Blockstream Chief Strategy Officer Samson Mow stated that the lockup period will remove $500 million worth of bitcoin from the market for five year, which will increase the tokens’ scarcity as well as value.
According to the report, El Salvador will also build “Bitcoin City”, which will be exempt from income, property, and capital gains taxes. For the construction of the city, and other services, the only tax will be a 10% value added tax. Conchagua volcano will be the site of the city. It is hoped that the volcano will be used to generate energy for mining.
According to Mow, El Salvador wants to be the financial center of the globe. He said that he believes other countries will start to notice. According to Mow, countries that replicate El Salvador’s efforts will enjoy a massive advantage’ while those who don’t will feel ‘bitcoin FOMO’, or the fear of missing out,
User complaints in El Salvador were increasing last month. Users fell prey to scammers and lost a lot of money. Other failures include incompatibility of other wallets, and other technical issues.
Peter Thiel, tech billionaire and tech billionaire, said bitcoin’s sky high price is a sign of a ‘crisis’ in the economy due to inflation. Inflation has risen to a 13 year high in the US.
According to Bloomberg, he stated that $60,000 worth of bitcoin was too much for him and that he wasn’t sure if he should buy aggressively. “But surely, it’s telling us that we’re in a crisis moment.”
Thiel stated that the US Federal Reserve believed it could launch massive stimulus without driving up inflation. However, it isn’t taking the issue seriously. Thiel said that he wishes he had purchased more bitcoin and added that he believes inflation is here to stay.
Bitcoin enthusiasts argue that it is “digital gold” – a rare asset that will retain its value even during high inflation.
Bitcoin reached a record high above $66,000 October due to investors’ concerns over sharp price increases across the globe.
The US consumer price index inflation hovered around 5.4% in September, a record high for the year. This was due to an economic rebound from coronavirus that pushed up food prices and energy prices.
JPMorgan stated that in late October, it appeared as though investors were buying into digital gold. The bank’s analysts stated in a note that they believe bitcoin is a better inflation hedge than gold.
Many institutional investors remain skeptical about the inflation hedge argument. They believe bitcoin’s volatility makes it too risky to be added to portfolios.
Bloomberg reported that Thiel stated that the Fed, which has said for years it expects price increases to fade, is being too close-minded about inflation, and failing to acknowledge the problem.
This billionaire was among the first to invest in Facebook, and is also a co-founder at PayPal and Palantir.
He supports cryptocurrencies and has supported companies such as Bitpanda, an European digital asset exchange.
China’s massive crackdown on cryptocurrency has caused chaos. China was a key participant in the new financial ecosystem. Beijing’s actions may be the beginning of a wider regulatory crackdown against cryptocurrencies and crypto assets worldwide. This would be a shame. Although cryptocurrencies are not without faults, the technology behind them holds great promise.
China had previously banned initial coin offerings. This is the cryptocurrency equivalent to initial public offerings of stock shares by companies. The Chinese government then took steps towards limiting the use of crypto assets and cryptocurrencies by financial institutions. This latest move is even more expansive. All domestic cryptocurrency transactions are now banned. These transactions are possible in principle without the government’s knowledge. However, few Chinese citizens and financial institutions will be willing to take the government’s ire.
Beijing’s actions show how central banks and national governments are increasingly worried about cryptocurrencies destabilizing financial systems and other adverse consequences. They have every reason to be concerned.
Bitcoin, the original cryptocurrency, was once used to fuel illicit transactions on the dark internet and is now used to facilitate ransomware attacks payoffs. In the meantime, it has been revealed that Bitcoin is not a good medium for daily transactions. It is volatile and the Bitcoin network can’t process large volumes of transactions quickly or cheaply.
Instead, Bitcoin has become a speculative digital asset that is of no intrinsic value. Its scarcity is its entire value proposition. Bitcoin is issued by a computer algorithm that has a hard limit on the number of digital coins that can be issued. This is in contrast to fiat currencies, which central banks can print at will.
Governments are concerned by the possibility that households will channel their savings into crypto assets. This could make them more vulnerable to a burst of the speculative boom. China’s government is clearly against this. This is especially true given the fact that it is currently facing criticism for trying to reduce the housing market speculative bubble, which it once supported.
Beijing was also concerned about the impact of cryptocurrencies on its control over domestic payment systems. It has taken steps to crack down on Ant Financial and other tech companies that have dominated domestic retail payments. This has made central bank money less relevant. China is also wary of stablecoins, a new cryptocurrency that maintains stable value and is backed by fiat currency stores. These stablecoins could be used to make payments in addition to the fiat currencies.
Another concern was that stablecoins and cryptocurrencies could be used to bypass restrictions on cross-border financial flows. These controls have been relaxed in recent years. The government is concerned that unregulated flows could make it more difficult to control the renminbi’s exchange rate. China attempted to curb capital outflows in 2015-16 to stop a sharp depreciation of its currency. However, Bitcoin demand from China soared during this time, as people used the cryptocurrency to escape the government’s control and take money out of China. Beijing sees cryptocurrency as a conduit for capital control evasion.
China has also taken aim at Bitcoin mining. This is a process in which huge amounts of computing power are used to validate transactions on the cryptocurrency network in return for Bitcoins. Because of its easy access to cheap energy and high-quality hardware, such mining has been a growing trend in China. This makes it the world’s largest center for this type of activity. Both the environmental impact of such mining in terms energy consumption and computer debris have been huge. The country is currently experiencing a power crisis as it attempts to reduce its dependence on nonrenewable energies. Bitcoin mining was clearly not going to be tolerated.
Despite all these flaws, blockchain technology which underpins Bitcoin may actually have many benefits. This technology has already been used in finance. The technology will soon allow for a wide range of transactions, including the purchase of a house or car without traditional intermediariessuch lawyers and real-estate brokers. The emergence of cryptocurrency has also prompted central banks to design digital variants of their fiat currencies. China has already started such trials. Japan, Sweden, and many other countries have already started such trials.
It is uncertain what the future holds for cryptocurrencies as financial assets. However, the revolution they started will make it possible to make low-cost digital payment easily accessible. If these new technologies are allowed to evolve further, they will also help expand access to basic banking services and financial services for all income levels, including those with low incomes and those who are not served by existing financial institutions.
The Chinese crackdown on cryptocurrency advocates is a lesson for them to learn. Instead of resisting regulation and oversight or claiming technology will allow the industry’s police to take control, advocates for cryptocurrency should work with regulators and governments in creating effective regulation. The industry will then benefit from increased legitimacy and stability.
I know people who see bitcoin’s price and think, “Damn, I missed that.” I’m late. They are attracted to altcoins that are cheaper, but will eventually lose their value. They believe that coins selling for less than $1 are going to be the next bitcoin. There isn’t a ‘next Bitcoin’. Bitcoin is a historical accident. It was and still is a lot like our ancestors discovering fire. Let’s look at the early internet for context.
Only a few people had internet access in the 1990s. The internet was a strange thing back then. It was a new phenomenon that few people knew about. Few people could have predicted the rise of social networking, social media and online conferencing. That’s where Bitcoin is at the moment. It is still very, very early. Because so many people don’t know about all the developments and what’s being built on Bitcoin right now, it is especially important.
Layer 2 solutions are those that build on top of Bitcoin blockchain. The Lightning Network is one such project. It now has 14,000 nodes and 68.300 payment channels. This network spans across six continents (sorry Antarctica). Layer 3 solutions are the decentralized apps being built on top the Lightning Network. The goal is to create a new peer internet. One that isn’t subject to the control or censorship of Big Tech. It realizes the original internet ethos.
We are now seeing the first glimpses of projects using the infrastructure built by companies like Impervious. These will allow people to call Lightning nodes or monetize any service that is not financed with a Lightning bank account.
We are witnessing an early stage of evolution. It’s still early days of an evolution. Bitcoin’s Layer 1 settlement layer has been the most valuable store of value. nations have adopted it as legal tender, thereby abandoning the U.S. dollars’ global dominance. The Lightning Network has been the best exchange. We now have Layer 3 decentralized apps. These are the companies of tomorrow. Bitcoin is now more rare than it really is because of the functionality that it offers.
Bitcoin is almost as popular today in terms of adoption as the internet was back in 1997. Bitcoin is growing faster than the internet. We could very well see more than one billion users in the next four years, if this trend continues.
A single bitcoin’s price movement is just noise. It doesn’t really matter at what price you buy. It doesn’t matter what price you buy. Individuals and groups that are smarter than I see the current price as a blip. We are on the way to $1,000,000 per coin by using PlanB’s’stock-to-flow_’ model. It’s like worrying about Amazon and Apple’s share prices in the 2000s that we worry about where our coins are trading now. We’re just getting started. The Lightning Network continues to be strong.
These are exciting times. It’s an honor to have witnessed the evolution of the internet from its inception to today. It’s not too late to participate in Bitcoin’s evolution.
Bitcoin and other cryptoassets can also be sold when the stock market falls sharply, as Monday’s Evergrande meltdown.
This is always surprising to people. Skeptics are quick to jump out of the woodwork, pointing sarcastically at their mistaken belief that cryptoassets should be uncorrelated. “
This is a puzzle to me.
Crypto is a risky investment, that’s what everyone agrees on. Why is it that crypto often sells at risk-off times?
It is common to say that crypto is uncorrelated. However, over any meaningful time period, the correlation between crypto-stock market is only about 0.2. This is very low. However, a lack of correlation does not mean that crypto will be able to zig and zag with the market in the short-term. This means that it will provide uncorrelated returns over months or years. It has historically done so.
People who believe that crypto will completely offset the market do not understand what drives crypto performance. There are three main factors that drive crypto returns. Understanding how these three drivers interact will help you understand why different crypto assets behave in the same way.
Driver 1: Risk-On/Risk Off Appetite
Risk appetite is the first driver of crypto returns. Cryptoassets such as bitcoin can be risky investments. Investors sell risky assets when they feel anxious. They buy when they become bullish.
This is true for all risky assets. We saw this Monday when crypto traded in line with stocks. The same effect can be seen in other areas of risk, such as the ETFs that offer disruptive technology (ARK Invest) and Cathie Wood.
Crypto can respond to both risk-on and risk-off dynamics.
Driver 2: Industry-Wide Factors
Industry-wide factors are the second driver of crypto returns. This means that news and developments impacting the entire industry or specific sectors will be important.
One example is regulation. Today, regulators in Washington and other places are discussing issues such as how to regulate stablecoins and crypto exchanges and the DeFi sector. Positive news from the regulatory front could lift the overall price of the crypto market, but concerns about excessive regulation could cause the market to fall. As the market reacts against China’s ban on crypto trading, you can see this today.
Education is another example. For the past two weeks, I have been traveling around speaking to thousands of financial advisors and institutional investors about crypto at various conferences. This education, multiplied by the thousands of other people doing the exact same thing, has a huge industry benefit and is a long-term driver for returns. Confidence breeds knowledge.
Driver #3: Drivers who are Asset-Specific
The third driver of returns are factors that have an impact on individual cryptoassets or their use cases.
The booming interest in NFTs (or non-fungible tokens) has led to an increase in the price of ether this year. These tokens are tied to Ethereum’s network. Bitcoin’s price has not risen much due to its inability to be exposed the NFT boom.
Bitcoin’s price, by contrast, is more sensitive to central bank activity than ether’s. This is because bitcoin’s primary purpose is as digital gold.
Different cryptoassets offer different services and are targeted at various markets. The returns of each asset are affected by whether they succeed or fail, and how those markets change.
What this means for investors
Understanding how these three factors interact is crucial to understand cryptoassets performance. Crypto was highly speculative and the use cases for it were not clear. Risk-on bull runs and sell-offs were extreme as a result. On any given day, cryptoassets moved by 10% or more.
Today, asset-specific drivers and industry drivers are dominant. While there are times when market risk factors can overwhelm, such as Monday, most crypto is driven by regulatory factors and institutional adoption. When compared over time, crypto has low correlations to stocks and other markets. However, correlations can spike up to 1 in risk-off times.
Long-term, asset-specific drivers will become more dominant, or at the very least, a greater driver of returns as markets mature. This is already evident in markets where assets such as Solana are showing remarkable returns (up over 9,000% year to-date), as investors increasingly view them as an alternative to the overcrowded Ethereum Blockchain. As each cryptoasset’s unique characteristics and uses become more apparent, I expect that correlations between them will decrease. Over the long-term, there is no reason why bitcoin, which acts as digital gold, should be high correlated with Ethereum (which is the platform to DeFi, NFTs and other applications). Because they are both subject to significant industry-wide risks and appetite dynamics, it is currently. They should however have distinct returns in a stable, mature state.
Don’t let the short-term returns fool your eyes: Cryptoassets trading lower on risk-off days is just a reminder of how risky cryptoassets are. In the short-term, this risk factor could overwhelm the industry and asset specific drivers. Over the long-term, however, crypto has shown a low correlation to other assets and this lack of correlation is likely to continue.
Bitcoin is on the rise and many investors are excited about its potential. The question is, why is Bitcoin so precious? Although it is too early to know, it appears that many people are interested in Bitcoin as a way to store value. This could help to ensure more long-term success.
Some theories suggest that some Bitcoin buyers may be hedging against other investments, such as gold and equities. This is the right time to invest in Bitcoins if you are an investor who wants to diversify your portfolio by buying digital currency.
This blog will discuss three major reasons why Bitcoin is so popular.
Institutional Adoption of Bitcoin
Institutional investors are increasingly interested in Bitcoin. Two major Bitcoin ETFs (exchange traded fund) have recently been released. This has resulted in a significant increase in institutional trading and investments of Bitcoin and other crypto tokens, as well as by mutual funds, pension funds and hedge funds. You can visit CryptoEngine to start investing in bitcoins.
Cumberland Mining raised $1 billion to fund crypto. According to the firm’s founder, ‘the whole world is moving digital’ and it makes sense to invest in this space. Goldman Sachs, Citigroup and Nasdaq offer bitcoin futures contracts that allow them to trade on behalf of clients.
Two of the most widely used cryptocurrencies are Ethereum and Bitcoin. PayPal recently announced that it will accept Bitcoin for certain transactions via its Braintree Payments subsidiary.
This is a major move by one of the biggest online payment processors. It indicates a shift in the way we pay for things online. Investors may be able to buy cryptocurrency faster with their PayPal account than traditional methods such as bank transfer or credit card, which can take weeks.
This announcement, which comes on the heels of Ethereum and Bitcoin’s recent market caps, could bring in significant money for these currencies as well as big returns for investors who make their investments now before prices rise.
The Impact Of Bitcoin Halving on Its Price
Bitcoin’s public ledger is updated with transaction records by Bitcoin mining. Bitcoin is not like other currencies that are printed by central banks or backed by governments. Instead, it relies on individuals and businesses who use specialized computers to solve complex mathematical problems.
To release new Bitcoins into circulation, these miners perform energy-intensive computations. The Bitcoin protocol states that miners will receive a half-off reward every four years until 21 million Bitcoins have been mined. This is known as a Bitcoin halves.
The inflation rate for bitcoins is reduced by the bitcoin halving. This encourages long-term investments in Bitcoins rather than short-term trading and speculation. This event causes less supply, but the demand for bitcoins remains constant or increases until equilibrium is restored. The demand for Bitcoins is increased by halving its value, which in turn increases its popularity.