The Week in Crypto #1
In this letter:
✔️The first week of 2022 was terrible for Bitcoin and Ethereum
✔️Kazakhstan and Kosovo against Bitcoin
✔️CBDCs
✔️NFT update
✔️The first week of 2022 was terrible for Bitcoin and Ethereum
The first week of the New year was not as successful for crypto as we thought it could be. As of writing the crypto market has a capitalization of $1.95T. In addition, Bitcoin and Ethereum were trading under $40 000 and $3 000 respectively.
One of the main reasons for the downtrend in the last 7 days was caused by the FED and its plans for 2022.
During its last sessions, the FED announced that it will start fighting inflation (which hit levels of 6.8% in November). Increasing interest rates and reducing bond purchases are the main instruments the regulator will use.
However, the most influential tool that Jerome Powell could use is verbal manipulation of the market.
The new policy will affect risk assets like Bitcoin and the stock market but it could bring a recession in the US. With that in mind, it looks like the FED will tighten the belt but will keep a close eye on the market.
✔️Kazakhstan and Kosovo against Bitcoin
Last week two countries decided to crackdown on Bitcoin, causing the price to go down.
Kazakhstan suddenly decided to shut down its internet, leaving all of the Bitcoin miners into the abyss.
A little background - Kazakhstan is a democratic republic that gained independence in 1991. Despite that, the country has had one and the same leader for 28 years. In 2019 he resigned giving his power to another leader from the same political party.
During the last week, the government removed price caps on the fuel, which doubled its price overnight. Protests all around the country began searching for greater change. The protests became so violent that the government asked Russia for help.
Now let’s come back to crypto. There are two reasons why Kazakhstan is a topic this week. Firstly, the government stopped the internet. The centralization of these services and their relation with the policy could affect the citizens. Many start realizing that decentralization really matters.
Secondly, with the government shutting down the internet a big portion of Bitcoin miners went offline. After China cracked down on crypto in 2021 Kazakhstan and the US are the main beneficiaries. In addition, Kazakhstan is closer to China and offers low-cost electricity. These two factors doubled Kazakhstan’s share of the global hash rate from 8% to 19%. With most of the Bitcoin miners going offline, 13.4% of the global hash rate was wiped out.
The second country that went against Bitcoin was Kosovo. Despite its 0.01% of global hash rate, Kosovo is a popular destination due to its low-cost energy. However, last week the government announced a 60-day state of emergency so that it could deal with a power shortage. Trying to cope with the situation the government banned Bitcoin mining. Kosovo police seizure of more than 300 Bitcoin mining devices.
✔️CBDCs
Last year there was nothing surprising when it came to CBDCs. The first week of 2022 was the moment for many countries to announce their bright plans related to the central bank's digital currencies.
The Federal Reserve of Boston is looking for a new director to lead its CBDC ideas
Mexico will have its CBDC ready within 2 years
China launched its digital yuan wallet. The Winter Olympics will be held in the country next month. It is expected that every foreigner will also be able to use the wallet.
✔️NFT update
While Ethereum is down, the NFTs continue to pop.
Last week the leading NFT marketplace OpenSea announced its latest funding for $300 million and is valued at $13.3 billion.
The legend Nas will sell two songs as NFTs on Royal.
Last but not least GameStop will create a gaming NFT marketplace. The platform will allow users to buy and sell different gaming items such as weapons and clothes for avatars.