Welcome back to Distributed Ledger. This is Frances Yue, reporter at MarketWatch.
This week, macroeconomic news still dominated the headlines, as the Federal Reserve kept its interest rate unchanged at the end of its June meeting, but signaled more hikes to come for the rest of the year. Major crypto prices fell on the same day.
While crypto trading volume has been relatively muted for the past few months, activities were still vibrant on major networks, such as Ethereum
ETHUSD,
according to Paul Brody, global blockchain leader at Ernst & Young Global. However, more usage of the blockchain doesn’t guarantee a rally of ether price, according to Brody.
Find me on Twitter at @FrancesYue_ to share any thoughts on crypto or this newsletter.
Ethereum growth and ether price
The number of active addresses and the amount of daily transactions on Ethereum both remain elevated compared to historical averages, according to data from Etherscan.
However, it’s important to differentiate between the consumption demand and investor demand for ether, Brody said in an interview.
Users of Ethereum have to pay gas fees, or transaction fees, in ether to the so-called validators, or those who verify transactions on the blockchain. But as the Ethereum network continues to scale up through upgrades, the network could become more efficient, reducing the gas costs.
“You could easily see a scenario where people end up doing far more transactions, but because the network is so much more efficient, the demand for consuming ether in those transactions actually goes down,” noted Brody.
There could be “a scenario where the Ethereum ecosystem is wildly successful, and grows enormously, but it doesn’t necessarily bring with it the price of the underlying asset,” Brody said.
Ether gained 37% so far this year, but is still down over 60% from its all-time high in 2021, according to CoinDesk data.
Should you be worried if your funds are on Coinbase or Binance?
After the U.S. Securities and Exchange Commission sued both crypto exchanges Binance and Coinbase, some investors have been asking whether they should still keep their funds on the platforms or flee.
It depends on the risk a person can stomach, experts say.
“I’m not going to say that I think that it’s game over for Binance or Coinbase by any means,” attorney Blake Harris, who focuses on asset protection for clients, told MarketWatch’s Andrew Keshner. But speaking generally, Harris said if people wanted to store their money on exchanges, he wouldn’t necessarily do it all on one exchange.
Investors may also want to consider keeping their cryptocurrencies in an offline wallet in what can be called “cold storage,” or using decentralized finance, or DeFi, which is a peer-to-peer payment system that avoids intermediaries like banks or brokerages. However, with DeFi, there could be cybersecurity risks and risks of getting money directed into investments and coins that a person might not want, Hays said.
Still not sure what you should do with your coins on Binance.US or Coinbase? Read more here.
Bitcoin dominance rises
The ratio of bitcoin’s
BTCUSD,
market capitalization to that of the entire crypto market has risen to almost 50% on June 10, the highest level since May 2021. That’s an increase from 42% at the start of the year.
“This suggests a persistent rotation of capital from altcoins to the major assets, as capital begins to concentrate in the most liquid crypto assets,” analysts at Glassnode wrote in a tweet Thursday. Altcoins usually refer to cryptocurrencies other than bitcoin.
The Securities and Exchange Commission named a number of cryptocurrencies, such as BNB, Binance USD, Solana
SOLUSD,
Cardano
ADAUSD,
and Polygon
MATICUSD,
as securities in lawsuits against Binance and Coinbase
COIN,
while the agency’s chairman Gary Gensler repeatedly said that bitcoin was the only cryptocurrency he was prepared to publicly label a commodity, rather than a security.
Crypto in a snap
Bitcoin lost 5.8% in the past week and was trading at around $25,047 on Thursday, according to CoinDesk data. Ether declined 11.2% in the same period to around $1,642.
Must-reads
- Two Crypto Platforms Halt Withdrawals in an Echo of the Sector’s 2022 Woes (Bloomberg)
- HSBC and Standard Chartered pressed by Hong Kong regulator to take on crypto clients (FinancialTimes)
Read the full article here
