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Tether Reduces its Commercial Paper Holdings in Favor of US Treasuries for its Reserves

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Tether Reduces its Commercial Paper Holdings in Favor of US Treasuries for its Reserves

Quick take:

  • Tether’s CTO has stated that the company has reduced its holdings of commercial paper and increased its US Treasuries as reserves for USDT
  • Tether also announced that the USDT stablecoin had stood the test of time
  • USDT also suffered depegging this week as stablecoins were in the spotlight after UST’s and LUNA’s depreciation in the markets

Tether’s and Bitfinex’s CTO, Paolo Ardoino, has updated on the status of USDT reserves during a Twitter Spaces chat on Thursday. According to Mr. Ardoino, the majority of Tether’s reserves are in US Treasuries after the company reduced its exposure to commercial paper over the last six months.

Tether (USDT) had Depegged from the $1 Mark

The update on Tether’s reserves comes in the backdrop of USDT depegging as crypto-traders and users panicked as UST depegged and LUNA underwent severe inflation. At the height of Tether’s depegging, USDT was trading as low as $0.95, but the stablecoin has since resumed to $0.9988, which is very close to the $1 mark.

Tether Reduces its Commercial Paper Holdings in Favor of US Treasuries for its Reserves 14
USDT depegging in the last 48 hours. Source, Coinmarketcap.com

Tether Issues a Statement Explaining that USDT has Withstood other Black Swan Events

The depegging of Tether and the subsequent anxiety surrounding the future of USDT resulted in the team at the company issuing a statement to allay any fears in the markets. They explained that it was ‘business as usual [for USDT] amid some expected market panic following this week’s market movements.’

In addition, the team at Tether explained that USDT redemption continues at a 1:1 ratio with the US Dollar. They also added that this was not the first time Tether’s stability had been tested. They said:

Tether has maintained its stability through multiple black swan events and highly volatile market conditions and even in its darkest days Tether has never once failed to honour a redemption request from any of its verified customers. Tether will continue to do so which has always been its practice.

Tether is the most liquid stablecoin in the market, backed by a strong, conservative portfolio that consists of cash & cash equivalents, such as short-term treasury bills, money market funds, and commercial paper holdings from A-2 and above rated issuers.

[Feature image courtesy of Unsplash.com]

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Ethereum

Galaxy Capital’s Mike Novogratz Warns that Finding Crypto Bottoms is Dangerous, Altcoins Could Dump by Another 70%

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Galaxy Capital’s Mike Novogratz Warns that Finding Crypto Bottoms is Dangerous, Altcoins Could Dump by Another 70%

Summary:

  • Mike Novogratz has warned the crypto community against picking price bottoms as it is dangerous.
  • He also pointed out that most altcoins are down by over 80% from their highs, and the losses in the 2018 bear market were over 95%.
  • Consequently, altcoins will likely drop by another 70% from their current levels.
  • Robert Kiyosaki has also highlighted that market crashes could be an opportune time ‘for smart investors to become very rich winners.’

The CEO of Galaxy Digital, Mike Novogratz, has warned the crypto community against picking price bottoms during the ongoing bear market as it is dangerous. According to Mr. Novogratz, anyone attempting to time the crypto market bottom should do so gradually.

In addition, Mr. Novogratz highlighted that many altcoins are down by 80% from their recent highs. But more losses could soon follow, given that the 2018 bear market resulted in the same altcoins retracing by 95%. He, therefore, forecasted that altcoins could quickly fall by another 70% from their current levels. He said:

Alts are down over 80 percent from the highs.

In [2018] it was over 95 percent. That is down another 70 percent.

My point is picking bottoms is dangerous and if you do scale in slowly.

Bear Markets Turn Smart Investors into Winners – Rich Dad Poor Dad Author

In another Tweet, the author of Rich Dad Poor Dad, Robert Kiyosaki, highlighted that bull markets make stupid investors look smart. However, bear markets turn the same stupid investors into losers and smart investors into winners. He also pointed out that market crashes could provide opportunities for smart investors to become very rich winners.

Mr. Kiyosaki shared his insights on the mechanisms of bull and bear markets through the following tweet.

RICH DAD said “Bull Markets make stupid investors look smart. Bear Markets turn the stupid investors into losers and smart investors into winners.”Markets are crashing. Time for smart investors to become very rich winners. Take care

— therealkiyosaki (@theRealKiyosaki) May 21, 2022

Bitcoin Continues to Consolidate Between $30k and $28k

Concerning price action, Bitcoin continues to consolidate between the $30k resistance level and the $28k support level. The King of Crypto continues to trade in bear territory below the 50-day (white), 100-day (yellow), and 200-day (green) moving averages, as seen in the following BTC/USDT chart.

Galaxy Capital's Mike Novogratz Warns that Finding Crypto Bottoms is Dangerous, Altcoins Could Dump by Another 70% 16

However, the daily MFI, MACD, and RSI are in oversold territory and could signal a continuation of consolidation or an attempt at reclaiming $30k as support.

But caution is advised longing Bitcoin given the bearish mood surrounding both the traditional and crypto markets due to various global central banks, including the US Fed, increasing interest rates to tame inflation.

Consequently, the consolidation being observed by Bitcoin could be the genesis of another drop to lower levels, such as the recent low of $26,700 or even lower to Arthur Hayes’ forecast of $20k.

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ZCash (ZEC) Could Soon Transition to Proof-of-Stake as a Means of Driving Sustainable Growth

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ZCash (ZEC) Could Soon Transition to Proof-of-Stake as a Means of Driving Sustainable Growth

Summary:

  • The Electric Coin Company has initiated research on a possible transition of ZCash from a proof-of-work mechanism to a proof-of-stake.
  • The research will focus on shielded wallet UX and security, cross-chain interoperability, proof-of-stake security, issuance rate, on-chain governance, and reducing the protocol’s complexity.
  • The rationale behind exploring ZCash’s possible switch to a PoS is to drive the sustainable growth of ZEC. It will also reduce selling pressure from PoW miners, amongst other benefits.

The popular privacy coin of ZCash (ZEC) could very well switch from its current proof-of-work algorithm to a proof-of-stake mechanism. The team behind the project, the Electric Coin Company, has announced via Twitter the kickoff of the initial phase of research geared towards finding out whether ZCash could transition into a proof-of-stake network, thus placing ZEC at the forefront of Web3.

Our goal for the initial phase of Proof-of-Stake research is to produce a concrete transition proposal for the #Zcash community.

We believe this proposal could place $ZEC and its underlying technologies at the forefront of Web3. https://t.co/4ZWsOwfhCg

— Electric Coin Co. (@ElectricCoinCo) May 20, 2022

ZCash (ZEC) Research Areas at the Core of the Potential Transition to PoS

The Electric Coin Company (ECC) team also provided the following six areas of research that will lead to the possible transition into Proof-of-stake for ZEC.

  • Shielded wallet UX and security – focusing on maintaining existing shielded mobile functionality. The ECC aims to enable shielded mobile users, to delegate ZEC to earn staking rewards easily.
  • Cross-chain interoperability.
  • Proof-of-stake security.
  • Issuance rate of ZEC, which maintains the 21 million ZCash supply cap.
  • On-chain governance – the ECC wants users to easily express their preferences by coin weight polls created by any community member. But coin weighted poll will not be binding on the protocol or governance layers.
  • Reducing protocol complexity.

Switching ZCash to PoS Will Drive Sustainable Growth for ZEC

In an August 2021 blog post, the team at the ECC had initially explained that the transition to proof-of-stake was a community decision and that their idea was meant to place ZEC as the ‘engine driving the sustainable growth necessary to provide economic and social freedom for everyone.’

According to the ECC, ZCash, as it stands as a Proof-of-work protocol, is faced with selling pressure from miners who need to pay for operational costs that continue to increase over time. Consequently, ‘in PoS, stakers can keep the coins they’ve earned and become long-term investors.’

In addition, switching to proof-of-stake is a win/win for everyone, including community members who believe proof-of-stake is better for the environment.

The ECC also provided the following additional reasons why Proof-of-stake would be beneficial to ZCash.

  • It provides much better security and performance at a lower cost.
  • PoS provides an avenue for many ZCash holders to become ZCash users.
  • PoS increases the demand for ZEC because it supports novel new use cases.
  • It provides a voice for all ZEC holders.
  • PoS is more decentralized, attack- and capture-resistant, and egalitarian.

The Next Step is to Introduce a Proposal that Recommends ZCash Move to PoS

Concerning the next step of action, the ECC has explained that the initial research will ultimately lead to a proposal that recommends ZCash’s move to a proof-of-stake protocol. By releasing the research first, the ECC hopes that the ZCash community will understand their vision and why Proof-of-stake could benefit ZEC, leading to more adoption. They explained:

This proposal could change the broader use case for the ZEC currency and place its underlying technologies at the forefront of Web3.

To provide ZEC users with as much information as possible, we will be releasing a series of technical research blogs in the coming months. This will give community members a chance to provide feedback and ask questions on our approach, long before we begin developing a specific proposal.

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CoinGecko Co-Founder: The Next 12 – 18 Months Will be Challenging in the Crypto Markets as the Fed Increases Interest Rates

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CoinGecko Co-Founder: The Next 12 – 18 Months Will be Challenging in the Crypto Markets as the Fed Increases Interest Rates

Quick take:

  • Bobby Won has forecasted that the next 12 to 18 months in the crypto-markets will be challenging.
  • He cites the US Fed increasing interest rates to tame inflation as the reason to expect more pain in the crypto markets.
  • The Bitcoin and Crypto market will not be short, and we have to prepare for tough times.

CoinGecko’s Co-Founder, Bobby Ong, has forecasted that the next 12 to 18 months in the crypto markets will be challenging due to the US Federal Reserve increasing interest rates to tame inflation. Additionally, Bitcoin and crypto are now tied at the hip with traditional finance and will most likely suffer losses as stocks undergo a correction.

He said:

The Fed has no choice but to raise interest rates to tame inflation. Growth stocks valuation are highly sensitive to i/r and are being pummelled.

With institutions involvement, crypto is now highly correlated to TradFi and is being viewed like a tech stock / risk-on asset so it’s also taking a large beating. Many publicly-listed tech stocks have seen its market cap drop 75% in the past 6 months. Are we near the bottom?

Unfortunately, we are just at the start of the rate tightening cycle by the Feds. The Feds will have to continuously increase interest rates for the next few quarters to tame inflation and more pain is incoming. We told our team to expect the next 12-18 months to be challenging.

The War in Ukraine and Supply-Chain Issues Continue to Cause Inflation

According to Mr. Ong, the crypto market is highly volatile, as demonstrated by USTs depegging and LUNA losing a huge chunk of its market capitalization in the last two weeks. Furthermore, the crypto-wide market pullback is being catalyzed by a macro-driven bear market as the war in Ukraine, and supply-chain issues continue to cause persistent inflation.

The Bear Market Will Most Likely Not Be Short

Concerning the length of the ongoing crypto bear market, Mr. Ong believes that it will not be short, and CoinGecko had to ‘prepare for tough times, be careful with expenditure, focus on optimizing revenue, and build things that the community wants. Now is the time to roll our sleeves up and BUIDL for the next cycle.’

He also pointed out that CoinGecko will not carry out employee layoffs during the bear market highlighted in the below two tweets.

We have started seeing tech companies implementing hiring freeze. Some have even started to layoff staff and I will not be surprised to see more layoffs taking place in soon as runway challenges become evident in more firms. https://t.co/pVx4ZCeLqk

— Bobby Ong (@bobbyong) May 19, 2022

Time to Be Extremely Selective With Your Bitcoin and Crypto Buys

In his concluding remarks on the bear market, Mr. Ong recommended that the crypto community be highly selective with their Bitcoin and crypto purchases. He also pointed out that Bitmex’s Hayes had stated that he would be a Bitcoin buyer at $20k and Ethereum buyer at $1,300.

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