3 reasons why Ethereum exchange reserves are falling to new lows


Cointelegraph 08 July, 2021 - 04:25pm 30 views

When is ETH London hard fork?

Ethereum's long-awaited London hard fork is likely to launch on Aug. 4 between 13:00 UTC (9 a.m. ET) and 17:00 UTC, with block 12,965,000. Many Ethereum enthusiasts are excited for the delayed release, while some are watching on with “cautious optimism.” Yahoo FinanceEthereum’s London Hard Fork Expected to Launch on Aug. 4

Ethereum held in exchange reserves reached a new low after a surge in Ether staked in Eth2 and the approach of the long-awaited London hard fork.

Recent data from CryptoQuant, an on-chain analytics firm, indicates that the amount of Ether held in cryptocurrency exchanges' reserves has hit new daily lows since the start of July.

To determine if this is a bullish or bearish development for the top altcoin, let's take a closer look at some of the factors playing a role in the increased demand for Ether, including the Eth2.0 staking contract, increased activity in decentralized finance and traders' possible excitement ahead of the implementation of Ethereum Improvement Proposal (EIP) 1559.

One source for the increased demand for Ether is the Eth2 staking contract which surpassed the 6 million Ether mark on June 30.

There is now 6 million ETH in the eth2 deposit contract.

Data from CryptoQuant shows that July 1 saw the largest single-day outflow of Ether from exchanges since January 21 with more than 596,000 Ether pulled off exchanges.

The most recent data provided by Eth2 Launchpad indicates that the current amount staked is 6,166,661, which indicates that not all of the Ether withdrawn from exchanges went into staking.

Another possible destination for the Ether being taken off exchanges is the decentralized finance ecosystem which has seen increases in token values as well as the total value locked in DeFi protocols.

While Ether and Bitcoin (BTC) hold a lot of the value that is currently locked in DeFi, their prices have remained relatively unchanged over the past week, meaning the recent rise in TVL seen on July 8 may have been caused by rising token values as deposits have remained steady according to deposits and loan data provided by Dune Analytics. 

A third potential contributor to the recent flows seen in Ether is the upcoming London Hard Fork and the EIP-1559 proposal.

Several analysts expect the upgrade to positively impact Ether's price due to the transition to a more eco-friendly proof-of-stake consensus mechanism as well as a new “scarcity” feature that will reduce the number of tokens in circulation.

Related: Ethereum price can gain 40% on Bitcoin, argues analyst as London fork nears

Excitement about the upcoming hard fork is a possible source in the rise of ETH/BTC pair seen since June 27 as the price of Ether also rose in its USD pair.

While Ether has outperformed Bticoin for a majority of the time since June 27, BTC’s performance during the market-wide pullback on July 8 is a sign that BTC remains the most resilient of the cryptocurrencies when market conditions are less than favorable.

From a long term perspective, however, the value proposition of Ether can’t be ignored and the battle between Ether and BTC is far from settled as recently discussed in a report from Goldman Sachs, which suggests that Ether will possibly surpass the total market capitalization of Bitcoin in the coming years.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Deep in rural China, bitcoin miners are packing up

The Economist 09 July, 2021 - 07:00pm

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But across Sichuan, the fans have stopped whirring. In May, a government committee tasked with promoting financial stability vowed to put a stop to bitcoin mining. Within weeks the authorities in four main mining regions—Inner Mongolia, Sichuan, Xinjiang and Yunnan—ordered the closure of local projects. Residents of Inner Mongolia were urged to call a hotline to report anyone flouting the ban. In parts of Sichuan, miners were ordered to clear out computers and demolish buildings housing them overnight. Power suppliers pulled the plug on most of them.

The clampdown has had a global impact. Bitcoin’s “hash rate”, a measure of the computational power being used by the world’s mining machines, has fallen by half in recent weeks. Its “difficulty rate”, which rises and falls as computers join or leave the mining effort, last week fell to an all-time low. China had accounted for about 65% of bitcoins earned through mining, according to the Cambridge Bitcoin Electricity Consumption Index. But analysts think about 90% of its mining has now ceased. Chinese miners are selling their computers at half their value.

In 2017 China, fearing a loss of financial control, banned cryptocurrency trading. But local governments still welcomed the miners: they were a source of taxes and other levies. In June a state-run zone in Ya’an, a city in Sichuan, had been set to open in time for the start of the rainy season. It was offering cheap power for mining and other digital activities. “It was a win-win,” says Kirk Su, a miner who had been planning to put some of his machines in the zone. “China was leading in mining in all respects: cheap power, cheap labour, fast and easy access to kit,” he says.

Then came the clampdown. It was targeted in part at the cryptocurrency traders. The mining industry itself has little to do with the volatile business of trading. But miners could not function without converting their new bitcoins into yuan. For this they used exchanges that had moved offshore after the trading ban, but still targeted Chinese users. The government may have decided that to rid China of crypto transactions, “mining had to go”, says Bobby Lee, who co-founded China’s first cryptocurrency exchange (it was forced to shut in 2017). He now runs Ballet, an app that lets users manage their digital currency.

The central government said it wanted to “resolutely prevent the transmission of individual-level risks to broader society”. That may, in part, have been a reference to the activities of some mines that had been setting up Ponzi-like schemes, promising big returns to investors. Other scammers have been masquerading as cryptocurrency traders. Last year over 100 people were arresting for running two such operations, PlusToken and WoToken.

To evade the clampdown, big miners have sent their machines overseas. Mr Su, who also runs a logistics business that transports mining machines, has been chartering Boeing 747s to get used ones out swiftly. Most are going to Russia and Kazakhstan, which together account for about 13% of the world’s bitcoin mining. But there are few data centres abroad with space for lots of new machines, including in America, the second-biggest miner. Building a farm there costs between five and ten times what it does in China, says Mr Su. That is too much for most Chinese miners. More than half of their computers will stay put for now, he says.

Some smaller miners are still finding ways to operate. One says he is lucky to have teamed up with a privately owned hydropower station that is loth to forgo the extra revenue (it risks being fined by the grid or booted off it). While meeting your correspondent, he struck a deal to buy a farm from a fellow miner for 5m yuan ($770,000), powered by a plant that is off the grid. If his machines can function there for 15 days, he will have earned his investment back in bitcoin.

In an abandoned school in southern Sichuan, Mr Su has stored 10,000 machines from some of his shuttered farms. For every day they spend there, unplugged and stacked to the ceiling, he says that 1m yuan in potential profit is lost.

This article appeared in the China section of the print edition under the headline "There was gold in them thar hills"

Market Wrap: Bitcoin Sells Off as Regulatory Concerns Resurface

Yahoo Finance 08 July, 2021 - 03:25pm

There is a lack of a “real catalyst or market-moving events right now,” wrote QCP Capital in a Telegram chat. “We expect volatility to remain under pressure until mid [to] late August.”

“With BTC, we have seen some funds speculate that the lack of narrative combined with lower levels of liquidity on exchanges may lead to a pop in prices if a positive headline is to occur,” wrote Chris Dick, quant trader at crypto trading firm B2C2. 

Related: Survey Suggests Most Salvadorans Wary of Bitcoin as Legal Tender

Bitcoin (BTC) $32962.45, -4.68%

Ether (ETH) $2157.6, -8.93%

10-year Treasury yield closed at 1.3%, compared with 1.318% on Wednesday

Growing concerns from regulators have been weighing on cryptocurrency prices over the past few months. This week, China’s crackdown intensified when the nation’s central bank issued a warning about the risks of stablecoins. 

“Global stablecoins may bring risks and challenges to the international monetary system,” said Fan Yifei, deputy governor of the People’s Bank of China (PBOC) on Thursday. The banker also said the central bank was already taking measures against cryptos.

Related: Osprey&#8217;s Bitcoin Trust Ups the Ante in Race to Displace GBTC

In Europe, several countries are proposing forming a new agency to crack down on cryptocurrencies that could potentially be used for money laundering. Concerns also include terrorist financing and organized crime, which should be addressed at the European Union level, according to documents reviewed by Reuters on Thursday. 

Cryptocurrency risks were also reviewed by 15 West African nations during parliamentary meetings on Thursday. 

And in the U.S., Sen. Elizabeth Warren (D-Mass.) gave the Securities and Exchange Commission (SEC) until the end of this month to figure out its role in regulating cryptocurrencies.

Some analysts are not convinced that bitcoin could receive a boost from the expiration of investor restrictions on the sale of shares in the Grayscale Bitcoin Trust (GBTC), the world’s largest cryptocurrency fund. (Grayscale is a unit of Digital Currency Group, of which CoinDesk is an independent subsidiary).

“We don’t expect these unlocks on [their] own to have significant impact on the overall market outside of GBTC itself,” QCP Capital wrote in a Telegram chat.  

“Most of the large institutional positions who had subscribed in-kind before have already been unlocked earlier, and they have held off selling at the current discounted price.”

The stablecoin supply ratio (SSR), which measures the relationship between bitcoin supply and stablecoin supply, is stabilizing after a sharp decline from the January peak.

“A low SSR implies high quantities of stablecoins on the sidelines – or more buying power to purchase risk-on digital assets,” wrote David Grider, strategist at Fundstrat, in a Thursday newsletter.

SSR shows that flows have shifted from bitcoin to stablecoins for most of the year, but recently bottomed out. This could point to investor confidence in bitcoin’s price direction as stablecoin cash is put to use.

​​Circle, operator of USD coin, the world’s second-biggest stablecoin, announced it is listing on the New York Stock Exchange via an acquisition by Concord, a special purpose acquisition company, or SPAC, led in part by former Barclays CEO Bob Diamond. The deal values the crypto financial services firm at $4.5 billion. 

The Boston-based firm generates income in three ways, according to its investor presentation: from transaction fees on USDC and interest earned on its reserves; transaction and treasury services (TTS); and SeedInvest, the equity crowdfunding platform it purchased in 2019.

Jeremy Allaire, CEO of Circle, wrote in a tweet that the transformation from a private to a public company “creates an opportunity for Circle to also provide significantly more transparency about the business we are building around USDC, and about the reserves that back USDC.”

USDC has grown to about $25 billion outstanding from less than $1 billion a year ago, while an increasing number of investors have demanded more insight into assets backing the stablecoins. 

Circle losses from email fraud: Circle lost over $156 million on its blockbuster buyout and subsequent jettisoning of the crypto exchange Poloniex, the payments company revealed Thursday. The company also lost another $2 million to email fraudsters in an “incident” that occurred last month.

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Elizabeth Warren Gives SEC July 28 Deadline to Figure Out Crypto Regulation 

All digital assets on the CoinDesk 20 ended lower on Thursday.

polkadot (DOT) -11.25% 

the graph (GRT) -9.9%

uniswap (UNI) -9.01%

Sen. Elizabeth Warren is wondering about increased federal oversight of cryptocurrency trading exchanges and wants the Securities and Exchange Commission to examine its authority to regulate them.

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Kraken is disputing the premise that a wave of GBTC shares hitting the secondary market will drive the price of bitcoin lower.

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