The ability for cryptoassets to provide a good hedge against inflation is again in the spotlight this week, as consumer and commercial price rises start to accelerate across the board. It’s perhaps the reason why more billionaires and one-time sceptics are weighing significant Bitcoin investments. Carl Icahn is the latest, telling Bloomberg he is considering a $1bn to $1.5bn purchase through Icahn Enterprises.
“We’re pumping a lot of money into this economy and obviously you’re going to get inflation from that. Equities are being traded at ridiculous prices. And you can’t have these values without excess inflation. Cryptoassets are here to stay in one form or another [so] I’m looking at the whole business, and how I might get involved in it.” Carl Icahn, owner, Icahn Enterprises
UK factory output figures have hit a record pace, The Guardian reported on 1 June. A surge of new orders helped Britain’s manufacturing sector to post the highest monthly figures since records began in 1992. IHS Markit, which compiles the figures, said that UK PMIs hit an unprecendented 65.6 in May 2021, compared to 60.9 in April. Any reading over 50 indicates sector-level growth.
“UK manufacturing growth boomed in May, as the PMI rose to a record high amid the strongest intake of new orders in nearly three decades. However, producers also saw supply-chain disruption, leading to soaring output costs.” IHS Markit, PMI reporting
Across the Atlantic, CNN reported that US gas prices hit their highest prices in seven years on 30 May, aided by soaring WTI and Brent crude prices, with both benchmarks approaching the $70 per barrel mark.
Reuters also recorded on 1 June 2021 how Eurozone inflation jumped past the European Central Bank’s target in May, with manufacturing too facing record input costs in the face of output records tumbling.
The real result of such numbers on bond yields was almost immediate, with German 10-year yields hitting fresh all time lows, dropping to minus 2.67%. The German Federal Statistics Office noted that inflation in the Euro powerhouse climbed from 2% in April 2021 to 2.5% in May 2021.
“Real yields are now NEGATIVE for 61 consecutive months, another fresh historic record!” Holger Zschaepitz, markets reporter, Die Welt
At the same time, the balance sheets of the ECB, the US Federal Reserve and the Bank of Japan each hit all time highs as central banks continue their unprecedented quantitative easing experiment, seemingly indefinitely. The ECB’s balance sheet extended to €7,657.6bn as Christine Lagarde continues to print Euros at an accelerated rate: the bank’s total balance sheet is now equal to 77% of the Eurozone’s entire GDP.
Ethereum is already the global settlement layer for trillions of dollars-worth of digital assets. The extraordinary growth and utility of this blockchain does not comes without problems: slow transaction times and high fees are persistent issues. But each in turn could be solved by the rapidly-approaching ETH2 upgrade.
We heard this week that the ETH2 staking contract has now surpassed 5 million ETH, worth a total of $13.5bn at time of writing, where 1 ETH = ~$2,600.
The contract holding all of this ETH is viewable via the Etherscan.io block explorer. This size of the staking contract is a proxy for the strength of community support for Ethereum’s long-term development, with a suite of upgrades expected between now and 2023.
The main difference between ETH and ETH2 is its consensus mechanism: Ethereum is moving away from Proof of Work to Proof of Stake. This technical shift alters Ethereum’s reliance on miners to process blocks of transactions. In its place, any party that owns 32ETH (~$84,329) and is willing to stake that ETH into the ETH2 contract will be allowed to process transactions instead. As per a recent blog post from the Ethereum Foundation developer Carl Beekhuizen, after the merge to ETH2, the Ethereum blockchain will use around 99.95% less energy.
The Genesis launch of ETH2, called the Beacon chain, required an absolute minimum of 16,384 validators to deposit and maintain funds equivalent to 524,288 ETH into the ETH2 contract. Because this minimum balance was maintained until the launch date, the Beacon chain (the core upgrade turning ETH from Proof of Work to Proof of Stake) went live on 1 December 2020.
That was the first move in a multi-year upgrade that could see Ethereum blockchain process 100,000 transactions per second. Between now and 2023, developers are expecting to introduce features like sharding, transaction rollups and parallel chains to speed up processing.
As of 1 June 2021, the ETH2 contract is over-subscribed by 994%, showing the level of support for the Ethereum blockchain’s switch to the newer, greener PoS consensus mechanism. Data from analytics provider Beaconcha.in shows that 153,161 validators are now active on the network.
A recent hackathon, or developer conference, has also accelerated Ethereum’s upcoming ETH2 merger.
“All teams now have a deep familiarity with the structure of the merge, and a clear visual on how their software will evolve in this coming year. Client teams are now focused on this summer’s two forks, London and Altair, which researchers are back to merge spec refinements and testing. After the summer upgrades, teams will shift their focus to the merge, and begin tackling the production engineering with an eye toward public testnets.” Danny Ryan, lead ETH2 co-ordinator, Ethereum Foundation
ETH2 won’t change anything about the way Ethereum is used, only its efficiency. Malicious actors seeking to carry out illicit actions are heavily disincentivised from doing so. The minimum 32ETH required to become a validator has to be locked up for the duration of transaction processing and ETH2 punishes poor behaviour (like going offline, failing to validate certain transactions, or attempting to manipulate Ethereum’s record) forcing bad actors to lose their staked ETH.
It’s no secret that Binance has long wanted a piece of Ethereum’s success with DeFi, knowing that Vitalik Buterin’s 2015-launched foundational financial base layer has a vice-like grip on the market. Ethereum’s pre-emininence in DeFi comes really from its technological advances, wide adoption and the perception and reality of its internal security. By contrast, Binance’s failure to secure its protocols correctly has led to its DeFi platforms losing staggering amounts of money in recent weeks.
One of the main uses for smart contracts is to create programmable transactions. For example, with automated market makers like Uniswap, all of whose markets are Ethereum-based. Each Uniswap liquidity pool, whether that’s DAI to ETH or USDC to ETH, is simply a smart contract running on Ethereum.
Users can write particular functions into the smart contract: programming logic that governs how that transaction plays out.
When poor security meets inadequate governance, that’s when smart contract-based DeFi loans, borrowing or swaps start to see significant and costly problems.
At present, there’s no question that Binance can offer lower transaction fees for services on its Binance Smart Chain platform than Ethereum. But this has come at a security cost. Between March and early June 2021, $125m of Binance’s BUSD stablecoin has been stolen from leaky DeFi protocols.
And the thefts are accelerating. Just the latest of Binance’s failings was exposed on 29 May, when the automated market maker Belt Finance was exploited for $6.2m in BUSD. In a post-mortem report, the Belt Finance team admitted that attackers managed to exploit the bug eight times before the hack was discovered. 24 hours earlier, Binance-based BurgerSwap saw $7.2m stolen. And on 20 May a staggering $45m was stolen from the Binance Smart Chain-based PancakeBunny DeFi service.
Further attacks against two Binance DeFi protocols, Bogged Finance and BunnySwap earlier in May, saw another $6m in BUSD stolen. In March, decentralised storage provider Turtledex exit-scammed users for $2.5m That thefts came hot on the heels of two of the largest hacks in recent memory, again both against Binance-based DeFi services. On 2 May Spartan Finance was hacked for over $30m while Uranium Finance, a Uniswap clone, lost $50m in a late April hack.
Binance CEO CZ Zhao recently defended the number of DeFi protocols using code copy-pasted from Ethereum on Binance Smart Chain. Insitutional interest in DeFi loans and borrowing is rising rapidly, but with security issues like these, it can’t be long until there is a mass exodus away from the rival blockchain.
After all the excitement and cascade effects of heavily-leveraged liquidations in last week’s crash, markets have stabilised in a fairly tight range. Starting the week at almost exactly $40,000, Bitcoin dipped to just over 16% to a weekly low of $33,420.18, before paring back those losses to climb 8.1% to $36,148.48. The $40,000 region was surpassed twice earlier in the week, but it is that round number that now appears to be providing some near-term resistance.
After briefly careening down into the $1,700 range, Ethereum has reverted to recent type, bouncing back above the $2,000 level it first captured in February 2021. There began a relatively quiet and stable week for the Ethereum blockchain’s native currency, as ETH posted a high of $2,905.96, just 5.4% above where it began. By the end of the week ETH had bounced off a low of $2,187.27, adding another 16.2% to finish proceedings at $2,541.25.
Litecoin has rebounded strongly from recent lows, aided by the launch of Venmo’s much-awaiting cryptocurrency offering, another milestone in adoption for one of the oldest and most-secure crypto payments platforms on the market. Like Bitcoin and Ethereum, Litecoin too traded in quite a tight range this week, beginning at a hair under $200 and finishing the week just below $180. A daily low of $156.53 was quickly rejected as traders brought LTC back up into the mid $170s, and the payments coin finished the week some 14.4% above its weekly low.
Disclosure | Copyright © 2022 ETC Group. All rights reserved
If you continue to use our website, you are deemed to have read and accepted our Terms and Conditions as set out below:
This website is for information only. It does not provide investment, tax or legal advice or recommendations. According to the applicable laws and regulations in your jurisdiction, some contents on this website or the access to certain contents on this website might be restricted.
Disclaimer: The material and information contained on this website is for informational purposes only and ETC Management Ltd, its affiliates, and subsidiaries are not soliciting any action based upon such material. The material and products do not represent or shall not be inferred as an offer or a recommendation to buy or sell a security, nor shall it be considered or treated as investment advice. Additionally, the material accessible through this website does not constitute a representation that the investments described herein are suitable or appropriate for any person. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on any information.
Distribution of Information:
The distribution of the information and material on this website may be restricted by law in certain countries. None of the information is directed at, or is intended for distribution to, or use by, any person or entity in any jurisdiction (by virtue of nationality, place of residence, domicile or registered office) where publication, distribution or use of such information would be contrary to local law or regulation.
You must inform yourself about, and observe any such restrictions in your jurisdiction and by accessing this website you represent that you have done so. The information on this website is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof).
By accepting these Terms and Conditions, you hereby confirm that according to the applicable laws and regulations of the relevant jurisdiction (be it the jurisdiction of your nationality, residence, incorporation of the company you are representing or current physical location) you are allowed access this website.
Use of this website does not result in a contractual relationship between the user and ETC Issuance GmbH. To that extent, no contractual or quasi-contractual claims arise against ETC Issuance GmbH as a consequence of visiting this website.
No content of this website should be considered as an offer to purchase any product or securities as described on this website. The prices and valuations published on this website are indicative and are for information purposes only, as is other information displayed on this website. Any person making offer of securities described on this website shall observe and strictly comply with restrictions on the usage of information pursuant to these Terms and Conditions, as well as any restriction imposed by a prospectus published with respect of any securities described or applicable laws and regulation, including without limitation restrictions imposed by the EU Prospectus Regulation (REGULATION (EU) 2017/1129 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 June 2017).
Any securities described on this website are not permitted to be offered for sale in all countries and are in each case reserved for investors who are authorised to purchase the securities. Selling restrictions applicable to specific products are set out in the relevant prospectus and should be read carefully by investors. Any restrictions imposed by the relevant prospectus are in addition and without prejudice to any restriction or prohibition established by laws or regulations of any jurisdiction.
United States Persons and legal entities resident in the United States
Securities issued by ETC Issuance GmbH or its affiliates have not been registered under the U.S. Securities Act of 1933, as amended, (the "Securities Act"). The Bonds are being offered outside the United States of America (the "United States" or "U.S.") in accordance with Regulation S under the Securities Act ("Regulation S"), and may not be offered, sold or delivered within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
The information provided on this website is not directed to any United States person or legal entity or any state thereof, or any of its territories or possessions.
U.S. PERSONS (AS DEFINED IN REGULATION S) AND LEGAL ENTITIES RESIDENT IN THE UNITED STATES MAY NOT ENTER THIS WEBSITE.
Information from this website may not be distributed or redistributed into the United States or into any jurisdiction where it is not permitted.
Exclusion of liability for content
Some documents displayed on the website and its content are restricted to ”Professional Investors” only and are not intended for retail or private investors. By making use, opening, or downloading such documents, you agree that you are an “Institutional Investor” as defined here: https://www.handbook.fca.org.uk/handbook/COBS/3/5.html, and have read, understood and accepted the conditions.
Certain documents made available on this website may have been prepared and issued by persons other than ETC Issuance GmbH. This includes any prospectus and additional documents thereto. ETC Issuance GmbH is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, ETC Issuance GmbH shall not be responsible for any loss which is a direct or indirect result of reliance placed on any part of the website and it makes no warranty as to the accuracy of any information or content on the website. The terms and conditions of securities applicable to investors will be set out in the relevant prospectus, available on the website and should be read prior to making any investment.
You should always bear in mind that:
Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuers before investing.
Changes of terms and conditions of website use
ETC Issuance GmbH reserves the right to modify or amend these Terms and Conditions at any time without prior warning.
Content and design of this website are protected by copyright and other applicable laws. Any copying of the website or of its content requires the prior written consent of ETC Issuance GmbH.
Some of the hyperlinks contained on this website may lead the user to external websites that are not under the control of ETC Issuance GmbH and for the content of which ETC Issuance GmbH is not responsible. When the user clicks on such a link, the user will leave the ETC Issuance GmbH website. ETC Issuance GmbH is not responsible for the content of any websites reached by means of such a link.
Governing Law and Jurisdiction
ETC Issuance GmbH is a subsidiary of ETC Management Ltd, company number 12165332, with registered office at Gridiron, One Pancras Square, London, England, N1C 4AG. These Terms and Conditions and your access to and use of this website and the content are subject to the laws of England and Wales.