Following a week-long halt in the publication of this letter due to the author’s summer vacation, we are back at the beginning of August under a much less gloomy sky than during our last mailing. While the macroeconomic issues that drive all the markets have obviously not changed at all in the space of two weeks, it is clear that investors are beginning to believe in the interventionist success of central banks in their ability to slow down the economy to curb inflation. Such a slowdown is actually welcomed and gives confidence for positioning in anticipation of the next cycle.
Indeed, while it is true that the U.S. economy is technically now in recession following the release of gross domestic product (GDP) data showing growth declining for a second consecutive quarter, one cannot say that the economy is in crisis, at least for now. US employers added 372,000 jobs in June, suggesting there is still enough capital in the economy for expanding businesses. Janet Yellen, Secretary of the US Treasury, has also stated that in past periods of recession, the labor market lost a significant number of jobs, which is not currently the case. Certainly, she said, the economy is experiencing a “significant slowdown in growth,” but there are also “great forces” playing out alongside it.
Immediately after our last communication, we learned that Tesla had sold 75% of its cash in bitcoins. If the announcement of this investment had once caused prices to explode, that of the sale was rather inconsequential. Despite a temporary drop, bitcoin found its share of buyers at the same levels as in recent weeks to quickly stabilize. We will not be sorry for the increasingly attenuated effects of Musk’s comments on the cryptocurrency market.
We were talking to you two weeks ago about the importance of the 200-week moving average (red line) for bitcoin and how closing above after breaking through it has always led to a subsequent bull run. We thought we were close to it then, but that penultimate week of July ended up closing just below this indicator. However, the week that ended on Sunday succeeded in closing north of this line, giving hope that it will now serve as strong support for the future. We can see that the path seems open for a bullish push up to around $26,500 where the 200-week EMA is located (yellow line).
Also note that July was the best month of 2022 for bitcoin. It was the same for Ether, with higher returns for the latter.
Starting next Monday, Michael Saylor will no longer be CEO of MicroStrategy. The firm which recorded a heavy loss on the balance sheet in the 2e quarter with its bitcoin treasury will now hand over this role to the company’s current president, Phong Le. Don’t think this is a departure from the company for Saylor, however. On the contrary, the latter says he welcomes this transition to his future position as executive director, which will allow him to devote even more time to the company’s bitcoin and crypto treasury. “I will remain an officer of the company and chairman of the board, while serving as chair of the investment committee and leading our bitcoin acquisition strategy,” Saylor said on the conference call. the company’s second-quarter 2022 results on Tuesday. “I focus on bitcoin advocacy and education, such as with the Bitcoin Mining Council, and my role as a spokesperson and envoy to the global bitcoin community.”
This is reminiscent of the recent words of Jack Dorsey, co-founder of Twitter and Square, who admits to making the adoption of bitcoin his top priority. “Bitcoin changes absolutely everything. I don’t think there is anything more important in my lifetime to work on,” he said recently.
Why not take the opportunity to recall all the resilience of the blockchain, bitcoin being the monetary network with the operating time (up time) the highest and constant. It is its decentralization that explains it vis-à-vis centralized payment systems. It has been calculated that the network has an access availability of 99.987%. The last operational shutdown lasted 6.5 hours 3423 days ago, or about 9.3 years. In short, bitcoin has been offering the possibility of trading anywhere in the world for almost 10 years, without any intermediary, at ridiculously low costs, without the slightest downtime. There is no financial system in the world that comes close to such a feat. This is another demonstration of the revolution brought by the blockchain.
Speaking of blockchain, that of the Ethereum network is truly approaching a crucial turning point in its existence. The final Ethereum Testnet merger is scheduled for early August. “Goerli” will be the network’s third and final testnet before the chain transitions to proof-of-stake, which is scheduled for mid-September. Between August 6 and 12, the Goerli testnet is expected to merge with Prater, its associated coordination chain. The coordination chain (Beacon Chain) main is the proof-of-stake version of Ethereum that has been running alongside the current proof-of-work Ethereum network since December 2020. The last two such tests have been successful.
Recall that the 2.0 chain eliminates the need for miners. Instead, the validators, who can be anyone, as long as they pledge at least 32 ETH or join a common pool of validators, will ensure network security by locking down the network’s cryptocurrency. Ethereum’s energy efficiency will be improved by around 99%, according to the Ethereum Foundation. The bottom line, and what some investors and analysts are currently so optimistic about, is that this transition has intrinsic reasons to lead to a substantial rise in prices. Indeed, by requiring ETH currently in circulation to be blocked in order to issue new ETH, the process could have a deflationary effect on the cryptocurrency. If ETH supply growth can be slowed while demand for the crypto remains high, this can have a positive impact on its price. In any case, this is the opinion of speculators who stock up on Ether and take advantage of its outperformance against bitcoin. This is also the case of the Rivemont crypto fund.
Proof of the enthusiasm, the domain registrations of the Ethereum Name Service are reaching an all-time high as the merger approaches. Over 1.8 million ENS domain names have been registered, and adoption by non-English speaking communities is on the rise.
Is this migration an end for the network? The creator of Ethereum, Vitalik Buterin, reminds us that this is far from the case. The merger is only a development step bringing the network to 55% completion, he claimed in an Ethereum conference in France at the end of July. After “the merge”, Ethereum will undergo further upgrades which it calls “surge”, “verge”, “purge” and “splurge”. While the names might sound cartoonish, these steps are actually key parts of scaling, cleaning, and evolving Ethereum, Buterin said.
The “surge” refers to the addition of the sharding of Ethereum, a scaling solution that will enable cheap Tier 2 solutions, reduce the cost of rollups or bulk transactions, and to make it easier for users to operate the nodes that secure the Ethereum network. ETH can only process 20 transactions per second right now. After this future step, we are talking about 100,000 second transactions.
The “rod” will implement what Buterin calls “Verkle trees”, which represent a type of mathematical proof. These technical improvements will allow users to become network validators without having to store large amounts of data on their machines. According to Buterin, it is this step that will allow true decentralization.
The “purge” will simply seek to reduce the amount of space you need to have on your hard drive, trying to simplify the Ethereum protocol over time and not requiring nodes to store their history.
The “splurge”, finally? A much less technical step. “All the rest of the fun stuff,” Buterin explains with a laugh. In short, everything that the network will be able to allow, including what has possibly not even been thought of yet.
The fund’s capital has been fully exposed throughout the past few weeks. Our positions in ETH, MATIC and UNI generated a higher return than bitcoin for the period. Note that the fund has a position in SAND which has been relatively stable since our entry.
This article is brought to you by Fonds Rivemont. The Rivemont crypto fund is the first and only actively managed cryptocurrency fund in Canada. RRSP and TFSA eligible. Accredited investors can learn more here.
Disclaimer: This column does not necessarily reflect the opinion of CryptonewsFR and does not constitute investment advice or trading instructions..
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