Crypto Corner - Summary of the Week 09/08/2021


Written by: Yves, Head of Trading at Wirex

The Bitcoin price continued its ascension this week reaching a new monthly high at $46,367, but the momentum seems to be slowing down.

July’s inflation figures, announced two days ago, sent the BTC/USD pair 8% lower towards the $44,000 level. But the first cryptocurrency took back the $46,000 level today after the Argentinian president Alberto Fernandez mentioned in an interview that he wouldn’t rule out a Bitcoin legal tender: he mentioned that ‘there is no reason to say no’ and that it could be a ‘good path to take’. He also cited that such the adoption could ‘nullify inflationary effects’. Although the president stayed cautious over cryptocurrencies during his interview, the potential to have another country follow in El Salvador’s footsteps revived the bullish sentiment.

With El Salvador, There are eight countries that are currently dollarised, and there are more than 65 countries that have their currencies pegged to the greenback. These countries gave up their monetary policy to the US, and are consequently affected by the Fed’s decisions. The main drawback for adopting Bitcoin as an official currency is certainly its extreme volatility. Adopting Bitcoin wouldn’t give these countries their monetary policy back. But volatility aside, adopting the main cryptocurrency could facilitate and favour direct foreign investments. With the right operational setup, it could make these countries more competitive.

The Ether price is also on the rise this week, gaining more than 11% since Friday, and aiming now for $3,600. The price is evolving within a strong bullish channel that started on July 21st, fifteen days before the London upgrade.

Since the London upgrade, 36,494 Ethers generated from transaction fees have been burnt and 2.25 ETHs are burnt every minute. Before the upgrade, this amount would have been awarded to miners. Yet, the miners’ revenues are not affected by the change because the higher Ether price is boosting production. ETHs issued are now close to 7 per minute at the time of writing which is 1 ETH higher than last week. In turn, this additional supply is weighing on the market. Looking at the benefits of the London upgrade, they might be disappointing at first glance as the base fee went up from the ETH 0.0030 levels to ETH 0.0054. The dynamics of the fee level (in ETH) should be smoother as the base fee change is now constrained. Indeed, the base fee is adjusted by 12.5% at most from one block to the next, and it is naturally adjusted up when the network is congested. But given that a block is produced every 13 seconds, it is still difficult to predict where the fees will be in the next few minutes. It will likely take time for the network’s participants to get used to the new mechanics and optimise the transactions’ timing accordingly. The second cryptocurrency by market capitalisation is still catching up to Bitcoin. Among the most significant events this week, Coinbase reported that its total volumes traded for ETH in the second quarter exceeded the volumes traded for Bitcoin. Also the non-fungible token (NFT) market is growing at an impressive rate: the total number and cost of sales reached new highs this week.


Total number and cost (in USD) of NFT sales: source: nonfungible.com

If the results of the Ethereum upgrade are mitigated at best, then the outcome doesn’t outweigh the risk taken by the developers when they re-engineered the code. Over-engineering a blockchain certainly comes at a risk and the cryptocurrency sector understands it all the more after the extraordinary hack of the Poly Network.

The Poly Network project implemented cross-chain interoperability across several blockchains to enable cross-chain transactions. But its failure to protect one of the contracts (EthCrossChainData) with a proper authentication process let a hacker (a white hat) interact with it and tamper with sensitive data: $600m worth of tokens were sent from the project’s main address (a pre-funding account equivalent) to the hacker’s private address. This hack is a reminder that complex projects are more likely to have flaws, and it could take only one critical flaw to drive a serious project to the ground.

data taken at 10:16 am 13/08/2021 - coinmarketcap

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The above is an opinion piece and therefore should not be taken as financial advice. Please do your own research thoroughly when looking at Cryptocurrency.
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So it seems that the most South American countries are planning to follow in El Salvador’s footsteps , besides the continent, also there’s positive signs from Nigeria, Ukraine and Philippines

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