Riding The Wave News Summary #30
Bitcoin network difficulty reaches all-time high as miners pursue 2M BTC, Terra founder reveals what will happen to UST if Bitcoin price crashes, ...
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Just when the Bitcoin (BTC) miners helped release the 19th millionth BTC in circulation on Friday, the BTC network’s mining difficulty reciprocated by reaching an all-time high of 28.587 trillion.
Bitcoin’s network difficulty correlates to the computational power required to mine BTC blocks, which currently demands an estimated hash rate of 201.84 exahash per second (EH/s), according to data from Blockchain.com.
A higher hash rate ensures resilience against double-spending attacks, which is the process of reversing BTC transactions over the blockchain by contributing to at least 51% of the Bitcoin hash rate.
On Wednesday, a Terra wallet belonging to Luna Foundation Guard (LFG) amassed $139 million in BTC, bringing its total coffers up to 31,000 BTC, or $1.47 billion.
As Cointelegraph reported, the wallet began amassing colossal amounts of BTC on Jan. 2021 and has not sold a single satoshi to date.
I’m always happy to see network difficulty rise for Bitcoin as it means more security and often more demand. I think this rise may be in part due to the Luna Foundations buying but I think it’s more likely due to Bitcoin breaking its downtrend and potentially forming an uptrend. If it confirms the uptrend by successfully testing the 20 and 50 week SMA I would expect demand to go up even more.
Terraform Labs CEO Do Kwon has conceded that a crash in the price of Bitcoin (BTC) would be “negative” for the stability of the TerraUSD (UST) stablecoin but that he expects Bitcoin to go up.
Kwon said, “The worst case would be if we were buying Bitcoin and a crash happens six months later, and it’s correlated with a massive fall in demand for UST,” which would be, as he modestly put it, “negative.” However, that scenario isn‘t keeping him up at night:
Kwon has been buying Bitcoin to hold in Terra’s treasury as 40% of the collateral for UST. So far, Terra has acquired 30,727.9 BTC and most recently purchased 2,943 BTC on Tuesday. This makes Terra the third-largest single-wallet BTC holder.
The large buying is definitely a short-term risk but as long as we trend upwards in price and see a double top it shouldn’t be an issue for Terra even if we see a crash in 6 months. If we instead dropped in price from here it would definitely put pressure on Terra but I would be extremely surprised if it was enough to cause major issues beyond stress for the Terra team.
Russia's biggest bank has been cut out of the global financial markets — and now it's launched a cryptocurrency
In early March, just days after the invasion began, trading in Sberbank shares was halted in London after they plummeted 95%. The lender was ordered to close its European business as Western sanctions threw Russia's economy into disarray.
But just two weeks later, on March 17, the Russian central bank granted Sberbank a license to issue its own cryptocurrency, according to media reports. That led to the launch of sbercoin the same day.
Russia is seen as struggling to meet dollar-denominated debt obligations, and it has said it will demand payment for its energy in rubles.
Against that backdrop, there has been speculation the sbercoin could become a quietly condoned way to exchange rubles for other currencies, and get around constraints.
"I'm not sure it's going to be very helpful in terms of getting liquidity in and out of Russia," Birla said about sbercoin.
"It's like taking your own a bank account, and putting it onto a ledger. It's not all that useful, unless you can start trading it for other things. And so far, the data I saw is that it's not very liquid," he added.
It’s unlikely that this would work out as a workaround for sanctions although I could see them demanding payment in this currency instead of Rubles to increase the odds that other countries agree. More likely the development of this currency was already in progress like China’s is and they just sped up its release to keep their options open after the invasion of Ukraine.
There is increasing discussion at financial service firms about how they could best provide a relatively safe crypto option in 401(k)s and other employer-sponsored retirement plans.
For instance, Fidelity Investments, one of the largest plan providers, is seeing growing interest in the idea from plan sponsors. "We believe retirement investors increasingly view digital assets, and bitcoin in particular, as an investment worthy of consideration for long-term investing," said Dave Gray, Fidelity's head of workplace products and platforms.
But many plans are not there yet. The Plan Sponsor Council of America recently asked its members -- employers that sponsor a qualified savings plan -- if they were or are considering adding crypto to their menu of investment choices. Only about 2% said yes. "Plan sponsors are overwhelmingly not considering, and will not consider, cryptocurrency a prudent investment option in a retirement plan," the organization said.
"At this early stage in the history of cryptocurrencies ... [the DOL] has serious concerns about plans' decisions to expose participants to direct investments in cryptocurrencies or related products, such as NFTs, coins, and crypto assets," wrote Ali Khawar, acting head of the DOL's Employee Benefits Security Administration.
While the DOL did not explicitly ban plans from doing so, it said it will investigate any plans offering crypto or related products. "The plan fiduciaries ... should expect to be questioned about how they can square their actions with their duties of prudence and loyalty in light of the risks described above."
A small player in the 401(k) provider universe -- ForUsAll -- said it will be launching a cryptocurrency investment option for clients in the second quarter of this year.
ForUsAll, which primarily services small- to mid-size employers, said over 120 of its 400 clients to date have signed up for the new option, which will be available to participants through a self-directed account on Coinbase.
I’d be surprised if any major 401k players jump in prior to regulations becoming clear, especially with the threats of investigations and questioning. I personally would enjoy this option for my 401k but I expect we will all be waiting quite a while for it as the 401k business isn’t known for being high risk.
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