Dispatch #12: ETH 2.0 Is Real

In this patch of your weekly Dispatch:

• Bitcoin smashes through $19,000, heading towards a new all-time high
• Ethereum stakers trigger first phase on the way to ETH 2.0
• Antoni's BTC comments mark digital finance's breakthrough into the mainstream

The Big Idea

Ethereum Achieves Major Milestone on its Way to ETH 2.0

Ethereum is in the midst of one of the grandest and most ambitious upgrades not only in its own history but in the history of the crypto industry. The move to Ethereum 2.0 is a shift in resource usage, network security, governance, incentives, and more.

That transition achieved an important milestone this week when it reached the minimum threshold of 524,288 ETH needed to be staked to trigger the launch of the beacon chain on December 1.

There was a time when it didn’t seem like that all-important staking number would be met. Indeed, a significant portion of the total staked funds poured in a few hours before the deadline.

What’s more, the beacon chain is just the first of four phases of transition, so there is still a long way to go in the transition.

Still, you have to admire the ambition and fortitude of Ethereum taking this next big step.

The Latest In…

Bitcoin

As you might imagine, this newsletter is worked on and refined continuously throughout the week. We try to keep the news as current as close to the moment of publishing as possible, but sometimes this topsy turvy industry makes it difficult.

Case in point, Bitcoin crashed through $19,000 earlier this week and has been keeping us on our toes about when it will achieve a new all-time high. Then on Thursday, a correction followed and the price plunged by almost $3,000 in the biggest sell-off since March’s meltdown. Speaking to the Financial Times, our Co-founder and Managing Partner Antoni Trenchev attributed the drop to traders taking profits after the record high, as well as predictions for more stringent regulations in the US.

The Latest In…

Traditional Markets

As Bitcoin was waiting to breach its big $20,000 psychological barrier, the DOW was hitting its own waymarker of 30,000. The milestone came on Tuesday, as the Trump Administration finally began to accede to transition to Biden, as another vaccine candidate showed a promising trial, and as former Fed chair Janet Yellen was revealed to be Biden’s choice for Treasury Secretary.

The Latest In…

Regulators

Speaking of Yellen, let’s dig a little bit deeper into what she might mean for Bitcoin and crypto as a whole. Of course, having been Fed Chair from 2014-2018, we have a record of commentary from her. Still, some are arguing that she is poised to create a significant tailwind for Bitcoin because she is effectively being hired as a stimulating economy recovery specialist.

The Latest In…

Institutions

Alright, one last crazy little bullish nugget. We’ve been watching folks like Stan Druckenmiller and Paul Tudor Jones come to the Bitcoin table all year. But last weekend, $8T asset manager Blackrock’s CIO Rick Rieder hopped on CNBC and said that he thought that Bitcoin was poised not only to flourish but to scoop market share from gold.

The Latest In…

Exchanges

Here’s one that many (particularly in the US) are grumbling about. Based on regulatory concerns with the CFTC, Coinbase will be discontinuing margin trading. This continues a pattern of US users being unable to access many of the trading options available to the rest of the world.

The Week’s Most Interesting Data Story

A Simple Story of Supply and Demand

One of the first things economics students learn is supply and demand. When supply decreases and demand increases, prices go up. With that in mind, let’s take a look at some growing sources of demand, and compare them to supply. Square Cash App's growing business is estimated to consume about 360 BTC daily. PayPal’s just launched crypto business seems to need even more than that and Grayscale’s BTC Trust is swallowing more than that combined. At the same time, an average of 900 new BTC is mined daily. This is why Pantera Capital is suggesting that, if these circumstances continue, we’ll see a full-on Bitcoin shortage.

Hot Topics

What the Community Is Discussing

The Ethereum 2.0 transition has a lot of people talking - and seemingly, not just crypto insiders.

Even as some retail investors start to poke their heads in, there is a clear consensus that this run-up is being driven by a very different set of investors.

Yet while this time may not be like 2017, some questions from those days linger…

Our Take

@AntoniNexo This Week

As the financial world woke up to a sharp Bitcoin drop on November 26, we saw crypto make the headlines in a string of established business media outlets, with Antoni the go-to spokesperson not only for Nexo, but for digital finance. This is a significant win for the crypto space, marking the beginning of our industry’s breakthrough into mainstream finance. And, not to blow our own trumpet, but it feels pretty amazing to be leading this breakthrough.

• “We’ve come a long way very fast and it’s natural to have a correction after such a rally,” he told the Financial Times.
• The reason why most people don’t get to profit off Bitcoin, in the long run, is that mentality to question Bitcoin every time it moves to the downside, Antoni suggested in his Bloomberg interview, adding that he still sees a new BTC all-time high by year-end.
• “Long term I don’t see anything derailing Bitcoin’s irrevocable rise higher,” Antoni was cited as saying by CNBC. “That doesn’t mean we won’t have pullbacks along the way. Look what happened in March; Bitcoin plunged 40% in one day during the coronavirus market panic. 20-30% falls can and should be expected,” he added.

What to Watch for Next Week:

• Again, seriously, this time, will Bitcoin punch through all-time highs?
• Will ETH-enthusiasm keep swinging up as the beacon chain goes live?
• Will the XRP, XLM, and alt pump continue or recede once more?