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What Will The Fed’s Quantitative Easing Do To Cryptocurrency?

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What Will The Fed’s Quantitative Easing Do To Cryptocurrency
What Will The Fed’s Quantitative Easing Do To Cryptocurrency?

These are perilous times, and it hasn’t escaped anyone’s notice that the United States Federal Reserve is doing its part to alleviate the suffering — which began with the coronavirus pandemic and has spread to the global economy. It’s printing more money. “There is an infinite amount of cash at the Federal Reserve,” Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, told Scott Pelley of CBS on March 22, adding: “We will do whatever we need to do to make sure there is enough cash in the financial system.” The U.S. Federal Reserve itself reinforced that message on March 23, announcing that it would “continue to purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning.”

Reactions to these affirmations of quantitative easing, or QE, have been swift from sectors of the crypto community: “With these words, the last vestige of #capitalism died in the US,” wrote Caitlin Long, who established the first crypto-native bank in the United States. “[The] Fed’s monetization U.S. debt is now unlimited.” Mati Greenspan, the CEO and co-founder of Quantum Economics said: “The Fed said it is willing to buy the entire market” if necessary to stabilize markets. Meanwhile, on the fiscal side, Congress’s $2 trillion stimulus package includes handouts like “helicopter money” — i.e., a $1,200 payment to every tax-paying adult who has an annual income below $75,000. “Inflation is pretty much a foregone conclusion at this point,” he stated elsewhere. Garrick Hileman, head of research at Blockchain.com, said: “The response by central banks to COVID-19 is truly unprecedented, with Fed and Bank of England officials using terms like ‘infinite,’ ‘unlimited’ and ‘radical.’” They’ve been using such extraordinary language in the hope they’ll prevent equity and credit markets from seizing up. “Only time will tell if they have gone too far.”

Is inflation really imminent, though? Not if one recognizes that the global demand for U.S. dollars continues to exceed supply. As Civic CEO Vinny Lingham said: “The reality is: Everyone needs to reprice assets, and they need to do it in U.S. dollars.” Lingham grew up in South Africa. He saw what happened with hyperinflation in neighboring Zimbabwe where “the demand for stable currency exceeded everything else.” With people in the grip of the current pandemic, entire business sectors have been shutting down all over the world. People have been selling assets whether it’s equities, collectible classic cars or Bitcoin (BTC). Lingham added:

“If I’m living in South Africa, I may have kept money in the form of a bar of gold that is priced in Rands. Now I’m selling it for local Rands and buying U.S. dollars with those Rands. As the Rand devalues, the dollar gets stronger.”

Under such conditions, “if the Federal Reserve prints another $2 trillion USD, it’s okay,” said Lingham. Greenspan agrees that the U.S. dollar has been the world’s most in-demand financial asset in recent weeks, and theoretically, the Fed could print trillions more than it is currently proposing — and there may not be any hyperinflation. The problem is that no one knows what the “stop point” is — i.e., how much is too much. “We won’t know [hyperinflation is] happening until it’s too late.”

 

What Is Quantitative Easing? Quantitative Easing Explained - YouTube

What does all of this mean for cryptocurrencies? Many in the crypto world assume that Bitcoin, with its fixed maximum supply — 21 million BTC — is bound to come out ahead if the Fed and other central banks print too much money. “Though that assumption has not been tested in real-time except in Venezuela,” said Greenspan. If you had bought BTC at its low point in Venezuelan bolivars and had sold BTC at its height, also for bolivars, you would have come out way ahead. It’s not clear that this case can be generalized, though. During the current crisis, BTC and other cryptocurrencies have plunged dramatically, just like equities — which has somewhat damaged Bitcoin’s claim of being a store of value. The current economic environment is not favorable for any asset class, Lingham observed. Bitcoin i3s now positively correlated with other asset classes. Greenspan said the correlation between BTC and the stock market has recently reached a high point of 0.6 — with 1.0 representing perfect positive correlation. If this were not the case, BTC would currently be priced somewhere between $12,000 and $15,000, Lingham suggested. Ariel Zetlin-Jones, associate professor of economics at Carnegie Mellon University’s Tepper School of Business, said that he understands this moment is critical for the future of cryptocurrencies:

“U.S. equity markets have suddenly become as volatile as Bitcoin markets, and the U.S. government is undertaking a large scale intervention that involves a massive expansion of the money supply which in the absence of other major shocks (the economic shutdown due to the pandemic), would normally induce a large increase in the inflation rate.”

However, Zetlin-Jones does not see these developments causing Bitcoin to emerge as a leading store of value because in the long run: “Bitcoin is one of the riskiest stores of value in the world, with Bitcoin price volatility more than five times that of both gold or even U.S. equity prices.” Kevin Dowd, a professor of finance and economics at Durham University in the United Kingdom, said:

“BTC does offer an alternative store of value, and there is no question about that. The issue is: How good is it? It all depends upon when you buy and when you sell, and so there remains a huge element of luck.”

According to Hileman, the University of Cambridge’s first “cryptocurrency academic,” the prices of gold and Bitcoin should both rise:

“Even before COVID-19, we felt the unprecedented level of public and private debts made Bitcoin, and hard assets in general, attractive. Historically, recessions and large fiscal and monetary expansions have driven up the price of hard assets like gold. […] We do not see a reason why this time should be any different.”

It is still too early to gauge the impact of QE on crypto, said Greenspan. “The initial shock of the global economy grinding to a halt” is still too fresh. “The long-term trend is yet to emerge.” Moreover, BTC is just a small part of the story, though it has held its value well compared with other asset classes, Greenspan said. People have been struggling, and many individuals are selling everything they can, said Lingham. “Until there is excess capital, Bitcoin is in the same basket as other assets. There will be no mad rush to get into cryptocurrency unless the U.S. dollar falters” — and then, only maybe. “I would be surprised if BTC bit the dust due to the current crisis, but you cannot rule anything out,” said Dowd, who has maintained in the past that Bitcoin’s price must go to zero in the long term — principally because its mining model, a natural monopoly, is unsustainable. In the short term, meanwhile: “The injection of money tends to float all markets, and that includes crypto,” said Greenspan. “Stocks will be first, but [the fiscal stimulus] is also likely to push up the price of BTC.”

The current crisis might eventually impel structural changes in the world economy, however, and these could change the crypto and blockchain space — for the better. Zetlin-Jones said that once the recovery begins, a new way has to be found:

“We will need a more robust economy — one where supply chains are less dependent on a single producer, where workers are less dependent on the operations of a single firm, where individuals are less dependent on a single source of health care.”

These are effective movements toward a more decentralized world economy, in which blockchain technology seems uniquely poised to play a key role, Zetlin-Jones said. “They might speed up the demand for blockchain solutions and, therefore, [improve] the long-run viability of blockchains and their associated cryptocurrencies.

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Altcoin News

Is Crypto Growing In Africa?

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Is Crypto Growing In Africa
Is Crypto Growing In Africa?

Crypto adoption is making significant advances in Africa, with crypto ownership, trade volume, and regulation all moving toward greater adoption. A recent report by Arcane Research and Luno found that Uganda, Nigeria, South Africa, Ghana, and Kenya are frequently among the top 10 countries by Google searches for the word “Bitcoin.” The report describes the continent as “one of, if not the most promising region for the adoption of cryptocurrencies,” emphasizing Africa’s combination of low existing crypto adoption alongside an “enormous” domain possibility. The firms emphasize that Africa exhibits a young population, frequent monetary crises and currency failures, large unbanked or underbanked populations, and expensive means of payment.

While Nigeria has long dominated the continent’s trade volume, the report found that South Africa has the highest percent of cryptocurrency ownership or use among internet users in Africa with 13%, followed by Nigeria with 11%. Worldwide, South Africa ranks fifth for crypto adoption among connected citizens. This past week saw South Africa post its second-strongest weekly volume on peer-to-peer Bitcoin (BTC) marketplace Localbitcoins, with nearly $1.65 million worth of BTC changing hands.

Weekly Localbitcoins trade volume: Coin.dance

The surge in trade activity saw total P2P volume for South African trade edge out Kenya last week with $1.95 million in trade across Localbitcoins and Paxful. Last month, South Africa’s financial regulator issued a policy document asserting that crypto-assets and activities relating to virtual currencies “can no longer remain outside of the regulatory perimeter.”

Nigerian P2P trade is rallying to record highs, producing $9.2 million in combined weekly trade. Kenyan trade has also seen a recent spike, with Localbitcoins trade between BTC and the Kenyan shilling producing its second-strongest week on record for the third consecutive time. Morocco and Egypt have also posted record trade activity in recent weeks. The increase in volume across the continent has also seen P2P volume from Sub Saharan Africa beat out Latin America for the first time.

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Altcoin News

Craig Wright Says He Did Not Transfer ‘Satoshi’ Coins, Leaving Him in Legal Catch-22

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Craig Wright Says He Did Not Transfer ‘Satoshi’ Coins, Leaving Him in Legal Catch-22
Craig Wright Says He Did Not Transfer ‘Satoshi’ Coins, Leaving Him in Legal Catch-22

Bitcoin’s SV’s billionaire benefactor Calvin Ayre revealed Satoshi claimant Craig Wright has denied moving 50 BTC from a long-dormant address thought by some to belong to the Bitcoin founder. On Wednesday, an unknown party moved 50 BTC ⁠— roughly $486,000 worth — from an address containing coins mined barely one month after the launch of the Bitcoin mainnet in 2009. But in a Twitter response to Blockstream’s Adam Back, Ayre said it had nothing to do with Wright:

“It was NOT Satoshi, I just spoke with him and Craig confirmed not him.”

However, the address in question, 17XiVVooLcdCUCMf9s4t4jTExacxwFS5uh, is among the 16,000 listed in a court document in the Kleinman v. Wright case, that Wright claims as his own. The Catch-22 in this situation is that Wright has denied in court he has access to the private keys to the addresses, so if he said he moved the 50 BTC he’d be in trouble. However if someone else moved the coins, that would indicate the address does not belong to him, again leaving him in a potentially sticky legal situation. If Ayre is to be believed regarding Wright’s denial, the latter could face serious complications in the ongoing trial. The judge has already questioned Wright’s credibility on more than one occasion.

Prior to Ayre’s response, the movement of 50 BTC from the dormant wallet had many in the crypto community asking whether Nakamoto himself was back. The wallet address is not one associated with the Bitcoin creator, but the 11-year gap in activity still caused a 5% drop in BTC price — from the $9,700s to $9,400s — when the news broke.

Wright’s denial should stem any fears he’s about to sell off a large amount of Bitcoin. In 2018, he posted an ominous warning on Slack, explaining in detail how he’d be selling a “large volume of BTC” around the time of a halving that would tank the price. Others in the crypto community, however, are highly skeptical the tokens belong to either Nakamoto or Wright. Blockstream founder Adam Back thinks if the real Satoshi were to liquidate some of his holdings, he would choose a more anonymous address.

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Bitcoin News

Does ISIS Have $300M In A Bitcoin ‘War Chest’?

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Does ISIS Have $300M In A Bitcoin ‘War Chest’
Does ISIS Have $300M In A Bitcoin ‘War Chest’?

Blockchain forensics firm Chainalysis has published a report debunking a number of popular narratives surrounding the use of crypto to finance terrorism. The report emphasizes the harm of false reporting in spreading misinformation and damaging the reputation of firms operating with virtual currencies. As “a trusted investigative partner to governments around the world, preventing terrorists from using cryptocurrency is one of our primary objectives,” Chainalysis states. “It’s a serious task, and it’s important to be responsible and judicious when releasing information on a subject as consequential as terrorism financing.”

Chainalysis cites reports from over the last week claiming that ISIS’s missing $300 million war chest is being held in Bitcoin (BTC). Despite being expressed as a certainty in mainstream reporting, the primary source for the reports, Hans-Jakob Schindler, director of the Counter Extremism Project think-tank, merely suggested that cryptocurrencies “might have been one of the ways [the funds] might have been used.” Apart from highlighting how Schindler’s claims had been beaten up, Chainalysis said that “Schindler’s theory is highly unlikely” in any case.

“We know that most terrorism financing campaigns have raised less than $10,000, indicating limited adoption. Further, if ISIS had funneled oil proceeds into Bitcoin, trading volume of regional exchanges and money service businesses would have reflected this flow of funds.”

The report also notes poorly founded claims that ISIS funded its 2019 Easter Sunday bombings in Sri Lanka using Bitcoin, citing Chainalysis’ 2020 Crypto Crime Report in refuting that crypto was used as a means to fund the attacks. However, a separate report from the Philippine Institute for Peace, Violence and Terrorism Research released today, shows the ISIS offshoots in South East Asia have been using crypto for money laundering.

At the start of the year, reports claimed that the Popular Resistance Committees (PRC) in Gaza had raised $24 million through the local money service business Cash4PS. Chainalysis noted significant flaws underpinning the story, asserting that the reports assumed that every single transfer to Cash4PS wallets was related to terror financing without evidence. Further, the majority of funds received by Cash4PS wallets were from other addresses within the Cash4PS network, with Chainalysis estimating that only $1 million was transferred into the network from external sources.

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