Visa Backs Cryptocurrencies, Ethereum Returns to $2000 and Goldman Sachs Offers Cryptocurrency Investments

The first quarter came to a close last week and what a quarter it has been for the cryptocurrency space! Bitcoin has doubled in price since the start of the year and mass adoption has further taken hold.

• Visa and Paypal back cryptocurrency payments
• Goldman Sachs joins the crypto club
• $100,000 Bitcoin competition
• DeFi fighting against high Ethereum gas fees

Global payment providers back cryptocurrencies

It was a bright start to the week for the cryptocurrency markets with Visa, one of the largest payment providers in the world, announcing that it was allowing users to settle transactions with the digital stablecoin USDC, a key step towards mainstream adoption of cryptocurrency.

USDC is a cryptocurrency that’s value is pegged directly to the US Dollar. Traditionally, Visa transactions using cryptocurrencies would have required a transfer into fiat currency. However, with this new step, Visa will simply settle transactions using digital coins, with the transactions taking place on the Ethereum network.

The move from the payment provider illustrates the growing demand to use cryptocurrencies for everyday purchases and the faith that the financial industry is beginning to have in digital assets. As the cryptocurrency market grows in popularity, consumers want that ease of access, and companies such as Visa are beginning to adapt.

The announcement appeared to bolster the cryptocurrency markets through the rest of the week, with Ethereum showing one of the largest increases due to its involvement in the new Visa payments. By Friday, Ethereum was once again testing the $2000 level.

PayPal could not let Visa take all of the glory this week though and was hot on Visa’s heels with their announcement of ‘Checkout with Crypto’ on Tuesday. U.S. consumers will be granted the ability to use their cryptocurrencies to pay at millions of online retailers via PayPal. Customers will be able to use either Bitcoin, Ether, Bitcoin Cash, or Litecoin to pay for purchases, with the option being available during checkout. The new scheme will roll out next month and adds further validation from a company that offered the ability to buy, sell and hold cryptocurrencies in October last year. Consumers should be warned however that purchasing cryptocurrencies with PayPal means their cryptocurrencies can only be spent within PayPal’s walled garden. PayPal doesn’t allow customers to access their private keys or transfer their cryptocurrency outside of PayPal, therefore serious crypto users are best advised to spend their money elsewhere.

Another investment bank succumbs to Bitcoin’s potential

Goldman Sachs was the latest investment bank to complete a U-turn on their stance towards the cryptocurrency market this week, joining the likes of Morgan Stanley and JPMorgan who have already made the move. Within the next three months, Goldman Sachs’ private wealth management clients that hold a minimum of $25 million, will be given the opportunity to invest in Bitcoin and other digital currencies. Many investors view Bitcoin as a hedge against inflation and are actively looking to enter the market.

Chipotle Madness

It may have been 1st April last week, but for others, it was National Burrito day. To celebrate, Chipotle launched a competition where they gave away $100,000 worth of Bitcoin to fans or a burrito as a consolation prize.

Although just a bit of fun, this was one of the largest competition giveaways involving cryptocurrency to date.

Aave and Polygon working to bypass high Ethereum fees

There has been a huge influx of investors flooding into the Decentralised Finance (DeFi) sector since the ‘DeFi summer’ of 2020. However, as DeFi runs on the Ethereum network, the increased popularity of DeFi and cryptocurrency, in general, comes as a double-edged sword. On the one hand, Ethereum and DeFi coins are increasing in price, however, as many DeFi protocols are based on the Ethereum network, transaction costs, often referred to as gas fees, have increased considerably.

To combat this effect and to make DeFi more readily available to those that can’t afford the higher gas fees, Aave, a DeFi protocol targeting both retail and institutional investors, announced that it would be working on a solution. Combining resources with Polygon, a company focused on scaling blockchain transactions, the team is looking to develop a sidechain to relieve some of the congestion and lower transaction costs.

The sidechain would allow coins from the main Ethereum network to be processed via a separate blockchain and transferred back across if necessary.

NFT enthusiasm cooling

According to Bloomberg, after the sale of a $69 million piece of digital artwork, potentially the peak of non-fungible token (NFT) mania, the enthusiasm for the marketplace has slowed its pace. Figures gathered from Christie’s auction house, which facilitated the sale of the $69 million piece, saw the average value of sales retreat from $19 million to $3 million.

Although retreating, NFTs have certainly secured their position within the cryptocurrency industry and the current pullback is more likely to be a healthy correction rather than the beginning of the end for the technology.

As it has only been a week since the first digital house was sold for $500,000, we think there is plenty of appetite left.

Manufacturing Boost

In the wider economy, it was a promising week for manufacturing figures coming out of the US and the Eurozone. The US ISM’s monthly manufacturing survey posted a 64.7% reading, which is the highest reading since December 1983, whilst Europe’s manufacturing figures jumped from 62.5 to 57.9.

Although positive for the sector, with this increased demand, manufacturers are facing issues regarding labor and logistics, which in turn is adding to the risk of inflation. With the Fed persistent on rising inflation to 2% this may well continue into the near future.

With vaccinations and the reopening of sectors within the economy, March employment figures were also up, with the US expecting an additional 635,000 jobs, with some economists predicting a real figure closer to 1,000,000. As a result, the expectation is for unemployment to fall to 6% from a February figure of 6.2%. 

Biden bolsters markets

President Biden took to the stage on Wednesday last week, to talk through a $2.3tn infrastructure bill, focusing on transportation, affordable housing, and improved broadband. Since his announcement, many of the global markets climbed higher, including the S&P 500 which passed the historical 4,000 mark for the first time. The Dow Jones and the Nasdaq also secured new all-time highs.

With the juggling of economic data, coupled with the Biden announcement on Wednesday, 10-year treasury yields withdrew below 1.7% but continued to climb overall as the threat of inflation continues.

OPEC+ turning on the taps

OPEC+ agreed on Thursday to gradually increase production during the months of May through to July this year, increasing production by 441,000 barrels per day in July. Viewed as a risky move by some, it is believed the increased production should help to avoid a severe spike in oil prices as economies reopen and demand increases throughout the remainder of the year.

Big-ticket reports to watch out for this week:

Monday – US ISM Non-Manufacturing Index figures

Tuesday – Australian Central Bank Interest Rate Decision

Wednesday – US Goods and Services Trade Balance figures for the month of April

Thursday – US Initial Jobless Claims

Friday – China CPI YoY and Canadian Unemployment figures 

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