💬 In Plain English
There’s more uncertainty on how governments will regulate cryptocurrencies with both the US Treasury and EU regulators indicating more scrutiny is required. China has implemented a new ban on mining.
There has been a massive rise in Sh*tCoins, driven by the promise of quick money through pump and dumps schemes. Investable money has been spread thin (and in some cases wiped out).
Normal investors are running out of disposable cash, spending it on rising living costs, paying down student loans or placing home downpayments. With no sign of further stimulus cheques, people are becoming more prudent with their money.
People have realised the environmental impact of first generation cryptocurrencies and are questioning if it is an acceptable trade off.
The pandemic isn’t over yet, which has created a wider sell off on Wall Street.
💎 Why It Matters
Regulation is no longer if and more when and what. The US seems to want to discourage usage, while the EU seems to want to protect consumers. How that will look like will greatly influence which coins win and lose.
There is reason to doubt China’s latest ban on crypto mining. Despite the repeated restrictions by Beijing, cryptocurrencies have continued to thrive in one form or another. There is a political flavour to their most recent decision.
With less disposable income, normal investors will be easily outgunned by larger investors. It is unlikely that we will see a repeat of retail traders crushing hedge funds, like what happened with superstonks GME and AMC.
It is easier than ever to create your own coin and unfortunately, too many people have taken advantage of this. Important concepts like Proof of Stake or Ethereum 2.0 are not able to cut through the noise, hype and promise of quick money.
There is gathering momentum to tackle climate change and with a renewed push into renewables (heh) by the US and the EU, there will be more scrutiny on power hungry cryptocurrencies.
📘 Key Takeaways
Despite the downward price trend, there has been no interest lost in Bitcoin with trading remaining stable over the last 3 months.
The Chinese mines that have shut down have found new homes with similarly cheap electricity prices but those new homes are being powered by coal power plants, which will further feed the eco-sustanability questions.
Big banks (JP Morgan) and institutions (Mastercard) continue to invest resources and energy into cryptocurrency projects. Given their sizable investment, it is unlikely they can easily change course.
With regulation, there is more chance of coin consolidation. Newer coins will have more difficulty to gain traction.
🔮 What Should I Do With This Info?
If you think regulation is a good thing for the industry, consider investing in coins backed by major companies. Mastercard recently backed USDC, a stablecoin that promises up to 4% yield.
If you think Bitcoin, DogeCoin and other first generation cryptocurencies will not be able to become more eco-friendly, consider buying second generation coins like ADA or ALGO which consume significantly less energy.
If you hear about a promising new coin out there, it’s likely smoke and mirrors. Let the dust settle for awhile before trying out anything too new.
If you think another stimulus cheque is coming soon, the pandemic is going to be over, big finance is prepping or China is bluffing, flip a coin.