A Russian Gas-Embargo, NFT Regulations, and BTC as Legal Tender: the Weekly Round-Up
Market Movers
The majority of the largest coins by market cap were in the green for the week; however, most gains were not substantial percentage-wise—highlighted by Bitcoin dropping from its mid-week high of $45K to a more conservative under $40K range
A coin that did trend significantly upward was Waves (WAVES), which rose nearly 60%
WAVES’ big gains were in large part due to the announcement of Waves 2.0, an upgraded protocol of their current version set to launch in the spring that includes a new metaverse utility and a faster overall network (via CoinTelegraph)
First Sip
If you’re already a crypto native, feel free to skip to “Table Talk.”
A QUICK HISTORY LESSON
Late in 2008, an individual or group of individuals posted a whitepaper to a cryptography forum under the pseudonym Satoshi Nakamoto (via James Moore). The true identity of Nakamoto is unknown, but his/her/their paper and ensuing implementation of the Bitcoin blockchain have since revolutionized payment systems and have spawned an entire ecosystem of new applications.
On January 3, 2009, Nakamoto mined the “genesis block” (the initial block), and Bitcoin was officially born. In this paper, Nakamoto outlined the structure of a peer-to-peer, trust-less, monetary framework. However, it was not until the actual implementation that the hard cap of 21 million bitcoins was set, which garnered it the reputation as “digital gold” and the ultimate inflationary hedge because of this (via CNBC).
In the first several years, Bitcoin was essentially Monopoly money with miners supporting the network and executing proof-of-concept transactions. On May 22, 2010, this all changed as Bitcoin miner Laszlo Hanyecz paid an individual $10K BTC for $25 worth of Papa John’s pizza (via Investopedia). “That transaction essentially established the initial real-world price or value of Bitcoin at 4 Bitcoins per penny,” according to Professor Mark Grabowski (via U.S. News).
In the ensuing years, the price of BTC has risen rapidly—essentially following Moore’s Law as seen below (via Business Insider).
The graph above is particularly bullish as it can be interpreted as indicative of BTC following a similar adoption/advancement curve to other world-changing technologies.
Other cryptocurrencies have been created, but Bitcoin still remains the greatest by market cap. At the time of this writing, 18,976,562 of the 21,000,000 are already in circulation (via CoinMarketCap). There’s incredible value to being the first mover, but innovations in the DeFi would have begun to put selective pressure on BTC to adapt.
The BTC Blockchain has attempted to incorporate some of the platform-like features that Ethereum and Solana support, for example, with the creation of the Lightning Network, but its dominant attraction is that idea of an inflationary hedge. Jack Dorsey’s Spiral offers grants to create applications built on Bitcoin/Lightning. Still, Lightning development has remained relatively unpopular in comparison to development on the more platform-centric blockchains. We are excited to see what’s next for the world’s first cryptocurrency.
Some food for thought: What will happen once all 21 million bitcoins are minted? Will the price stabilize? If so, will there be much interest in trading such an asset as the price volatility decreases, especially with most owners HODLing?
Table Talk
UKRAINE/RUSSIA CONFLICT STILL AFFECTING CRYPTO
We believe that there are three main factors influencing cryptocurrency price movements at the moment that you need to know:
The Russia/Ukraine Conflict
Surging gas prices as a result of said conflict
The Federal Reserve releasing its Consumer Price Index number for February
As we’ve talked about in recent newsletters, the price of Bitcoin and other cryptocurrencies are sometimes affected by the global markets. Since cryptocurrencies are labeled a “risk asset” to many investors who do not believe in the technology long term, once the stock market sells off, risk assets such as crypto are also sold off, resulting in a drop in prices.
Next, it is no secret that many investors remain hesitant, if not fearful, over the ongoing Russia/Ukraine conflict. Gas prices soared above $4 dollars a gallon in the U.S. this past week, a price-point that has not been reached since 2008 (via CarAndDriver).
These prices could continue to rise as a Sunday report from The Guardian indicated that the U.S and its allies are seriously discussing banning the import of Russian oil in an effort to hinder Putin’s war efforts. European countries would be more drastically affected than the U.S. by such a decision since only 3% of U.S crude shipments from 2021 came from Russia. As many reports signal, the 3% could be easily made up by turning to global oil reserves to make up for the loss.
Another potential catalyst for cryptocurrency price trends is the Federal Reserve releasing its consumer price index (CPI) number for February, which it is scheduled to do this upcoming Thursday (2/10).
In short, the CPI measures the average change in prices over time that consumers pay for a basket of goods and services and is the most widely used measure of inflation (via Investopedia). Last month, CPI rose to 7.5%, and it is worth noting that it has been increasing each month since August 2021 (via U.S. Bureau of Labor Statistics).
It is widely anticipated that February’s CPI number will be higher than January’s 7.5%, and all of Wall Street will be tuning in to see how significant that jump will be. Moreover, a small rise could spark a positive week for both stocks and crypto and signal that inflation is trending downward, but that’s unlikely.
The data released on Thursday is vital in the long run as well since the Feds’ chairman Jerome Powell and the FOMC will use these numbers when they meet the following week, March 15th and 16th, to decide how they will handle inflation going forward.
NFT Buzz
SEC ANNOUNCES NFT REGULATORY DIVE
Earlier this week, Bloomberg reported that “insiders within the SEC” are investigating if NFTs “are being utilized to raise money like traditional securities,” which would clearly fall within the SEC’s chartered purview and give the SEC an avenue to regulating at least some NFTs (via Fast Company). The distinction comes from trying to determine if there is an “investment contract” involved (via protocol). While the SEC does not indicate that they are looking to regulate the entire industry, they maintain: “given the breadth of the NFT landscape, certain pieces of it might fall within our jurisdiction” (via protocol).
We’ve seen NFTs used in this fashion, but relatively rarely. The SEC would only have the jurisdiction to regulate a niche portion of the NFT market, which makes this action a relative drop in the bucket when compared to the broad nature of the overall NFT market. As we’ve said in past weeks, regulation of crypto is inevitable—it’s part of maturing into a mainstay of society. Many regulatory institutions within the U.S. and beyond are trying to define their roles in the new crypto ecosystem, so expect to see many more of these “probes” in the coming months/years. Nothing to worry about.
P.S. We’ve announced our newest NFT collection this week. See more on our Twitter.
DeFi Demographic
LUGANO TO MAKE BTC LEGAL TENDER
Lugano, a city in Switzerland's southern region, plans to make Bitcoin, Tether, and the city's own LVGA token legal tender (via TheCRYPTOBasic).
Citizens of Lugano will be able to use the three cryptocurrencies to pay for all goods and services and, eventually, for taxes.
The move marks a historic day for all things Web3 as Lugano is the first European city to adopt cryptocurrency as a legal tender.
The city’s mayor, Michele Foletti, was quoted as saying, “The city is investing in its future. Lugano strongly believes in the potential of blockchain and that our partnership will help build a better, more open, transparent, and smart city.” It’s fitting that a nation that was once known for its incredibly private banking system is also the one to take a first step in accepting a pseudonymous medium of exchange.
Bullish.
Final Cup
Positive week for most large cryptocurrencies, but gains were small for most. Volatility could be higher than usual if Russia/Ukraine continue to be at war.
Keep an eye out for the Feds’ Consumer Price Index announcement on Thursday and how the market reacts to it
The SEC will be probing NFT marketplaces to understand if any fund-raising NFT collections fall under their purview. It is unlikely this will have much impact on the broader NFT ecosystem
Swiss city Lugano plans to make crypto legal tender. Hopefully, this inspires a domino effect in European crypto adoption
Meme of the Week
(Via Reddit)
In honor of the new Batman movie. If Bruce Wayne tells you to HODL, you HODL.
Pat + Ari ✌️
Disclaimer: None of this is investment advice, financial advice, or trading advice. CRYPTOPONG does not endorse any of the cryptocurrencies, DeFi applications, or NFT collections mentioned in this article. Perform your own due diligence and/or consult a financial advisor before investing.