News Updates January 07, 2023
1. Why does Bitcoin have value? Bitcoin is a digital asset that was created in 2009 by an unknown person using the pseudonym Satoshi Nakamoto. It has since become the largest and most well-known cryptocurrency, with a market capitalization of over $900 billion at the time of writing. Despite its widespread use and recognition, many people still do not understand why Bitcoin has any value at all. In this blog post, we will explore the various factors that contribute to the value of Bitcoin and why it has become such a valuable asset.
One reason why Bitcoin has value is that it is a scarce resource. There are only 21 million Bitcoins that will ever be created, and more than 18 million of them have already been mined. This fixed supply means that the value of Bitcoin is determined, in part, by the laws of supply and demand. As the demand for Bitcoin increases, the price will tend to rise, and as the demand decreases, the price will tend to fall.
Another reason why Bitcoin has value is that it is a decentralized network. Unlike traditional currencies, which are issued and controlled by governments, Bitcoin is not controlled by any single entity. Instead, it is maintained by a decentralized network of users who contribute their computing power to validate transactions and add them to the public ledger known as the blockchain. This decentralization makes it difficult for any one person or group to manipulate the supply or demand of Bitcoin, which helps to maintain its value.
Another factor that contributes to the value of Bitcoin is its use as a store of value. Unlike traditional currencies, which can be printed by governments at will, Bitcoin has a fixed supply and is therefore immune to inflation. This makes it an attractive asset for people who are concerned about the erosion of their purchasing power due to inflation. Bitcoin is also a relatively safe haven asset, meaning that it tends to hold its value during times of economic uncertainty. For example, during the 2020 economic downturn caused by the COVID-19 pandemic, the price of Bitcoin actually increased as people sought to protect their wealth from the effects of the crisis.
Bitcoin’s utility as a means of exchange is another factor that gives it value. Although it is not widely accepted as a form of payment in the same way that traditional currencies are, it is becoming increasingly popular as a means of exchange for a growing number of merchants. This is due, in part, to the low fees and fast transaction times associated with Bitcoin. In addition, the use of Bitcoin allows for more secure and private transactions, as it does not require the sharing of personal information.
Finally, the growing adoption of Bitcoin by institutions and investors also contributes to its value. In recent years, major financial institutions such as Goldman Sachs and JPMorgan Chase have begun offering Bitcoin-related products and services to their clients. In addition, high-profile investors such as Paul Tudor Jones and Stan Druckenmiller have publicly endorsed Bitcoin as a valuable asset. This increased adoption by institutions and investors helps to legitimize Bitcoin and adds to its perceived value.
In conclusion, there are several factors that contribute to the value of Bitcoin. Its fixed supply, decentralization, use as a store of value, utility as a means of exchange, and growing adoption by institutions and investors all contribute to its perceived value. While the value of Bitcoin can be volatile, it has proven to be a valuable and enduring asset over time, and it is likely to continue to be a significant force in the world of finance for years to come.
2. Former Fed Chair Alan Greenspan: Crypto Is Too Dependent on 'Greater Fool Theory' to Be a Desirable Investment.
Former Federal Reserve Chairman Alan Greenspan says crypto is “too dependent on the ‘greater fool theory’ to be a desirable investment.” However, he noted that the collapse of crypto exchange FTX was “purely fraud,” rather than the result of a feature inherent to crypto. He does not expect the FTX contagion to spread far beyond the crypto space.
Alan Greenspan on Crypto, FTX, and US Economy
Former Federal Reserve Chairman Alan Greenspan shared his views on cryptocurrency, the collapsed crypto exchange FTX, and the U.S. economy in a year-end Q&A published by Advisors Capital Management this week.
Greenspan served five terms as chairman of the Board of Governors of the Federal Reserve System from 1987 to 2006. He was appointed chairman by four different U.S. presidents. He joined Advisors Capital Management in September 2016 as Economic Advisor to the asset management firm.
The former Fed chair was asked to comment on the FTX meltdown and whether he expects contagion from it. “I do not expect the fallout from FTX to spread beyond the cryptocurrency/NFT [non-fungible token] space,” Greenspan replied, citing “the information that has come to light so far.” He stressed:
The collapse of FTX was not a result of lax risk management, inadequate accounting procedures, or some feature inherent to crypto — it was purely fraud.
“Fortunately, although FTX and firms like it have increased marketing of their products in recent years, the lack of any noticeable widespread market reaction to FTX suggests that they are still fairly concentrated in the hands of a relatively small subset of investors,” Greenspan described.
“Moreover, the differences we observed in the aftermaths of the popping of the tech bubble and the popping of the housing bubble showed clearly that credit-fueled asset bubbles create far more contagion when they ultimately deflate,” he opined. “There does not appear to be a significant amount of leverage dedicated to the cryptocurrency/NFT space at this time, so I do not expect contagion to spread very far beyond this particular asset class.”
The former Federal Reserve chief added:
With respect to the wider crypto universe, I view the asset class as too dependent on the ‘greater fool theory’ to be a desirable investment.
3. Bitcoin Testing $17K But is Another Crash Imminent? (BTC Price Analysis.
Bitcoin’s price has broken above a significant moving average which has been acting as a resistance over recent weeks. The market seems ready to rise higher in the coming week if the remaining negative factors do not hinder the forming momentum.
Technical Analysis
The Daily Chart:
On the daily timeframe, the price has closed above the 50-day moving average to the upside at last, after failing to do so and getting rejected multiple times over the last few weeks.
This breakout has seemingly paved the way for a rally toward the $18K resistance level and perhaps even higher. A break above the wedge pattern would likely lead to bullish price action in the mid-term, as it is considered a reversal pattern in a bear market.
However, if the price drops back below the 50-day moving average, the chance of declining toward the $15K support zone will increase accordingly.
The 4-Hour Chart:
Looking at the 4-hour chart, the fake breakout and bearish scenario seem more probable, as the price is yet to break above the $17K resistance area to maintain the formed bullish momentum.
Moreover, the RSI indicator shows a clear bearish divergence signal, which further strengthens the likelihood of a reversal in the short term.
An impulsive rejection from the current price level would likely lead to a drop toward the $15,500 support level, which would be the bulls’ last resort.
All in all, things are getting interesting from a technical point of view, as BTC’s behavior around the $17K mark in the next few days would likely determine the mid-term trend of the crypto market.
Onchain Analysis
The following chart includes the Realized Price metric, one of the most valuable indicators to determine whether Bitcoin is under or over-valued. Typically, the price stays above the realized price during bullish market cycles. Conversely, during the last capitulation phase of a bear market, the price drops below the realized price, bringing significant fear and uncertainty. During this period, market participants are under much stress and distribute their assets to avoid additional losses and control their exposure to further market fluctuations.
Considering the previous cycles, the beginning of a bull market is anticipated once the market price surpasses the realized price. This has not happened yet, as the cryptocurrency has failed to break above the realized price, followed by a short leg down.
Consequently, the sustainability of any positive price action is questionable unless Bitcoin surpasses the realized price ($19.7K).
4. After FTX Is Binance Next To Face The Wrath Of U.S. Prosecutors?
U.S. authorities are looking into hedge firms' interactions with the cryptocurrency exchange Binance for possible money laundering offences.
As part of a protracted investigation into possible violations of money-laundering laws at one of the world’s largest crypto businesses, federal prosecutors are now looking into Binance’s connections with American hedge funds. According to the most recent reports, the U.S. Attorney’s Office for the Western District of Washington issued subpoenas in recent months directing investment companies to provide details of their communications with the top cryptocurrency exchange Binance.
As part of a protracted investigation into possible violations of money-laundering laws at one of the world’s largest crypto businesses, federal prosecutors are now looking into Binance’s connections with American hedge funds. According to the most recent reports, the U.S. Attorney’s Office for the Western District of Washington issued subpoenas in recent months directing investment companies to provide details of their communications with the top cryptocurrency exchange Binance.
Binance In More Trouble?
The subpoenas have been issued at a time when Binance, the largest crypto conglomerate in the world, is under increasing scrutiny from the media as well as the regulatory authorities on its business methods and financials. This criticism reached a fever pitch by the end of the previous year in the wake of the multi-billion-dollar implosion of FTX, which shook the trust of investors in an increasingly volatile and unsettled crypto market.
However, according to legal specialists, the U.S. authorities are still examining the evidence at hand & currently in discussion for a potential settlement with Binance; therefore indicating that the purportedly issued subpoenas do not aim towards pressing charges against the cryptocurrency exchange or the hedge funds in question.
5. Ankr Hack Update: Law Enforcement Investigates Vulnerabilities That Led to Hack.
Ankr has released the most recent information on the exploit case following the events of the DeFi protocol's aBNBc token exploit on Dec. 1.
Ankr claimed in a blog post published toward the end of December that a former employee had carried out a "supply chain attack" by slipping malicious code into a package of upcoming updates. "A former team member (who is no longer with Ankr) acted maliciously to conduct a combination of a social engineering and supply chain attack, inserting a malicious code package that was able to compromise our private key once a legitimate update was made," the blog post stated. It also stated that it was working with law enforcement to prosecute and bring the former team member to justice.
According to the team, the exploit case is still ongoing as of right now. It said that because it was collaborating with law enforcement and had to be careful about sharing information because of this relationship, updates on its status were kept from the public. The Ankr team draws attention to recent reports of funds related to the exploiter being moved. It explains this was because it was able to recover part of the stolen funds from the exploiter with the help of law enforcement, which was then sent to Huobi. The process of recovering funds remains ongoing, according to Ankr, and more are being sought.
