Elevated Bitcoin Open Interest Levels Puts Market In Vulnerable Position
Bitcoin has recovered above $23,000 multiple times now, but the digital asset remains in a perilous position. This is because the recovery alone has not been able to assure that the bull trend would endure. Rather, it has been falling the brief buying and selling pressures that have been plaguing investors in recent times. The bitcoin open interest also mirrors this fact and shows just how easy it would be for bitcoin to lose its position.
Bitcoin Open Interest Stays Elevated
For the past week, the bitcoin open interest has been on the rise. After hitting above 300k the previous week, there was no stopping this part of the market. However, it also pointed to more peculiarities about the current bitcoin uptrend.
Related Reading | Why Cardano (ADA) May Breakout In A Bull Run To $1
For one, the elevated bitcoin-denominated open interest shows that there is very high leverage in the crypto market. As with any market, having such high leverage always puts the value of the digital asset in a perilous position. It could swing either way resulting in a short squeeze or a long squeeze. Whatever the case may end up being, the results are often the same; there are significant price swings that would go in either direction.
With the current movement of bitcoin, it is more likely that a long squeeze would be the end of it. This would likely see the price drop back down and touch $20,000. But if the off chance that it does end in a short squeeze, then bitcoin’s price could very well revisit $25,000.
Funding Rates Fall
Last week, the market had seen some much-needed bullish sentiment on the part of perpetual traders when the funding rates had recovered to neutral levels. Given that the funding rates had spent weeks swinging below neutral, this was a welcome change, however briefly.
It would seem the positive recovery would only last a single week as bitcoin funding rates have begun to swing back into the negative. It shows a straight decline down from neutral, indicating that traders were returning to more careful trades.
Interestingly, though, is the fact that despite the decline in the funding rates, they still continue to maintain higher lows. It shows better prospects compared to the month of June, which was characterized by funding rates remaining perpetually below neutral.
Related Reading | Bullish Sentiment Spills Over To Institutional Investors As Ethereum Inflows Balloons
What this shows is that although bitcoin traders are being more careful, they have not entirely written off the digital asset. This improvement in market sentiment has shone through in bitcoin’s recent recovery. However, for this to continue, funding rates would need a reversal from here.
Featured image from GoBankingRates, charts from Arcane Research and TradingView.com
Filecoin (FIL) is a global decentralized storage system striving to become the faster, most secure, and most affordable way to store data on the internet. Filecoin aims to disrupt the dominance of a few centralized players in the cloud storage space like Amazon, Google, Microsoft, etc. The network offers a crypto-incentivized decentralized cloud storage solution by providing economic incentives to storage providers to ensure that files are stored reliably over time.
Clients can access the decentralized cloud storage with the Filecoin FIL token, the native token of the Filecoin network.
In this article, we’re going to dive deep into the Filecoin network, explore the use cases of the FIL token, and learn how to buy Filecoin in a few simple steps.
Let’s get right to it!
What Is Filecoin (FIL)
Filecoin (FIL) is a decentralized peer-to-peer network for storing files on the internet using the Filecoin blockchain, which records each transaction with a storage unit.
The network helps in monetizing unused storage available on computer systems worldwide. Anyone with extra space on their computer can become a storage provider and make money in the form of FIL tokens for storing the data reliably.
Filecoin was launched in 2017 on top of the Interplanetary File System (IPFS) protocol, ensuring file storage and sharing in a distributed network, invented by Juan Benet. Protocol Labs, founded by Benet in 2014, is behind the Filecoin network and IPFS.
Filecoin attempts to solve two of the biggest problems associated with centralized storage providers – control over data and the cost of storing data.
Firstly, the control of data in centralized storage facilities lies in the hands of the company providing the service. For example, clients lose access to their own data when a platform like Amazon Web Services is hit by a bug or suffers a breakdown. In contrast, Filecoin clients have complete control over the data stored on the network and can access and retrieve their data at any point as per their convenience.
Secondly, the centralized storage providers have complete control over the storage costs the clients have to pay, and these are non-negotiable. In contrast, Filecoin allows end users and storage providers to negotiate a mutually beneficial storage rate.
These two factors have helped the network emerge
as the go-to platform for users looking to store their sensitive files safely.
Who Can Use Filecoin Storage
Filecoin can be used for storing large data sets and is suitable for websites, private data, public datasets, contract data, company files, private data, video, app websites, podcast data, security archives, and personal files. The network uses cryptographic storage proofs and content addressing to ensure that the data is stored securely and correctly over a period decided by clients.
Filecoin provides a foundation for critically important public data such as open access public data, Creative Commons media, historical archives, etc. It stores treasured data archives like Wikipedia, OpenStreetMap, gnomAD, Project Gutenberg, and OpenAQ.
The demand for decentralized file storage has come from both Web2 and Web3 use cases. The network has already achieved a storage capacity of $16,000 PiB, equivalent to approximately 65,000 copies of Wikipedia.
FIL Token Use Cases
Transactions on the Filecoin blockchain require FIL tokens. The digital asset is needed for storing files on the network. FIL tokens are also distributed to storage providers (miners) and retrievers as an economic incentive to ensure the safety of files. Miners earn FIL tokens as a reward even if the storage they provide remains unused. This helps ensure the availability of free storage on the network at any given time.
Storage providers can hold the FIL token as collateral for future uses. FIL tokens are used as the payment method for the negotiated contracts between storage providers and clients in the open market. The FIL token is also required for settling several micro-transactions on the network.
Filecoin has several advantages:
Filecoin (FIL) makes it easy for anyone with extra storage on their computer to earn passive income by renting the space to clients on the network. This feature has led to the creation of a vast community network in just a few years.
Affordable Storage and Retrieval
The network allows clients to negotiate storage rent with miners in an open market to ensure the storage cost is not arbitrarily fixed. Retrieving data on Filecoin is also cheap because of the competitive pricing in the open market.
Filecoin is a highly scalable platform that brings millions of computers with unused storage across the world together. The network aims to increase its storage capacity by 1000x in under 20 years.
Filecoin provides decentralized storage, ensuring files are stored in a trustless manner over the peer-to-peer network. Moreover, the power of making decisions on the network is not limited to any one single player.
Applications implementing Filecoin can store their data on any storage provider using the same protocol. There isn’t a different API to implement for each provider.
Although there are multiple advantages to using Filecoin, there are also certain risks or disadvantages that users should consider:
The price of Filecoin tokens is subject to market risks and volatility that can affect the storage providers’ and token holders’ earning potential. While their income can increase manifold when the markets are green, they may also witness sharp losses in a bear market.
Filecoin is still a small challenger to large competitors like Amazon and Google in the cloud storage segment. Moreover, the network has competitors like Arweave, Sia, and Storj in the decentralized blockchain-based storage space.
The reliability of storage provided by Filecoin is heavily dependent on the crypto-economic incentives given to miners. The network may not operate at its full potential if the miners are disinterested in these incentives.
Non-crypto users cannot use Filecoin, as FIL tokens are required to complete transactions on the network. With global uncertainties around crypto regulations, a large section of the population is not yet interested in crypto and crypto-related services.
FIL is an inflationary cryptocurrency developed as a utility token for use within the Filecoin network. It may not have a long-term speculative value, as opposed to Bitcoin.
How to Buy Filecoin
Buying Filecoin is pretty straightforward. Users can buy Filecoin FIL on several crypto exchanges, such as Coinbase, Gemini,Crypto.com, and Binance.
To purchase Fil on CoinStats, you must connect your wallet and swap your existing tokens for Filecoin. CoinStats supports over 250 cryptocurrency exchanges and over 7,000 cryptocurrencies. You can use the CoinStats Wallet, Ethereum Wallet, Trust Wallet, Bitcoin Wallet, etc.
Follow our step-by-step guide to buying FIL on CoinStats:
Step #1: Log in to CoinStats
To buy FIL, users need to have some major crypto tokens like Bitcoin, Ethereum, etc., in their crypto wallet. After that, you need to log in or create an account on the coinstats.app and search for Filecoin in the search bar to buy FIL.
Step #2: Click Buy FIL
In the next step, click on the “Buy FIL” link available in the upper right corner of the page.
Step #3: Connect Your Wallet
Scroll down to the “swap” feature and connect the wallet where you store your ETH or BTC tokens. Once you click on the “Connect” button, you’ll see various wallet choices offered by CoinStats. Search for your wallet and connect it. You can also connect it by scanning the QR Code via WalletConnect or manually adding the Blockchain/Crypto and Wallet address in your web or mobile application.
Step #4: Select the Token
After successfully linking your wallet, choose the token you want to swap by providing the data either in cryptocurrencies or USD/EUR.
For example, we are swapping ETH for FIL or buying Filecoin with ETH. In the “From” field, select the ETH token from your wallet, and in the “To” field, select “FIL.”
Step #5: Swap Crypto
Click on Advanced Options to change the slippage and gas settings. When you’re finished customizing, scroll down to the bottom of your screen and click the “Submit Swap” button.
After you’ve submitted your swap request, you’ll be prompted to confirm it. To begin the swap, review the information displayed on your web or mobile app screen, and click the “Confirm” button.
Your transaction is now being processed. The pace of your transaction will vary depending on the gas parameters you select. You can trace your transaction from the loader at the bottom right corner of the wallet’s home page.
NOTE: You’ll be charged Network Transaction fees, also known as gas fees. This refers to the charge necessary to complete a transaction on the blockchain. In essence, gas fees are paid in the native currency of the network, i.e., Ethereum for the Ethereum network. CoinStats also charges a small swap fee in addition to the gas fees.
How to Buy FIL on Cryptocurrency Exchanges
Here’s our guide on how to buy Filecoin (FIL) on crypto exchanges:
Step #1: Select an Exchange
You can purchase FIL tokens on several exchanges. You’ll have to compare them to choose the one with the features you want, such as low transaction fees, an easy-to-use platform, and 24-hour customer support. Also, consider if the cryptocurrency exchange is regulated by the Financial Industry Regulatory Authority (FINRA), etc., and allows buying FIL with your preferred payment methods, such as a credit or debit card, another cryptocurrency, or a bank transfer.
Step #2: Login or Create an Account
After selecting a cryptocurrency exchange that ticks all the boxes, the next step is to create an account on the exchange with your email or mobile number. The requirements differ depending on the platform you pick. You must enter the verification code sent to your email or mobile phone to get verified and start trading.
Some exchanges might require stringent KYC and AML procedures, and you must provide personal information like your name, contact number, email address, home address, social security number, and a copy of your driver’s license, passport, or government-issued ID to get verified. You must provide this information to be authenticated if you plan to deposit fiat currency from your bank account to purchase the FIL token.
It’s advisable to enable two-factor authentication (2FA) to keep your funds safe once you’ve verified your identity.
Note: Existing users can simply log in to buy Filecoin (FIL).
Step #3: Deposit Funds
The next step is to deposit funds into your account. Many exchanges will allow you to use fiat currency like USD or EUR to fund your account. Simply choose your preferred method, such as a bank transfer, Master and Visa credit/debit cards, e-wallets, wire transfer, PayPal, etc. The payment method used to buy FIL coins will be determined by the platform, location, and preferences.
Some deposit methods are almost instantaneous, while others require a confirmation from authorities depending on the amount. Remember also to check the costs associated with different deposit methods because some attract higher fees than others.
Step #4: Buy FIL
The process of purchasing Filecoin is similar across all exchanges. Search for Filecoin FIL in the search bar, select it, and click on “Buy FIL” or its equivalent. Input the amount of FIL or the fiat amount to be spent. Most exchanges will automatically convert the amount to let you know how much you’ll spend and how much FIL will be obtained. Before making your purchase, double-check the details and confirm.
You can place a market order to buy Filecoin (FIL) tokens immediately at the current market price. Otherwise, you can place a limit order indicating that you want to buy FIL at or below a specific price point. The coins will only appear in your wallet if your broker fulfills your order at or below your requested pricing.
Some cryptocurrency exchanges provide peer-to-peer (P2P) platforms to let users buy FIL from other users directly. Users must select Filecoin FIL, a seller, and a payment method. After making selections, users must click the “buy” button, confirm the transaction, and the seller will release the FIL tokens to the buyer.
The FIL tokens’ total supply is capped at 2 billion, with 223 million tokens currently in circulation. The token was launched in 2017 at an initial price of $0.75 per token. Of the total FIL supply, 70% of tokens have been allocated to miners/storage providers, and the remaining 600 million tokens were pre-allocated with varying vesting periods in the following way:
770 million FIL tokens will be released over 20 years. 97% of 330 million FIL tokens will be released in around 30 years.
FIL token reached its all-time high (ATH) of $237 on April 1, 2021. The token fell to its all-time low of $1.83 on August 29, 2019. Its current price is 187% more than the all-time low.
How to Sell or Exchange FIL
Users can easily sell and exchange their FIL tokens on a cryptocurrency exchange. Follow these steps to sell or exchange your FIL tokens easily:
Step 1: Log in to your account.
Step 2: Select FIL from your portfolio’s list of assets and choose how many Filecoin you want to trade.
Step 3: Complete the token sale or exchange process as instructed by crypto exchanges.
How to Store FIL
After buying a digital asset, it’s essential to securely store it in a crypto wallet. While you can leave your tokens on your exchange wallet, this leaves you more vulnerable should the platform be hacked, so we highly recommend creating a private wallet with your own set of keys. There are 2 major storage options to store your Filecoin FIL tokens off the exchange wallets: a Software Wallet (Hot Wallet) and a Hardware Wallet (Cold Wallet).
The supported wallets for storing FIL include the CoinStats wallet, Trust Wallet, Filfox wallet, FilSnap, Metamask, Plugin, FilWallet, FoxWallet, Glif Web Wallet, ImToken, MathWallet, Brave Browser Wallet, etc. Some of these wallets are approved by Financial Crimes Enforcement Network (FinCEN).
“Not your keys, not your coins” is an often quoted saying for crypto investors. Giving away your private keys to online exchanges and wallets may put your digital assets at risk and make them vulnerable to cyber attacks or suspension of withdrawal by exchanges, as witnessed during the ongoing market downturn. Storing your keys in cold or hardware wallets is, therefore, the safest way to store FIL.
Should You Buy Filecoin
The Filecoin token has registered instant success on its launch but failed to keep up to its reputation. In the bull run of 2021, the token’s price increased to $237; however, the FIL price has been on a downward trajectory since last year. The current decrease in FIL price may also be attributed to the overall downturn in crypto and general financial markets across the globe.
However, when it comes to crypto investment, one should always look for the long-term potential of digital assets. Decisions based on current prices often lead to disappointment.
Filecoin has a promising future, but it needs to become a major competitor to traditional Web 2 cloud players, earn the clients’ trust, and ensure a smooth user experience for all stakeholders like clients and storage providers.
Before purchasing Filecoin or any other cryptocurrency, it’s also vital for investors to do their own research and seek investment advice from professional financial advisors.
FIL is one of the few highly rated crypto assets with real-world use cases. The popularity of decentralized file storage solutions among crypto enthusiasts contributes to the network’s growth, irrespective of the market conditions. The global cloud storage market is predicted to grow manifold in the coming years, and the Filecoin ecosystem could capture a significant portion of the market if it lives up to its promise.
The Filecoin network also provides a decentralized cloud storage system for the Web 3 ecosystem, including storage solutions for NFTs, the metaverse space, music, video streaming, and gaming. If Web 3 manages to grow as projected, Filecoin may also develop.
Lastly, the Web 3 ecosystem is expanding rapidly, and a new player can quickly emerge and disrupt existing platforms. So, Filecoin must remain ahead of other blockchain-based file-sharing protocols by providing a better user experience and earning opportunities to storage providers. The network should also be wary of the existing centralized storage providers and the rapidly evolving crypto regulations worldwide. The network’s unique model puts it in a sweet spot, but the company may have to do more to experience massive growth in the coming years.
Note: Before buying FIL, users should always seek professional investment advice and do their own research.
We’ve turned 11: Kraken CEO Jesse Powell discusses how we stood the test of time
“You’d think after 11 years, you could start feeling comfortable with your business, but it has basically been wartime in crypto since day one.”
In 2011, Kraken CEO Jesse Powell set out to build a crypto exchange that clients and regulators could trust. Despite headwinds and market uncertainties, Jesse has led Kraken through more than a decade of highs, lows, frenzies and FUD to establish Kraken as a leader in the cryptoasset industry.
Kraken Editor-at-large Pete Rizzo sat down with Jesse to mark Kraken’s 11th anniversary. Get a first-hand account of how Kraken charted our own path through the stormy crypto-market waters time after time — and learn where we’re headed next.
Building through bear markets
As we celebrate 11 years in the crypto space, Jesse reflected on Kraken’s early days and what it was like to build an industry in its infancy.
“We were building all this tech, and the crypto industry could’ve shut down at the time. It wasn’t thoroughly tested at that point and we didn’t know what regulators were going to do. We couldn’t even raise venture capital until 2014.”
Recognizing this uncertainty, Jesse set out to build Kraken as a safe haven for early crypto investors. With the motto security above everything, he earned trust with this single, uncompromising first priority: the safeguarding of client funds.
Kraken wasn’t just built on resilient, adaptable technology for an asset-agnostic environment. These same principles could easily be used to describe the company too. Kraken has remained dedicated to its mission: to accelerate the adoption of cryptocurrency so that you and the rest of the world can achieve financial freedom and inclusion… regardless of how long that takes or what challenges we face.
“In , Bitcoin went from $1 to $10 to $1000 — and then back to $100. It’s been a long road. I thought we’d all be using Bitcoin by now but it looks like crypto adoption is going to be like smartphone adoption,” Jesse said, reflecting on how both industries have matured and grown through similar innovation cycles and iterative generations.
Jesse added that Kraken is evaluating the acquisition of other exchanges and crypto platforms to accelerate our roadmap during this bear market, as we did during previous crypto winters. No stranger to mergers and acquisitions, Jesse expressed his interest in acquiring culturally similar companies with strong crypto values. He also spoke about the different characteristics that make Kraken the ideal environment for crypto-visionaries to continue building out their bleeding edge ideas.
Financial inclusion is our key motivator
Jesse discussed the unique features of crypto that help it empower some of the world’s most vulnerable people, and how Kraken continues to solidify its position at the forefront of this movement.
Jesse also highlighted the financial benefits of NFTs, cryptocurrencies and blockchain technology for artists. By using NFTs to verify ownership, he described how artists can connect with their fans in unique ways and monetize their creations within the digital economy.
Kraken is proud to play a part at this exciting intersection between creativity and commerce. The upcoming launch of Kraken NFT marketplace will feature our industry-leading security, enabling more secure NFT custody with gas free trading on the platform.
Jesse also spoke about the transformative power of blockchain technology as it relates to individuals’ ability to gain access to information.
“Crypto is what the internet was to information. Before the internet, you had to go to the local library or use your own encyclopedias to find information. If you couldn’t do either, you just didn’t have access to information. I think a similar thing is starting to happen with money and cryptocurrencies. Crypto is giving unbanked individuals access to financial services they wouldn’t otherwise have.”
There is no shortage of work to be done while delivering on Kraken’s mission. Jesse detailed some of the ways Kraken is breaking down the barriers to adoption that will help further financial freedom and inclusion. He called on the industry to continue taking steps that empower individuals to buy and spend their cryptocurrency in order to support the mainstream adoption of crypto over the coming years.
Beyond some gaps in usability and accessibility, Jesse named FUD regarding Bitcoin’s energy consumption as one of the key hurdles to widespread adoption. While many continue to see Bitcoin as a strain on our energy supply, recent studies showed more than two-thirds of the Bitcoin Mining Council and over 59% of global BTC miners use a sustainable power mix, adding that the energy consumption critique is “thoroughly debunked at this point.”
As Kraken continues to build through the bear market, with over 500 roles to fill, Jesse is also focused on the future and accelerating Kraken’s progression of our mission. Jesse concluded: “I want to say a big thank you to the Krakenites, this would not be possible without all of you and we definitely couldn’t have done it with the small team we had 11 years ago. I also want to thank those who’ve been in crypto for a long time and rode out a few of these cycles, as well as those who are experiencing their first bear market, thank you for sticking it out with us.” Together, we look forward to what lies ahead.
Here’s to the next 11 years of Kraken!
These materials are for general information purposes only and are not investment advice or a recommendation or solicitation to buy, sell, or hold any digital asset or to engage in any specific trading strategy. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets can lead to loss of funds. Tax may be payable on any return and/or on any increase in the value of your crypto assets and you should seek independent advice on your taxation position.
Alphabet, Microsoft and Now Meta Release Disappointing Quarterly Earnings – News Bitcoin News
Meta joined Alphabet and Microsoft in releasing disappointing quarterly financials, following the company’s Q2 earnings call. In a week of a disappointment for mega-cap stocks, the trio has all missed revenue and earnings expectations, with Meta seeing its first quarterly sales decline ever recorded.
Due to the current global economic slowdown, markets had anticipated that earnings of mega-cap stocks which account for 40% of the Nasdaq, and 30% of the S&P 500 could face a bloodbath.
However, although earnings have disappointed, and came in worse-than expected across the board, some analysts suggest that the situation might have been more dire.
The International Monetary Fund (IMF) recently announced that it was revising its 2022 global GDP forecast, from 3.6% at the start of April, to now expecting growth of 3.2% for the remainder of the year.
This seems to have been reflected in the earnings report released by three of the world’s largest tech companies.
Alphabet, the parent company of Google was one of the first companies to release earnings this week, with figures falling short of expectations.
The company reported revenue for the second quarter had risen by 13% to $69.7 billion, which was lower than the expected $70.8 billion.
Q2 earnings came in at $1.21 per share, which was less than the consensus of $1.27 per share for the quarter.
Microsoft also fell short of expectations, with both earnings and revenue figures disappointing for Q2.
The company founded by Bill Gates reported that earnings came in at $2.23 per share, versus general expectations of $2.29 per share.
Quarterly revenue was reported at $51.87 billion, which was less than the $52.44 billion analyst had forecasted.
Finally Meta, formerly Facebook, also reported disappointing financial results for the second quarter of the year.
They confirmed that revenue totaled $28.82 billion for April – June, which was marginally lower than the anticipated $28.94 billion.
EPS, earnings per share was reported at $2.46, versus hopes of $2.56 per share,which comes despite daily active users on Facebook climbing to 1.97 billion versus 1.95 billion expected.
Following the earnings call, CEO Mark Zuckerburg stated that, “We seem to have entered an economic downturn that will have a broad impact on the digital advertising business”.
Amazon and Apple are the next two mega-cap stocks to release their earnings later today, do you expect this trend to continue?
Eliman brings a eclectic point of view to market analysis, having worked as a brokerage director, retail trading educator, and market commentator in Crypto, Stocks and FX.
Image Credits: Shutterstock, Pixabay, Wiki Commons, Ascannio / Shutterstock.com
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
Around the Blocksheds light on key trends in crypto. Written by Connor Dempsey, sourced from the work and insights from the entire team at Coinbase Ventures & Corp Dev
Coinbase Ventures deal activity reflected the overall pace of the venture landscape, down 34% QoQ. Activity remained up 68% YoY, reflecting the steady growth of our venture practice over the past year
Among the key trends observed, we believe that Web3 gaming will onboard the next massive wave of crypto users, with experienced founders from Web2 gaming continuing to pour into the space
We’re excited about Web3 user applications working to upend the captive models of Web2 and give users control over their audiences and communities
The Solana ecosystem continues to show impressive momentum and developer traction
Massive UX improvements are coming to crypto that will obfuscate away complexity and deliver experiences on par with Web2
The United States continues to be home to the bulk of companies in our portfolio, with Singapore, UK, Germany, and India all establishing impressive innovation hubs
Where CeFi lenders faltered this year, DeFi lending platforms were resilient
Current price action aside, we remain convinced that the opportunity within crypto and Web3 are far greater than most realize.
The first half of 2022 was turbulent for all markets. The Dow and S&P had their worst first halves since 1962 and 1970. The NASDAQ had its worst quarter since 2008. Bitcoin had its worst quarter since 2011, DeFi TVL ended down 70% from its high, and June NFT sales slumped to levels not seen in a year.
A core part of the crypto market chaos stemmed from the collapse of the $60B Terra ecosystem in May. This contributed to the implosion of a $10B crypto fund (Three Arrows Capital) that had leveraged exposure to Terra along with a few other trades that moved against them (GBTC, stETH). Next, it was revealed that Three Arrows Capital had borrowed heavily from some of the largest centralized lenders in crypto. Unable to recoup these loans, several of these lenders were forced into bankruptcy.
The macro market downturn seeped into the venture landscape as well.
The broader venture market began to show signs of cooling in Q1, with total funding dropping for the first time since Q2 2019. That trend continued in Q2, with total venture funding dropping 23%, marking the largest dip in a decade. The quarter also saw later stage companies like Klarna raising down rounds; a further sign of the times.
Crypto venture funding still saw a record Q1, but as we wrote in our last letter, we’d already begun seeing signs of a slowdown that we expected to surface in Q2. Sure enough, data from John Dantoni at The Block showed that crypto venture funding dollars decreased 22%: the first down quarter in two years.
In Q2, Coinbase Ventures continued to rank among the most active investors in crypto, but also saw deal place slow, with the total count decreasing 34% QoQ, from 71 to 47. Despite the slowdown compared to the fervent pace of late 21 and Q1 22, our Q2 activity still increased 68% YoY; indicative of the overall growth of our venture practice.
The decline largely reflected the overall market conditions — with volatility in the markets, we saw many founders rethink or put their rounds on pause, particularly at the later stages. We’re seeing that many companies are foregoing a fundraise unless absolutely necessary, and even then, only if they feel confident that they can show the growth needed to justify a new round.
Gloomy macro environment aside, there are still plenty of high quality founders raising at the seed stage, where we’re most active. Looking beyond the price action at the areas that we invested in shows the range of real utility that’s continuing to be built and paints a promising picture of the future: one with a vibrant array of Web3 user applications, improved UX, robust DeFi markets, scalable L1/L2 ecosystems, and all of the tools developers need to build the next killer app.
Here’s how our activity broke down over Q2.
Now, let’s look at some themes that stood out. (* denotes Coinbase Ventures portfolio company)
The coming era of blockchain gaming
With the meteoric rise and subsequent fall of Axie Infinity activity, many pundits have been gleefully quick to dismiss blockchain gaming as a passing fad. As we wrote in September, Axie was experiencing a positive feedback loop that could turn negative should the fervor driving the game die down, which is ultimately what happened. Regardless, Axie posted nearly $1B in sales in a single month and attracted 2M DAUs with essentially zero marketing budget. This put the entire gaming world on notice to the power of this new vertical.
With an estimated 3.2B+ gamers in the world, we strongly believe that Web3 gaming will onboard the next massive wave of crypto users. Web3 gaming remained a sector of heavy investment in Q2, with The Block estimating that $2.6B+ was raised. Our activity over the last few quarters only strengthens our conviction.
As we saw in Q1, founders with strong track records in Web2 gaming continue to embrace this category. For example, Azra games*, was founded by the creators of the $1.4B+ mobile blockbuster Star Wars Galaxy Heroes. Their goal is to build a combat RPG game with a robust in-game economy that can still garner mainstream appeal. The space has also attracted Justin Kan, co-founder of the game streaming platform Twitch, which was sold to Amazon for $1B. Kan’s new company, Fractal*, is building a marketplace for NFT gaming assets.
Companies like Venly* will add fuel to the fire with a suite of tools that let Web2 game developers seamlessly make the leap into Web3. Established gaming powerhouses are even starting to come around, with Fortnite creator Epic Games now allowing NFT based games into its game store.
It will take some time for this sector to mature, but it’s growing increasingly clear that blockchain gaming will be a massive category in the future. Expect an increased focus on sustainable economics and gameplay that infuses NFTs with more familiar Web2 gaming experiences.
Beyond gaming, the next generation of Web3 user applications are working to upend the captive models of Web2 and to give users control over their audiences and communities. One company we’re particularly excited about is Farcaster*: a sufficiently decentralized social network founded by Coinbase alumns Dan Romero and Varun Srinivasan. Their early product resembles Twitter, but with the key difference of letting users own the relationship with their audiences.
Farcaster is an open protocol, similar to email (SMTP). While Farcaster has built the first social app on the protocol, other developers can build competing clients, just like we have Gmail and Apple iCloud. While you can’t take your Twitter followers with you to TikTok, someone could build a TikTok equivalent on the Farcaster protocol, and Farcaster users can take their followers with them to a new, differentiated platform. Not only can users maintain better ownership of their audience, but it also opens the door for more aligned monetization. Where most advertising spend goes directly to Twitter, Instagram, etc, Farcaster users with large followings can monetize their audiences directly across platforms.
Another investment we’re excited about is Highlight.xyz*, which sits at the burgeoning intersection of Web3 and music. Highlight will let musicians create their own web3-enabled fanclubs / communities (no coding necessary), complete with token gating, access to NFT airdrops, merchandise and more. Highlight joins other CBV portcos like Audius*, Sound.xyz*, Mint Songs*, and Royal*, all offering musicians new avenues for connecting with and monetizing their fanbases.
All told, we remain excited about Web3’s potential to reimagine entrenched Web2 models for social media, music, and more, and ultimately return power to creators.
Noticeable in our Q2 activity was the continued momentum behind the Solana ecosystem. While Ethereum and the EVM remain king as far as developer traction and compatible apps, we’re noting a clear trend in early teams placing importance on Solana. All in, we did 10 deals building on Solana in Q2.
Given that Solana smart contracts are coded in Rust as opposed to the EVM’s Solidity, founding teams often choose between building in one or the other. Increasingly, we’re seeing teams opt to support both the EVM and Solana from the onset — like recent additions in Coherent and Moralis. We’ve seen others start on EVM and opt to fully transition to Solana while the above mentioned Fractal opted to build on Solana from the onset.
Add in the fact that multiple large funds have publicly expressed support for the ecosystem, and it suggests that Solana’s staying power is real. Chain liveliness however (the ability for Solana to remain online) remains an issue that is paramount for the Solana team to solve.
The UX of Everything
An overall clunky and disjointed crypto user experience has long been a hurdle for adoption. Think of what a user has to do to execute a typical transaction: convert fiat to crypto, transfer crypto to a wallet, bridge crypto to their network of choice, and then finally execute a transaction.
In Q2, we’ve invested in multiple teams (not yet announced) working on streamlining and verticalizing the entire retail transaction journey. Soon developers building in crypto and Web3 will be able to deploy the entire transaction stack with a few simple lines of code and standard set of APIs.
The end result will be a future where, for example, a user can execute a DEX transaction in a single click. In the background, fiat will be converted into crypto, moved to a wallet, bridged to an L1/L2, before executing the swap and custodying the asset in their wallet of choice. All of the complexity will be obfuscated away and we’ll have user experiences on par with Web2 — a massive unlock.
Where are the buidlers?
This quarter we took a look at where the founding teams we’ve invested in are based. While crypto is a global industry, somewhat unsurprisingly, the largest concentration of our founding teams hail from the United States — home to 64% of our 356 portfolio companies; all the more reason for regulators to foster rather than inhibit this fast growing sector.
Singapore has established itself as the base of many of the teams building in Asia. Meanwhile, the UK and Germany are home to growing hubs, with policy makers proactively working towards regulatory clarity. We continue to be impressed by founding teams in India, who we expect to play a major role in the future of crypto adoption (CBV portfolio company Frontier, with 30 engineers in India has built a wonderful mobile-first DeFi aggregator supporting 20+ chains and 45+ protocols).
This quarter, we were also excited to back five teams founded by former Coinbase employees, including the aforementioned Coherent and Farcaster, as well as three others not yet announced. We’re proud to continue to support employees who receive a world class crypto education at Coinbase and go on to found world class companies and projects.
While there’s plenty to be excited about in the future, there are also plenty of lessons to be learned in the present. The current crypto crises is similar to those we’ve seen play out in traditional finance. The opaqueness that centralized lenders and Three Arrows Capital operated under resulted in an inability for lenders to properly evaluate the risk of their counterparties. Lenders didn’t know how much the others had lent to 3AC, nor did they know how much leverage and risk 3AC was taking on. Investors didn’t know how much risk they were exposed to altogether. When the market moved against both the lenders and 3AC, lenders were left with massive holes in their balance sheets, and investors were left holding the bag.
However in contrast to the centralized lenders facing insolvency, it’s important to note that blue chip DeFi lenders Aave, Compound, and MakerDAO operated without a hitch. Every loan and its terms remained transparently on-chain for all to see. When collateralization levels fell below thresholds, collateral was sold via autonomous code and lenders were paid back. This same code also dictated that Celsius was forced to pay back $400M in loans to Aave, Compound, and MakerDAO — no court order needed (though overcollaterization played a role). All told, it served as a powerful proving point for decentralized finance.
That’s just to say that it may be easy to get discouraged by the current price action while forgetting just how far we’ve come in a short period. When the last bear market hit, the most popular user application was Crypto Kitties. These days, there are more profound, impactful innovations than we can count. DeFi, NFTs, a rich DAO ecosystem, all came about in the last two years, and even came together to make a real impact on the world stage. Meanwhile, layer2 scaling solutions are finally here, and can take us from the dial-up to broadband phase, capable of supporting a rich array of user applications with simple UX to boot.
As in previous downturns, detractors are once again confidently pronouncing crypto dead. However, from our seat in the industry, we’re invigorated by the brilliant founders we see working tirelessly to move this technology forward. As the entire financial system and world digitizes itself, we remain convinced that the opportunity within crypto and Web3 are far greater than most realize.
Why The IMF Thinks The Crypto Market Could See “Further Selloffs”
The crypto market is trading in the green with Bitcoin and Ethereum pushing beyond critical resistance levels. The first and second cryptocurrencies by market capitalization record a 10% and 15% profit in the last day and seem poised for more profits during today’s trading session.
Related Reading | Bitcoin Makes Surprise Climb As Fed Discloses 0.75 Point Rate Bump
In order to get more clarity in terms of direction, Bitcoin must close the daily candle above $23,000 and Ethereum above $1,700. Data from Material Indicators records a thing order book on the sell side if BTC’s price can push above its current levels with high probabilities of hitting $28,000 in the short term.
If this rally can push past $25k, then $28k comes into focus very quickly. If you are long, don’t forget to take profits along the way.
In longer timeframes, macro-economic conditions will remain an obstacle to any sustainable rally. In that sense, Tobian Adrian, Director of Monetary and Capital Market for the International Monetary Fund (IMF) predicted more losses in the nascent asset class.
In an interview with Yahoo Finance, Adrian spoke of the risk for the crypto market and risk-on assets, like stocks. For digital assets, Adrian believes that the collapse of a stablecoin could fuel another leg down. The IMF official said:
There could be further failures of some of the coin offerings — in particular, some of the algorithmic stablecoins that have been hit most hard, and there are others that could fail.
The IMF official referred to the collapse of the Terra (LUNA) ecosystem. This event led to the downfall of Three Arrows Capital, Celsius, and other companies in the crypto industry. Thus, contributing to the crash in the price of Bitcoin and other cryptocurrencies.
Adrian claims digital assets might face another similar event but doesn’t mention a specific project with the size of Terra that could trigger it. The IMF official believes stablecoins might add to the selling pressure in the nascent industry due to the alleged vulnerabilities in its collateral:
There’s some vulnerability there, because they’re not backed one to one. [Some fiat-backed stablecoins] are backed by somewhat risky assets…it is certainly a vulnerability that some of the stablecoins are not fully backed by cash-like assets.
Will The Crypto Market Collapse If There Is A 2008 Like Recession?
In addition to the alleged risk from stablecoins, the IMF official spoke about the potential risk of economic recession. The U.S. recently reported its second consecutive quarter with a negative GDP, which should technically spell economic recession.
However, Adrian ruled out that the global market would see something like in 2008. At that time the financial sector was exposed to “shadow banking”, to assets hidden from the banks’ balance sheets which collapse worsening the economic crisis.
Cryptocurrencies could face a bigger obstacle from international regulators. The IMF official claimed that these entities should enforce securities laws to the 40,000 he claims comprised the sector. He added:
Regulating the coins themselves is going to be difficult but regulating the entry points such as exchanges and wallet providers to invest in those coins, that’s something that is very concrete and very feasible.
The U.S. Securities and Exchange Commission (SEC) seems to be following this approach. The Commission has entered into legal battles with major players in the sector, including payment solutions company Ripple and crypto exchange Coinbase.
SEC Chairman Gary Gensler already stated that he is willing to acknowledge that only Bitcoin is out of their jurisdiction. If the Commission turns more aggressive, the crypto market could suffer as crypto projects scramble to meet regulations requirements.
Related Reading | Bitcoin Bounces Off Consolidation Range, What Lies In Store?
This is probably one of the biggest obstacles for the nascent asset class in the coming months along with macro-economic conditions. In that sense, the IMF official might be on point, but cryptocurrencies have been facing regulatory hostilities since their inception.
Zuckerberg unfazed about $2.8B metaverse division loss in Q2
Meta’s virtual reality (VR) and metaverse division Reality Labs has posted its seventh straight quarter of losses, but CEO Mark Zuckerberg remains steadfast in investing in the technology, which he calls a “massive opportunity.”
During Meta’s Q2 earnings call on Wednesday, Zuckerberg acknowledged that such losses could continue for several more years until VR applications and its metaverse platform are mature enough to tap into the “massive opportunity” worth “hundreds of billions of dollars:”
“The Metaverse is a massive opportunity for a number of reasons. I feel even more strongly now that developing these platforms will unlock hundreds of billions of dollars, if not, trillions over time.”
“This is obviously a very expensive undertaking over the next several years,” Zuckerberg added, “I’m confident that we’re going to be glad that we played an important role in building this.”
The extended stretch of operating losses for Reality Labs was revealed in Meta’s Q2 earnings report earlier in the day. Such losses are not unusual for divisions in a research and development phase.
Reality Labs builds VR and augmented reality (AR) applications to help Meta users connect over its various social platforms, including the Metaverse, with the Oculus line of VR headsets.
In addition to the losses, Reality Lab’s revenue has been trending down since 2021 and its operating margin has been trending down since 2020. The $11.1 billion in revenue and 29% margin posted in Q2 2022 are the lowest over the past seven quarters.
Reality Labs posted $2.9 billion in losses for Q1.
Zuckerberg also noted that a “challenging macro environment” could be exacerbating the losses.
He said that the economic situation now is worse than it was a quarter ago, and his opinion is corroborated by the fact that the Federal Reserve raised interest rates by 0.75 percentage points for the second time in a row on Wednesday before the Meta earnings call took place, adding:
“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business. In this environment, we’re focused on making a long term investment that will position us to come out stronger.”
Despite the economic troubles, Zuckerberg is confident that his company and its subsidiaries will come out of the current economic downturn as “a stronger and more disciplined organization.”
He attributed this confidence to the investments his company is making now to ensure it is able to remain a leader in an industry that may be undergoing a shift to accommodate more metaverse platforms.
Related: Experts clash on where virtual reality sits in the Metaverse
Meanwhile, the United States Federal Trade Commission (FTC) has filed a lawsuit against Meta, alleging that the firm is aiming to monopolize the entire Metaverse market. The complaint states that Meta’s moves within the space hinder innovation and “competitive rivalry” among U.S.-based companies looking to build Metaverse platforms and applications.
Interest in Web 3.0, a decentralized web built upon blockchain technology, including digital identity, smart contracts, decentralized applications (DApps), etc., has skyrocketed recently. Web 3.0 incorporates more artificial intelligence and virtual reality into the internet experience and also fundamentally works with cryptocurrency,
Some of the best crypto opportunities for the years ahead are metaverse coins, NFTs, and Web 3.0 coins. KDA is a Web 3.0 coin used to process transactions on Kadena’s blockchain, a hybrid open-source blockchain platform that delivers high speed, security, scalability, and ease of use.
This article will dive deep into one of the most innovative, profitable, and scalable blockchains and crypto projects, Kadena. Also, we’ll explore why, where, and how to buy Kadena KDA to support Web 3.0 and, at the same time, give yourself a chance to make a profit. Let’s get right to it!
What Is Kadena
Kadena is the only scalable Layer 1 Proof-of-Work (PoW) blockchain protocol that offers both public and private networks. Kadena uses a public Layer 1 chain architecture called Chainweb to provide the security of Bitcoin along with no-cost transactions, complex smart contracts, and high throughput.
Kadena’s unique infrastructure is decentralized and built for mass adoption because of its multi-chain approach. Kadena promises industrial scalability that can support global financial systems and can be scaled as necessary. It provides safer smart contracts, innovative energy efficiency, and PoS security. Unlike other platforms, such as Bitcoin, which use more energy as network demand increases, Kadena vows to remain energy-efficient at scale and deliver more transactions with the same energy input. Using braided chains, the protocol can process up to 480,000 transactions per second (TPS).
The protocol lets developers build smart contracts through its smart contract language, Pact, allowing effortless writing directly on the blockchain. Pact is different from other smart contract programming languages as it is designed for correct, transactional execution on a high-performance blockchain. It is turing incomplete, human-readable, and supports upgradable contracts and formal verification to make high-performant and secure smart contracts. Another key element of Kadena is a private layer-2 network, Kuro, that developers can use to develop scalable, secure, and private decentralized applications (DApps).
The mission of Kadena is to expand blockchain mass adoption by delivering tools that meet the needs of developers and organizations.
The protocol’s native token Kadena(KDA) is used to cover costs on the Kadena blockchain and reward miners for producing blocks.
Kadena was founded by Will Martino and Stuart Popejoy, former members of the JPMorgan blockchain development team, in June 2016.
Stuart Popejoy led JPMorgan’s Emerging Blockchain group before founding Kadena and has 15 years of experience building trading systems and infrastructure in finance. He designed and developed transformative technologies, including blockchain and smart contracts. Before JPMorgan, Stuart worked as a programmer, analyst, and researcher at different companies.
Will Martino is the CEO of the company. Previously, he worked as Fintech Manager at JPMorgan and was the Lead Engineer for JPMorgan’s blockchain prototype Juno. He also led the Securities and Exchange Committee’s Cryptocurrency Steering Committee and Qualitative Analytics Unit. Another prominent founder of Kadena is Dr. Stuart Haber, the co-inventor of blockchain technology and the most cited author in Satoshi Nakamoto’s Bitcoin whitepaper.
Kadena has raised more than USD 25 million through private token sales. The first round of the private token sale took place in January 2018 and raised USD 2.25 million for 4.5 million KDA tokens. The second round was held in April 2018 and raised USD 12 million for 17.2 million KDA. Kadena raised USD 20 million for the third round in November 2019 through another token sale. Kadena launched its mainnet in December 2019.
Additionally, Kadena raised capital from several crypto venture capitalists like Multicoin Capital, CoinFund, Amino Capital, etc.
How Does Kadena Work
Kadena is a hybrid blockchain consisting of Layer 1 public chain protocol Chainweb and a layer 2 protocol Kuro. The smart contract language Pact ensures interoperability between the two layers.
In simple terms, Kadena achieves unparalleled throughput by braiding chains together, meaning it offers 20 separate blockchains working simultaneously to validate transactions. This allows Kadena to mint multiple blocks simultaneously, thus increasing its throughput.
Kadena claims that the DAG mechanism (Directed Acrylic Graph) it uses allows scaling from one PoW blockchain to a theoretically unlimited amount. However, its DAG structure is fixed, and multi-channel, meaning Kadena’s blockchains only communicate with three peer chains’ blocks instead of randomly confirming transactions. This improves real-world performance and scalability, making the Kadena blockchain usable for enterprises and entrepreneurs.
Kuro is Kadena’s private blockchain, optimized for enterprise-grade use cases. Developers can use the network to build and deploy scalable, secure, and private DApps. Initially, Kuro editions were available via Microsoft Azure and Amazon Web Services (AWS), but in 2020 the project became completely open-sourced.
Kadena’s smart contract language, Pact, enables smart contract execution between private and public networks.
Kadena’s user-friendly interface allows anyone without any prior technical knowledge to develop and integrate DApps on the blockchain.
Moreover, Kadena offers crypto gas stations, which allow businesses to pay for their customers’ gas fees and facilitate adopting blockchains for business.
How Is Kadena Network Secured
Kadena uses a public Layer 1 chain architecture called Chainweb to combine its several Proof-of-Work blockchains. Each chain confirms its three peer chains’ blocks, thereby increasing throughput linearly with the addition of new chains. This also increases security as Kadena chains achieve a single view of transaction history across chains. An attacker would have to fork not one chain but all the running chains to attack just one.
Kadena (KDA) Tokenomics
KDA tokens’ total supply is 1 billion. KDA tokens are used to pay gas fees and reward miners. Kadena pre-mined several rounds of KDA. The Kadena token distribution roadmap is as follows:
700 million KDA tokens will be mined over the next 100+ years.
200 million will be given to the Kadena platform over the next 9 years.
90 million KDA tokens have been distributed among investors, contributors, and Kadena’s strategic reserve.
10 million KDA tokens were burnt at the launch.
The Kadena price reached its all-time high of USD 24.22 on 11th November 2021. You can check the current Kadena price, circulating supply, market cap, 24-hour trading volume, etc., on the CoinStats page, Kadena price.
Kadena is one of the fastest-growing blockchain protocols in the crypto industry and is available for trade on almost all major cryptocurrency exchanges worldwide. Some popular crypto exchanges include Binance, Kucoin, WazirX, Gate.io, Hotbit, Bittrex, etc.
How to Buy Kadena (KDA) on Binance
Binance is one of the major cryptocurrency exchanges in terms of trading volume. Low fees and high liquidity are among the advantages of buying Kadena on Binance, allowing you to quickly buy and sell digital assets to take advantage of market opportunities. If you wish to buy Kadena on Binance, follow the steps described below:
Create an Account on Binance
If you don’t have a Binance account already, you can create one by providing your valid email address and a phone number. Once you verify your email address, the phone number is used to create a two-factor authentication. You’ll then need to complete your KYC verification which usually takes a few minutes. For KYC, you need a valid ID and a live photo. A user residing in the US can provide their social security number. The KYC process takes a few minutes, after which you’re set to trade Kadena or any other cryptocurrencies of your choice.
The next step is to deposit funds into your Binance account. You can choose a fiat currency, including USD, EUR, INR, GBP, AUD, etc. Binance cryptocurrency exchange supports different deposit methods, including bank transfer, third-party transfer, credit or debit card, third-party payments, peer-to-peer transactions, etc. You can also deposit cryptocurrency directly into your Binance wallet. Once you’ve deposited enough funds through a payment method of your choice into your Binance wallet, you’re one step closer to buying Kadena.
Choose a Trading Pair
Binance has three trading pairs for KDA: KDA/BTC, KDA/USDT, and KDA/BUSD. If you wish to trade KDA/USDT, you must buy USDT with the fiat currency you’ve deposited. Once you get USDT in your Spot Wallet, go to Markets and search for KDA/USDT.
In the Spot trading section, select the KDA/USDT market and enter the amount of USDT you wish to buy KDA for. After that, click on buy. The order will be filled within seconds, and the KDA tokens will be reflected in your exchange wallet.
Buy Kadena (KDA) on Kucoin
KuCoin is one of the fastest-growing crypto exchanges. To purchase KDA on Kucoin, follow the steps given below:
Create an account on Kucoin and perform KYC verification to unlock the exchange’s full features.
Go to “Buy Crypto” and select “Fast Buy” in the drop-down menu.
Enter the fiat currency of your choice; the exchange will tell you how much USDT you’ll receive.
On the next page, select “Bank Card,” enter your card details, and complete the transaction.
The USDT coins you’ve just purchased will be reflected in your wallet.
Now, go to “Trade,” select “Spot Trading” from the drop-down menu, and search for KDA/USDT.
Place an order to buy Kadena for the amount of USDT you wish to spend.
Your order will be filled within seconds, and KDA tokens will be reflected in your wallet.
Once you’ve managed to buy Kadena, the following step is to choose a secure wallet to store KDA tokens securely. Your coins can be kept in your exchange wallets, but in this case, they’ll become vulnerable to attacks by online hackers. So, we strongly advise you to hold crypto assets in a private wallet with your own private and public keys. Based on your investing preferences, you can choose between a software wallet, such as the CoinStats Wallet, and a hardware wallet like Ledger Nano.
Kadena is one of the most innovative projects in the crypto market. Although the Kadena Price has decreased drastically in recent months due to general market trends and the global situation, Kadena KDA is an excellent investment in the long run.
Check out our CoinStats guide, “What Is DeFi,” to gain a fundamental understanding of Decentralized Finance. And see our “Crypto Portfolio Trackers” to learn more about the best crypto portfolio trackers in the market.
Investment Advice Disclaimer: The information contained on this website is provided to you solely for informational purposes and does not constitute a recommendation by CoinStats to buy, sell, or hold any securities, financial product, or instrument mentioned in the content, nor does it constitute investment advice, financial advice, trading advice, or any other type of advice.
Cryptocurrency is a highly volatile market, do your independent research and only invest what you can afford to lose. Performance is unpredictable, and the past performance of Kadena is no guarantee of its future performance.
Despite the White House Debate, Critics Insist US Officially in a Recession After 2 Consecutive Quarters of Negative GDP Growth – Economics Bitcoin News
The U.S. economy has declined for the second-straight quarter as the country’s gross domestic product (GDP) declined by 0.9% in Q2. The Bureau of Economic Analysis’s summary of the U.S. GDP follows the recent debate over the technical definition of a recession.
America’s Q2 GDP Data Points to a Recession
One of the principal agencies of the U.S. Federal Statistical System, the Bureau of Economic Analysis (BEA), released the commerce department’s latest gross domestic product (GDP) statistics on Thursday. The report notes that the GDP data shows a 0.9% annualized decrease in economic growth during the second quarter.
“Real gross domestic product (GDP) decreased at an annual rate of 0.9 percent in the second quarter of 2022,” the BEA report explains. “The price index for gross domestic purchases increased 8.2 percent in the second quarter, compared with an increase of 8.0 percent in the first quarter.”
A number of economists and analysts mocked U.S. bureaucrats and members of the Federal Reserve for horrible economic predictions. “Just a friendly reminder that the Fed in December put out a 4% GDP growth forecast for 2022,” Northman Trader analyst Sven Henrich tweeted on Thursday. Lots of people on social media thanked U.S. president Joe Biden in a sarcastic manner for the country’s economic downturn. Most tweets loudly exclaimed that the U.S. is in fact in a recession after the country’s GDP declined by 0.9% in Q2.
White House Press Secretary Karine Jean-Pierre Claims 2 Decling GDPs Is ‘Not the Definition’ of a Recession
A week before the BEA released the GDP data, the Biden administration published two blog posts that claim two GDP declines in a row does not constitute a recession. This sparked a heated debate across the country on social media as numerous analysts, economists, websites, and textbooks state the very opposite. The BEA’s report on Thursday fueled the debate further; as many individuals insisted that the U.S. economy is most definitely in a recession.
When the White House correspondent for Fox News Peter Doocy asked the White House press secretary Karine Jean-Pierre “If things are going so great, why are White House officials are redefining recession?” Jean-Pierre replied “We are not.” After the comment, Doocy stressed that a recession is two consecutive quarters of negative GDP growth… How is that not redefining recession?” Jean-Pierre insisted “That’s not the definition.”
Even the economist and Nobel Laureate Paul Krugman told the public to “ignore the two-quarter rule… We might have a recession, but we aren’t in one now.” Gemini exchange co-founder Cameron Winklevoss explained that he doesnt believe the Biden administration’s experts.
We are officially in a recession.
Q2 GDP is negative, which is the second consecutive quarter.
“According to the White House and the ‘experts’ that be, we’re not in recession,” Winklevoss wrote on Thursday. “According to the numbers (two consecutive quarters of declining GDP), we’re in a recession. I trust the numbers because the numbers don’t lie, people do.”
The BEA’s GDP report follows the U.S. Federal Reserve raising the federal funds rate 75 basis points (bps) for a second time in a row this week. “The Fed is working expeditiously to bring inflation down,” the Fed’s chair Jerome Powell said on Wednesday.
Tags in this story
75 bps, BEA, Benchmark Rate, Bureau of Economic Analysis, CPI, economics, Fed, Federal Reserve, gdp, GDP data, gross domestic product, hot inflation, inflation, Janet Yellen, Joe Biden, Northman Trader, Paul Krugman, taming inflation, U.S. Federal Reserve, US Central Bank
What do you think about the U.S. economy’s GDP declining for a second consecutive quarter? Let us know what you think about this subject in the comments section below.
Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 5,700 articles for Bitcoin.com News about the disruptive protocols emerging today.
Image Credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
The Crypto Securities Market is Waiting to be Unlocked. But First We Need Workable Rules. | by Coinbase | Jul, 2022
Coinbase filed a petition asking the SEC to begin rulemaking on digital asset securities.
The existing rules for securities just do not work for digital assets.
Our petition calls on the SEC to develop a workable regulatory framework for digital asset securities guided by formal procedures and a public notice-and-comment process, rather than through arbitrary enforcement or guidance developed behind closed doors.
By Faryar Shirzad, Chief Policy Officer
Today, there is a robust crypto market in the U.S. That market includes thousands of different digital assets, crypto companies, and decentralized financial products, and is regulated at every level of government, including by multiple federal agencies in the United States. Yet despite the growth that has happened in recent years, close examination reveals a glaring deficiency in this market. Even with billions of dollars invested toward crypto innovation, and the passage of more than 13 years since the introduction of Bitcoin, there is still no meaningful crypto securities market in the United States.
Many factors can positively influence how a given market develops, but when it comes to crypto securities there is a significant, foundational hurdle that has prevented that market from maturing. That hurdle is the fact that the securities rules simply do not work for digitally native instruments. They don’t work for tokenized debt. They don’t work for tokenized equity. They don’t work for crypto. And that’s a major problem.
The consequence is that the United States is falling behind in digital asset innovation. Most of the digital assets traded today have the characteristics of commodities, and in many instances, were specifically designed to avoid the securities laws. In other words, as the crypto market develops, it is deliberately steering clear of the securities market — one of the principal financial markets in the United States. At Coinbase, we believe that digital asset innovation offers a number of profound, market-enhancing benefits — like real time settlement, the ability to trade safely without needing to go through costly intermediaries, and a transparent record of all transactions. But the full weight of those benefits will not come to pass if they are excluded from a market as big and impactful as the securities market.
Crypto assets that are securities need an updated rulebook to help guide safe and efficient practices. Crypto assets that are not securities need the certainty of being outside those rules. Anything short of that will have the effect of entrenching incumbent technologies at the expense of innovation and ultimately, consumers. That’s why we have submitted a petition to the SEC to request that it develop rules that work for digital asset securities. Here’s a little more on the problem as we see it, and how we hope to work toward a solution:
Modern securities law was put into place by the Securities Act of 1933 and the Securities Exchange Act of 1934. The most well-known securities are stocks and bonds, but most other assets that are considered securities are classified as such because they are “investment contracts” or “notes.” The Supreme Court set forth how to determine whether an asset is an investment contract or note in SEC v. W.J. Howey Co. and Reves v. Ernst & Young. The former case created a test for determining whether an asset is an investment contract; the latter created a test for determining whether an asset is a note. These tests play a large role today in evaluating whether a crypto asset is a security.
It is often difficult to determine what a jurist was thinking when they drafted a given piece of law, but I think it is reasonable to assume that none of the authors who drafted these securities statutes from the 1930’s, or the subsequent Supreme Court tests interpreting those statutes, did so while thinking of a day when a decentralized, cryptographically-based, automated financial instrument would be adopted en masse by millions of people in the United States and around the world.
Put simply — when these authors were writing rules to regulate square pegs, they did not account for how those rules would impact the unpredictable round holes of the future.
Securities law is thus not well-suited to govern digital assets. Attempted application of such ill-fitting laws to crypto creates a number of problems, including:
Lack of regulation for the subset of crypto assets that are securities;
So many different steps and intermediaries that there is no way trades can settle in real time;
It is effectively impossible for individual investors to trade directly, without using a broker; and
Blockchain technology is not able, under the current rules, to be used as a reliable record of transactions, even though this is the innovation that makes distributed ledger technology so powerful.
The SEC has thus far been unwilling to write new rules for crypto securities. Instead, the Commission recently announced that it will double the size of the enforcement unit that handles crypto and cyber cases. This enforcement-first approach has stifled development of the crypto securities market and prevents entrepreneurs from using crypto to raise money for their companies. It also prevents investors from using crypto to invest in those ventures.
Perhaps worst of all, the SEC’s approach has created enormous risk for investors. We saw this in vivid detail when the Commission brought an enforcement action against Ripple, after years of taking no action against them, claiming that XRP is a security. The value of XRP dropped immediately, costing investors huge sums of money. The XRP case is especially notable because there was disagreement even within the federal government about whether XRP was a security or not: FinCEN had determined it was not a security, and then the SEC said that it was.
If the SEC were to write rules permitting the tokenization of securities, the opportunities for innovation would be significant. The crypto markets could be expanded to offer crypto securities, subject to SEC regulation and governance, thereby giving investors new ways to invest in crypto. And opening debt and equity securities to tokenization would promote efficiency and resiliency in traditional markets.
But the SEC has not done this.
While the SEC has refused to develop new rules for digital asset securities, several governments and other organizations around the world are well on their way to new, workable crypto rules. The list is significant, and includes the European Union, United Kingdom, Singapore, Japan, Hong Kong, Australia, and Brazil. Action taken last month by the EU on their Markets in Crypto Assets (MiCA) regulation, for example, demonstrates the world’s largest economy — made up of 27 different countries — putting in place a clear, comprehensive set of rules for crypto.
We believe the SEC should follow the lead of these jurisdictions by helping to develop a robust and vibrant crypto securities market, with all of the excellent protections that investors have come to expect from American financial markets. That is why we filed our petition with the SEC that requests such a rulemaking to take place.
Coming Up With a Solution
With this petition, we are asking the SEC to start a process where the public and key stakeholders can transparently provide input into the agency’s work on crypto. We also hope the petition will launch a broader conversation where members of Congress — many of whom also see the need for the regulations to evolve — will provide their views. Doing this right will help to avoid one-off, arbitrary decisions that provide little clarity or guidance to the industry, and will instead result in a clear set of comprehensive rules, much like important jurisdictions around the world are working toward.
Coming up with such comprehensive rules will require a genuine examination of how crypto works differently from traditional financial securities and what provisions would actually protect investors who trade in crypto securities.
That examination should look at current crypto trading. Crypto trades differently from securities in a number of ways, and these differences must be weighed when writing rules for crypto securities. Consider:
Traditional financial exchanges like the New York Stock Exchange and NASDAQ have set trading hours, but crypto trades 24/7/365.
While traditional financial exchanges require that investors trade through the services of a broker, crypto lets you buy, sell, and trade assets directly, without going through an intermediary.
Finally, traditional securities exchanges only trade securities; they do not trade commodities or any other type of assets. Crypto investors seek to trade across types of tokens — buying stablecoins to store value, and then buying other crypto with those stablecoins, for example — all on one platform. This kind of trading is not recognized under existing rules for securities exchanges, but could offer tremendous capital efficiency gains.
Another way crypto is different from stock exchanges has to do with custody — or how securities have to be held and kept safe by brokers and exchanges.
Traditional securities transactions are permitted up to two days to settle. This delay is designed to accommodate trades going through a number of intermediaries before the securities are finally in the hands of the buyer, and the cash with the seller. Using existing technology, these intermediaries are needed to help make sure a trade goes through as promised. The buyer must actually pay the money, the seller must actually give up the assets, the trade must be properly recorded, and there must not be any errors or unauthorized actions. The broker also has to hold the securities in a certain way to ensure that it has “possession” and “control” over the assets. These rules ensure that the broker keeps the customer assets safely, and also ensures that the broker completes customer trades appropriately.
This system of intermediaries, and the specific custody rules governing them, fail to leverage the benefit of blockchain technology and do not work for crypto:
First, crypto investors expect trades to happen within seconds — one of the key innovations of crypto. But the current rules have too many steps to allow for immediate settlement.
Second, in order for trades to happen that fast, the securities and the money have to be held by the exchange so the exchange can effect the transaction as soon as it happens. But a crypto exchange cannot custody assets the same way that a broker can and still effect an immediate trade.
Finally, the rules for how to keep assets safe — to show possession and control — are based on how you would keep a stock or bond safe, not how you might hold a private key for crypto securities.
Let’s Work Together on This Solution
Coinbase believes that effective regulation benefits everyone — buyers, sellers, exchanges, and the U.S. financial system. The SEC has a long history of creating and enforcing regulations that have enabled the development of deep, liquid, and transparent capital markets in the U.S. These markets have, in turn, fueled incredible innovation and helped entrepreneurs build companies that have transformed the lives of billions of people.
Thankfully, the SEC won’t have to start from scratch when figuring out how to move forward. We laid out the questions that we think the Commission should be asking stakeholders and itself in determining the right path forward — our petition was written with the input of some of the best securities lawyers and economists in the country. If the Commission starts an open process where all of us can provide input, we look forward to sharing our thoughts on how to answer the important questions our petition raises, and we would encourage others to do the same. We may not agree every step of the way, but it’s critical that this is an open and transparent process, where the public has a chance to offer their views. Policymaking at this level is far too important to be made in a black box.
Crypto represents the next wave of innovation within the markets themselves — and whatever country encourages that innovation while also keeping investors safe will reap enormous benefits. We need the SEC to once again write the rules that will unleash the potential of U.S. capital markets, this time fueled by the benefits provided by crypto.
If they don’t, others will — and the U.S. may not be able to catch up.