It has been an eventful few months in cryptocurrencies, so we thought a round-up of some of the major news that has happened in the digital currency space would be helpful. In May, crypto experienced a drop-off in value due to various factors, including environmental concerns raised by Elon Musk about Bitcoin and regulation in China.
Some of this began in March when Tesla CEO Elon Musk announced via tweet that the electric vehicle manufacturer would accept Bitcoin as payment to buy their cars. Earlier this year, Tesla purchased $1.5 billion US of the digital currency. However, this initiative was short-lived as Musk roiled the cryptocurrency world in May by announcing a halt to purchases of vehicles with Bitcoin. The about-face came over concerns about the “rapidly increasing use of fossil fuels for Bitcoin mining.”
Tesla won’t be selling the $2.5 billion worth of Bitcoin it currently holds, however, and is open to resuming Bitcoin-based purchases once Bitcoin’s mining “transitions to more sustainable energy.” Musk pegged this at ~50% of mining-related energy being filled by clean, renewable sources. He also announced that Tesla would be looking into using other more energy-friendly cryptocurrencies.
Also, in May, crypto prices were hit when the Chinese government ordered a crackdown on Bitcoin mining in its territory and ordered banks and payment firms, like China Construction Bank and Alipay, to prevent cryptocurrency trading and purchases on their platforms. While China has banned crypto exchanges and initial coin offerings, it has not barred its citizens from holding cryptocurrencies.
According to estimates, China accounts for between 50% and 70% of the world’s crypto mining, and the crackdown on mining had significant impacts on global crypto markets. In June, trading volumes on major cryptocurrency exchanges fell by more than 40% because of the Chinese ban and lower volatility overall. While use cases for crypto are being found all over the world, some of the most innovative applications are happening in developing countries.
El Salvador and Kenya Welcomes Cryptocurrencies
El Salvador made headlines in June as the first nation to make Bitcoin legal tender in the country. Bitcoin can now be used in any transaction, with businesses required to accept the cryptocurrency as payment unless they lack the technology to do so. The legislation making Bitcoin legal tender also specified that the US dollar would remain El Salvador’s primary currency, and no one would be forced to pay for goods and services in Bitcoin if they did not wish to do so.
Noting that 70% of Salvadorans do not have access to traditional financial services, El Salvador’s Economy Ministry said the new law was spurred by the need to “authorize the circulation of a digital currency [whose] value exclusively follows free-market criteria” to stimulate growth.
Another innovative use of crypto is happening in Kenya, where farmers use a local cryptocurrency, Sarafu, to sell their produce. Introduced by Will Ruddick, an American economist, through his Kenyan nonprofit, Grassroots Economics, as a blockchain for low-income urban customers, the use of Sarafu has expanded to become a cashless system for rural users, too.
Known as a community inclusion currency, or CIC, Sarafu enables people to give or receive credit without needing a deposit of Kenyan shillings or other currency in a bank. Anyone with a Kenyan mobile phone line can enroll and receive 50 Sarafu for free. After that, coins are earned by selling goods or services to another user. Farmers, for example, can use Sarafu to sell vegetables and buy supplies without the need to spend hard currency. More recently, the crypto market has started to heat up again thanks, in part, to the interest of big tech.
All Roads Point to Crypto
Amazon posted a job looking for a head digital currency and blockchain expert as a potential prelude to eventually accepting cryptocurrency from its customers.
During Twitter’s second-quarter earnings call, Jack Dorsey, the Twitter and Square chief executive, announced that Bitcoin would have a significant role in Twitter’s future. He described it as the “best candidate” to become the “native currency” of the internet because it can allow Twitter to move faster with its product expansions.
At the same time, Dorsey’s other company, the payment app Square is launching a decentralized financial services (DeFi) business using Bitcoin. DeFi applications use blockchain-based smart contracts to execute instead of relying on traditional authorities, like banks. DeFi transactions are attractive to yield seekers, who can generate returns between 15% and 30% by “locking” capital in smart contracts—a figure approaching $55.21 billion by recent estimates. The new Square unit will include the Seller, Cash App, and recently acquired Tidal businesses.
A lot is happening in the world of crypto. It is hard to know what will happen to the prices of cryptocurrencies. However, with 13% of Americans trading crypto in the past year, there has been massive growth, and there remains a tremendous amount of growth potential.
Investing in Cryptocurrencies with Evolve ETFs
The Bitcoin ETF (TSX Ticker: EBIT) and the Ether ETF (TSX Ticker: ETHR), Canada’s first of their kind exchange-traded fund (ETF), offer a great way to access the price of Ethereum and Bitcoin respectively. For more information visit the fund pages here: https://evolveetfs.com/product/ebit/ and here https://evolveetfs.com/product/ethr/