Deepdive into the crypto markets - April 2021
April gave us both ups and downs. From 54.000 USD per bitcoin up to 64.000 USD to then fall down to 47.000 USD. At the time of writing, we are back at about 54.000 USD per bitcoin as if absolutely nothing has happened. This dip with its following swing back could be viewed from the eyes of many new crypto investors on Twitter who proclaimed that “the great bear market” was suddenly upon us while the more experienced barely raised an eyebrow. In the last bull run of 2017 bitcoin dropped 20 - 40% many times before it peaked. While at the moment it is easy to sell, it should be remembered that anyone that bought bitcoin during the last bull market, independent if it was in a dip or at the absolute peak, is today “in profit”. Bitcoin is a long game but volatility often makes that hard to forget.
The crypto market
Today’s picture shows a bitcoin in USD termes over a logarithmic scale over a longer time period. The reason for this is that this type of image usually calms anyone worried about short term volatility. When in doubt, zoom out.
Bitcoin and the traditional industry
Bitcoin is still fighting with the commodity silver that firmly remains in 7th place. For this month it seems that beating Facebook, Tencent and Tesla will have to suffice.
Bitcoin and other cryptocurrencies
During the past month, a clear trend has continued where the interest for DeFi has increased compared to the interest in bitcoin. Bitcoin has had a lot of interest from institutional investors, but with the last wave of interest for art on the blockchain (NFTs for example that we covered in the last edition) we can see a clear interest for NFT-enabling technologies like Ethereum. Bitcoin dominance is therefore down to about 50%.
This week we take a look at a relatively complex element within DeFi called Constant Function Market Makers or CFMMs. The purpose of CFMMs is to create a simple environment for individuals or smart contract to trade directly with smart contracts. To achieve this there was a need to solve the issue of high fees for order placement, making traditional market making styles almost impossible. CFMMs was the answer. Take a look! What Are Constant Function Market Makers?
This month most impactful news
Crypto Climate Accord: Bitcoin greenwashing or game-changer?
Elon Musk Confirms He Owns Bitcoin, Has Not Sold Any
US Bank Selects Cryptocurrency Custodian, Wins Admin Role for NYDIG’s Bitcoin ETF
Other interesting data
Hashrate is what secures the bitcoin network. It is what ensures that we can get our blockchain to accept a block every 10 minutes or so like the heartbeat we now almost take for granted. It is therefore extremely important that this function stays secure, which means that even those who provide the security for the network must not be able to corrupt it. Hashrate thus must stay relatively distributed to ensure decentralisation of the network.
This image, which is not only the most visually appealing of all the images in this deepdive, is also the most important. This graph, even more important than the price itself, shows just how decentralised the bitcoin network and its miners and mining pools are.
You can clearly see groupings, known as pools, but you can also see that the yellow segment, representing unknown, is growing over time. This unknown is, well, unknown in its nature, but it is expected to represent small miners and miners who do not connect to known pools. To see that the individual, that the private and the unknown, is taking a larger share when it comes to securing the bitcoin network is what makes it possible for someone to think about the bitcoin network in decades rather than intraday.