For the first time in months the crypto markets are noticeably down. Bitcoin had a quick correction to just below $30,000 and Ethereum, which was hanging out around its previous all time high, has given up a few hundred dollars of gains. Sad as it may be, this dip isn’t all bad news.
Just 1 month ago we were at $22,000, so BTC at $30,000 is still a pretty good deal. And to be honest we were due for a pullback. On Bitcoin’s rise to $20,000 in 2017, there were a couple of big 30% drawdowns before the price went higher. At any rate, even if prices are down a bit, the news is still pretty bullish.
Blackrock is getting into Bitcoin, a supposed double spend ended up being more FUD than reality, and crypto staking continues to be a popular way for crypto investors to make money.
The biggest news of the week is that Blackrock, one of the largest institutional investment firms in the world, has indicated that they’re interested in trading Bitcoin. The investment firm has more than 7 trillion dollars in assets under management and their entrance into crypto would add another layer of legitimacy.
Remember, it’s not like Blackrock is some longtime fan of the orange coin. In 2018 Larry Fink, the CEO of Blackrock, said, quote, “I don’t believe any client has sought out crypto exposure. Right now I can tell you, worldwide, I have not from one client who said ‘I need to be in this.’” How times change… From skeptical in 2018 to buying Bitcoin futures in 2021. That’s the plan anyways, as Blockrock has mentioned that they’ll be getting exposure to BTC via the futures market.
That’s a good start, but if Blackrock’s ultimate goal is to protect the purchasing power of their client’s funds, maybe they’ll start buying BTC later in the year. We’ll keep an eye on it and let you know as the story develops.
Speaking of developing stories, recently there has been some FUD about a potential double spend on the Bitcoin network. A double spend would be a flaw in which a single coin can be spent more than once. For example, I have only one bitcoin in my wallet, but somehow I’m able to send that one coin twice as if had two coins As we’ve come to expect, Bitcoin critics were quick to pronounce the death of the network. However, there’s a lot more to the story than the critics would have you believe.
It’s true that a duplicate set of coins from the same wallet ended up in two different blocks, however, that doesn’t mean a double spend took place. Only one of those blocks was accepted as valid by the Bitcoin network, and the other block was discarded. The technical details here are beyond the scope of this article to explain however this block reorganization is a fairly normal occurrence with Bitcoin and no cause for alarm.
The fact that so many people found it FUD-worthy is probably a good indication that there are a lot of new Bitcoin investors who don’t understand how the network works and added to the quick drawback of the BTC price.
As we already alluded to, Ethereum finally broke its previous all time high. On January 19th of this year, ETH hit $1,432. A new record! Etherians everywhere have been waiting for this to happen for about 3 years, especially since Bitcoin more than doubled its previous all time high at one point. This price growth comes on the back of an expanding DeFi ecosystem and last year’s rollout of staking. Even though the first stage of ETH 2.0 launched just a few months ago, there are already 2 million ETH being staked which is about 2% of all Ether in existence. That’s really good to see, and once staking withdrawals are enabled we’ll probably see the amount of staked ETH really take off.
So besides Ethereum there are lots of different cryptocurrencies that support staking. In fact, 2020 was a great year for earning a passive income with staking. The cryptocurrency infrastructure firm Staked has estimated that investors earned more than $20 billion in rewards for staking in 2020. That’s a fairly significant return once you consider that for much of 2020 the total crypto market cap was only about $300 billion.
That means that staking returned about 8% of the total crypto market cap last year. Furthermore, Staked has predicted that 2021 is going to be even better for Proof of Stake cryptocurrencies. Twenty-five percent of the top 100 most valuable cryptocurrencies are all using a Proof of Stake consensus mechanism. As crypto prices increase, the returns that investors can get by staking coins in these networks will also grow. Why is staking so popular? For one thing, many people consider staking to be more energy efficient than the mining process bitcoin uses.
Mining requires a lot of energy to power, whereas staking just requires a laptop and a reliable internet connection. Another factor is that it’s easier to stake than mine. Investors can buy some crypto, like Ethereum, and start staking that same day. The final factor is that staking can offer a really good return! Staked has estimated that the average return for staking is 11.2% per year. That’s a great return, especially when you consider how few opportunities there are to earn a good return in the traditional markets. So crypto continues to grow. Whether it’s Blackrock getting into the Bitcoin game, or Ethereum breaking its previous all time high, blockchain technology is showing the world what it’s got. Wherever you are, whether it’s Barcelona, Budapest or Boston, we hope you have a great weekend and keep stacking those sats.