The Bitcoin price has been hovering around the $20,000 area for the past week or so. However, it’s unclear if the worst of the crypto liquidation crisis is over. Many large players in the space have faced margin calls. Also, they have had collateral seized over the past few weeks. It’s clear that the large amount of leverage in the crypto market has been a huge driver of the recent price decline. Major crypto financial institutions, such as BlockFi, are now facing serious issues when it comes to solvency. However, other major players in the space, namely FTX, have also taken this situation as an opportunity to make new acquisitions and bail out the failing institutions.
The bear market has exposed many of the over-leveraged players in the space. However, there are also signs that bitcoin isn’t going to completely disappear anytime soon. MicroStrategy and El Salvador have continued to buy the dip. Additionally, a recent report indicates that many of the concerns regarding Bitcoin’s energy use may be overblown. And finally, Grayscale Investments announced that they are suing the U.S. Securities and Exchange Commission after their attempt to turn their GBTC product into a full-fledged ETF was, once again, declined.
BTC’s Energy Issue Overblown?
Earlier this week, a new report said that Bitcoin uses roughly half of the amount of energy that is usually made in this media. Additionally, this new measurement of Bitcoin energy usage indicates that Bitcoin uses 56 times less energy than the legacy banking system, all things considered. The reason that Bitcoin is often a target by environmentalists is that the cryptocurrency’s consensus mechanism is based on proof-of-work (PoW). In PoW, large amounts of computing equipment are used to find BTC blocks. These contain newly-created bitcoin and transaction fees as a reward for that work.
A key finding on the recent report regarding Bitcoin’s energy usage, which was put together by payments firm Valuechain, was that previous comparisons to the legacy financial system have been incomplete. More specifically, many previous reports regarding Bitcoin’s energy use compared the crypto network’s carbon footprint to that of debit cards. According to the Valuechain report, it’s important to also factor in other aspects of the global financial system. Other factors such as ATMs and physical bank branches. Value chain also factored Bitcoin’s Lightning Network into per-transaction comparisons between the crypto network and the traditional financial system.
There have been many attempts to create such a product and allow for it to be trade via traditional markets, but the U.S. SEC has never been comfortable with allowing it to happen. There are still concerns regarding potential price manipulation in the bitcoin markets. However, this is an ironic criticism. This is because allowing for an ETF product to exist would increase liquidity and make such manipulation even more difficult. Grayscale Investments has been working on their publicly-traded bitcoin product, known as GBTC, since 2013.
Additionally, there are a number of bitcoin ETFs that already exist in other countries around the world. Grayscale has had the plan to convert their Grayscale Bitcoin Trust product into a spot Bitcoin ETF for quite some time, but they’ve never been able to convince the SEC to allow this to happen. Due to the repeated rejection letters from the SEC, Grayscale has decided to sue the federal department. In their announcement regarding the lawsuit, Grayscale pointed out that over 99% of the feedback the SEC has received from the public regarding the possibility of a bitcoin ETF has been positive. Notably.
SEC Chairman Gary Gensler also shared his view on the crypto market more generally earlier this week. During his remarks, he pointed out that the vast majority of crypto tokens have the properties of being unregistered securities. However, he made an exception in the case of bitcoin, which he referred to as a commodity.
Finally, many crypto skeptics have claimed victory and deemed that bitcoin is dead. However, there are still a number of large entities who view the current price as a buying opportunity. On Twitter, controversial El Salvador President Nayib Bukele announced that the country had bought another 80 bitcoin at an average price of $19,000 each. Bukele went as far as to thank everyone for selling bitcoin to the central-American country at such a cheap price. El Salvador now holds a total of 2,381 bitcoin. However, the average acquisition cost per coin is around $43,000. This means El Salvador is still down more than 50% on their total bitcoin investment. Some pundits have pointed out that these losses may have been more than offset by the increase in tourism.
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