Yasmin Sharbaf

Crypto Market Musings

Crypto investors might finally be seeing the light at the end of the tunnel. Over the past month, bitcoin has risen 25% to reach around $21,000 as of this writing, and ethereum is up by nearly 30% at a price of $1,560. 

This rally was most likely caused by institutional investors with over the counter (OTC) desk holdings of bitcoin. OTC desks allow buyers and sellers to trade crypto directly and are mostly used by institutional investors that make massive transactions. These bitcoin desk holdings show an increase of 70%, according to Glassnode. And this activity seems to be spurred due to inflation softening. The Consumer Price Index showed a 0.1% decline in December. The Producer Price Index also dropped 0.5% in December — the largest drop since April 2020.  

Even though crypto is supposed to be a hedge against inflation and protection against the centralized financial system, the crypto market has been largely driven by market sentiment and the economy. As we have seen over the past few years — and especially last year — crypto has traded as a risk asset that’s extremely sensitive to inflation news and strongly correlated with the stock market.

The decline in inflation is giving investors some hope that the Federal Reserve might ease interest rate policies after seven brutal hikes in 2022. Regardless, the crypto market is experiencing a lot of volatility right now. If you have been following Early Investing regularly, you know that crypto’s volatility could be a good opportunity for traders to take advantage of. 

What Yasmin Is Thinking About

Recently, macroeconomic factors have been the biggest driver of the crypto market. The market has been reacting more to investor sentiment than the actual value or development of cryptocurrencies. But I don’t want us to forget that crypto is a complicated technology that keeps improving. So in the long run, as crypto becomes more advanced and widely accepted, I think its technology will be appreciated more and its usability and progress might become the driver of prices.

One of these advances we are going to see soon is the Ethereum Shanghai upgrade, which is set to launch in March. The Shanghai upgrade is Ethereum’s next big milestone after the Merge of September 2022. This upgrade will introduce a few Ethereum Improvement Proposals (EPIs). One of them is to allow investors to un-stake their staked ethereum and give them the opportunity to liquidate their ethereum. That means validators will have the opportunity to receive a reward for the first time since the Beacon Chain launched in 2020. (For context, the Beacon Chain was created as a first step to move ethereum to PoS. Ethereum then fully transitioned to PoS during the Merge.) There were a few other EPIs the Shanghai upgrade first introduced, but developers decided to mainly focus on un-staking for now. 

With all of that, what does the Shanghai upgrade mean for investors? 

With 13% of ETH currently staked, this could have an impact on its price. People have been waiting to un-stake their ETH for a long time. So we might see an ETH dump because validators probably want to make a profit on their staked ETH and rewards, especially since it has been a difficult journey for them with all the FTX news and the Terra Luna collapse. Some might even want to stop investing in crypto entirely. However, this also depends on the price of ethereum when the Shanghai upgrade is released. Some validators might choose to hold if they staked ethereum at a higher price. So for now, the best thing for investors to do is keep an eye on ethereum’s price as the release gets closer. 

In the long term, the Shanghai upgrade should eliminate the main risk associated with staking ethereum — lack of liquidity. In turn, this could attract more validators to earn interest without worrying about liquidity, and thus have a positive effect on the price.

And Finally…

ChatGPT, an AI chatbot created by OpenAI, has been a hot topic recently. I have been asking the chatbot random questions about random topics, including crypto. Here’s a recent question I asked it about crypto: 

Thanks for nothing, ChatGPT.

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Keep an Eye on Ethereum’s Next Big Upgrade Republished from Source https://earlyinvesting.com/keep-eye-ethereums-next-big-upgrade/ via https://earlyinvesting.com/feed/

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Crypto Market Musings

The impact of the FTX scandal continues to shake the crypto world. The exchange filed for bankruptcy last Friday after its rival Binance stepped back from saving it. And news of FTX’s corruption and bad investments just seems to keep coming. As of this writing, bitcoin is trading below $17,000 and ethereum is trading below $1,200. For the past week, bitcoin, ethereum and other coins have suffered following the FTX liquidation crisis. The fall of one of the largest crypto exchanges means crypto investors’ confidence — especially new crypto investors’ confidence — is low.

The market has been very volatile in the past few days. Although bitcoin and ETH are still trading lower than they were just a month ago, bitcoin experienced a slight recovery this week when it hit $17,000 after trading below $16,000. Sentiment might have temporarily improved because Binance released a crypto emergency fund to help other projects facing liquidity crises.

Nevertheless, the future of crypto is uncertain. Prices have suffered and seem to keep heading down. But it seems that multiple tokens’ loss is another token’s gain. While the crypto market suffered, Trust Wallet Token (TWT) has surged by more than 90% in the past week. TWT is a crypto hot wallet app that gives users control over their coins. But that’s not to say it’s a good investment, since its price only rallied the past week after the FTX collapse. So this may just be a short-term surge.

What Yasmin Is Thinking About

Last week, I attended Equity Crowdfunding Week. One of the events focused on the future of blockchain and crypto. Despite the crypto winter (or what some have started calling “the ice age”) and FTX news, all panelists were bullish on crypto. For them, this year is the year of builders and creators. Interestingly, they viewed the collapse of one of the biggest crypto exchanges as weeding out bad players, scammers and unnecessary technology. 

So while the FTX collapse is not good, it’s helping to get all the junk out. To a lot of crypto believers — including me — FTX is a black spot in crypto history that crypto is going to recover from sooner or later. Some have been comparing the FTX crash to the Lehman Brothers collapse of the 2008 financial crisis. And while we’re not likely to see the ripples extend into the mainstream financial markets, there is a good lesson in the comparison. The stock markets have recovered and grown since the 2008 crash, which means those who invested during the crash have reaped the rewards. Crypto investors could be facing a similar opportunity right now. 

The FTX collapse has a lot of implications for the crypto market. The fear of contagion is spreading. On Wednesday, Gemini saw a $485 million outflow. This was mainly due to the exchange pausing withdrawals from its yield-generating Earn program, which is powered by Genesis Global Trading. So it is no surprise that almost all crypto fear and greed indexes are showing “extreme fear.” 

With the current panic selling from exchanges and reduced investor confidence, I worry that crypto might become less accessible in the future. As much as I believe crypto should stay decentralized in all ways, centralized exchanges have made crypto investing easy and fast for the average user. The FTX collapse may scare investors away from exchanges, which could in turn hurt or shut down smaller exchanges — like BlockFi — and leave investors with even fewer options for crypto trading or investing. 

I think the market will recover over time. Similar to the dot-com bubble, there will be lots of players and enthusiasts dabbling and exploring different projects. And that means we’ll continue to see projects and ideas that look promising but ultimately fail. For investors, as Vin Narayanan always says, if you believe in crypto long term, then dollar cost averaging is your best friend. Crypto could regain its stability in the future. But for now, I think crypto traders can take advantage of this volatility.

And Finally…

“Not your keys, not your coins” has been the motto circulating around lately after the FTX scandal. Many people lost wealth they will never recover. However, I think this hammers home the reality that the whole purpose of crypto is decentralization. Having crypto in a centralized entity seems rather paradoxical. I’m sure that Vitalik Buterin is having an “I told you so” moment right now. 

The bitcoin supply on exchanges has fallen sharply in the past week amid calls and reminders to transfer crypto to hardware wallets and keep complete ownership of it.

However, it is important to keep in mind that hard wallets are also not 100% safe. Users can get phishing attempts through email, Twitter or Discord. So always be cautious and always remember it’s better to be safe than sorry.

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The Silver Lining of the FTX Collapse Republished from Source https://earlyinvesting.com/silver-lining-ftx-collapse/ via https://earlyinvesting.com/feed/

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Crypto Market Musings

The Consumer Price Index (CPI) for the month of September is finally here, and it’s not what economists and the Fed wanted. The CPI increased 8.2% from last September and increased 0.4% month to month. The financial markets tumbled right after yesterday morning’s news. Ethereum fell by more than 4%, reaching below $1,250. Bitcoin also reacted poorly, diving below $19,000. Fortunately, both the crypto and stock markets recovered later in the afternoon. 

Let’s always keep in mind that the Fed is very committed to controlling inflation, so we might see another interest rate raise in late November. Investors should brace themselves for the upcoming months as CME Group projects a 98.7% chance of a 75 basis point interest rate hike.

What Yasmin Is Thinking About

One thing the CPI reflects is fuel prices. Although crypto and fuel prices are not directly correlated with each other, fuel still indirectly affects the crypto market. After all, oil plays a major role in powering the global economy.

As the Northern Hemisphere heads into the winter season, demand for oil and electricity will be higher. Although the September CPI shows a decline in the gas and energy indexes, this trend might not continue for October. After a few months of  price reduction, U.S. gas prices have increased again by about $0.20 from last month to reach an average price of $3.90 a gallon. Over the past year, gas prices have increased due to many factors, including COVID-19 (which shifted the demand and supply of it), environmental, social and governance policies and the Russian-Ukraine war. And most recently, OPEC decided to reduce oil production by 2 million barrels a day. Less production means you will see another price hike at the pump, which also means another inflation wave is on the way. To battle that, the Fed will probably raise interest rates once again, and crypto prices could see another crash in the near future. This cycle will probably continue for a while.

There has also been a push against proof of work (like bitcoin) crypto mining due to the perceived high energy consumption and dependence on fossil fuels. A popular — but not accurate — way of describing it is that crypto mining consumes more than the total electricity needed to power Norway. 

To put things in perspective, crypto mining is actually far greener than the banking system or gold. And much of the bitcoin network is powered by renewable energy. In fact, about 56% of bitcoin mining utilizes renewables, according to the Bitcoin Mining Council. That’s much better than most countries do! Additionally, the Bitcoin Clean Energy Initiative found that bitcoin miners end up purchasing much of the excess renewable energy that can’t be channeled into the grid. 

But perception — instead of facts — often drives policy debates. That’s why around 500 environmental organizations, businesses and labor groups in New York have been pushing Governor Kathy Hochul to sign legislation to put a temporary moratorium on fossil fuel-based crypto mining. Proponents of the legislation have argued that crypto mining consumes enough energy to power 750,000 homes. If New York puts this legislation into action, it could drive many crypto miners out of New York. I also think it could set an example for other states or countries looking to address or minimize climate change or reduce energy usage. 

I can see a universe where European countries, struggling with energy prices during the winter because of the Russian-Ukraine war, cut off electricity to crypto mining sites because of the perceived problems.

The push toward clean energy and the energy crisis could affect crypto prices in the short term. If mining operations are hindered for any of these reasons,  transaction rates will slow down, as will the effectiveness of crypto networks. If this happens, the use of bitcoin, for example, would decrease, which in turn could negatively affect its value in the short term until miners find a solution.

And Finally…

Spooky season is here, so what better time to share a couple of spooky cryptos?

• EVIL (trading at $0.002 as of this writing) – an Evil coin with the purpose to “embrace and inspire evil.” (Yes, that’s its sole purpose.)
• GHOST (trading at $0.11 as of this writing) – created by McAfee antivirus developers, this coin actually has a purpose: to make transactions private and anonymous and thus “help make you nothing but a ‘ghost.’”

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The Vicious Cycle of Fuel Prices, Energy Consumption and Crypto Republished from Source https://earlyinvesting.com/vicious-cycle-fuel-prices-energy-consumption-crypto/ via https://earlyinvesting.com/feed/

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