When traders get enough money for life from their Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), or any crypto trading plays, what comes next? Crypto-savvy Reddit users shared their best ideas in a lively subreddit.
A user who goes by the tag u/LifeReboot shared how a stroke of luck led to less satisfaction than expected. Because of this, LifeReboot asked the crypto community about their thoughts on what to do next after making enough profit for the rest of their lives.
In a reply, user Adamant27 sent some congratulations and compared life to video games. “you passed a quest called financial stability and independence, but this game called Life has much more quests,” wrote Adamant27. The user encouraged LifeReboot to take on some “bigger quests” like personal development and spiritual enlightenment.
Exploring the world is the answer for Reddit user Snowboarding_kook. In a reply, the Redditor wrote that there’s “nothing better than travel.”
Snippet from the Reddit thread. Source: Reddit
On the other hand, Redditor Feodal_lord believes that disappearing and living without contact with other people is a good idea. The user wrote: “if I had made enough money for my whole life, I would say fuck to society and live my life in isolation.”
Because the creator of the thread didn’t “sound like the greedy crypto maniac,” user Goonzoo suggested launching a crypto project. “Make it unique and let it work as a foundation. […] Maybe it can fill your life in some way,” they wrote.
The Forbes crypto and blockchain list shows that crypto billionaires increased by 60% within a year. At the moment, the list includes 19 crypto billionaires including Binance CEO Changpeng Zhao, FTX CEO Sam Bankman-Fried and Coinbase CEO Brian Armstrong. Newcomers to the list include FTX co-founder Gary Wang and Alchemy founders Nikil Viswanathan and Joseph Lau.
Waves (WAVES) lost around half its value in April so far and risks further correction due to weakening technical and fundamental factors.
WAVES price risks another 30% decline
WAVES dropped from nearly $64 on March 31 to around $27.50 on April 7 — down by over 55%. As it fell, the WAVES/USD pair also broke below a key support confluence, hinting further correction.
Notably, the confluence comprises WAVES’ 50-day exponential moving average (50-day EMA; the red wave) and the 61.8% Fib line of the Fibonacci retracement graph — drawn from $64-swing high to $8.34-swing low.
Now broken, they suggest that WAVES’ path of least resistance is to the downside, with $25 acting as interim support due to its historical relevance as a price floor in October 2021 and March 2022.
WAVES/USD daily price chart. Source: TradingView
Additionally, WAVES’ daily relative strength index (RSI) also shows room for a further decline, being only 11 points away from slipping below the “oversold” threshold of 30.
Meanwhile, breaking below $25 would risk crashing WAVES’ price to its 200-day simple moving average (200-day SMA; the orange wave) near $20, coinciding with the 0.786 Fib line, about 30% lower than today’s price.
The bearish setup emerged amid allegations that equaled the Waves Platform with a “Ponzi,” namely a Twitter thread penned by 0xHamZ, who accused Waves’ team of artificially inflating the price by more than 650% from February to March.
Meanwhile, Neutrino USD, a “stablecoin” backed by WAVES reserves, also lost its U.S. dollar peg following 0xHamZ’s accusations, further dampening market sentiment.
Jolyon Horsfall, the co-CEO of NFT prediction platform SparkWorld, noted that the Waves Platform founder, Sasha Ivanov, “will need to step up if the token is to be revived and the project re-aligned on its ambitious path.” He warned:
“For the time being, the dumping is expected to continue, and the WAVES price may fall to its 30-day low of $21.”
Bull flag retest?
However, WAVES shows some signs of defying bearish predictions while keeping its long-term uptrend intact.
Notably, the ongoing correction brings WAVES closer to testing another double-layered support zone, defined by its 20-week EMA (the green wave) and the upper trendline of its previous “bull flag” setup, as shown in the chart below.
WAVES/USD weekly price chart. Source: TradingView
A bounce from this weekly support confluence could see WAVES rally to test its “bull flag” target near $70.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The cryptocurrency market is nearly completely red on April 6 after hawkish comments from multiple members of the Federal Reserve highlighted their opinion that aggressively raising interest rates and cutting bond purchases would need to happen in order to combat inflation. Members did concede that this would result in negative pressure being placed on financial markets and this seems to be exactly what happened on April 6.
Data from Cointelegraph Markets Pro and TradingView shows that the downward move for Ether (ETH) accelerated on April 6 and dropped the top altcoin to a low of $3,178 before the sell-off subsided and the price recovered to $3,200.
ETH/USDT 1-day chart. Source: TradingView
Here’s what several analysts are saying about this latest pullback for Ether and what levels of support to keep an eye on in case of a further move to the downside.
Ether could dip to $2,600
The outlook for Ether following a rejection of the monthly resistance at $3,400 was discussed by market analyst and pseudonymous Twitter user Rekt Capital, who posted the following chart noting that if this were to happen, “Ether could revisit $3,000” as indicated by the black line on the chart.
ETH/USD 1-month chart. Source: Twitter
Rekt Capital said,
“But September 2021 has shown that when black gets retested on a dip — downside wicks occur. So if Ether does dip to black, it could wick into the green higher low.”
Based on the chart provided, this would result in a potential drop to $2,602.
Will the $3,200 support hold?
A word of reassurance for concerned Ether holders was offered by crypto trader and pseudonymous Twitter user CryptoBatUSDT, who posted the following chart highlighting a retest of an important support level.
ETH/USDT 6-hour chart. Source: Twitter
CryptoBatUSDT said,
“The market structure is still bullish, currently in both the Range (Eq) and a Swing Low (HL) zone. Unless this level is lost, I will look to open a long position in these regions.”
Further insight into the support for Ethereum at this current price level was provided by crypto trader and pseudonymous Twitter user Don Yakka, who posted the following chart noting the importance of the 200-day moving average (MA) and exponential moving average (EMA).
ETH/USDT 1-day chart. Source: Twitter
Don Yakka said,
“Very similar to BTC chart, the 200MA is resistance and the 200EMA is support, as long as 200EMA holds on [the] daily, I would not panic.”
The overall cryptocurrency market cap now stands at $2.003 trillion and Bitcoin’s dominance rate is 41.5%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
On Wednesday, centralized cryptocurrency exchange Binance launched its new TerraUSD (UST) staking program. Although Binance did not name the underlying decentralized finance protocol responsible for the staking rewards, Do Kwon — Terra Luna’s (LUNA) co-founder — attributed the origins of the high yield to Terra’s flagship Anchor protocol.
Anchor rate is now available to 30M+ binance users
The anchor yield of web3 is living up to its name.
Terra’s (Luna) ecosystem consists of its algorithmic stablecoin UST and governance/equilibrium token LUNA. The Anchor protocol alleges that it operates as a “crypto savings account,” allowing users to deposit their UST and earn up to 20% APY. The savings rate is funded via a combination of borrowers paying interest on UST loans and staking income from their collateral.
At the time of publication, there is a continued imbalance between borrowers and lenders, with 12.4 billion UST worth of deposits relying on income generated by just 3.47 billion UST of loans. Anchor must tap into its reserves to pay out its promised APY when this occurs. According to data from an unofficial tracking resource called Terra.engineer, Anchor has less than 340 million UST remaining in its reserves, compared to approximately 450 million UST last month. Despite the declining reserve count, the Terra development team is using initiatives such as injecting more reserve capital and launching more income-generating methods to maintain protocol.
Earlier in the day, data from Luna Foundation Guard’s (LFG) official Bitcoin (BTC) address shows that the entity purchased another 5,040 BTC ($222 million), bringing its total stack to 35,768 BTC ($1.577 billion). LFG launched in January to grow the Terra ecosystem and improve the sustainability of its stablecoins. Earlier, Do Kwon said he wanted to build a decentralized foreign exchange, or forex, reserve for UST, utilizing both LUNA and BTC. LFG plans to expand its BTC reserves to $10 billion, with additional purchases after that based on how much UST is minted.
Bitcoin (BTC), the entire crypto sector and the S&P 500 index are correcting on April 6, which highlights the tight correlation between the two sectors.
Despite the weakness, institutional investors do not seem to be halting their purchases, suggesting that they remain bullish in the long term. Terra used the dip to buy an additional 5,040 Bitcoin, which takes its total holding to 35,768 Bitcoin.
Terra was not alone in this venture. MicroStrategy, the treasury with the largest Bitcoin reserves, also increased its holdings by 4,197 Bitcoin through its subsidiary MacroStrategy. After the latest purchase, the business intelligence firm holds 129,218 Bitcoin.
Another sign of strong appetite for Bitcoin is seen in the inflows to the two Canadian Bitcoin exchange-traded funds. According to Glassnode data, the funds boosted their holdings to an all-time high of 69,052 Bitcoin, an increase of 6,594 since January.
Could Bitcoin and altcoins enter a deeper correction or will lower levels attract buying? Let’s study the charts of the top-10 cryptocurrencies to find out.
BTC/USDT
After staying in a tight range between the 200-day simple moving average ($48,240) and $45,000 for the past few days, the bears made their move and have pulled the price below the 20-day exponential moving average ($44,567).
BTC/USDT daily chart. Source: TradingView
The relative strength index (RSI) has dipped to the midpoint and the 20-day EMA is flattening out. This suggests that the bullish momentum could be weakening. If the price rebounds off the 50-day SMA ($41,752), the bulls will again attempt to push the BTC/USDT pair above the 200-day SMA.
Conversely, if the bears sink the price below the 50-day SMA, it will signal that the pair could extend its stay inside the ascending channel. The pair could then gradually drop toward the strong support at $37,000.
ETH/USDT
The failure of the bulls to sustain the price of Ether (ETH) above the 200-day SMA ($3,487) may have resulted in profit-booking by short-term traders. That has pulled the price to the critical support at the 20-day EMA ($3,223).
ETH/USDT daily chart. Source: TradingView
If the price rebounds off the 20-day EMA, it will suggest that bulls are buying on dips. The bulls will then make another attempt to push and sustain the price above the 200-day SMA. If they succeed, the ETH/USDT pair could start its northward march toward $4,150 where the bears are expected to mount a strong defense.
Contrary to this assumption, if the bears sink the price below the 20-day EMA, the selling could pick up momentum and the pair may drop to the 50-day SMA ($2,907).
BNB/USDT
Binance Coin (BNB) once again failed to break above the 200-day SMA ($468) on April 5. The long wick on the day’s candlestick showed that the bears are defending the 200-day SMA with all their might.
BNB/USDT daily chart. Source: TradingView
The BNB/USDT pair has dipped to the 20-day EMA ($424). The bears will now attempt to sink and sustain the price below the 20-day EMA. If they succeed, the pair could extend its decline to the 50-day SMA ($398). A strong rebound off this level will suggest that the pair may remain range-bound between the 200-day SMA and the 50-day SMA.
Conversely, if the price rebounds off the 20-day EMA, the bulls will attempt to drive the pair above the 200-day SMA and challenge the resistance at $500.
SOL/USDT
Solana’s (SOL) recovery stalled on April 2 and the price has dipped below the breakout level at $122. The bulls are expected to defend the 20-day EMA ($113) with vigor.
SOL/USDT daily chart. Source: TradingView
A strong bounce off the 20-day EMA will suggest that the sentiment remains positive and traders are buying on dips. The bulls will then attempt to push the price above the overhead hurdle at the 200-day SMA ($149).
Alternatively, a break and close below the 20-day EMA will suggest that the bullish momentum has weakened. The pair could then drop to the 50-day SMA ($96). A strong rebound off this level could keep the pair stuck between the 50-day SMA and the 200-day SMA.
XRP/USDT
Ripple (XRP) turned down and slipped below the 20-day EMA ($0.81) on April 5. The selling continued today and the price broke below the 50-day SMA ($0.78).
XRP/USDT daily chart. Source: TradingView
The RSI has dropped into the negative territory and the 20-day EMA has started to slope down, suggesting that bears have a slight edge. If the price sustains below the 50-day SMA, the XRP/USDT pair could drop to $0.70. This is an important level for the bulls to defend because if it gives way, the decline could extend to $0.60.
On the contrary, if the price turns up from the current level and rises above the 20-day EMA, the bulls will attempt to propel the pair above the 200-day SMA ($0.89).
ADA/USDT
The failure of the bears to propel Cardano (ADA) above the overhead resistance at $1.26 may have tempted short-term traders to book profits. That has pulled the price below the 20-day EMA ($1.09).
ADA/USDT daily chart. Source: TradingView
If the price breaks below the 20-day EMA, the pair could drop to the 50-day SMA ($0.96). The bulls are likely to defend this level aggressively but if the bears overpower them, the ADA/USDT pair could drop to the strong support at $0.74. A strong rebound off this level will suggest that the pair may consolidate between $0.74 and $1.26 for some more time.
Alternatively, if the price rises from the current level, the bulls will again attempt to drive the pair above the overhead resistance. If they succeed, the ADA/USDT pair could rally to the 200-day SMA ($1.47).
LUNA/USDT
Terra’s LUNA token had been in a strong uptrend but the Doji candlestick pattern on April 5 cautioned that the bullish momentum could be weakening. The negative divergence on the RSI also suggested that the bulls may be losing their grip.
LUNA/USDT daily chart. Source: TradingView
The uncertainty of the Doji candlestick pattern resolved to the downside today. The bears will now try and pull the price to the 20-day EMA ($102). This is an important level for the bulls to defend because a strong rebound off it will suggest that the sentiment remains bullish and traders are buying on dips.
Conversely, if the price breaks below the 20-day EMA, the selling could intensify as traders rush to the exit. That may sink the LUNA/USDT pair to the 50-day SMA ($86).
The bulls purchased the dip to the 20-day EMA ($89) on April 4 but they could not push Avalanche (AVAX) above the overhead resistance at $98. This suggests that bears continue to defend the overhead resistance aggressively.
AVAX/USDT daily chart. Source: TradingView
The 20-day EMA is flattening out and the RSI has dropped into the negative zone, indicating that bears have a slight edge. If the price breaks below the 50-day SMA ($82), the AVAX/USDT pair could drop to the next major support at $65. A bounce off this level will suggest that the pair may remain range-bound between $65 and $98 for a few more days.
Conversely, if the price turns up from the current level, the bulls will make another attempt to climb above the overhead zone between $98 and $100.
DOT/USDT
Polkadot (DOT) rebounded off the 20-day EMA ($21) on April 4 but the bulls could not overcome the barrier at $23. This may have tempted short-term traders to book profits.
DOT/USDT daily chart. Source: TradingView
The DOT/USDT pair has plunged below the 20-day EMA today and the RSI has entered the negative territory. This suggests that the bulls are losing their grip. The next stop could be the 50-day SMA ($19). The bulls are likely to defend this level with vigor but if the support cracks, the decline could extend to $16.
Alternatively, a strong rebound off the 50-day SMA could suggest that the pair may consolidate between $19 and $23 for a few days. The bulls will have to push and sustain the price above $23 to signal the start of a potential new uptrend.
DOGE/USDT
Dogecoin (DOGE) soared above the overhead resistance at $0.17 on April 5 but the bulls could not clear the hurdle at the 200-day SMA ($0.18). This may have attracted profit-booking by the short-term bulls and selling by the aggressive bears, resulting in the sharp reversal today.
DOGE/USDT daily chart. Source: TradingView
The DOGE/USDT pair is likely to retest the 20-day EMA ($0.14). If the price rebounds off this level, it will suggest that bulls continue to buy on dips. The buyers will then again try to clear the overhead hurdle at the 200-day SMA.
This positive view will invalidate if the price continues lower and breaks below the 20-day EMA. Such a move could open the doors for a possible drop to $0.12. The pair could then remain stuck between $0.10 and $0.18 for a few more days.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
According to a new industry report published by DappRadar, the number of users engaging in decentralized applications, or DApps, every day surged 396% year over year to 2.4 million. This is only 5.8% below the same user activity level witnessed in Q4 2021.
The overall growth was impressive, considering that during the quarter, the cryptocurrency sector saw a short-lived bear market, as well as experiencing $1.19 billion in decentralized finance, or DeFi, hacks, and exploits.
Two of the worst affected token bridge protocols were that of Ronin and Wormhole. Last month, Axie Infinity’s Ronin bridge was breached for over $600 million after an attacker used hacked private keys to forge fake withdrawals. Meanwhile, the Wormhole protocol lost $321 million via a minting exploit in February. Though, in a rather heroic move, venture capital firm Jump Crypto dug into its own wallets and replenished the lost funds.
In addition, the staff at DappRadar wrote:
“The first quarter of 2022 had its ups and downs but was tainted by the war in Ukraine. This was one of the biggest events since the 2008 Global Financial Crisis that shook world markets and had a negative effect on the industry.”
Number of Unique Active Wallets Interacting with DApps | Source: DappRadar
Gaming DApps accounted for over 50% of all user activity in Q1 2022. Simultaneously, nonfungible tokens, or NFTs, generated $12 billion in trades despite warnings of a bubble. In terms of DeFi total value locked, Ethereum (ETH) once again held the top spot with $127 billion, followed by Terra Luna (LUNA) at $29 billion and BNB Chain at $13 billion.
Central bank digital currencies — digital currencies backed by a central bank — have received renewed interest with the United States President Joe Biden’s Executive Order on Ensuring Responsible Development of Digital Assets. Proponents of CBDCs argue that widespread adoption will promote financial inclusion, expand public access to safe money, improve the efficiency of payments and more.
But their rationale remains tenuous. Many analysts and practitioners increasingly view CBDCs as fundamentally at odds with the purpose of cryptocurrency, which is to provide a secure, decentralized peer-to-peer mechanism for transferring funds. And the hypothetical benefits of CBDCs remain hypothetical — no evidence exists yet that suggests any advantages over other examples of distributed ledger technologies in financial services, especially given the new risks they pose.
The status of CBDCs worldwide
Nine countries have already developed their own CBDCs, and the U.S. has joined a list of over 100 countries exploring issuing one. Most CBDCs take a hybrid approach whereby “The central bank issues the CBDC to banks and other and other payment service providers, which in turn distribute the CBDC to users throughout the economy and provide them with account-related services,” according to a recent report by the Hoover Institution.
There are other types, according to leading experts at the Bank for International Settlements — which consists of stakeholders from major central banks. These include a synthetic CBDC, where the consumer has a claim on an intermediary, with the central bank only keeping track of wholesale accounts; and a direct CBDC, where the consumer has a claim on the central bank, with it handling all the retail.
Bitcoiners have launched a campaign against CBDCs, warning that they allow the government to control what you spend money on.
Some scholars have underscored that DLT has a role to play in helping central banks become more efficient and secure, but such technology should be introduced with “a ‘minimally invasive’ CBDC design — one that upgrades money to current needs without disrupting the proven two-tier architecture of the monetary system,” according to Raphael Auer, head of the BIS Innovation Hub Eurosystem Centre, and Rainer Böhme, a professor at the University of Innsbruck.
The fact that central banks are interested in digital currencies is not surprising. As countries look to rebound from nearly two years of lockdowns and other restrictions on mobility, coupled with rising inflation, central banks have been feeling the pressure to promote employment and manage price levels u20 their “dual mandate.” Across the world, central banks have bought a significant amount of bonds, thereby expanding the money supply and arguably further contributing to inflation. For example, the Federal Reserve has expanded the U.S. money supply from roughly $4 trillion to over $20 trillion over the past two years, but we are only now seeing the resulting inflationary effects.
Evaluating the potential benefits
In a 2020 report, the BIS outlined a handful of potential benefits brought up by proponents of CBDCs: financial inclusion, cross-border payments, financial resilience and stability, increased efficiency of fiscal transfers, and privacy. But cryptocurrency fulfills all of these aims better than government-backed currencies.
Let’s take a look at these potential benefits one by one.
Financial inclusion: The expansion of decentralized finance and emergence of nonfungible tokens are already changing the economic landscape. Thousands of content creators have sold NFTs and joined the DeFi community, removing intermediaries and allowing revenues to go directly to the creators.
“We’re entering a ‘Web2.5 era’ where content creators have benefited from the rise of social media, but what they create is owned by centralized groups,” Avery Akkineni, president of VaynerNFT, tells Magazine. “Now they are starting to own the end-to-end process, and we’ve seen some of these creators become wildly successful. […] That is inspiring a new generation of creators.”
Furthermore, existing financial institutions have already expanded access to credit by lowering the barriers to adoption. My research from 2021 found that the expansion of mobile banking in the U.S. since 2014 has been concentrated among those who are younger, single or a part of minority groups.
Even if these patterns were not true, it’s unclear how CBDCs expand financial inclusion.
CBDC proponents cite numerous advantages, but anything a digital dollar can do, crypto can do better.
Cross-border payments and efficiency of fiscal transfers: While financial transactions across borders are already possible, they are time-intensive and costly. However, several Web3 companies enabling cross-border transactions have emerged, including Ripple.
Financial resilience and stability: Resilience is integral to cushion against unanticipated shocks to the system. The 2007–2008 financial crisis in the U.S. and many developed countries was arguably driven by a concentration of risky, securitized assets. In the run-up to the crisis, the number of mortgages increased rapidly, but many new homeowners were not financially prepared to pay their mortgages — a pattern that was, at least partially, influenced by the Federal Reserve through its impact on interest rates and failure to attend to the warning signs.
The financial crisis could have been avoided if these warning signs had been taken more seriously. The United States’ 2011 Financial Crisis Inquiry Report reads: “The prime example is the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage-lending standards. The Federal Reserve was the one entity empowered to do so and it did not.”
Central banks are making analogous claims to those made in the run-up to the financial crisis when they play down the risks of CBDCs, especially the possible monopolization of the financial system by the central bank, and talk only about their benefits. “A core instrument by which central banks carry out their public policy objectives is providing the safest form of money to banks, businesses and the public — central bank money,” according to the BIS.
CBDCs are designed to attack crypto and shore up the power of central banks, according to critics.
Charles Calomiris, Henry Kaufman professor of financial institutions at Columbia Business School, tells Magazine that CBDCs seem more like a power grab than useful financial technology.
“CBDC is the latest attempt to expand their power at our expense by self-interested central bankers, which have done more in developed countries to expand their power at the expense of democracy over the past two decades than any other instrument of government.”
The architectural design of CBDCs matters. If they are designed so that they, even if not explicitly stated, can replace private commercial and retail banking, as the Peoples’ Bank of China has suggested, then central banks will have yet another mechanism for creating money that has no collateral or underlying asset value. Such an approach would have grave inflationary implications.
Last year, several economists published research on CBDCs and bank runs, finding that large-scale intermediation by central banks could lead to them becoming monopolies. Since central banks’ contracts with investment banks tend to be rigid, they have the potential to deter bank runs. Consumers “internalize this feature ex-ante, and the central bank arises as a deposit monopolist, attracting all deposits away from the commercial banking sector,” according to the research’s authors.
A nail in the coffin for privacy
Even though public documents from central bankers talk about privacy as a feature of CBDCs, no explanation exists for how this will work. In contrast, the BIS reported that “Full anonymity is not plausible. […] For a CBDC and its system, payments data will exist, and a key national policy question will be deciding who can access which parts of it and under what circumstances.”
Such a rollout could mean that every central bank would be able to identify each user. Today, a bank cannot tell who is using a euro versus a dollar bill, but “The key difference with the CBDC is the central bank will have absolute control [over] the rules and regulations that will determine the use of that expression of central bank liability, and also, we will have the technology to enforce that,” said Agustin Carstens, general manager of the BIS, during a 2020 panel discussion.
The U.S. is looking into a digital dollar, but will it be in keeping with the principles that make America what it is? Source: Pexels
There is little doubt that illicit transactions occur with cryptocurrency, but illicit transactions have always taken place, whether a thousand years ago with gold or today with cash. The question is how to create a framework that preserves privacy and counters illicit activity.
If central banks can track every transaction, what is to stop them from shutting down people’s access to finance, travel and their livelihoods? Furthermore, what would stop central banks from coordinating, as outlined in the BIS’ 2020 report?
“CBDCs don’t just threaten but fully infringe upon our financial autonomy, stripping away our most basic rights and freedoms as enumerated by our forefathers,” Eric Waisanen, co-founder of Hydro.Finance and host of the Secret Code Podcast, tells Magazine. In contrast, “DeFi provides freedom from the alleged protection that strips us of our ability to participate,” Waisanen continues.
The future of finance lies in decentralization. While we have traditionally known and interacted with large, centralized institutions, we have seen a widespread preference for and adoption of decentralized technologies arise from technological advances coupled with a recognition of the ills of centralization.
But DLT, and blockchain more generally, is only a tool. It still needs good governance and proper stewarding. The emergence of CBDCs is likely to centralize the “creation” and flow of finance even further by granting central banks even more authority to issue tokens rather than buy and sell bonds on a somewhat “open” market.
“A CBDC is an authoritarian government’s dream and represents a giant step backward for consumer privacy,” says Paul Watkins, managing director at Patomak Global Partners.
Many architectures for CBDCs have been proposed. There is widespread enthusiasm for the use of DLT in central banking, but not for retail CBDCs that simultaneously can create money without collateral and require individuals to share personally identifiable information. It is important to seriously consider the architecture of a CBDC when thinking about design; otherwise, CBDCs will be launched in competition with the growing move and appetite for decentralization.
Central bank digital currencies — digital currencies backed by a central bank — have received renewed interest with the United States President Joe Biden’s Executive Order on Ensuring Responsible Development of Digital Assets. Proponents of CBDCs argue that widespread adoption will promote financial inclusion, expand public access to safe money, improve the efficiency of payments and more.
But their rationale remains tenuous. Many analysts and practitioners increasingly view CBDCs as fundamentally at odds with the purpose of cryptocurrency, which is to provide a secure, decentralized peer-to-peer mechanism for transferring funds. And the hypothetical benefits of CBDCs remain hypothetical — no evidence exists yet that suggests any advantages over other examples of distributed ledger technologies in financial services, especially given the new risks they pose.
The status of CBDCs worldwide
Nine countries have already developed their own CBDCs, and the U.S. has joined a list of over 100 countries exploring issuing one. Most CBDCs take a hybrid approach whereby “The central bank issues the CBDC to banks and other and other payment service providers, which in turn distribute the CBDC to users throughout the economy and provide them with account-related services,” according to a recent report by the Hoover Institution.
There are other types, according to leading experts at the Bank for International Settlements — which consists of stakeholders from major central banks. These include a synthetic CBDC, where the consumer has a claim on an intermediary, with the central bank only keeping track of wholesale accounts; and a direct CBDC, where the consumer has a claim on the central bank, with it handling all the retail.
Bitcoiners have launched a campaign against CBDCs, warning that they allow the government to control what you spend money on.
Some scholars have underscored that DLT has a role to play in helping central banks become more efficient and secure, but such technology should be introduced with “a ‘minimally invasive’ CBDC design — one that upgrades money to current needs without disrupting the proven two-tier architecture of the monetary system,” according to Raphael Auer, head of the BIS Innovation Hub Eurosystem Centre, and Rainer Böhme, a professor at the University of Innsbruck.
The fact that central banks are interested in digital currencies is not surprising. As countries look to rebound from nearly two years of lockdowns and other restrictions on mobility, coupled with rising inflation, central banks have been feeling the pressure to promote employment and manage price levels u20 their “dual mandate.” Across the world, central banks have bought a significant amount of bonds, thereby expanding the money supply and arguably further contributing to inflation. For example, the Federal Reserve has expanded the U.S. money supply from roughly $4 trillion to over $20 trillion over the past two years, but we are only now seeing the resulting inflationary effects.
Evaluating the potential benefits
In a 2020 report, the BIS outlined a handful of potential benefits brought up by proponents of CBDCs: financial inclusion, cross-border payments, financial resilience and stability, increased efficiency of fiscal transfers, and privacy. But cryptocurrency fulfills all of these aims better than government-backed currencies.
Let’s take a look at these potential benefits one by one.
Financial inclusion: The expansion of decentralized finance and emergence of nonfungible tokens are already changing the economic landscape. Thousands of content creators have sold NFTs and joined the DeFi community, removing intermediaries and allowing revenues to go directly to the creators.
“We’re entering a ‘Web2.5 era’ where content creators have benefited from the rise of social media, but what they create is owned by centralized groups,” Avery Akkineni, president of VaynerNFT, tells Magazine. “Now they are starting to own the end-to-end process, and we’ve seen some of these creators become wildly successful. […] That is inspiring a new generation of creators.”
Furthermore, existing financial institutions have already expanded access to credit by lowering the barriers to adoption. My research from 2021 found that the expansion of mobile banking in the U.S. since 2014 has been concentrated among those who are younger, single or a part of minority groups.
Even if these patterns were not true, it’s unclear how CBDCs expand financial inclusion.
CBDC proponents cite numerous advantages, but anything a digital dollar can do, crypto can do better.
Cross-border payments and efficiency of fiscal transfers: While financial transactions across borders are already possible, they are time-intensive and costly. However, several Web3 companies enabling cross-border transactions have emerged, including Ripple.
Financial resilience and stability: Resilience is integral to cushion against unanticipated shocks to the system. The 2007–2008 financial crisis in the U.S. and many developed countries was arguably driven by a concentration of risky, securitized assets. In the run-up to the crisis, the number of mortgages increased rapidly, but many new homeowners were not financially prepared to pay their mortgages — a pattern that was, at least partially, influenced by the Federal Reserve through its impact on interest rates and failure to attend to the warning signs.
The financial crisis could have been avoided if these warning signs had been taken more seriously. The United States’ 2011 Financial Crisis Inquiry Report reads: “The prime example is the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage-lending standards. The Federal Reserve was the one entity empowered to do so and it did not.”
Central banks are making analogous claims to those made in the run-up to the financial crisis when they play down the risks of CBDCs, especially the possible monopolization of the financial system by the central bank, and talk only about their benefits. “A core instrument by which central banks carry out their public policy objectives is providing the safest form of money to banks, businesses and the public — central bank money,” according to the BIS.
CBDCs are designed to attack crypto and shore up the power of central banks, according to critics.
Charles Calomiris, Henry Kaufman professor of financial institutions at Columbia Business School, tells Magazine that CBDCs seem more like a power grab than useful financial technology.
“CBDC is the latest attempt to expand their power at our expense by self-interested central bankers, which have done more in developed countries to expand their power at the expense of democracy over the past two decades than any other instrument of government.”
The architectural design of CBDCs matters. If they are designed so that they, even if not explicitly stated, can replace private commercial and retail banking, as the Peoples’ Bank of China has suggested, then central banks will have yet another mechanism for creating money that has no collateral or underlying asset value. Such an approach would have grave inflationary implications.
Last year, several economists published research on CBDCs and bank runs, finding that large-scale intermediation by central banks could lead to them becoming monopolies. Since central banks’ contracts with investment banks tend to be rigid, they have the potential to deter bank runs. Consumers “internalize this feature ex-ante, and the central bank arises as a deposit monopolist, attracting all deposits away from the commercial banking sector,” according to the research’s authors.
A nail in the coffin for privacy
Even though public documents from central bankers talk about privacy as a feature of CBDCs, no explanation exists for how this will work. In contrast, the BIS reported that “Full anonymity is not plausible. […] For a CBDC and its system, payments data will exist, and a key national policy question will be deciding who can access which parts of it and under what circumstances.”
Such a rollout could mean that every central bank would be able to identify each user. Today, a bank cannot tell who is using a euro versus a dollar bill, but “The key difference with the CBDC is the central bank will have absolute control [over] the rules and regulations that will determine the use of that expression of central bank liability, and also, we will have the technology to enforce that,” said Agustin Carstens, general manager of the BIS, during a 2020 panel discussion.
The U.S. is looking into a digital dollar, but will it be in keeping with the principles that make America what it is? Source: Pexels
There is little doubt that illicit transactions occur with cryptocurrency, but illicit transactions have always taken place, whether a thousand years ago with gold or today with cash. The question is how to create a framework that preserves privacy and counters illicit activity.
If central banks can track every transaction, what is to stop them from shutting down people’s access to finance, travel and their livelihoods? Furthermore, what would stop central banks from coordinating, as outlined in the BIS’ 2020 report?
“CBDCs don’t just threaten but fully infringe upon our financial autonomy, stripping away our most basic rights and freedoms as enumerated by our forefathers,” Eric Waisanen, co-founder of Hydro.Finance and host of the Secret Code Podcast, tells Magazine. In contrast, “DeFi provides freedom from the alleged protection that strips us of our ability to participate,” Waisanen continues.
The future of finance lies in decentralization. While we have traditionally known and interacted with large, centralized institutions, we have seen a widespread preference for and adoption of decentralized technologies arise from technological advances coupled with a recognition of the ills of centralization.
But DLT, and blockchain more generally, is only a tool. It still needs good governance and proper stewarding. The emergence of CBDCs is likely to centralize the “creation” and flow of finance even further by granting central banks even more authority to issue tokens rather than buy and sell bonds on a somewhat “open” market.
“A CBDC is an authoritarian government’s dream and represents a giant step backward for consumer privacy,” says Paul Watkins, managing director at Patomak Global Partners.
Many architectures for CBDCs have been proposed. There is widespread enthusiasm for the use of DLT in central banking, but not for retail CBDCs that simultaneously can create money without collateral and require individuals to share personally identifiable information. It is important to seriously consider the architecture of a CBDC when thinking about design; otherwise, CBDCs will be launched in competition with the growing move and appetite for decentralization.
The daily transactions involving the richest Litecoin (LTC) addresses — “whales” that hold 10,000 to 1 million LTC — have jumped to their highest levels since December 2021.
Litecoin selloff ahead?
On-chain analytics platform Santiment detected a total of 3,458 LTC transactions worth over $100,000 on April 5, calling it “an indicator of mid-term price direction shifts.”
Meanwhile, Litecoin’s price continued its correction move on April 6, down 13% from recent highs of $135 on March 30.
Litecoin daily whale transactions in 2022. Source: Santiment
Whales are an influential cluster of investors since they hold a comparatively large amount of coins, whose movements can intentionally or unintentionally move markets in either direction.
Santiment’s chart revealed little about whether Litecoin whales purchased, sold, or merely transferred their LTC holdings to other addresses. However, it showed that spikes in daily whale transactions have been preceding price declines in the Litecoin market this year, raising the possibility of LTC’s price falling in the coming weeks.
LTC price technicals
Over the last ten days, Litecoin has experienced modest selloffs upon twice testing its 20-week exponential moving average (20-week EMA; the green wave) near $133.
LTC/USD weekly price chart. Source: TradingView
LTC’s price declined by nearly 7.5% week-to-date to drop below $120. Its path of least resistance looks skewed toward the downside, with its 200-week simple moving average (200-week SMA; the orange wave) near $100 acting as the next pullback target — around 20% below current prices.
The given level also coincides with the lower horizontal support that constitutes a descending triangle pattern, raising LTC’s chances of a rebound here toward the channel’s upper falling resistance above $200 in Q2.
Litcoin hodlers holding
Additionally, the monthly position change of Litecoin’s long-term investors — or “hodlers” — shows LTC accumulation (green) during its price declines in 2021, suggesting that investors are currently betting on the price to rise in the future.
Litecoin holder net position change. Source: Glassnode
Meanwhile, Rekt Capital, an independent market analyst, expects an early rebound in LTC/USD, citing a “falling wedge” — a bullish reversal pattern that starts wide at the top but contracts as prices move lower.
LTC/USD daily candle price chart
“LTC now pulling back for a post-breakout retest of the Falling Wedge top,” he noted in reference to the chart above, adding:
“This Falling Wedge diagonal is confluent with the green Range Low area ($116-$125). LTC will be looking to hammer out a base in this area.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
