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Lamborghini Bros No More: Crypto Is Creating a New Wealth Effect

It’s an oft-told anecdote littering social media: Those who invested early in cryptocurrencies have enjoyed life-changing wealth.

How much that extra cash gives them confidence to spend more — a phenomenon economists call the wealth effect — is a hot topic whenever crypto prices are surging. A group of researchers tried to quantify it and determined that crypto bonanzas in the US aren’t exactly spent like windfalls from winning the lottery. And so far, the effect has been relatively modest on the $28 trillion American economy. But if the asset class continues to boom, the study provides insight on potential game-changers in consumer patterns.

The new wealth increased households’ consumption by about $30 billion in total over a decade, the researchers estimated, with every dollar of unrealized gains leading to about nine cents of spending. While that figure is almost double the marginal propensity to consume when it comes to stock-market returns, it’s about one-third that of income shocks such as lottery winnings. Despite all the flexing on social media, it wasn’t all blown on Lamborghinis and bling: Some went toward home purchases, boosting real estate markets where crypto is popular.

“If households tend to treat crypto like gambling, then we would expect them to spend their gains in similar ways as lottery winners do,” Darren Aiello, assistant professor of finance at Brigham Young University’s Marriott School of Business and one of the authors of the paper, said in an interview. “In contrast, our estimates suggest that household spending out of crypto gains is more like the patterns we see from traditional equity investments.”

It’s a topic that is likely to gain more attention from economists after this year’s launch of spot-Bitcoin exchange-traded funds expanded the universe of potential crypto investors.

The researchers, who presented the paper to the Federal Deposit Insurance Corp. in March, also hail from Northwestern University, Emory University and Imperial College London. They used data from 60 million people from 2010 to 2023, spanning millions of bank, credit- and debit-card transactions, to analyze how crypto wealth spills over into the real American economy. They found that 16% of the households analyzed made deposits to retail cryptocurrency exchanges at some point in the decade through 2023.

Making the connection between spending and crypto investments can be tricky, since some may invest in the asset class in hopes of boosting their savings in order to make a big purchase, rather than deciding to make a big purchase only after a crypto windfall. As a result, the researchers isolated the portion of household crypto gains that were driven by long-term buying and holding, rather than recent investments, in order to directly measure the causal effects of crypto on spending.

“There is significant debate about the role crypto should play in a household’s portfolio due to its high volatility and nebulous fundamentals,” Jason Kotter, another assistant professor of finance at BYU who co-authored the paper, said in an interview.

To Noelle Acheson, author of the Crypto Is Macro Now newsletter, the insights about how crypto holds different appeal to different investor types is more noteworthy than the takeaways for the macro economy. “For lower-income investors placing less priority on wealth preservation, a crypto allocation could be seen as a make-or-break play — more to gain than to lose,” she said. “So it makes sense that any gains would be spent on big-ticket items such as a house.”

Housing market

While the boost in wealth was mostly poured into discretionary spending, a significant portion spilled into local housing markets, the researchers found, especially in parts of California, Nevada, Utah and other places where crypto is popular.

To arrive at a figure, the researchers went back in time to 2017, a year when Bitcoin saw its price jump from around $950 to $14,000 for a nearly 1,400% rally. Using zip codes associated with brokerage accounts, they compared what happened to home prices in counties with high crypto wealth compared with those that were less enthusiastic toward digital assets. They discovered that home prices in crypto-wealthy counties grew 43 basis points faster, pushing the median house price up by about $2,000 in 12 months.

They analyzed what that would look like spread out over the decade through 2023, and found that every dollar gained in households’ crypto wealth pushed median home price up by 15 cents over the following three months.

The researchers also tracked investors who withdrew at least $5,000 from their crypto brokerages — around 90% of which came from Coinbase Global Inc. — between 2018 and 2023. That analysis revealed that Americans increased their total spending in the year after a large withdrawal by around $5,754 relative to the prior year. And while mortgage spending remained constant in the six months leading up to large withdrawals, it rose significantly after the event.

“For every household that withdrew $5,000 from their crypto exchange account, one in 20 bought a house for the first time,” said Kotter.

After all, you can’t live in a Lambo.

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Crypto has retreated from the lows, but no rush for growth - January 29, 2024

Market picture

Crypto market capitalisation at around $1.62 trillion is less than 1% higher than it was seven days ago, thanks to a growth spurt on Friday. Bitcoin has added 3% in the same period and continues to be the driving force behind crypto volatility. The sentiment is gradually returning to greed territory, taking the corresponding index to 55 after lows of 48 in the middle of last week.

Bitcoin has stabilised near $42K over the past three days. The 50-day moving average at $42.8K has acted as local resistance for short-term gains. This curve changed direction from rising to falling last week, which looks to be an additional short-term negative factor.

Ethereum, as the flagship cryptocurrency, has pulled back from local lows but is in no hurry to gain altitude, trading near $2270.

The two major cryptocurrencies have started stabilising and rebounding higher than we expected. But we assume that the current calm is a local trap for bulls, and the decline will continue after some pause. The trigger for the decline may be volatility in equities ahead of the reports of giant corporations, the results of the Fed meeting and the employment report.

News background

The US Department of Justice has filed a notice to sell another batch of crypto assets confiscated from the criminal trading platform Silk Road. A total of 2,934 BTC worth $115 million is to be sold.

The US Securities and Exchange Commission (SEC) is likely to approve an ETF based on the spot price of Ethereum in the summer of 2024, Grayscale expects.

According to cryptocurrency payment operator BitPay, XRP has become one of the most used crypto asset for making payments, with the number of payment transactions up 42%. Bitcoin topped the top 10, followed by Litecoin and Ethereum.

According to Flipside, the Polygon project has equalled Ethereum in terms of new users. For 2023, Polygon recorded 15.24 million new accounts, compared to 15.4 million for Ethereum.

Matthew Schultz, co-founder of mining firm CleanSpark, believes that unless Bitcoin shows significant growth, 11 major mining companies will be unprofitable after the halving.

Source: Alex Kuptsikevich, the FxPro

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Bitcoin to soar as ETFs on cusp of approval
- January 9, 2024

The price of Bitcoin is spiking and one analyst predicts it could more than triple in value and hit $300,000 by the end of 2025.

Bitcoin has risen above $US47,000 (A$70,000) for the first time since April 2022 and one analyst is predicting it could more than triple in value to be worth US$200,000 (A$298,000) by the end of 2025.

The prediction comes after news that US regulators appear ready to finally approve Bitcoin exchange-traded funds (ETFs).

In a note, Standard Chartered head of crypto research Geoff Kendrick wrote: “If ETF-related inflows materialise as we expect, we think an end-2025 level closer to US$200,000 is possible.”

It has been over a decade since the first applications for ETFs that invest directly in the digital currency were filed with the US Securities and Exchange Commission (SEC).

Prospective ETF issuers BlackRock, Fidelity, Invesco, Ark, Galaxy Digital and WisdomTree filed amended forms on Monday in what is seen by analysts as a final push to offer the investment products.

The regulator has until Wednesday to make a decision on the applications, which could result in an investment product tracking the daily price of the most popular digital currency traded on a stock market for the first time.

If approved, the advent of Bitcoin ETFs is expected to drive up Bitcoin’s price due to increased accessibility and liquidity of the digital currency.

The rise in Bitcoin also flowed through to a surge in the price of other cryptocurrencies, such as Ethereum, Cardano, SOL and Polkadot, while the share prices of listed crypto exchanges and miners such as Coinbase Global, Riot Platforms and Marathon Digital also rose.

Bitcoin’s previous all-time high of almost $US69,000 (A$103,000) was reached in November 2021.

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(Newsfeeds)

Bitcoin Rally Cools in Countdown to US Spot ETF Decision by SEC - 9 January 2024

Bitcoin consolidated after briefly rallying past $47,000 on optimism that regulators are set to approve the first US exchange-traded funds investing directly in the world’s largest digital asset.

The token dipped to $46,739 as of 6 a.m. Tuesday in London after a 6.5% jump on Monday in the US to a 21-month high. Bitcoin’s new year climb now stands at 10%, contrasting with drops over the same period in stocks and gold.

The crypto market expects a green light for US spot Bitcoin ETFs by a Jan. 10 deadline. Prospective issuers such as BlackRock Inc., Fidelity Investments and Ark Investment Management updated paperwork with the Securities and Exchange Commission, and the regulator has until Wednesday to take action on at least one of the applications.

Speculators are wagering that the agency will announce a slew of decisions at once to avoid handing out a first-mover advantage. If the funds are approved, the next question is how much money they will woo. Bitcoin is up 172% in the past 12 months in a sign that traders anticipate wider adoption of the token.

“Participants seem to be coming around to thinking that the initial flows will actually exceed expectations,” said Kyle Doane, a trader at Arca.

Applicants amended forms on Monday in the US in a final push to offer spot Bitcoin ETF products more than a decade after the first attempt.

SEC Chair Gary Gensler has repeatedly argued that crypto is rife with fraud and misconduct. The agency cracked down on the sector following a 2022 rout and collapses such as the bankruptcy of Sam Bankman-Fried’s FTX exchange.

But the SEC last year lost a key legal fight against crypto asset manager Grayscale Investments LLC, spurring speculation that the regulator will have to acquiesce to the spot ETFs. The spat was over the $29 billion Grayscale Bitcoin Trust’s desire to convert into such a product.

ETF Critics

Critics contend that spot crypto ETFs would pose a risk for investors given that digital assets are notorious for volatility and attracting illicit activity.

“What’s going to happen, unfortunately, is lots and lots of Americans in our view, are going to get hurt financially,” said Dennis Kelleher, chief executive officer of financial reform nonprofit Better Markets.

The months-long advance in Bitcoin has lifted the digital-asset market more broadly, bolstering smaller tokens like Solana and Avalanche. US crypto-linked stocks mostly rose on Monday, providing a tailwind for Asian peers such as Japan’s Monex Group and Woori Technology Investment Co. in South Korea.

Pullback Risk

Some crypto watchers wonder whether Bitcoin is ripe for a pullback if and when SEC approval finally lands, since speculators may decide to bank a slice of profits from the token’s rally.

There are “no signs” of a so-called sell-the-news event just yet, Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. Based on chart patterns, the $51,000 level is a possible target before any such retreat, according to Tony Sycamore, a market analyst at IG Australia Pty.

Looking past short-term price gyrations, “the main result of Bitcoin spot ETF approval will be the marketing machine behind greater Bitcoin awareness, powered by some of the largest names in traditional finance,” wrote Noelle Acheson, author of the Crypto Is Macro Now newsletter.

The token reached a record high of almost $69,000 back in 2021 during a pandemic-era bull run fueled by ultra-low borrowing costs.

#Bitcoin #BitcoinETF #ETC #crypto #cryptonews #cryptocurrencies #SEC #markets #finance #fintech #digitalnews #digitalbiz #digitalbusiness #newsmedia #newsfeeds #media

Bitcoin News Media

January 8, 2024

Bitcoin ETF Insider Leak Powers Bitcoin Price Surge Over $45,000 After $1.6 Trillion Ethereum, XRP, Solana And Crypto Boom

Now, as panicked traders try to get ahead of the U.S. Securities and Exchange Commission's (SEC) "rug pull of the decade," an insider leak has revealed BlackRock has readied a huge $2 billion bazooka if its spot bitcoin ETF bid is approved.

"I heard from a pretty well placed source that BlackRock has more than $2 billion lined up in week one in new incremental flows from existing bitcoin holders who are adding to positions," Matthew Sigel, head of digital assets research at investment company VanEck, said during an X Spaces broadcast organized by The Block.

"I can't vouch for that," Sigel added. "But you know, that's what everyone is doing. Just making phone calls and trying to find the folks who can write checks into these products. And our estimates—that, you know, if that $2 billion happened in week one, you know, that would blow away our estimates."

1/8 update: The bitcoin price has shot over $45,000 per bitcoin as the Wall Street race to get a bitcoin spot exchange-traded fund (ETF) to market enters its final week. The price surge boosted the price of ethereum, XRP and solana as traders bet a historical spot bitcoin ETF would boost crypto prices across the board.

This week, spot bitcoin ETF hopefuls, including BlackRock, Fidelity and Grayscale, have met the deadline to file their amended documents.

This filing "is another important step towards uplisting GBTC as a spot bitcoin ETF," Grayscale spokeswoman Jenn Rosenthal said in a statement to Coindesk. Grayscale has been trying to convert its bitcoin trust to a fully-fledged spot bitcoin ETF for years, last year successfully suing the SEC over its rejection of its bid. "At Grayscale, we continue to work collaboratively with the SEC, and we remain ready to operate GBTC as an ETF upon receipt of regulatory approvals."

"Market participants maintain expectations for the approval of the 21Shares filing, potentially triggering a cascade approval for all issuers," Matteo Greco, a research analyst at investment company Fineqia International, said in emailed comments, referring to the Ark 21Shares spot bitcoin ETF bid that's first in line.

"Numerous meetings between the SEC, issuers, and exchanges have fuelled the narrative of an imminent approval. The introduction of ETFs could usher in new investor cohorts from traditional finance, significantly improving market transparency and liquidity and bringing long term capital inflow in the digital assets market."

Sigel said VanEck was anticipating "$2.5 billion in the first quarter of trading," a figure derived from "past flows into the first gold ETF and adjusting by the U.S. money supply. And we have a $40 billion market opportunity over two years based on a similar analysis."

"$2 billion week one into BlackRock alone would blow expectations out of the water," Travis Kling, the chief investment officer of Ikigai Asset Management, posted to X. "Half that from all ETFs combined would have been a pretty good outcome."

VanEck, along with other spot bitcoin ETF hopefuls BlackRock, Fidelity, Grayscale, Valkyrie, ARK 21Shares and InvescoIVZ +1.8% have rushed to finalize their applications this week ahead of a January 8 Monday morning deadline.

Five SEC commissioners will reportedly vote on the spot bitcoin ETF bids next week, according to Bloomberg, citing an anonymous source.

#Bitcoin #BTC #BitcoinNews #Crypto #CryptoNews #cryptocurrency #XRP #ETF #Ethereum #BitcoinETF #BitcoinETFs #fintech #digitalnews #newsmedia #newsfeeds #trend #trends #buzz #hype #bitcoinnewsmedia #x #media

(Sources: Wires, Newsfeeds, X)

Crypto needs a new king. These are the contenders - December 15, 2023

The price of bitcoin is surging again. Major financial firms are showing renewed interest in digital currencies. And crypto fanatics are celebrating the end of a long period of depressed prices and business collapses.

But the sudden explosion of optimism has come at a turbulent moment for the cryptocurrency industry.

The last time crypto prices were skyrocketing, the industry’s most influential executives were Sam Bankman-Fried and Changpeng Zhao, rival billionaires whose online sparring could move markets. Now Bankman-Fried, founder of the FTX crypto exchange, and Zhao, who ran the world’s largest crypto firm, Binance, both face prison time after parallel falls from power.

A federal jury convicted Bankman-Fried last month on fraud and conspiracy charges stemming from FTX’s collapse. Three weeks later, Zhao pleaded guilty to a money laundering charge and agreed to relinquish control of Binance.

With the two men out of the picture, a crowded field of crypto entrepreneurs, Wall Street executives and government regulators are vying to control the industry’s next chapter. Their scramble for influence could determine whether crypto survives in the United States, where a regulatory crackdown has made it increasingly difficult for the industry to operate.

Some executives have argued that the crypto world needed to purge figures like Zhao and Bankman-Fried — aggressive entrepreneurs who gave priority to growth over compliance — to win over regulators and the public.

After Zhao’s guilty plea, Brian Armstrong, CEO of the US-based crypto exchange Coinbase, hailed the case as a turning point for the industry.

“We now have an opportunity to start a new chapter,” Armstrong posted on social media last month. “This industry should be built right here in America, in a compliant way, under US law.”

But the crypto world remains filled with companies that engage in risky business practices and don’t offer much transparency about their experimental products.

“There is no intrinsic value to any of this,” said Hilary Allen, an expert on financial regulation at American University. “The only hope is to have more money sloshing around, and more people willing to buy into it to create demand.”

Crypto has always had its share of influential leaders. The vision behind bitcoin, the original and most valuable digital currency, was first laid out by someone using the pseudonym Satoshi Nakamoto, whose mysterious identity became its own brand.

As the crypto world expanded, new centres of power and influence emerged. Zhao founded Binance in 2017 and built it into the world’s largest marketplace for buying and selling experimental coins. The exchange’s size and reach turned Zhao into a star on Twitter, now known as X, where he accumulated more than 8 million followers, dismissing government lawsuits and allegations of illegal conduct as disinformation spread by crypto’s enemies.

Zhao’s chief rival was Bankman-Fried, who appeared on billboards and magazine covers, cultivating a persona as the responsible adult who would help the fledgling industry work with regulators.

In the end, both Zhao and Bankman-Fried fell from grace. Bankman-Fried is set to be sentenced in March and faces the prospect of decades behind bars. Zhao is likely to receive a lighter sentence, with prosecutors expected to request about 18 months.

“Having those characters not in the plot any more is a really good thing,” said Jeremy Allaire, CEO of the crypto company Circle. “I’m focused and have been focused on: How do we make this useful for the world?”

A new generation of executives is already emerging as the industry’s top cheerleaders. Paolo Ardoino, an outspoken crypto enthusiast with a vast online following, recently took over as CEO of Tether, the company that oversees one of the most popular digital currencies. At Binance, Zhao was replaced by Richard Teng, a key executive at the exchange who had been groomed to step into Zhao’s shoes.

On paper, Teng is Zhao’s opposite. The Binance founder was antagonistic toward regulators, while Teng is a veteran of the Monetary Authority of Singapore, the country’s central bank.

Binance’s future is uncertain. As part of a settlement last month, the company agreed to pay a $US4.5 billion ($6.7 billion) fine to several government agencies and have a US monitor embedded in the business for the next three years.

“My general sense is there’s a real ‘wait and see,’” Allaire said. “I don’t think anyone knows the details of what that monitorship means.”

A Binance spokesperson did not respond to a request for comment.

Arguably the biggest beneficiary of crypto’s current reshuffle is Coinbase’s Armstrong, who declared this month that bitcoin “may be the key to extending western civilisation”. Coinbase’s share price has nearly tripled over the past six months, even after the Securities and Exchange Commission sued the firm as part of the agency’s broad crackdown on the industry.

“Coinbase is now the last man standing,” said John Todaro, an analyst at Needham who tracks the crypto industry. “There’s less competition out there.”

Coinbase has also positioned itself to profit from a potentially seismic development in the crypto world — the possible approval of an exchange-traded fund, or ETF, that tracks the price of bitcoin.

“Having those characters not in the plot any more is a really good thing.”

Circle CEO Jeremy Allaire

In recent days, bitcoin’s price has surged to over $US43,000 ($65,600), its highest level since a wave of bankruptcies sent the industry into crisis last year. Much of the enthusiasm is fuelled by growing confidence that the SEC is poised to approve a bitcoin ETF that would trade on traditional stock exchanges, potentially bringing new money into the industry.

Coinbase has agreed to store the bitcoin that would underlie an ETF offered by BlackRock, one of the world’s largest asset managers. BlackRock is the biggest of several major financial firms, including Fidelity, that have applied to offer the investment product.

Wall Street was once the enemy of the insurgent crypto industry, but after a bruising 18 months of bankruptcies and arrests, crypto proponents have greeted the collaboration between Coinbase and BlackRock as a potential salvation.

“Crypto isn’t disrupting Wall Street; it’s merging with it,” Allen said. “It’s fairly obvious — they think they can make some money here.”

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Cryptocurrency-mining Chinese principal sacked for stealing school power supply -
12th November 2018

by Richard Wood

Cryptocurrency machines drained electricity from a Chinese high school for almost a year before the principal behind the illicit operation was busted.

‘Lei's clandestine set-up would total eight cryptocurrency machines’

When a school employee reported a spike in electricity usage, the principal Lei Hua blamed it on air conditioners and heaters, reports the South China Morning Post.

Lei, the head of Puman Middle school in China’s Hunan province, started mining the cryptocurrency ethereum from his home in June 2017 using one machine.

But it became such a huge electricity drain – reportedly up to 21 kilowatts per hour – that he moved his operation to his school’s computer room.

Eventually Lei’s clandestine set-up there would total eight cryptocurrency machines.

In January, the school’s deputy principal purchased a mining computer and, under guidance from Lei, also tapped into the school’s power source.

High powered mining machines can generate more cryptocurrency, but become hot and noisy and eat up huge amounts of power.

Authorities uncovered the electricity theft after reports of strange round-the-clock noises from the school’s computer room and problems with its IT network.

The school’s energy surge also caused its power bill run to 14,700 yuan ($2900) – almost double compared with the previous year.

Lei was dismissed soon after and his deputy principal was reportedly issued a warning, reports the BBC.

China started a crackdown on cryptocurrency mining operations this year amid fears of future financial chaos.

In April, police arrested six people in Tianjin province for stealing electricity from the local grid to power 600 bitcoin mining machines.

(Nine.com.com)