Bitcoin survives another crackdown from China as Europe embraces DeFi
Data from CryptoCompare shows that the price of Bitcoin started the week moving downward, dropping to a $41,000 low before recovering. Over the week its trading volume grew along with its price, which then reached a $48,000 high.
Ethereum’s Ether – the second-largest cryptocurrency by market capitalisation – started the week at $3,000 and moved under that mark during the week’s first few days, before surging to $3,400 when the flagship cryptocurrency’s price spiked.
Headlines in the cryptocurrency space this last week were heavily influenced by China’s all-out cryptocurrency crackdown that saw the People’s Bank of China (PBoC), the country’s central bank, declare all cryptocurrency payments are illegal.
The move sparked an initial market crash that most cryptocurrencies recovered surprisingly well from. Popular cryptocurrency exchanges including Huobi stopped catering to customers in mainland China because of the crackdown.
The move also led to a shutdown of large Ethereum mining pools like SparkPool. SparkPool was launched in 2016 and clarified it was shutting down in response to regulatory changes. Similarly, BeePool also announced it was shutting down later this month over “the latest regulatory policies”.
Both mining pools were responsible for more than one-quarter of all the Ethereum being mined. The crackdown also affected Bitcoin mining, with Beijing-based crypto mining hardware manufacturer Bitmain planning to suspend sales of its machines to miners in mainland China.
Moving out of China
The company is also reportedly moving the majority of its production out of southern China and into other countries to comply with the latest mandates from the PBoC. Founded in 2013, Bitmain was one of the earliest manufacturing companies to make application-specific integrated circuits (ASICs) to mine cryptocurrencies.
Notably, Bitcoin’s hashrate, the total computational power used to mine and secure the network, has been steadily rising over the last few months since it hit a low in July. In April, when BTC was trading above $60,000, its hashrate was over 160.9 EH/s.
By the beginning of July, its hashrate had dropped to 89.52 EH/s, meaning it was down by 45% at one point. Its latest recorded hashrate is estimated to be 140.36 EH/s.
It’s worth pointing out that bitcoin’s hashrate isn’t related to its use. Just this week Salvadoran President Nayib Bukele claimed that three million of his fellow citizens are using the government-backed Chivo cryptocurrency wallet. Per the President, the wallet “has more users than any bank in El Salvador”.
Available data suggests El Salvador’s population is close to 6.4 million people, which would mean nearly half of the country’s population now actively use a cryptocurrency wallet.
European institutional investors embrace DeFi
Institutional investors in Europe are reportedly embracing decentralized finance (DeFi), as according to a Chainalysis report the region of Central, Northern, and Western Europe (CNWE) has become the world’s largest cryptocurrency economy thanks to DeFi.
The report notes the region received more than $1 trillion in cryptocurrency over the last 12 months, amounting to 25 per cent of the global activity. The report added that large traditional institutional players have been paying attention to DeFi. It adds the region’s volume grew significantly with institutional investment driving “most of the growth”.
Despite the institutional embrace, DeFi is still showing how nascent of a space it is. Blue-chip decentralised protocol Compound, which acts as a money market, has overpaid millions in its native token COMP while rewarding users of its liquidity mining program.
While the program offers single-digit APY rates, an update that went awry led to the distribution of millions worth of tokens to users with often small deposits. The bug has been addressed, but Compound’s governance has a time-lock mechanism that will keep the bug in place for a few days.
Visa proposes ‘Universal Payments Channel’ for stablecoins
Credit card giant Visa has outlined what it calls a “universal payments channel” that would facilitate transactions between stablecoins and central bank digital currencies (CBDCs) in a bid to create a digital currency equivalent to the existing international payments system.
Visa’s product lead for CBDC’s, Catherine Gu, likened the new payments channel to a “layer 2” solution while speaking to cryptocurrency media. Gu noted that Visa’s solution focuses on interoperability to make it easy to exchange one currency for another. To do this, it will use a smart contract known as “hashed timelock contract.” This smart contract is already widely used in the cryptocurrency space.
For the plan to work, Visa will have to work with companies and governments to create digital wallets compatible with the payments channel. Its task may have become easier after US Federal Reserve Chairman Jerome Powell has said he does not intend to ban cryptocurrencies, although he noted that stablecoins need greater regulatory oversight.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies but has no bias in his writing.
Featured image via Pixabay.