Stuff I'm Currently Reading
Cryptocurrencies are a 24/7/365 marketplace thanks to enthusiasts all over the world. So while you may have been indulging in mulled wine, fruitcake, potato latkes, or that yule log, you may have missed some of the important comings and goings in cryptocurrencies.
And thanks to some big announcements by countries and companies, there's a lot to choose from. So let's take a look at what's happening.
#1 Banking in Crypto is a Mess
Before you say, of course, banking in crypto is a mess cause we want crypto to replace banks, this is about crypto operating companies that still need conventional banking options to help run their businesses.
Lots of talk in cryptocurrency is about whether a coin or a platform is decentralized or not. The result of this conversation is that many people talk about 'points of failure' in the system. A place where the whole system can break down. And a big potential point of failure for US-based crypto operating companies is the US banking system.
2019 was a year that saw the US Government and US banks become more hostile to cryptocurrencies. The Facebook/Libra stuff is only a small factor in it but it is a factor.
The point of failure risk is that only 3 banks: Silvergate (by far the most used), Metropolitan, and Signature Bank bank nearly all US-based crypto operating companies. If something happens to one of those banks, whether it is an issue of solvency or regulatory action, it can seriously damage the entire industry in the US. And what people are more afraid of but not saying, is that leadership in cryptocurrency will move to Asia permanently should something like this happen to one of the crypto-friendly banks.
It's something everyone needs to watch.
#2 Bitcoin as Stabilizer Against Weak Currencies. Emerging Market Trading Volume Grows
Here we have a long-running argument about use cases in the real world for Bitcoin: as a wealth preservation/purchasing power preservation tool against weak fiat gov't issued currencies. I've made this argument myself many times including in my Bitcoin Case Study on Venezuela from back in 2016.
The biggest p2p trading website for Bitcoin is LocalBitcoins.com. You can find me there as Stup2plending by the way. this CoinTelegraph article states that weekly trading volume in 2 countries: Venezuela and Argentina are hitting all-time highs now. And what's going on in these countries?
- Venezuela: the economic disaster of Socialism there continues to get worse. Everyone is trying to get their money out of the country or out of the Bolivar or the Petro into USD, Bitcoin, or DASH (so far the most popular cryptocurrency choices). A huge $24.8 million USD equivalent traded in just one week.
- Argentina: Severe capital controls now in place that limit USD purchases and already delayed debt payments as described in this Bloomberg article. Argentines can only buy $200 worth of cryptocurrency PER MONTH. It's crazy.
#3 Bitcoin Hash Rate Hits All-Time High
The hash rate, or hashes per second, is a measure of the health of the Bitcoin network. The hash process is the last step the block of transactions goes through before it is added to the blockchain. Due to concerns about concentrations of hash power in China and their ability to try to do a 51% attack on the network, this is a number that many industry insiders look at regularly.
And it's hitting all-time highs. Higher is better. Higher means the network is healthier and more secure against network attacks. So while price is important, the health of the network is important too and that part of the equation for Bitcoin is doing just fine.
And lastly a question for you.
Do you think events in Iran or other geopolitical events are factors in Bitcoin pricing? Is it moving to more of a store of value or exit strategy like Gold? What do you think?