The crypto market has been on a downward trajectory since the tail end of 2021. In early May 2022, it culminated in a dip that impacted traditional markets just as hard. The recent bust removed some speculation from the market. But the shakeup is different than in the past. There are still many more active users utilizing the Bitcoin network than we have seen in past cycles. Many more holders and true believers made it through to the other side. However, as this increases over time, one of the concerns some have over Bitcoin (BTC) may impact its adoption. There is an economic incentive, not just utility, that privacy coins can offer as a solution.
At different points in the first half of 2022, both in crypto market rallies and huge dumps, privacy coins such as Monero (XMR), Dash (DASH) and Zcash (ZEC) have fared relatively well against other altcoins. Does this mean there is an underlying demand for interest in crypto privacy?
The Bitcoin standard is finally here (well, not yet)
For the sake of this discussion, let us presume that Bitcoin made it. Bitcoin is now the dominant currency globally. But due to the pseudo-anonymous nature of the Bitcoin blockchain, anyone can see all of the transactions for each wallet. And for each coffee purchased, the spending habits of the buyer, the location where the spending took place and all the other dystopian trappings of a 1984-inspired nightmare are a reality. This nightmare is what has spurred on the creation of the likes of Monero, Zcash, Dash, Decred (DCR), Secret (SCRT) and Horizen (ZEN), just to name a few. Some of these have similar qualities to Bitcoin. Zcash is modeled very similarly to Bitcoin with a 21 million hard cap supply and operates by proof-of-work.
Could it be out of the question that one or two of these blockchain protocols would be adopted as the “everyday” transactional currency to complement the Bitcoin standard? Protocols like Monero and Zcash have either a shallow inflation rate or a capped supply. They act with their tokenomics and do not promise to do more than be a medium of exchange and store of value, other than, of course, protecting the privacy of the user.
Bimetallism: What is that, and why does it matter?
Bimetallism is a concept from long ago and before the advent of cryptocurrencies. As the name suggests, the idea behind bimetallism is that different types of precious metals would be used to offset the price inflation rate relative to the other. Gold traditionally had silver and vice versa to balance the other out if one started to have too much buying power. For example, a horse is worth one gold coin or 10 silver ones (gold and silver are rare to different degrees but still have different intrinsic qualities for utility). If the horse is now equal to two gold a year later, it may only be 12 silver coins, which makes the trade more palatable to the holder of silver, putting pressure on the inflation price of gold. This bimetallism arrangement works in theory when you have similar mediums of exchange like two precious metals. When the state introduced fiat currency in the mix, Grisham’s Law kicked into effect, and with a vengeance.
Grisham’s Law states that bad money drives out good. If a holder has fiat or Bitcoin, there is a high probability that they will value the good/service less than they do BTC and trade away the fiat, which has a potentially unlimited supply. This means that Bitcoin will sit, unused, in people’s wallets forever, destroying some of the value proposition of sound decentralized money for the world. If we are to assume that the world is going to digital mediums of exchange, it will not change the laws of economics.
There will still be adjustments in the price level of things to tradable assets. To keep these different mediums in check, other assets may be needed as alternatives. However, if we do not wish to have Grisham’s Law play out again, there must be assets similar to Bitcoin yet propose a different value proposition. Enter privacy coins.
Bitcoin can be a unit of account, medium of exchange, store of value and other qualities that fit the gold 2.0 narrative. And the traceability of Bitcoin is a good feature that has its uses. As we see now with Bitcoin-backed loans, the transparency of assuring creditors the funds exist is a great utility of the chain. But do you want the coffee barista to know you shop at the antique store every Wednesday? Do you want your personal finance known to your boss? Or to anyone who cares to look through your payment history?
This is where the idea of bimetallism, or “bicryptoism,” can step in and solve these issues. If Bitcoin is adopted with one or two different scarce and limited mediums of exchange (a privacy coin), these can help to keep the purchasing power of goods/services in constant “stable fluctuation” against each other. This is, of course, in the future when Bitcoin is the dominant currency of the world.
Because these different protocols have different properties (just like gold and silver), they can serve different functions in users’ lives. For daily transactions, users can enjoy the privacy that a privacy coin can offer while utilizing all the benefits of a decentralized ledger and blockchain technologies. When users desire to transfer their money into wallets that have a publically facing address, they can choose to keep their funds in Bitcoin. Perhaps, through functions like atomic swaps on-chain, this can be even easier than a decentralized or centralized exchange.
Satoshi Nakamoto, the mysterious inventor(s) of Bitcoin, once wrote: “For greater privacy, it’s best to use Bitcoin addresses only once.” A new BTC address for every user would be rather impractical for the 2022 crypto user, never mind a world where Bitcoin is the standard medium of exchange. Users will either have to try and create a Bitcoin improvement proposal (BIP) to change Bitcoin to adopt to include privacy-enhancing features or co-exist with options in a “bicryptoism” setup with one or more privacy coins. The latter has additional economic benefits of keeping inflationary pressures lower on prices over time.
These are just some thoughts for the future, and the greater crypto community needs to think about these potential issues as we move forward. Economics played a big part in the founding of Bitcoin and the cryptocurrency revolution, and it should be a great source of informing its future as well.
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.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Michael Tabone is an economist at Cointelegraph Research. A Ph.D. candidate, engineer, economist and business strategist, he also provides strategic consulting to firms concentrating in the DeFi and blockchain space. Michael has co-authored several reports for Cointelegraph Research and writes a quarterly venture capitalist report published on the Cointelegraph Research Terminal. His Ph.D. dissertation is on DAOs and their practical applications in the world of business.
When Will Bitcoin Bottom Out? Pi Cycle Bottom Says It Will Happen on July 9
Many cryptocurrency enthusiasts have heard of the Pi Cycle Top indicator, which has “magically” predicted the peaks of several previous bull markets. However, few know that there is also its opposite, Pi Cycle Bottom, which also has some track record in trying to estimate the bottom of a bear market.
But before we take a closer look at Pi Cycle Bottom, let’s remind ourselves why its bullish nemesis has earned so much popularity.
The historic effectiveness of the Pi Cycle Top
We first wrote about the Pi Cycle Top on BeInCrypto over a year ago, when Bitcoin was close to reaching its previous all-time high (ATH). The indicator is based on the relationship between the double of the 350-day DMA and the 111-day DMA. The signal fired on April 12, 2021, and just two days later, Bitcoin reached a historic ATH of $64,900.
This high accuracy of the Pi Cycle Top was not an exception, as the indicator has been very effective in previous cycles as well. All 3 historical ATHs of previous bull markets coincided with the signal flashing up no more than 5 days before or after the peak.
The only ATH during which the Pi Cycle Top was far from crossed is the most recent one. On November 10, 2021, when BTC reached $69,000, the indicator failed to generate a signal. At the time, this was interpreted as a sign that the second wave of the bull market was not yet over. Today we know that the indicator failed in this case.
Pi Cycle Bottom and the end of a bear market
Pi Cycle Bottom is the opposite of Pi Cycle Top. The bearish version is the relationship between the 471 SMA and the 150 EMA. Moreover, the former is multiplied by a factor of 0.745. Not a very elegant construction, but historically quite effective.
As it turns out Pi Cycle Bottom indicator could be successfully used to estimate the area of the absolute bottom of two previous bear markets (blue lines).
The first time the 150 EMA fell below the 471 SMA was on January 16, 2015. This happened just two days after the absolute bottom of the BTC price at $152.
The second time the Pi Cycle Bottom generated the same signal was on December 16, 2018. This happened just one day after the absolute bottom of the previous bear market at $3122.
We are currently approaching the third signal in history and another bearish crossing of the two moving averages (blue circle).
When will Bitcoin bottom out?
If the relationship between the intersection of the two moving averages and the bottom of the BTC price repeats itself in this cycle, Bitcoin could soon reach the bottom of this bear market. Currently, the 150 EMA has begun the sharp decline characteristic of the recent capitulation phase. A crossover is likely in the coming days.
Cryptocurrency market analyst @TheRealPlanC tweeted his own prediction of the date of the intersection and reaching a hypothetical bottom for Bitcoin. Based on the movement trajectory of the two curves, he estimated that the intersection will occur on July 9, 2022.
If this were to happen, then in exactly 15 days the Pi Cycle Bottom would generate a signal that very accurately indicated the bottom of the BTC price in the previous two iterations.
One step further went another analyst @el_crypto_prof, who combined the potential signal from the Pi Cycle Bottom with a fractal analysis of previous cycles. In his opinion, if a potential Bitcoin bottom were to happen in the near future, it would fit well with analogies between previous cycles.
In the chart above, we can see that for the entire period from April 2021, the analyst includes the post-ATH correction phase highlighted in red. It also includes the latest ATH at $69,000 reached on November 10. Although technically a higher BTC price was reached then, many technical and on-chain indicators suggest that it was already a bear market.
Perhaps this was also the reason why the Pi Cycle Top did not generate a proper signal. If this is true and the correction in the BTC market has been going on for more than a year, then indeed we can soon expect an end to the long-term decline. The Pi Cycle Bottom indicator is just an additional layer of confluence that may make this scenario more likely.
For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.
All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
It seems NFT-themed Bored & Hungry restaurant no longer accepts crypto
The alleged removal is a bit strange considering Bored and Hungry only opened its doors back in April.
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The Los Angeles Times reported Friday that recently opened NFT-themed burger joint Bored & Hungry no longer accepts cryptocurrency as a form of payment for its food.
When questioned, one Bored & Hungry employee told the Los Angeles Times “Not today — I don’t know.” The individual didn’t give any indication of when the decision was made to cut crypto from the menu of payment options, nor did they know if crypto payments would be making a return.
Bored & Hungry initially launched back in April of this year. At the time, one worker told the Los Angeles Times that the majority of its customers didn’t seem to care about crypto payment options, also noting that customers were generally indifferent to “the restaurant’s fidelity to the crypto cause.”
Another Bored & Hungry restaurant patron told the Los Angeles Times “People want to hold onto their ethereum. They’re not gonna want to use it.” Customer Richard Rubalcaba said, “I don’t know how [crypto purchases] would work, with the crash.”
Many of the restaurant’s patrons stated that they are not hardcore crypto enthusiasts, and simply frequent the establishment for the food. Customer Jessica Perez said, “We rate this up there with In-N-Out, maybe even better.”
Changes to venue’s payment policies seem to fall in line with the overarching crypto and macro economical meltdown transpiring across the globe. But never fear, hungry crypto users! You can still visit Chipotle, which began accepting crypto payments earlier in June via Flexa. Several countries are facing relentless regulations and scrutiny and there are issues of contagion in the crypto market.
Cointelegraph reached out to Bored and Hungry owner Andy Nguyen for clarification on the restaurant’s crypto acceptance, but did not receive a response prior to publication.
When Will Bitcoin Bottom Out? Pi Cycle Bottom Says It Will Happen on July 9
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