I’m going to cover some of the biggest stories to come out of crypto in the last few weeks.
Looking at what’s been happening, it’s clear we’re on the cusp of something major.
The New York Stock Exchange (NYSE) is opening up a bitcoin exchange
Bitcoin news doesn’t really get much bigger than this. On Monday The New York Times revealed that the NYSE is planning to open up a bitcoin trading exchange.
From the article:
The parent company of the New York Stock Exchange has been working on an online trading platform that would allow large investors to buy and hold Bitcoin, according to emails and documents viewed by The New York Times and four people briefed on the effort who asked to remain anonymous because the plans were still confidential.
The news of the virtual exchange, which has not been reported before, came after Goldman Sachs went public with its intention to open a Bitcoin trading unit — most likely the first of its kind at a Wall Street bank.
And if you’re wondering about the Goldman Sachs part in that excerpt, don’t worry. That’s new information, too.
Goldman Sachs moves ahead with crypto trading desk
Back in December Bloomberg broke the news that Goldman Sachs was going to open up a crypto trading desk:
Goldman Sachs Group Inc. is setting up a trading desk to make markets in digital currencies such as bitcoin, according to people with knowledge of the strategy. The bank aims to get the business running by the end of June, if not earlier, two of the people said. Another said it’s still trying to work out security issues as well as how it would hold, or custody, the assets.
We all know what happened a couple of weeks later. The crypto market crashed over 50% and a lot of mainstream interest went with it.
But it seems the crash didn’t do anything to slow Goldman’s plans.
Last week, The New York Times confirmed it is going ahead with its crypto trading desk.
[Goldman Executive Rana Yared said] Goldman had concluded that Bitcoin is not a fraud and does not have the characteristics of a currency. But a number of clients wanted to hold it as a valuable commodity, similar to gold, given the limited quantity of Bitcoin that can ever be “mined” in a complex, virtual system.
“It resonates with us when a client says, ‘I want to hold Bitcoin or Bitcoin futures because I think it is an alternate store of value,’” she said.
Ms. Yared said the bank had received inquiries from hedge funds, as well as endowments and foundations that received virtual currency donations from newly minted Bitcoin millionaires and didn’t know how to handle them. The ultimate decision to begin trading Bitcoin contracts went through Goldman’s board of directors.
So we now have both the NYSE and Goldman Sachs opening up crypto markets to a wider audience of both hedge funds and retail investors.
Still, that hasn’t stopped the hate from Buffett.
Investing in bitcoin is almost as bad as “trading freshly harvested baby brains”
The above quote is from Berkshire Hathaway vice chairman Charlie Munger. I have no idea how he got to that conclusion, but it came just one day after Warren Buffett called bitcoin “rat poison squared.”
The “freshly harvested baby brains” dig comes from an interview with Yahoo! Finance, just after Berkshire Hathaway’s annual shareholders’ meeting.
Here’s what he said, courtesy of Yahoo! Finance:
I asked Munger if we should dismiss bitcoin completely — and he savaged the cryptocurrency even more.
“The computer science behind bitcoin is a great triumph of the human mind,” Munger started. “They created a product that’s hard to create more of but not impossible. [But] I see an artificial speculative medium,” he said, in which people can sell it to someone else at a higher value with no intrinsic value behind it. It’s “anti-social, stupid and immoral,” he said.
“Immoral?” I asked him.
“Suppose you could make a lot of money trading freshly harvested baby brains. Would you do it?” Munger asked. “To me bitcoin is almost as bad.”
Anything else, Charlie?
“I regard the whole thing as a combination of dementia and immorality. I think the people pushing it are a disgrace. There ought to be some things that are beneath you, that you just don’t do, and this is one.”
It’s clear that Berkshire Hathaway really, really hates cryptos.
I wonder why?
Is it because it is so concerned that people investing in them are too stupid to realise they may lose some, or all, of their money?
Or is it because six of Berkshire Hathaway’s top ten holdings are legacy financial services companies, as one Reddit user pointed out yesterday.
Have a look at Berkshire Hathaway’s top ten holdings below and decide for yourself.
Ethereum staking amount confirmed
This is very big news for people who hold a lot of Ethereum. As I have written about before, Ethereum will be changing from a proof-of-work (POW) consensus mechanism to a proof-of-stake (POS) one.
That may sound complicated. But it basically means that there will be no more mining for Ethereum. It won’t be secured by miners and it won’t be wasting huge amounts of energy like bitcoin does.
Instead, people will “stake” a certain amount of Ether to keep the network secure. In return for staking their Ether, they will get more Ether in return.
In order to stake you’ll have to lock up your Ether for a few months. And you’ll get around 4% interest. But these numbers aren’t set in stone and are likely to change and be confirmed at a later date.
What has been confirmed, though, is the minimum amount you’ll need in order to stake. When the POS mechanism was first announced, the amount needed was 1,000 Ethereum.
As you know, 1,000 Ethereum is a hell of a lot of money. However, when POS was first proposed, Ethereum was a lot cheaper.
And rumours have been going around for some time about a drop in the required amount. We now have confirmation that the minimum amount will be 32 ETH.
This I a huge drop from the 1,000 number and will mean many more people can take part in staking.
And even if you have much less than 32 Ethereum, you’ll likely be able to join a “staking pool” to essentially stake any amount.
If you want to know more about staking Ethereum and the switch to POS, you can read this article from Trustnodes.
IOTA announces Q
And finally, perhaps the biggest news of them all.
IOTA has announced its long anticipated Q project. You can see its video for yourself here.
Q is going to enable smart contracts and oracles on IOTA. It’s hard to convey how big of a development this is. It could be game-changing for the entire crypto industry. Actually, not just for the crypto industry, but for the whole world.
Q could essentially give IOTA the functionality of Ether, but with unlimited scaling and free transactions.
Here’s perhaps one of the biggest uses of Q and IOTA, taken from a thread about the announcement on Reddit:
Q will also enable “outsourced computing”. This could also be a world-changing technology, as another Redditor explains:
Say a scientist wants to do a research study using a supercomputer, or say some company like google wants to build a new supercomputer… Instead of spending millions building one they decide to rent 5 minutes of computing power time from your phone as well as thousands of other phones and computers to combine them into a supercomputer millions of times faster than the fastest supercomputer on earth for a fraction of the cost. They pay you for the time instead of building a sup computer.
The full information on Q won’t be released till June. But when it is, we can expect to see massive things coming from IOTA, and from cryptos in general.
As one person I saw put it: “Looks like IOTA will be capable of doing everything the top 100 coins can do together but then without using miners.”
Will it really be able to? Will IOTA become the one crypto to rule them all? We’ll have to wait and see. I doubt all the other major cryptos will go down without a fight.
Until next time,
Editor, Exponential Investor
PS If you’re a fan of the sitcom Silicon Valley, you’ll know that this season it’s gone “full crypto”. Here’s a good fake interview with Bertram Gilfoyle on the merits of crypto and the evils of corporate finance.
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