Ethereum (ETH) co-creator Vitalik Buterin reportedly says that central bank digital currencies (CBDCs) are not developing in the way he had once hoped for. In a new interview with CNBC, Buterin says that he was once more optimistic about CBDCs, but now he believes they have mostly become “front ends” for the traditional banking system. […]
The post Vitalik Buterin Warns CBDCs Moving in Wrong Direction, Calls Them ‘Front Ends’ for the Banking System: Report appeared first on The Daily Hodl.
One year after the Ethereum Merge, Grayscale has finally taken a decision to abandon all the rights to proof-of-work Ethereum tokens.
Major cryptocurrency investment firm Grayscale has finally taken a decision to abandon all the rights to the post-Merge proof-of-work (PoW) Ethereum tokens (ETHPoW).
Announcing the news on Sept. 18, Grayscale said that the firm has “irrevocably abandoned” all the rights to ETHPoW tokens on behalf of the record date shareholders of each product.
After thorough review, Grayscale determined that the ETHPoW tokens have not developed meaningful liquidity, while the products’ custodian doesn’t support such tokens. The firm wrote:
“As such, it is not possible to exercise the rights to acquire and sell the ETHPoW tokens, and on behalf of the record date shareholders, Grayscale is abandoning the rights to these assets.”
Grayscale’s decision to drop the rights for ETHPoW tokens comes more than a year after the Ethereum Merge, an event that marked Ethereum’s full transition from PoW to proof-of-stake (PoS). The Merge occurred on Sept. 15, 2022, forking the Ethereum blockchain into main PoS-based Ether (ETH) and minor PoW-based EthereumPoW (ETHW) tokens.
In the aftermath of the Merge, Grayscale was considering whether the company should acquire EthereumPoW and sell ETHW on behalf of the record date shareholders. 180 days after the Merge, the company took another six months to make a decision on whether to acquire those PoW tokens, citing uncertainty regarding the support of ETHW tokens by digital asset custodians and trading venues.
Related: Ethereum Merge anniversary — 99% energy drop but centralization fears linger
Unlike Grayscale, some cryptocurrency investment firms like ETC Group have attempted to launch dedicated EthereumPoW exchange-traded products (ETPs). ETC Group eventually terminated its PoW-based ZETW ETP just six weeks after the launch, citing the absence of eligible custody providers.
The news on Grayscale’s ETHW decision came one day before The Wall Street Journal reported that the firm has launched a new Ether futures exchange-traded fund, citing a filing with the Securities and Exchange Commission. Cointelegraph hasn’t been able to locate a related SEC filing online. Grayscale did not immediately respond to Cointelegraph’s request for comment.
The United States tax collector will require taxpayers to count staking rewards as gross income at the time they gain “dominion" over the tokens.
United States crypto investors must report crypto staking rewards as gross income in the year it was received, according to a new ruling from the country’s top tax authority.
On July 31, the Internal Revenue Service issued Revenue Ruling 2023-14, giving clarification about how income earned from staking digital assets should be treated for taxation purposes.
Gross income includes income realized in any form, whether in money, property, services and now staking rewards.
The ruling applies to cash-method taxpayers who receive any crypto as remuneration for validating transactions on proof-of-stake blockchains and applies both when staking cryptocurrency directly and when staking through a centralized crypto exchange.
The ruling stated that the fair market value of the crypto rewards should be included in annual income and determined when the assets are received.
“The fair market value is determined as of the date and time the taxpayer gains dominion and control over the validation rewards."
“Dominion” was defined as the time when the investor controls and has the ability to sell, exchange, or otherwise dispose of the cryptocurrency rewards.
The IRS previously subjected crypto-mining rewards to both income and capital gains tax but had no provisions for staking rewards up until now, according to crypto tax firm Koinly.
Head of tax at Koinly, Danny Talwar, elaborated to Cointelegraph:
“The revenue ruling compounds the understanding of many accounting professionals in that staking rewards are only taxed as gross income when they are able to be sold. This means in that rewards accrued but locked won’t be taxable until the recipient can exercise ‘dominion and control’ over their staking rewards.”
Messari founder Ryan Selkis said the IRS is treating crypto staking like stock dividends.
What PoS blockchains do at scale is embed state-level taxes into their protocols.
— Ryan Selkis (@twobitidiot) July 31, 2023
The IRS says PoS rewards should be included in gross income, which means crypto has taken the concept of a "stock dividend" and made it taxable.
You get a taxed for slicing a pizza in 10 vs. 8. pic.twitter.com/3qlm6lAGQv
Meanwhile, Jason Schwartz, tax partner and digital assets co-head at Fried Frank, said: “While the ruling is therefore unsurprising, it’s still disappointing,” adding:
“Tax law has always required the existence of a payer, such as an employer or other counterparty, for taxable income to accrue to someone. Even treasure trove discoveries are deferred payments.”
Related: Judge suggests IRS issued $4K refund over tax lawsuit based on quality of lawyers
The IRS tax bulletin comes at a time when U.S. federal regulators such as the Securities and Exchange Commission are targeting crypto-staking service providers and exchanges, alleging that they are offering illegal securities sales.
Magazine: Best and worst countries for crypto taxes – plus crypto tax tips
The proposal received mixed reactions from the crypto community, with some users stressing that it would make the network more centralized.
Ethereum core developers plan to implement a 64-fold increase in the minimum amount of staked Ether (ETH) required to become a validator, from 32 ETH to 2048 ETH.
The proposal was made during a June 15 Ethereum core developer consensus meeting by Ethereum Foundation researcher Michael Neuder. The researcher noted that although the current limit of 32 ETH allows more validators to join the Ethereum network, making it more decentralized, it also leads to an inflation of the validator set size.
Neuder added that such a large increase would ultimately help the Ethereum network become more efficient over time. Besides the proposal to increase the minimum required staked ETH for validators, Neuder also called for auto-compounding validator rewards.
The auto-compounding of rewards would allow validators to make more money on their staked ETH. Currently, to produce any staking income, rewards received in excess of the 32 ETH cap must be transferred to another account. These benefits could be rapidly compounded if the cap were raised, giving validators a practical way to increase their earn reward.
Neuder claimed the current proposal would not only make the Ethereum network more efficient and make way for validators to earn more money, but it would also help large node operators, such as exchanges, which currently manage thousands of validators.
Related: Hong Kong legislator invites Coinbase to the region despite SEC scrutiny
The 32 ETH limit has led to a significant surge in validator addresses after Ethereum’s transition to a proof-of-stake network. Currently, there are over 700,000 validators with around 90,000 awaiting activation in the queue.
The proposal received mixed reactions from the crypto community with several users pointing out that such a significant change in staked ETH would lead to a lower number of validators and thus make the network more centralized. Other users dismissed the idea and claimed it wouldn't be beneficial for the network.
Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?
The MicroStrategy co-founder believes crypto-related regulatory enforcement action will play in Bitcoin's favor.
Enforcement actions on cryptocurrency firms by regulators in the United States could result in a Bitcoin (BTC)-focused industry that will push its price over $250,000, according to MicroStrategy co-founder Michael Saylor.
In a June 13 Bloomberg interview, the Bitcoin bull explained recent enforcement actions from the Securities and Exchange Commission (SEC) will eventually play in Bitcoin’s favor — the only crypto excluded from being a security by SEC chair Gary Gensler.
Saylor added U.S. regulators "don't see a legitimate path forward for cryptocurrencies" adding "they don't have any love" for stablecoins, crypto-tokens or crypto-based derivatives.
Saylor said crypto exchanges would be the catalysts behind the significant price surge:
“[The SEC’s] view is crypto exchanges should trade and hold pure digital commodities like Bitcoin and so the entire industry is kind of destined to be rationalized down to a Bitcoin-focused industry with maybe a half a dozen to a dozen other proof of work tokens.”
“The next logical step is for Bitcoin to 10x from here and then 10x again,” he claimed.
Regulatory clarity is going to drive #Bitcoin adoption by eliminating the confusion & anxiety that has been holding back institutional investors. Bitcoin dominance will continue to grow as the #Crypto industry rationalizes around $BTC and goes mainstream. pic.twitter.com/Foq4lpderj
— Michael Saylor⚡️ (@saylor) June 13, 2023
Saylor noted Bitcoin’s market share increased from 40% to 48% in 2023 which may be attributed in part to the SEC’s enforcement activity and having now labeled 68 cryptocurrencies as securities — none of which are proof-of-work.
In the future, Saylor believes this dominance will increase to 80% as “mega institutional money” will flow into crypto after “confusion and anxiety” over crypto disappears.
Saylor and other Bitcoin-centric advocates have been met with considerable criticism, however.
Anthony Sassano, host of The Daily Gwei recently called out “Bitcoiners” that are pleased to see the SEC file lawsuits against Coinbase and other exchanges that list tokens considered to be unregistered securities by the SEC.
Incredibly embarrassing to see how many Bitcoiners who self-identify as "cypherpunks" are absolutely salivating at the fact that the SEC is going after Coinbase.
— sassal.eth (@sassal0x) June 7, 2023
No company in this industry has done more for Bitcoin adoption than Coinbase.
Ethereum-based wallet MetaMask and many others also believe a “multichain future” is inevitable because different blockchains serve different purposes.
Related: Bitcoin price can ‘easily’ hit $20K in next 4 months — Philip Swift
Mike McGlone, senior macro strategist at Bloomberg Intelligence explained in early May that a “deflationary bust” is impacting the commodities market and bank deposits — and that crypto may be the next domino to fall.
Cryptos Could Be the Next Assets to Drop in Deflation Dominoes - It's been a year of rebounds for just about everything that fell in 2022, with #cryptos tops among high-beta performers, but a deflationary bust may be gaining fuel as seen in plunging #commodities and bank deposits pic.twitter.com/H871jqA5xc
— Mike McGlone (@mikemcglone11) May 3, 2023
In January, economist Lyn Alden told Cointelegraph there is “considerable danger ahead” for Bitcoin in the second half of 2023, stating that when the U.S. resolves its debt issue, significant liquidity will be pulled out of markets:
“At that point, both the Treasury and Fed will be sucking liquidity out of the system, and that would create a vulnerable time for risk assets in general, including BTC.”
Magazine: $3.4B of Bitcoin in a popcorn tin — The Silk Road hacker’s story
Stanford University professor David Tse has pioneered a way to use Bitcoin to secure proof-of-stake blockchains.
The Bitcoin network’s proof-of-work consensus mechanism could become a useful means of securing a variety of proof-of-stake (PoS) smart contract blockchain protocols, thanks to efforts from a Stanford University professor.
David Tse and his research team are driving the use of the preeminent cryptocurrency to provide added security to PoS networks. Tse’s proprietary Babylon blockchain aims to use Bitcoin (BTC) to bolster network security and incentivize BTC holders to participate in what is ostensibly a new approach allowing the staking of Bitcoin on proof-of-stake chains.
In an interview with Cointelegraph, Tse outlined how Babylon uses the Bitcoin scripting language to connect a PoS-based slashing mechanism to the Bitcoin network. This allows for the creation of smart contracts that can set specific spending conditions:
“Although the Bitcoin scripting language is limited in its ability to express complex spending conditions, we have used advanced cryptography to translate the slashing conditions of a PoS chain into a spendable transaction on the Bitcoin blockchain.”
Tse said that Babylon’s BTC staking protocol enables BTC to secure its network without altering or forking the Bitcoin blockchain. This also allows BTC holders to earn rewards for contributing to the security of PoS networks by staking their BTC.
“Our method essentially transforms the slashing condition of a Proof-of-Stake chain into a spendable Bitcoin transaction. This way the staked BTC does not need to be bridged to the PoS chain at all.”
The Stanford professor also added that the simplicity of the approach also maximizes the security of blockchains by avoiding potential vulnerabilities associated with cross-chain bridges. As Cointelegraph has previously explored, cross-chain hacks and exploits have been rife, leading to over $2 billion being fleeced over the past year.
Bitcoin remains unrivaled as the largest cryptocurrency by market capitalization and continues to operate on the original specifications set out by its pseudonymous creator Satoshi Nakamoto.
Nevertheless the ecosystem has seen renewed interest and growth with the inception of Bitcoin Ordinals, which allow users to to inscribe nonfungible tokens (NFTs) onto individual satoshis, the smallest denomination of a unit of BTC.
Similarly, Professor Tse believes that protocol’s like Babylon expand the utility of Bitcoin beyond being a simple store of value or medium of exchange by sharing Bitcoin's robust security with other chains and applications:
“We aim to scale Bitcoin's security in a way similar to Ethereum's scaling efforts, effectively sharing Bitcoin's robust security with the rest of the decentralized world.”
Novel approaches to blockchain consensus continue to be developed by the wider cryptocurrency ecosystem. Proof-of-stake chains have benefitted and are quickly adopting new approaches like zero-knowledge proofs (zk-proofs). The likes of StarkWare co-founder Eli Ben-Sasson, who pioneered the technology, also believes that zk-proofs could be of great benefit to the proof-of-work based Bitcoin blockchain.
Magazine: Here’s how Ethereum’s ZK-rollups can become interoperable
The record surge in Ethereum staking in May was attributed to the ongoing U.S. debt ceiling saga, confidence in the U.S. dollar, bank collapses and the high APR offered on ETH staking.
The number of staked Ether (ETH) in May reached a new all-time high of 2.96 million ETH, approximately 2.46% of the total supply.
The amount of ETH staked in May does not include withdrawals and is more than twice as big as the second-highest amount registered in February 2022.
The significant surge in staked ETH comes within a month of the Shapella upgrade on April 12, allowing validators to withdraw their staked ETH after two years. Many then believed the heavy unstaking of ETH could be a bearish event for the Ethereum network. However, an estimated less than 1% of all staked ETH was sold after Shapella.
In the week after Shapella, nearly a million ETH were withdrawn by validators from the Beacon Chain. However, with the start of May, the number of staked ETH already surpassed the number of withdrawals. At present, almost 18% of all ETH staking was done in May.
The record surge in Ethereum staking in May was attributed to several factors, the most prominent being the United States debt ceiling saga, confidence in the U.S. dollar, bank collapses and the high annual percentage rate (APR) offered on ETH staking. According to research analyst Brian McColl:
“The U.S. Debt ceiling saga and the earlier events with banks going bankrupt surely affected Ether’s popularity, and more and more users prefer to stake their money in ETH rather than keep them in the bank.”
The debt ceiling in the U.S. is a statutory cap on the total amount of national debt the U.S. Treasury may incur, limiting the amount of money that the federal government may borrow to pay off its existing debt.
Related: Bitcoin hodlers exited ‘capitulation’ above $20K, new metric hints
As Cointelegraph reported earlier, President Joe Biden and U.S. House majority leader Representative Kevin McCarthy agreed to raise the $31.4 trillion debt ceiling. However, financial pundits, including BlackRock CEO Laurence Fink, have warned that the drama around the debt ceiling could deteriorate global trust in the U.S. dollar.
McColl also noted that the current APR is approximately 5.4%, which offers better deposit conditions than most banks around the world, making Ethereum staking a popular choice.
Magazine: AI Eye: 25K traders bet on ChatGPT’s stock picks, AI sucks at dice throws, and more
LDO price is well-positioned to gain another 50% by June based on a classic bullish reversal setup after Lido DAO rebounds 40%.
The price of Lido DAO (LDO) has rebounded to its three-week high of $2.21 as of May 16, up 40% when measured from its local low of $1.57, established four days ago.
This impressive double-digit recovery appeared in tandem with other top-ranking crypto assets, including Bitcoin (BTC) and Ether (ETH). However, LDO has greatly outperformed the broader crypto market (TOTAL) that's up only 4.5% since May 12.
But what are the reasons why Lido DAO is outperforming the rest of the cryptocurrency market right now? Let's take a closer look at the three biggest factors likely driving up LDO price.
The LDO price recovery coincides with the net positive inflows into Ethereum's proof-of-stake (PoS) contract in recent days.
Lido DAO is primarily an Ethereum liquid staking platform. It enables users to pool their funds to become validators on Ethereum, thus bypassing the network's requirement of depositing at least 32 ETH.
In April, Ethereum underwent a network upgrade called Shapella, which supports reward withdrawals from its staking contract. As a result, its PoS contract witnessed days when the amount of ETH withdrawals outnumbered deposits.
For instance, the net ETH staked with its PoS contract were 19.27 million ETH on April 11, a day before the Shapella upgrade. The number fell to 90,704 a week later, followed by a consistent recovery, according to data tracked by Nansen.
As of May 16, the Ethereum PoS contract had over 20 million ETH, underscoring the growing demand for liquid staking service providers like Lido DAO. The price of its governance token LDO likely benefited from the narrative.
For instance, Lido DAO's nearest competitor, RocketPool (RPL), has also soared 15% to around $50 when measured from its May 12 low.
It should be noted that Lido DAO did not support full ETH withdrawals. Instead, it issued staked Ethereum (stETH), theoretically pegged to ETH by 1:1, to users that could be exchanged freely for other crypto assets across exchanges.
But that was until recently.
On May 15, Lido DAO launched the mainnet version of "Lido V2," which enables Ethereum stakers to burn their stETH and exit the protocol at a 1:1 ratio. Since the upgrade, LDO price has climbed 20%, or half of its 40% rebound thus far.
Related: Celsius moves $781M in stETH just as Lido withdrawals open
Lido DAO whales have also supported LDO's upside move in the days leading up to the Lido V2 launch. And, according to data resource Lookonchain. This may suggest that the "buy the rumor" scenario may have contributed to the LDO price rally.
Due to the launch of Lido V2, we noticed 3 whales accumulating $LDO in the past week.
— Lookonchain (@lookonchain) May 16, 2023
- 0x9EA7 withdrew 724,822 $LDO($1.52M) from #Binance at $2.01.
- 0x4E4e withdrew 655,641 $LDO($1.38M) from #Binance at $1.83.
- 0x9eda bought 570,883 $LDO with 974K $USDC at $1.71 on May 12. pic.twitter.com/S0cNUxpLw0
From a technical standpoint, LDO's 40% bounce started near the lower trendline of a prevailing falling wedge setup. Traditional analysts see a falling wedge as a bullish reversal pattern.
The LDO/USD pair has recovered similarly in recent history, with each rebound taking its price to the wedge's upper trendline. Now with the price treading around the upper trendline again, LDO could enter a breakout stage or pull back to retest the lower trendline.
LDO's breakout scenario will have the price rally toward $3.35 by June 2023, up around 50% from current price levels. This target appears after adding the maximum wedge height to the potential breakout point near $2.70.
Conversely, the pullback scenario could bring the LDO price near $1.56 by June 2023, down 30% from current price levels. This level has served as support and resistance in the past.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
A buzz has been generated around a new layer one (L1) proof-of-stake blockchain initiative named Sui, following the network’s mainnet debut on May 3, 2023. The native token SUI has been listed on various cryptocurrency exchanges, drawing attention to the project. On the same day the network launched, SUI peaked at $2.16 per unit, but […]
Ethereum's supply across whale addresses has dropped consistently since March 2020, offset by greater retail interest.
The share of Ethereum (ETH) held by so-called whale addresses has dropped since Ethereum's Shapella upgrade in mid April, suggesting that large investors may be leaning bearish in t near term.
The amount of Ether held by addresses with 1,000-10,000 ETH, or "whales," was over 14.033 million ETH on May 1, according to Glassnode data. In comparison, the count was 14.167 million ETH on April 12, when Shapella went live on Ethereum.
Interestingly, a week before the Shapella upgrade, the Ethereum whale cohort held 14.303 million ETH, the highest amount in 2023
Ether's price is down over 3.5% since the Shapella upgrade— suggesting that several whales may have indeed "sold the news."
Interestingly, other address cohorts also showed a decline, including sharks (100-1,000 ETH), fishes (10-100 ETH), crabs (1-10 ETH), and even mega-whales (10,000+ ETH).
Only shrimps (<1 ETH) accumulated during the period, with their net position slightly increasing from 1.79 million ETH on April 12 to 1.80 million ETH on May 1.
Shapella enabled investors to withdraw the ETH locked via staking, which some argued would increase selling pressure.
Since the Shapella upgrade, investors have withdrawn over 1.97 million ETH worth around $3.6 billion, according to Beaconcha.in. Nevertheless, no major changes in cryptocurrency exchanges' ETH balances have been seen to date.
Historically, less Ethereum whales typically means heightened downside risk for ETH price.
Whale activity typically acts as a leading market indicator. So, rich investors accumulating typically precedes a price rise, and vice versa.
The price-whale positive correlation existed until March 2020, as shown in the chart below. Afterward, retail mania took over alongside the Federal Reserve's quantitative easing and the correlation snapped.
Notably, ETH price rallied from $110 in March 2020 to over $4,950 in November 2021 despite the declining whales. The inverse correlation continued throughout the price downtrend to around $850 in June 2022.
But since then, whale holdings have risen by nearly 1 million ETH. Meanwhile, ETH's price has more than doubled to around $1,850, hinting at a possible return of the price-whale correlation, which would be a bullish sign for Ethereum.
The $2,000-level is an important psychological resistance level for ETH/USD that bulls have been unable to break upon multiple attempts in 2023.
Related: Ethereum price outlook weakens, but ETH derivatives suggest $1.6K is unlikely
On the daily chart, ETH/USD holds above the short-term support provided by its 50-day exponential moving average (50-day EMA; the red wave), near $1,840. A successful rebound from here opens $2,000-$2,125 as the next upside target range in Q2.
Conversely, a break below the 50-day EMA risks sending ETH toward its 200-day EMA (the blue wave) near $1,670, down about 10% from current price levels.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
