Don’t ignore what is going on with Ethereum, analyst says as stablecoins erupt

While ETH prices have remained in the proverbial dumps, the underlying Ethereum blockchain has seen a flurry of activity and development of recent months. The jury is still out on how these trends will affect the asset in the long run, but a top analyst says it would be unwise to ignore what is going on.

Ethereum is dramatically changing

Due to a Cambrian explosion in the demand for stablecoins based on Ethereum, ETH has rapidly been losing dominance on its home blockchain. That’s to say, ETH may not be the driving monetary force on its own chain in the coming weeks.

Ryan Watkins, a research analyst at crypto data firm Messari, shared:

“ERC-20 tokens are approaching 50% of the total value stored on Ethereum.Over the past two years there has been a complete transformation in how value is stored and transferred on the Ethereum blockchain.”

Chart from Messari’s Ryan Watkins

Due to the growth in stablecoins and other ERC tokens, the fees spent by users of Ethereum have increased dramatically over the past few months to near all-time highs. Simultaneously, the amount of value locked in decentralized finance has gone parabolic. 

The trends identified are still nascent, but the Messari analyst said that they show how the fundamental nature of the Ethereum blockchain and ETH’s utility and investment case have changed dramatically.

“In short, Ethereum is being used more than ever, and in just two years, Ethereum has evolved from a blank canvas to an agglomeration of novel forms of value and use cases.”

He added that considering the developments, “you can’t ignore what’s going on on Ethereum.”

Investors aren’t ignoring ETH

Watkins is right: large investors are seemingly taking what’s going on with the second-largest blockchain seriously. And they’re largely bullish, despite the assertions by some that ETH is not a proper investment. 

As reported by CryptoSlate previously, blockchain analytics firm Santiment found that there has been a strong increase in accumulation by some of ETH’s largest holders over the past few weeks.

“ETH whale addresses have just hit a 10-month high with the cumulative holdings of the top 100 non-exchange wallets now owning over 21,800,000 Ethereum.” the firm wrote in reference to the chart below.

Chart of ETH whale holdings from blockchain analytics firm Santiment

The holdings of the top 100 ETH addresses have “added an additional 145,000 ETH,” worth about $30 million, over the last two days alone.

It isn’t clear who is behind these “whale” addresses that are accumulating millions of dollars worth of coins, but there are some contenders.

For one, Tyler Winklevoss and Cameron Winklevoss of the Gemini cryptocurrency exchange revealed that they “definitely own a lot of ether,” calling their holdings a “material amount.” The twins added that their stash of ETH is in the “same galaxy” as their Bitcoin holdings, which would mean they own hundreds of millions of dollars worth of the asset.

There is also an analysis suggesting that “wallets associated with major players such as JPMorgan Chase, Reddit, IBM, Microsoft, Amazon, and Walmart” are stacking ETH too.

The post Don’t ignore what is going on with Ethereum, analyst says as stablecoins erupt appeared first on CryptoSlate.

Stablecoin boom doesn’t guarantee Bitcoin price will explode higher: economists

With Bitcoin seemingly finding a local top, all eyes in the crypto space have migrated to stablecoins, digital assets tied to and backed by a “stable” reserve asset. Although present in the cryptocurrency industry for 2017 and 2018, the assets have become increasingly important to the market over the past few months, as they’ve grown in supply.

In fact, per recent data from blockchain analytics firm Coin Metrics, the value of all stablecoins in circulation just passed over $9 billion for the first time ever. What’s especially interesting about this stat is six weeks ago, the aggregate value of all stablecoins was $6 billion.

That’s 50 percent growth in a multi-billion-dollar statistic within a month and a half, making it clear that it isn’t only central banks that are having their money printers operating at full speed. (Three hours ago as of the time of this article’s writing, yet another $120 million worth of USDT was tacked onto the chart below.)

The common narrative goes that this is decisively bullish for the crypto market; investors say that the growth in stablecoin supply is indicative of money prepared to buy Bitcoin, Ethereum, and other cryptocurrencies.

But, a new report from economists has suggested that this narrative isn’t 100 percent true.

Economists: Stablecoin boom isn’t bullish for Bitcoin, it’s neutral if anything

In a note titled “Stable coins don’t inflate crypto markets” and published to economics research blog VOX, Richard K. Lyons and Ganesh Visawanath-Natraj — of UC Berkeley and Warwick Business School, respectively — poo-pooed on the sentiment that stablecoins will push Bitcoin higher.

The core of their argument came down to the two charts seen below, which depict the average performance of both Bitcoin and Ethereum — two of USDT’s biggest crypto markets — in the wake of Tether’s issuance of coins.

They found that from August 2017 to November 2019, there was no obvious trend to the prices of BTC and ETH in the three weeks after USDT issuances.

In fact, on average over the sampled time frame, Bitcoin trended lower immediately after Tether minted coins, but that trend may just be related to the fact the period they observed was marked by bear trends.

BTC and ETH Response to USDT Issuance
BTC and ETH Response to USDT Issuance

Notably, the data they sampled doesn’t take the past few months into account, which have contained the biggest bouts of USDT’s growth ever, and may have skewed their thesis and conclusion.

Even still, they came to the following conclusion:

“This column answers a series of questions relevant to whether stable coins have an inflationary effect on crypto asset prices. The bottom line: We find no systematic evidence that stable coin issuance affects cryptocurrency prices. Rather, our evidence supports alternative views.”

What’s behind the trend then?

That begs the following question: if it isn’t buyers looking to buy Bitcoin, who’s or what is behind the surge in demand for stablecoins?

According to them, the minting of stablecoins coincides with “deviations of the secondary market rate” of USDT compared to the pegged rate of $1, suggesting that it is arbitrageurs that are causing the stock of stablecoins to increase. This, the economists claimed, is a sign that Tether acts as a reserve asset for cryptocurrency investors, as opposed to “real” dollars:

“In periods of risk, some investors will choose to exchange into a better store of value. Portfolio rebalancing toward Tether and other stable coins provide this function with minimal intermediation costs.”

After all, USDT is simply more available and liquid than Bitcoin-to-fiat currency trading pairs.

This is an assertion very similar to that made by Sam Bankman-Fried, CEO of crypto exchange FTX and crypto fund and OTC desk Alameda Research.

Per previous reports from CryptoSlate, he said that per his data, the phenomenon of the rapidly-increasing stock of USDT is primarily due to traders selling Bitcoin to USDT to hedge risk, just as the economists in the VOX column described.

The post Stablecoin boom doesn’t guarantee Bitcoin price will explode higher: economists appeared first on CryptoSlate.

Ethereum Isn’t Only Democratizing Finance: It’s Bypassing Censors Too


Over the past few months, China has been seemingly forthcoming with information regarding the outbreak of the coronavirus-caused illness COVID-19, with the country releasing images of outbreak facilities, the genetic code of the novel virus, and much more. But, not all information regarding the outbreak has been free-flowing.

A recent report featuring an interview with a doctor from novel coronavirus epicenter Wuhan, one Dr. Ai Fen, was wiped off WeChat, while censors have prevented the link and the contents from being shared in private group chats.

And interestingly, blockchain, specifically the Ethereum blockchain, has made itself a home in this debacle.

Ethereum, An Information Smuggling Tool?

Over the past few weeks, there’s been a quiet uprising on the Chinese intranet; there’s been a call for digital free speech, which trended on Weibo last month, in response to China’s censorship of whistleblowers of the virus, which recounted its effects first-hand weeks before “COVID-19” was splattered across the world’s headlines.

One such whistleblower was Dr. Ai Fen, who said in the now-censored interview that she was on the receiving “end of unprecedented and severe rebuke” after a test she did found a SARS-like virus in a Wuhan patient, which we now know was the coronavirus.

According to Sarah Zheng, a Hong Kong reporter at the South China Morning Post, excerpts of the interview aforementioned were published on the Ethereum blockchain “in an apparent pushback against online censorship.” The transactions involving these excerpts were not given.

This isn’t the first time Ethereum has been used to transfer information; in 2018, there was this linked Quartz feature on how #MeToo activists moved from WeChat and Weibo to the Ethereum blockchain to get the word out about attack allegations.

As a result of these cases and others like them, Etherscan, a website used to track transactions made on the network (including transaction information), has been blocked by the Chinese government, joining the ranks of Youtube, Facebook, most Western media, and many more websites deemed unsuitable by the censors. Of course, VPNs can be used to bypass these restrictions.

Along with decentralized blockchains, activists have been siphoning pertinent coronavirus information out through QR codes, encoded in sanctioned Chinese social media messages, sharing typo-filled versions of articles to bypass the automatic censors, and other unconventional vehicles.

Decentralized Finance First

While enabling the unfettered transfer of information seems to be amongst a blockchain’s top use case, for Ethereum, its killer use case is seemingly decentralized finance.

Raoul Pal, a former head of hedge fund sales at Goldman Sachs, said in the January edition of his Global Macro Investor report that  he is getting “increasingly bullish on Ethereum,” adding that the asset is “silver to Bitcoin’s gold.” His opinion on this was spurred by the growth of DeFi, which he pinned as central to “adoption rates and usage” of the technology.

Pal isn’t alone in touting this sentiment. Speaking with me in an interview late last year, Jon Jordan, Communications Director at DappRadar, explained that if you boil Ethereum down, it’s killer use case is decentralized finance.

With the ecosystem briefly surpassing $1 billion in locked value while accounting for a large portion of Ethereum’s gas budget and transactions (data from Eth Gas Station and DappRadar), it’s easy to see why Jordan and Pal think so.

Unfortunately, DeFi has been under some pressure late, with MakerDAO experiencing a multi-million-dollar shortage of collateral in the system caused by a combination of an oracle failure and a congested blockchain.

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