Bitcoin Rebounds From 3-Month Low Despite Higher-Than-Expected CPI Results
Bitcoin is surging today in the face of rising U.S. inflation, defying expectations amid the threat of further interest rate hikes.
Ethereum celebrates the one-year anniversary of ‘The Merge,’ a monumental shift that has led to a considerable reduction in its net supply and the unveiling of the expansive ‘Holesky’ test network.
Lastly, Bloomberg’s groundbreaking analysis sheds light on Bitcoin’s sustainable future, presenting a promising picture of green mining practices that have been a subject of intense debate.
- Bitcoin surges despite high US inflation
- Ethereum celebrates one-year anniversary of ‘The Merge’ as ‘Holesky’ testnet is unveiled
- Bitcoin’s sustainable future looks bright
Bitcoin surges despite high US inflation
Cryptocurrency markets displayed resilience last week, unfazed by a small surge in U.S. inflation revealed by the Consumer Price Index (CPI).
The latest CPI data, released by the Bureau of Labor Statistics (BLS), indicated a 3.7% increase in the 12 months through August, surpassing economists’ expectations of 3.6%.
In August alone, the CPI rose by 0.6%, a notable increase compared to the 0.2% bump in July and June. This uptick was primarily attributed to soaring gasoline prices, which accounted for more than half of the index’s overall growth.
Following the CPI announcement, Bitcoin maintained its position around $26,100, experiencing minimal fluctuations. Meanwhile, Ethereum saw a slight dip of 0.5% during the same period, settling at approximately $1,600. Altcoins like XRP and Litecoin also recorded minor losses.
However, despite the small dip on Wednesday, most altcoins were back in the green by the end of the week.
The release of Wednesday’s CPI report is expected to be a pivotal factor in the Federal Reserve’s upcoming decision on interest rates, scheduled for September 20.
The central bank has already taken a more stringent monetary stance in response to inflation, which reached a staggering 9.1% in June, marking the most significant annual increase since 1981.
Higher interest rates are designed to cool down the economy by increasing the cost of borrowing for both businesses and consumers.
However, the repercussions of higher interest rates extend beyond the traditional economy, affecting cryptocurrency markets and other risk assets, including stocks.
This occurs as assets like U.S. Treasuries become more appealing to investors due to their relative safety and stability.
Although inflation has moderated significantly since its peak in June, it still exceeds the Federal Reserve’s target of 2% annually.
In July, the central bank raised its benchmark interest rate to a range between 5.25% and 5.5%, marking a 22-year high and breaking a streak of 18 months without a rate increase.
According to data collected by CME Group’s FedWatch Tool, traders are currently assigning a 98% probability that the Federal Reserve will maintain current interest rates after its meeting on Wednesday.
Ethereum celebrates one-year anniversary of ‘The Merge’ as ‘Holesky’ testnet is unveiled
On the first anniversary of Ethereum’s groundbreaking transition known as ‘The Merge,’ the cryptocurrency landscape is witnessing a significant reduction in net supply and the possible launch of an expansive test network called ‘Holesky.’
One year ago, Ethereum executed a pivotal upgrade known as ‘The Merge.’ This monumental shift marked the completion of Ethereum’s transition from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) model, fundamentally altering its operational dynamics.
Since the Merge, Ethereum has seen a remarkable transformation. As documented by Ultra Sound Money, the cryptocurrency has minted 685,682.23 ETH while burning 983,377.32 ETH, resulting in a net supply reduction of 297,768.09 ETH.
To put this into perspective, this decrease represents nearly 300,000 ETH that would have otherwise entered the market had Ethereum remained under the PoW model.
The PoS mechanism, which replaced miners solving computational problems with validators holding a minimum amount of ETH, has not only removed a significant portion of the miner supply from circulation but has also introduced a deflationary aspect to the cryptocurrency.
Transaction fees paid by users are now partially burned, reducing the overall ether supply.
Despite these positive changes, Ethereum’s current price remains relatively unchanged at $1,630, in stark contrast to Bitcoin’s 30% gain over the past year.
Analysts believe that the reduction in gas fees, a key factor for Ethereum’s future growth, is the missing piece of the puzzle.
On this momentous one-year anniversary, Ethereum developers unveiled plans for the ‘Holesky‘ test network. Designed to be twice the size of the main Ethereum network, ‘Holesky’ offers developers a robust environment for simulating massive scaling scenarios and testing applications and smart contracts.
Testnets like ‘Holesky’ are essential for safely experimenting with new features and applications without impacting the main network. Ethereum developers anticipate that ‘Holesky’ will eventually replace the Goerli testnet, which is scheduled for retirement in early 2024.
Hailed as the most extensive testnet for Ethereum, ‘Holesky’ is projected to boast a staggering 1.4 million validators, doubling the number on the main Ethereum network.
Ethereum core developer Parithosh Jayanthi notes that this expansion is crucial to address scalability challenges and ensure that potential issues are identified and resolved on the test network, rather than the live mainnet.
By creating a more substantial test environment, developers can ensure smoother transitions of infrastructure and upgrades from ‘Holesky’ to the Ethereum main network. This proactive approach aims to prevent scaling issues that could hinder Ethereum’s future growth and performance.
Bitcoin’s sustainable future looks bright
Amid a growing debate about the environmental impact of Bitcoin mining, Bloomberg has released a recent piece of analysis that has stirred the pot by claiming that more than 50% of Bitcoin mining now relies on sustainable energy sources.
Bloomberg Intelligence analyst Jamie Coutts highlighted a positive trend, showcasing declining carbon emissions in the Bitcoin network since 2021, despite an increase in the hash rate, which measures the network’s security and mining activity.
Coutts’ conclusion was that this could signify a significant shift towards a more sustainable energy mix in the industry.
The intensity of emissions is defined as the amount of carbon dioxide emitted per unit of electricity consumed by the Bitcoin network.
The conclusions were based on the work completed by Daniel Batten, a climate-tech venture capitalist specializing in leveraging mining for environmental benefits. Bloomberg described his work as far more accurate when compared with Cambridge University’s model, which has been used as the base case in the past.
According to Batten, emissions from the Bitcoin network have decreased for two primary reasons: the adoption of more sustainable energy sources and the implementation of more efficient mining rigs.
In addition, Batten also stated that Cambridge’s model, which depicts Bitcoin electricity supply as 37.6% from sustainable resources, stopped updating in January 2022.
According to Batten, Cambridge’s model does not yet account for: (1) the reduction of Kazakhstan network input, (2) offgrid mining, and (3) methane mitigation.
“Until all 3 factors are factored into their model, it will continue to overestimate Bitcoin emissions and underestimate Bitcoin’s sustainable energy sources.”
As a notable example, Kazakhstan-based miners, once responsible for a substantial portion of the global hashrate, now account for a mere 0.73%. This marks a significant drop from their 18% share in October 2021.
Furthermore, the presence of off-grid mining further complicates calculations, as it is notoriously challenging to measure.
However, Batten has attempted to factor these miners into his estimates of Bitcoin’s energy mix, suggesting that the industry’s reliance on sustainable energy sources may now exceed 53%.
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