$300 Billion Wiped off Crypto’s Market Cap but Fundamentals Remain Strong

U.S. regulation worries and tax hike concerns spooked the cryptocurrency markets this week but innovation continues to march onwards. In this week’s round-up, a new way to purchase Bitcoin will bring in droves of new investors, the first blockchain gold refinery and the institutional demand for cryptocurrency insurance. 

• $10 billion liquidated in a single day
• Cryptocurrency investors forecast to double during the remainder of 2021
• Paypal-backed Venmo launches crypto purchases
• Time and WeWork to accept cryptocurrency payments
• A blockchain-focused gold refinery
• BitGo cryptocurrency insurance increases to $700 million
• Baillie Gifford invests early in Blockchain.com
• U.S. tax increases and a 4% inflation risk?
• Big-ticket reports to watch out for this week

The Bitcoin shakedown

The cryptocurrency markets were rattled last week, with Bitcoin experiencing a 26% decrease in price from its recent all-time high posting of $65,000. Rumours surrounding a U.S. regulatory crackdown on cryptocurrencies triggered the early panic sell on Sunday last week, which subsequently resulted in the liquidation of $10 billion worth of long trading positions last Monday. According to Business Insider, nearly 927,000 traders were affected.

A Chinese power outage, in the province of Xinjiang, is also believed to have influenced the early selloff. Xinjiang hosts nearly 50% of Bitcoin’s mining network and with this mining network offline it raised concerns over Bitcoin transactions, which in turn resulted in market fear.

Prices were subsequently pushed lower on Friday after an announcement from U.S. President Joe Biden proposing to double capital gains taxes on high-income individuals. 

Although a rough week for the cryptocurrency markets, more positive news was released by Gemini. A U.S. Crypto Report highlighted that nearly 64% of U.S. consumers were interested in cryptocurrencies, meaning that they either wanted to learn more or were thinking of purchasing. The company is expecting the number of cryptocurrency investors to double in the remainder of 2021.

PayPal continues to lead the crypto charge with Venmo

Venmo, a peer-to-peer transaction app with a 70 million user base, announced last week it was allowing the purchase and sale of cryptocurrencies via its platform. Venmo, which is owned by PayPal, announced its ‘crypto on Venmo’ initiative on Tuesday and plans to capture a share of the cryptocurrency transaction market. PayPal, which has already demonstrated its commitment to cryptocurrency earlier this year, is continuing that trend with this latest launch. The new service currently offers the option to purchase four types of cryptocurrency: Bitcoin, Ether, Litecoin and Bitcoin Cash. Users should however be warned, that if they purchase crypto with services like Venmo or Paypal that don’t allow the transfer of crypto outside their walled garden, their crypto is at risk, and they don’t stand to benefit from the many benefits of controlling their own crypto.

The launch will enable ease of access for Venmo customers, 30% of which have already purchased cryptocurrencies. As the Venmo app operates very much like a social network it is hoped that the social feed will further encourage cryptocurrency use.

In the past, Bitcoin has primarily been seen as a store of value but with payment providers promoting the use of Bitcoin and other coins for transactions, the peer-to-peer transaction space is growing rapidly.

TIME to accept crypto

Time magazine confirmed last week that it would be allowing cryptocurrency payments for its digital magazine subscriptions. The magazine, which has been publishing since 1923 and is known the world over, has partnered with Crypto.com to offer this new payment option. 

The payment option will initially be available for those based in the U.S. and Canada, but the company eventually plans to expand the option internationally. The move is not too surprising for Time, as back in March, the magazine became involved in the NFT boom. Three magazine covers were listed for sale as NFTs. Time’s 1966 ‘Is God Dead?’ was picked as the initial cover, followed by the 2017 ‘Is Truth Dead?’. The final cover to round off the trio, was topically named ‘Is Fiat Dead?’. The three eventually sold for $435,000.

Office space service provider joins the crypto ranks

Like Time, WeWork, the office-sharing provider, also announced it would be accepting cryptocurrencies as a form of payment last week. The company will also hold the option to pay those it needs in cryptocurrencies if the recipient so wishes. In order to meet increased demand and remain competitive, the company will be accepting cryptocurrencies including; Bitcoin, Ether, USD Coin, and Paxos, and holding the digital assets on its balance sheet.

WeWork is partnering with Coinbase and BitPay to complete the transaction process. In addition to facilitating the transactions, Coinbase will also be the first member of WeWork to pay for their services using cryptocurrency.

Going for gold in Dubai

DMCC, a free trade zone situated in the city of Dubai, UAE, has confirmed the construction of a blockchain-focused precious metals refinery. Not only will the facility be the largest metals refinery in the Gulf but, along with storage, it will provide the backing of a new breed of asset-collateralized stablecoins.

These stablecoins will be pegged to the value of one gram of the corresponding precious metal and have so far include GoldCoin, SilverCoin, PalladiumCoin, RhodiumCoin and PlatinumCoin. The associated coins will then be available for trade on DMCC’s exchange platform.

The UAE, which has a vision to fully power Dubai via blockchain technology, within the same week confirmed the adoption of blockchain to assist the judicial department with the notarization and authentication of documents. The resulting increased efficiency is part of the UAE’s ‘unified digital government platform’ which reduces the time and effort of its internal operations. Although ambitious, the country is showing what can be achieved via a little innovation and hard work.

Increased insurance cover of digital assets by BitGo

Institutional adoption continues to drive the cryptocurrency markets with BitGo, a major crypto-security firm, improving their cold storage program this week. The company increased its insurance program so that it now covers a staggering $700 million worth of digital assets. The expansion comes as a direct result of institutional pressure, which is increasingly keen to hold digital assets. 

Elsewhere, a major technology investor, Baillie Gifford, invested $100 million into Blockchain.com during a March investment round, with the belief that the company will continue to grow. Securing a reputation as an early mover, returning nearly $28 billion from investments in Tesla and Alibaba, the Baillie Gifford investment comes with optimism for Blockchain.com and indeed the cryptocurrency market in general. It is the largest single investment Blockchain.com has ever received and is the first move into the cryptocurrency sector for the major investment fund.

U.S. seeks higher taxes

Markets were shaken on Thursday after U.S. President Joe Biden unveiled plans to increase tax rates on the highest earners. Top income taxes would be raised from 37% to 39.6%, whilst capital gains would nearly double from their current rate of 20%. The move will be used to fund childcare and education.

The plans were enough to spook many investors, including those in the cryptocurrency sector, with many markets experiencing a significant selloff on the back of the news. The proposal is expected to be fought heavily by Republicans.

A 3-4% inflation prediction

Global unemployment figures continued to withdraw last week illustrating a promising step out of the Covid world. U.S. unemployment claims released on Thursday fell by 50000. Figures are now down to 547000 a month, down from a pandemic high of 6.2 million. UK job figures released this week were also positive, with job vacancies increasing across the country.

Markets continue to be daunted by rising inflation with strategists this week announcing that inflation could reach 3% or 4% by 2022. In a post-Covid world, there is expected to be a significant demand as consumers spend savings acquired during Covid. If prices increase it could change asset values and the profitability of corporations.

Big-ticket reports to watch out for this week:

Monday – U.S. Durable Goods Orders

Tuesday – Bank of Japan Interest Rate Decision, U.S. Consumer Confidence

Wednesday – Australia CPI Figures, Canada Retail Sales, U.S. Goods Trade Balance, U.S. Fed Interest Rate Decision

Thursday – European Unemployment Change, U.S. GDP Figures, U.S. Initial Jobless Claims

Friday – China PMI Figures, Australia PPI Figures, European GDP & CPI Figures

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