Eco Crypto on the Horizon
After major price corrections took place across the cryptocurrency markets last week, investors were relieved to have a rebound over the last few days. Despite the market correction, leading financial institutions stood steadfast in their bullish convictions behind Bitcoin and cryptocurrencies. Lastly, the conversation of Bitcoin and blockchain’s impact on the environment was thrust back into headline news as Elon Musk led conversations with leading crypto miners on their plans for more eco-friendly operations.
Ether Upgrade is Groundbreaking for Energy Conservation
Ethereum developers appear to be making a groundbreaking transition towards a proof of stake system that is set to be significantly more environmentally conscious and boasts a smaller carbon footprint than the existing proof of work method. The proof of work system (which Ethereum and Bitcoin both currently operate) requires a global network of computers to run 24/7 in order to maintain the blockchain. At any given moment, these thousands of computers are crunching complex math problems in order to both create and sustain bitcoin and ether — an energy intensive practice. Contrarily, a proof of stake system takes a different approach by people using their stake (cryptocurrency) as a sort of deposit in order to verify or create new blocks on the blockchain. Instead of using a ton of electricity and resources, this method relies on securing assets as opposed to exhausting energy.
Some researchers estimate that switching to a proof of stake system would bring Ethereum’s energy consumption down to 1/10,000th of what it currently is.
New Council Paves the Way to Eco-Friendly Crypto
These changes could not come at a more welcome time as Bitcoin prices appeared to bear the brunt of some heated tweets put out by Tesla CEO Elon Musk. The billionaire and crypto supporter informed followers that the electric car company would halt accepting Bitcoin as a form of payment over concerns of surging energy usage for Bitcoin mining. Musk later clarified that Tesla would not be selling its share of crypto, a statement that appeared to quell the market.
Also big on the energy conservation front was the establishment of a Bitcoin Mining Council that will work to promote transparency and greener practices. News of this Council cushioned the price of Bitcoin almost instantly, with the coin jumping nearly 19%. This tidbit was revealed by Musk who stated in a tweet that he had met with North American bitcoin miners who were “committed to publish current [and] planned renewable usage [and] to ask miners [worldwide] to do so”. Musk called this news “potentially promising”. Also present at the meeting were executives from various crypto mining companies including Argo Blockchain, Galaxy Digital, Core Scientific, and Hive. The council will reportedly respect bitcoin’s fungibility and not change anything about the nature of the asset, rather only work to promote more eco-friendly practices.
Council member and CEO of Argo Blockchain Peter Wall was quoted saying, “There will be lots of discussions moving forward about the best way to promote sustainable Bitcoin mining and to do it not just in North America”.
Goldman Sachs Still Into Crypto
Despite a rough couple of weeks for crypto investors, it appears as though Goldman Sachs is still saying yes to cryptocurrencies. A recent research report published by Goldman Sachs along with a series of interviews highlighted the investment bank’s bullish outlook on crypto.
The research report revealed that Goldman Sachs acknowledged Bitcoin as a new asset class, with comments from the Global Head of Digital Assets Matthew McDermott clearly stating, “Bitcoin is now considered an investable asset,” going on to say that the risks associated with cryptocurrencies can be attributed to their novelty. Speaking on the institutional interest in crypto, McDermott said, “I see continued investor interest in crypto. We have crossed the Rubicon in terms of institutional buy-in, and the space is of much greater value than it was three or four years ago”.
Though this report came at a critical time in the market, it is far from surprising. Just two weeks ago, Goldman Sachs revealed that it had executed its first crypto trade through its much-anticipated crypto trading desk. The investment bank joins the likes of JPMorgan, BNY Mellon, and Morgan Stanley in extending crypto services to clients.
Institutional Clients View Crypto Crash as Opportunity to Buy
Amid the recent pullback in prices of cryptocurrencies across the market, it was interesting to see how institutional investors were reacting, and there is reason to believe they are reacting bullishly. The institutional cryptocurrency exchange LMAX Digital reported a record $6.6 Billion worth of transactions made on one day during Bitcoin’s worst week, giving insight as to how big investors are dealing with the ebbs and flows of the market. Nearly 170,000 BTC were traded at $35,000 — a far cry from April’s high of $64,000. CEO David Mercer praised these trades saying, “For everyone who has a long-term view, it was an opportunity to buy”. Mercer then went on to reveal that LMAX Digital itself took the opportunity to add some Bitcoin to their balance sheet.
In 2021 alone, LMAX Digital managed to onboard 200 institutional crypto investors, a clear sign that institutional interest in this market is far from dry.
At the time of publication, Bitcoin had regained some of its strength and was trading at just above $39,000. Ether was also up at $2,750.