All the fireworks from the world of cryptocurrencies
by Mads Eberhardt
What is happening to cryptocurrencies? The analysis by Mads Eberhardt, cryptocurrency analyst for BG SAXO
While the cryptocurrency market collapsed last week due to concerns over the new Omicron Covid-19 variant, gold has risen, effectively putting pressure on the digital gold narrative. However, it didn’t scare El Salvador as the country announced its plan to establish a Bitcoin City.
A turbulent week in the world of cryptocurrencies
Last Thursday, there was a strong sell-off in the cryptocurrency market alongside other asset classes due to the arrival of the Omicron variant. Bitcoin fell nearly 10% from 59,400 (BTCUSD) to a low of 53,500 while ethereum fell 14% from 4,550 (ETH USD) to 3,900 in about 12 hours.
Despite the situation, compared to numerous other asset classes, cryptocurrencies suffered the most success last week. For example, airline stocks plummeted more heavily than cryptocurrencies while, conversely, gold rose. This latest news probably does not gratify the crypto community, especially the advocates of energetic bitcoins and their precious narrative that we are facing the new digital gold. Sure, the slump in the cryptocurrency market has been amplified by the fact that the market is constantly trading and that traders have made huge gains over the past year which means their desire to profit is greater in the case of the market. suddenly moves against them. However, since the market has gone in the completely opposite direction to gold as traders have become anxious, it is perhaps time to reevaluate the digital gold narrative.
El Salvador will build Bitcoin City
Not everyone went bearish. El Salvador’s President Nayib Bukele announced that El Salvador’s government bought another 100 Bitcoins by tweeting: “El Salvador just bought the drop.” A few days earlier, during a big event, Bukele announced the country’s plan to establish a new city in El Salvador called Bitcoin City.
The idea behind Bitcoin City is to create a city where the atmosphere and ecosystem are built on bitcoin. The city will have no taxes with the exception of a value added tax (VAT) of 10%. The city’s constitution will be partially funded by a $ 1 billion bond issued on a Bitcoin sidechain. It is fair to say that El Salvador doubles up on Bitcoin and presumably will continue to do so after making Bitcoin legal tender in September.
1 minute of Ether was burned
After its London update in early August, Ethereum started burning off most of the transaction fees paid on Ether. The amount of Ether burned reached something of a milestone last week, as it surpassed 1 million Ether burned since August. This means that the combustion mechanism has offset 62% of the current emission to the miners, which is quite significant.
In August, we estimated this number to be around 35%. This is good news for Ethereum holders as the offer falls short of expectations. On the other hand, in view of its scalability constraints, it illustrates Ethereum’s very high fees, making Ethereum for a select few momentarily able to afford + $ 10 in transaction fees, which is not good for Ethereum users nor for long-term owners because it has a strong negative impact on the ecosystem.