The crypto space is buzzing with events. Bitcoin and Ethereum hit new highs, Tesla entered the crypto space, XRP bounced back and new regulations on digital assets all over the world are coming. What is going on and what does it mean for the whole cryptocurrency world?
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Tesla took its first step into bitcoin
The electric car giant Tesla has bought $1.5 billion dollar worth of bitcoins. In its filing with the Securities and Exchange Commission on February 8, the company also mentioned its plans to start accepting bitcoins as a payment method for its products in the near future.
The news drove bitcoin’s price up in minutes. The biggest crypto spiked by 12% within a single hour and fixed the new record high of nearly $44,000. It continued to grow over the $48k mark the next day when a new historic high of $48,025 was reached.
Tesla shares consequently increased by 10% soon after. The company even overtook Apple and became the favorite stock to buy for millennials.
Tesla seems to be on a tear, but the question is – for how long? Could its massive bitcoin investment be just a distraction? On the flipside of these events, Chinese regulators summoned Tesla on quality issues this week as users started to complain about their electric cars’ quality.
This might ring some bells for Tesla, as China is a highly important, fast-growing and second-largest market, generating 21% of the company’s global sales. The company is competing with a number of solid electric car start-ups in China as well.
Ethereum is gaining in market capitalization
Ethereum, the second-largest digital currency, also spiked to a new record high this week. The coin rallied to $1,826 just hours after the Chicago Mercantile Exchange started trading its futures.
Ethereum has seen an unprecedented institutional demand lately. Multiple Wall Street investors see it as a store of value and a hedge against the US dollar inflation. During the past year, Ethereum increased by almost 700%, generating solid returns.
Tyler Winklevoss once used an accurate metaphor for Ethereum and named it as digital oil, whose blockchain is used as a fuel for multiple decentralized applications that can be built on top of its network. However, the crypto space has plenty of Ethereum rivals and now they are raising their heads.
Cardano (ADA) introduced smart contract functionality, which allows creating and deploying decentralized apps and even their own custom tokens on the Cardano blockchain. The price of the coin rallied, making it the fourth-largest crypto by market cap. The market excitement around other rival coins like EOS and Polkadot is growing as well as investors are starting to see value in so-called Ethereum-killers.
More institutional investors, more regulators
In 2020 bitcoin went institutional with Grayscale, MicroStrategy, Massmutual, Fidelity Investments, Guggenheim, and Ruffer Investments investing hundreds of millions. No less than 1000 companies chose bitcoin as a form of investment last year, said Micheal Saylor, the CEO of MicroStrategy.
The trend continued in 2021 with a fresh resurgence of institutional interest, which brought the total value of the crypto market over a record high of $1 trillion dollars.
The largest asset management company BlackRock opened its two funds to bitcoin futures. Then Tesla stepped into. Then Michael Saylor held the conference “Bitcoin for Corporations” and almost 7,000 companies showed they are interested in digital assets. Even the mayor of Miami revealed the plans to invest some city funds in bitcoin.
On the flipside, crypto regulators also are on the move. The chairman of the French financial regulator suggested the centralized regulation of digital assets in the European Union. He offered European Securities and Markets Authority (ESMA) to regulate the emerging crypto market.
Tax authorities worldwide intensify their efforts to create a framework for taxing digital currencies. G7 countries declared their will to regulate the digital payments industry. They are discussing the implementation of digital taxation in this week’s summit.
The South Korean government intends to sign a number of changes to crypto tax legislation and plans to launch it by 2022.
Meanwhile, the Central Bank of Nigeria has banned crypto transactions and even warned of serious regulatory sanctions for anyone, who will not comply with the order. Nigeria is one of the most Bitcoin-interested countries on Earth. And the move can be a huge blow for its blockchain start-up economy that aims to generate $10 billion in revenue within a decade.
XRP bounced back after a wave of delistings
The massive cryptocurrency rally has also benefited Ripple’s XRP these days. The coin increased its value by more than 30 percent in a week. XRP crossed the $0.5 level for the first time since the massive pre-Christmas free fall.
Japanese financial giant SBI Holdings included XRP in its cryptocurrency lending service. Users of SBI can lend XRP for a return of 0.1 percent per year, including taxes.
SBI Holdings is collaborating with Ripple Labs in developing a cash transfer application, widely used by Japanese banks. However, the company’s latest move might still be a risky one keeping in mind the darker side of XRP.
The Ripple’s coin is still delisted by major cryptocurrency exchanges including Coinbase and Binance. Multiple crypto trading platforms refused to support XRP since the last days of 2020 as the Securities and Exchange Commission sued Ripple Labs for selling XRP coins as security.
XRP lost almost 60% of its value by the beginning of January. The world’s largest digital asset manager Grayscale Investments announced the start of its XRP Trust dissolution process. Cardano (ADA) outranked XRP by market capitalization and became the fourth biggest crypto.
The bright side and the flipside. Crypto space is full of contradictions that keep the turbulence in the markets. That is definitely going to bring interesting news for all of us. So let’s keep questioning all the things that are going on in the crypto space. Thank you for listening. And see you in the next episode of “Flipside of crypto”.