This week in crypto. May 10 - 16
Crypto news
The Marketmaker
Crypto markets are relatively young, and tend to fluctuate with every tweet, especially if it comes from public figures of importance. Elon Musk is undoubtedly one of such figures, and, not unlike the previous US president, he loves tweeting.
His backing of Bitcoin and Tesla’s 1.5 bn investment in it were among the forces that drew Bitcoin rally from the February’s $40k to $60k, and his announcement of Tesla suspending accepting BTC for cars were one of the reasons of Bitcoin price dropping from $58k to $44k this week. Tesla mentioned ecological concerns, but it looked rather dubious. Indeed, the green mining trend is only getting stronger: only this week we heard about Agro miner buying hydro plants in Canada, Greenridge miner and Ninepoint investment firm buying carbon offset credits, and EZ Blockchain miner setting datacenters near oil wells to capture natural gas that would otherwise be rejected into the atmosphere. And news like this happen every week.
What could really cause Tesla to put its Bitcoin enthusiasm on hold is its application at the Environmental Protection Agency. If accepted, Tesla vehicles could qualify for tradeable credits under the Renewable Fuel Standard, which could attract Tesla billions of dollars of investment. Whatever the reasons, though, Bitcoin community has been pretty angry with Elon this week, and Twitter debates keep heating up.
The Dogefather
While backing down on Bitcoin, Elon Musk continues touting another cryptocurrency – a crypto-meme called Dogecoin.
Born as a joke in 2013, Dogecoin is a fork off Litecoin, which in turn is a fork off Bitcoin. Famous for his love of memes, Elon Musk gets interested in it in the late 2020, buying Dogecoin and progressively getting more and more involved. This week he even announced that SpaceX will be launching a satellite Doge-1 to the moon next year, a mission entirely paid for in DOGE. Dogecoin is a small community (65% of coins are owned by only 98 wallets), so Elon’s tweets are quite literally shaping the DOGE price chart - and they do it in a spectacular way.
The Dogecoin itself, however, is of little interest. Unlike Bitcoin, it cannot serve as a store of value : a block is mined every 1 min, generating 10k Dogecoins, with no emission cap (a Bitcoin block is mined every 10 min, generating 6.25 BTC, this reward divided by two every 4 years). This means that every year 5.26 Bn Dogecoin are created, while the number of bitcoins will never exceed 21 M.
As a means of payment Dogecoin, with its more than basic science, is much less efficient than more sophisticated coins like Stellar, which is faster and has smaller fees thanks to a different type of consensus. So basically it only has a big hype and Elon Musk behind it... Let’s see how this plays out.
In the meantime it’s always prudent to keep in mind the real function and potential of a coin and not let ourselves get distracted by celebrities’ moodswings.
Art and NFT
NFTs allow a real ownership of digital assets, and this is of a particular interest to the gaming industry. Games can turn their heroes or artifacts into NFTs, which then can be exchanged freely between anyone, anywhere.
Being a cryptoassets, NFT is easily monetized, and “play to earn” crypto games develop massively. Among them Axie Infinity is a true phenomenon. Created as a universe populated with cute blobs (Axies), the game incites them to battle and progress, while earning the game’s token. What makes the game phenomenal though is its increasing use as a means to earn one’s living. Axies’ biggest traffic comes from Philippines, Indonesia and Venezuela, where thousands of people have turned it into an income-earning opportunity. It’s so popular that there’s even a “Axie lending service”: people lending their Axies to others, so that they can start playing, while paying “rent” to the initial owner. Yet another use case for the NFTs.
Crypto markets
Bitcoin
Bitcoin dropped -26% this week, notably after Elon Musk’s tweet about halting bitcoin payments for Tesla, and rests around $45k for the moment.
Bitcoin Fear&Greed index dropped from 72 (greed) in the beginning of the week to 20 (extreme fear), indicating that investors are too worried and that this might be a buying opportunity. At the end of the day, even Tesla Technoking can’t stand against the whole Bitcoin community…
Ethereum
After signing yet another all-time high for a third week in a row ($4380), Ethereum lost -15% vs last week, reacting to the eco-shaming (it uses PoW as a consensus, at least for now). It rests around $3470 at the moment.
Altcoins
This week saw many cryptoassets plummet, but there were several coins that had an impressive surge, like Cardano (ADA +60%) and Polygon (MATIC +116%).
These coins do not have a PoW consensus that require a lot of energy, and they also have very distinct functions and qualities that D.Center mentioned in its previous publications: Cardano is a smart contract platform competing with Ethereum that put a lot of effort into its development in Africa, and Polygon is a layer-2 solution built atop Ethereum that allows faster and cheaper transactions. It was a good week for them indeed.
New article on d.center
Decentralized Finance, or DeFi, reinvents and democratizes finance, replacing traditional intermediaries with DApps accessible to everyone. With over $140 BN locked in DeFi protocol, this sector is booming.
Quote of the week
Bitcoin is an interesting asset, I think it's durable. I think it will be part of the investment arena for years to come.
Rick Rieder, a chief investment officer for the world’s biggest asset manager BlackRock