In this crypto and blockchain update, eToro's market analyst and crypto expert Simon Peters discusses the gathering pace of crypto's march, the UK's Law Commission rules on crypto, the approval by Aave DAO of a new GHO stablecoin and the launch of a ‘Bitcoin Valley’ in Honduras.
Crypto march up gathers pace
Crypto markets posted another strong week of growth last week as major cryptoassets such as bitcoin and ether continued a march up.
While still a way to go to recover losses of H1, cryptoassets such as bitcoin are witnessing a mini revival.
Bitcoin last week touched above US$24,000 on the eToro platform, having begun the week below US$20,000. Bitcoin is currently trading around US$23,000.
Ether likewise began the week below US$1,200 but rose above US$1,700 over the weekend and is currently trading around US$1,661.
In terms of activity, we’re very much seeing that the syncing up with equity markets is continuing. July saw stocks, particularly tech and other higher-risk-profile equities surge back. Much of the effects of inflation and rate hikes now appears priced in, with markets sanguine about recession worries.
Institutions have treated crypto holdings in much the same way as these equities, which is why there’s greater correlation now than in the past. As those big institutions move back into the space the crypto investors could see valuations tick back to better levels.
UK’s Law Commission rules on crypto
The UK’s Law Commission has published a consultation paper on crypto. The paper contains proposed reforms of the treatment of cryptoassets and other cryptographically-secure digital assets such as NFTs. While not setting anything in law, yet, it shows clear intent from the British legal community to confer important property rights on digital assets.
In many ways, property rights are one of the core tenets of successfully functioning markets. That is in part one of the reasons why the UK is such an attractive destination for many seeking asset management or other investment services.
Robust ownership of assets and the knowledge that the courts in your jurisdiction of choice will uphold those rights is really essential to functioning investment markets. That’s why the outcomes of this consultation couldn’t be more relevant and important for the UK’s crypto scene.
Cryptoassets and digital assets more widely currently exist in something of a grey area in the UK. Were these proposed reforms to be implemented, however, it would greatly strengthen digital ownership rights, and crucially, the right of owners to recover assets through the courts were it ever to be necessary.
Aave DAO approves GHO stablecoin
Crypto project Aave, whose token is available on the eToro platform, has approved the creation of a new stablecoin via its decentralised autonomous organisation (DAO). The stablecoin, GHO, will be backed with collateral from a basket of cryptoassets and was approved overwhelmingly by the community.
Stablecoins form a really important function within the crypto sector. They allow users of tokens a seamless and secure on ramp into the ecosphere and have a major role to play in managing liquidity across cryptoassets. Having a variety of stablecoins, which are interoperable with fiat and other tokens is really important.
Aave’s GHO will take time to launch but it is a positive signal that new stablecoins are entering the market.
Crypto has had something of a difficult few months, with some high-profile failures, so it's essential for investors to perform due diligence on projects to understand the use cases and risk profile.
Honduras launches Bitcoin Valley
Not to be outdone by its neighbour El Salvador, Honduras has launched a ‘Bitcoin Valley’ in a town 20 minute from its capital Tegucigalpa. The central American nation wants to promote the use of bitcoin, signing up 60 businesses to train and adopt the cryptoasset for their products and services.
While something of a publicity stunt, what’s become clear in recent times is developing nations such as El Salvador and Honduras see significant potential for the use of cryptoassets, particularly when local currencies are inherently unstable.
The bitcoin maximalists or ‘maxis’ see bitcoin as a future global currency but one of the biggest hurdles to this is adoption. Many see take up in developing nations where fiat currencies tend to not be great places to shelter wealth as a real driving force. Time will tell but take-up is underway as this project suggests.