Page 8 - EngineerIt August 2021

ICT FINANCE

ith many crypto investors
jealously watching as gold
Wand equity investors’ assets
keep climbing to greater levels, is it
possible that cryptocurrencies have just
hit the turning point that many have been
waiting for?
The crypto market has shed over
50% in recent months, with many
worried that a bear market was in full
swing and an 80% loss in value was
looming on the horizon.
People tend to think the worst, but
then again, crypto always finds a way
to surprise us, with this time being no
different. Bitcoin is currently up over 30%
from its lows, happening shortly after
rumours of potential Amazon payment
method adoption, as well as the recent
B Word conference featuring Twitter’s
Jack Dorsey and Tesla’s Elon Musk,
which included praise for the crown
cryptocurrency across the board.

When it rains, it pours Is the crypto market
The fear, uncertainty and doubt (FUD)
was coming from all directions, whether
payments, the energy usage of mining finally back on track?
from the China crackdown, mining hash
rate halving, Tesla stopping Bitcoin
being too high or even the view that
Grayscale premium had diminished,
dramatically impacting investor demand
— these last couple of months have been Elon and green energy
FUD central. Musk added fuel to the fire by saying Tesla would no longer accept Bitcoin payments due
All this news hit the surface during to the energy usage of Bitcoin being too high and dependent on coal and not clean energy.
a flood of bad press, yet all of it can be Positive outlook: This comment has pushed a green movement in Bitcoin and crypto
explained to actually represent a positive like never before, with most miners actively seeking ways to reduce their carbon footprint
for long-term growth; you just need to and increase the chances of a long and clean mining process for the future. This will
know what’s actually going on behind the inherently reinforce crypto’s longevity and induce more ESG investment in the future.
curtain and don’t take clickbait news at
face value. Grayscale premium is negative
During this pullback, the Grayscale Bitcoin trust premium went negative, which many
China crackdown and mining thought of as a bad sign, and assumed it showed that institutional demand was dropping
hash rate drop at a rapid rate. But what if the opposite is true?
It’s no secret that Bitcoin mining in China Positive outlook: More Bitcoin options, such as ETF’s in Canada, means that
accounts for over two-thirds of global Grayscale is not the only option out there for investors to use to get exposure to Bitcoin.
Bitcoin production (66%). This led to Therefore, while demand for their product may be coming off a bit, demand for Bitcoin
concerns that Bitcoin mining was overly investment options is increasing. Also, the fact that GBTC shares are becoming more
concentrated in one region of the world, liquid due to the decreasing lock-up time from one year to six months means that
which would expose the network to the premiums could be coming down due to more accurate pricing of the shares.
risk of outages and political interference.
Positive outlook: This migration It’s not over; it never was
will start to decentralise the previously Let’s take a step back and look for the signs that the crypto market is back on track.
centralised Bitcoin hash rate. It’s
probably one of the most significant Stock-to-flow – Are we in July 2013?
steps Bitcoin has taken towards true The Stock-to-flow model (S2F) was developed as a simple model to value scarce
decentralisation, and it will allow for the commodities like gold. The S2F ratio shows the current stock of a commodity (current total
fear of hash rate concentration to finally supply) against the new production flow (amount mined that specific year).
be put to bed. For store of value (SoV) commodities like gold, platinum and now Bitcoin, a high ratio

EngineerIT | August 2021 | 6