<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-820x547.jpeg" alt="" class="wp-image-423116" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/02/107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ-scaled.jpeg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Paxos has been ordered by New York regulators to stop issuing the Binance USD (BUSD) stablecoin. Jakub Porzycki | Nurphoto | Getty Images</figcaption></figure>



Digital currency markets are on edge after a flurry of aggressive regulatory actions from U.S. authorities over the past few days.



Bitcoin was slightly higher at $21,826.68 at around 05:31a.m. ET, according to CoinDesk data.



Investors are digesting a number of major regulatory actions in the U.S., as authorities look to rein in the once free-wheeling cryptocurrency industry.



On Monday, the New York State Department of Financial Services told Paxos to stop minting new Binance USD, or BUSD, stablecoins. A stablecoin is a type of digital currency that is pegged to a real-world asset. BUSD is pegged one-to-one with the U.S. dollar. Paxos issues BUSD, the third-largest dollar-pegged cryptocurrency.



Stablecoins are often backed by real-world reserve assets, such as bonds and cash. They are used to trade in and out of different cryptocurrencies, as a trader does not need to convert money back to fiat currencies.



BUSD remained relatively stable and close to its $1 peg after the New York regulator’s orders. Paxos said that BUSD will continue to be redeemable through at least Feb. 2024. People can redeem funds in U.S. dollars or convert BUSD to Paxos’ own stablecoin called Pax Dollar (USDP).



Paxos confirmed that the Securities and Exchange Commission has notified it that the agency could recommend an action that alleges BUSD is a security, and that Paxos should have registered the token offering under federal securities law.



The market is waiting to see what the exact SEC charges are toward Paxos, and whether that might have implications for other stablecoins such as USD Coin (USDC) and tether (USDT). There is no official SEC action against Paxos currently.



Last week, cryptocurrency exchange Kraken settled with the SEC over allegations that it sold unregistered securities.



U.S. regulatory action has picked up on parts of the cryptocurrency industry, following a year of turmoil that saw nearly $1.4 trillion wiped off the market, along with bankruptcies, failures of projects and companies topped off by the collapse of major exchange FTX.



Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said that there might not be a major collapse in coin prices after the huge sell-off last year.



“The market seems to be taking the news quite well and that sentiment remains cautiously optimistic given we might have seen most of the selling in the market occur over the last year,” Ayyar told CNBC on Tuesday.



Investors are waiting to see what happens next on the regulatory front.



“We’re seeing a lot of scrutiny across various sectors in crypto in the U.S., with the two most recent areas being staking and stablecoins. This is an obvious repercussion of the fallout from FTX, Luna, and the general contagion in crypto over the last year,” Ayyar said.



“The markets might take some time to consolidate here and wait and watch whether there are further events that play out in terms of regulatory crackdown, hence we could see a couple of weeks of sideways action.”



&#8211;&nbsp;CNBC’s Rohan Goswami contributed to this report.

107194087-1676371176205-gettyimages-1247107012-porzycki-busdbina230213_npvhJ

Crypto markets on edge as U.S. regulatory crackdown on industry intensifies

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-820x462.jpeg" alt="" class="wp-image-420480" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption>Ether has hugely outperformed bitcoin since both cryptocurrencies formed a bottom in June 2022. Ether’s superior gains have come as investors anticipate a major upgrade to the ethereum blockchain called “the merge.”
Yuriko Nakao | Getty Images</figcaption></figure>



2022 marked the start of a new “crypto winter,” with high-profile companies collapsing across the board and prices of digital currencies crashing spectacularly. The events of the year took many investors by surprise and made the task of predicting bitcoin’s price that much harder.



The crypto market was awash with pundits making feverish calls about where bitcoin was heading next. They were often positive, though a few correctly forecast the cryptocurrency sinking below $20,000 a coin.



But many market watchers were caught off guard in what has been a&nbsp;tumultuous year for crypto, with high-profile company and project failures sending shock waves across the industry.



It began in May with the collapse of terraUSD, or UST, an algorithmic stablecoin that was supposed to be pegged one-to-one with the&nbsp;U.S. dollar. Its failure brought down terraUSD’s sister token luna and hit companies with exposure to both cryptocurrencies.



Three Arrows Capital, a hedge fund with bullish views on crypto,&nbsp;plunged into liquidation&nbsp;and&nbsp;filed for bankruptcy&nbsp;because of its exposure to terraUSD.



Then came the&nbsp;November collapse of FTX, one of the world’s largest cryptocurrency exchanges which was run by Sam Bankman-Fried, an executive who was often in the spotlight. The fallout from FTX continues to ripple across the cryptocurrency industry.



On top of crypto-specific failures, investors have also had to contend with rising interest rates, which have put pressure on risk assets, including stocks and crypto.



Bitcoin has sunk around 75% since reaching its all-time high of nearly $69,000 in November 2021 and more than $2 trillion has been wiped off the value of the entire cryptocurrency market. On Friday, bitcoin was trading at just under $17,000.



CNBC reached out to the people behind some of the boldest price calls on bitcoin in 2022, asking them how they got it wrong and whether the year’s events have changed their outlook for the world’s largest digital currency.&nbsp;



<h2 class="wp-block-heading" id="h-tim-draper-250-000"><a></a>Tim Draper: $250,000&nbsp;</h2>



In 2018, at a tech conference in Amsterdam, Tim Draper predicted bitcoin reaching $250,000 a coin by the end of 2022. The famed Silicon Valley investor wore a purple tie with bitcoin logos, and even&nbsp;performed a rap&nbsp;about the digital currency onstage.&nbsp;



Four years later, it’s looking pretty unlikely Draper’s call will materialize. When asked about his $250,000 target earlier this month, the Draper Associates founder told CNBC $250,000 “is still my number” — but he’s extending his prediction by six months.



“I expect a flight to quality and decentralized crypto like bitcoin, and for some of the weaker coins to become relics,” he told CNBC via email.



Bitcoin would need to rally nearly 1,400% from its current price of just under $17,000 for Draper’s prediction to come true. His rationale is that despite the liquidation of notable players in the market like FTX, there’s still a huge untapped demographic for bitcoin: women.



“My assumption is that, since women control 80% of retail spending and only 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said.



<h2 class="wp-block-heading"><a></a>Nexo: $100,000&nbsp;</h2>



In April, Antoni Trenchev, the CEO of crypto lender Nexo, told CNBC he thought the world’s biggest cryptocurrency could&nbsp;surge above $100,000&nbsp;“within 12 months.” Though he still has four months to go, Trenchev acknowledges it is improbable that bitcoin will rally that high anytime soon.&nbsp;



Bitcoin “was on a very positive path” with institutional adoption growing, Trenchev says, but “a few major forces interfered,” including an accumulation of leverage, borrowing without collateral or against low-quality collateral, and fraudulent activity.&nbsp;



“I am pleasantly surprised by the stability of crypto prices, but I do not think we are out of the woods yet and that the second and third-order effects are still to play out, so I am somewhat skeptical as to a V-shape recovery,” Trenchev said.&nbsp;



The entrepreneur says he’s also done making bitcoin price predictions. “My advice to everyone, however, remains unchanged,” he added. “Get a single digit percentage point of your investable assets in bitcoin and do not look at it for 5-10 years. Thank me later.”&nbsp;



<h2 class="wp-block-heading"><a></a>Guido Buehler: $75,000&nbsp;</h2>



On Jan. 12, Guido Buehler, the former CEO of regulated Swiss bank Seba, which is focused on cryptocurrencies, said his company had an “internal valuation model” of between $50,000 and $75,000 for bitcoin in 2022.



Buehler’s reasoning was that institutional investors would help drive the price higher.



The executive, who now runs his own advisory and investment firm, said 2022 has been an “annus horribilis,” in response to CNBC questions about what went wrong with the call.



“The war in Ukraine in February triggered a shock to the paradigm of world order&nbsp;and the financial markets,” Buehler said, citing the consequences of raised market volatility and rising inflation in light of the disruption of commodities like oil.



Another major factor was “the&nbsp;realization that interest rates are still the driver of most asset classes,” including crypto, which “was hard blow for the crypto community,&nbsp;where&nbsp;there has been the belief that this asset class is not correlated to&nbsp;traditional assets.”



Buehler said lack of risk management in the crypto industry, missing regulation and fraud have also been major factors affecting prices.



The executive remains bullish on bitcoin, however, saying it will reach $75,000 “sometime in the future,” but that it is “all a matter of timing.”



“I believe that BTC has proven its robustness throughout all the crisis since&nbsp;2008 and will continue to do so.”



<h2 class="wp-block-heading"><a></a>Paolo Ardoino: $50,000&nbsp;</h2>



Paolo Ardoino, chief technology officer of Bitfinex and Tether, told CNBC in April that he expected bitcoin to fall sharply below $40,000 but end the year “well above” $50,000.



“I’m a bullish person on bitcoin … I see so much happening in this industry and so many countries interested in bitcoin adoption that I’m really positive,” he said at the time.



On the day of the interview, bitcoin was trading above $41,000. The first part of Ardoino’s call was correct — bitcoin did fall well below $40,000. But it never recovered.



In a follow-up email this month, Ardoino said he believes in bitcoin’s resilience and the blockchain technology underlying it.



“As mentioned, predictions are hard to make. No one could have predicted or foreseen the number of companies, well regarded by the global community, failing in such a spectacular fashion,” he told CNBC.



“Some legitimate concerns and questions remain around the future of crypto. It might be a volatile industry, but the technologies developed behind it are incredible.”



<h2 class="wp-block-heading"><a></a>Deutsche Bank: $28,000&nbsp;</h2>



A key theme in 2022 has been bitcoin’s correlation to U.S. stock indexes, especially the tech-heavy Nasdaq 100. In June, Deutsche Bank analysts published a note that said bitcoin could end the year with a price of approximately $27,000. At the time of the note, bitcoin was trading at just over $20,000.



It was based on the belief from Deutsche Bank’s equity analysts that the S&amp;P 500 would jump to $4,750 by year-end.



But that call is unlikely to materialize.



Marion Laboure, one of the authors of Deutsche Bank’s initial report on crypto in June, said the bank now expects bitcoin to end the year around $21,000.



“High inflation, monetary tightening, and slow economic growth have likely put additional downward pressure on the crypto ecosystem,” Laboure told CNBC, adding that more traditional assets such as bonds may begin to look more attractive to investors than bitcoin.



Laboure also said high-profile collapses continue to hit sentiment.



“Every time a major player in the crypto industry fails, the ecosystem suffers a confidence crisis,” she said.



“In addition to the lack of regulation, crypto’s biggest hurdles are transparency, conflicts of interest, liquidity, and the lack of reliable available data. The FTX collapse is a reminder that these problems continue to be unresolved.”



<h2 class="wp-block-heading"><a></a>JPMorgan: $13,000&nbsp;</h2>



In a Nov. 9 research note, JPMorgan analyst Nikolaos Panigirtzoglou and his team predicted the price of bitcoin would slump to $13,000 “in the coming weeks.” They had the benefit of hindsight after the FTX liquidity crisis, which they said would cause a “new phase of crypto deleveraging,” putting downside pressure on prices.



The cost it takes miners to produce new bitcoins historically acts as a “floor” for bitcoin’s price and is likely to revisit a $13,000 low as seen over the summer months, the analysts said. That’s not as far off bitcoin’s current price as some other predictions, but it’s still much lower than Friday’s price of just under $17,000.



A JPMorgan spokesperson said Panigirtzoglou “isn’t available to comment further” on his research team’s forecast.



<h2 class="wp-block-heading"><a></a>Absolute Strategy Research: $13,000&nbsp;</h2>



Ian Harnett, co-founder and chief investment officer at macro research firm Absolute Strategy Research,&nbsp;warned in June&nbsp;that the world’s top digital currency was likely to tank as low as $13,000.



Explaining his bearish call at the time, Harnett said that, in crypto rallies past, bitcoin had subsequently tended to fall roughly 80% from all-time highs. In 2018, for instance, the token plummeted close to $3,000 after hitting a peak of nearly $20,000 in late 2017.



Harnett’s target is closer than most, but bitcoin would need to fall another 22% for it to reach that level.



When asked about how he felt about the call today, Harnett said he is “very happy to suggest that we are still in the process of the bitcoin bubble deflating” and that a drop close to $13,000 is still on the cards.



“Bubbles usually see an 80% reversal,” he said in response to emailed questions.



With the U.S. Federal Reserve likely set to raise interest rates further next year, an extended drop below $13,000 to $12,000 or even $10,000 next can’t be ruled out, according to Harnett.



“Sadly, there is no intrinsic valuation model for this asset — indeed, there is no agreement whether it is a commodity or a currency — which means that there is every possibility that this could trade lower if we see tight liquidity conditions and/or a failure of other digital entities / exchanges,” he said.



<h2 class="wp-block-heading"><a></a>Mark Mobius: $20,000 then $10,000</h2>



Veteran investor Mark Mobius has probably been one of the more accurate predictors of bitcoin.



In May, when the price of bitcoin was above $28,000, he told Financial News that bitcoin would likely fall to $20,000, then bounce, but ultimately move down to $10,000.



Bitcoin did fall below $20,000 in June, and then bounce in August before falling again through the rest of the year.



However, the $10,000 mark was not reached.



Mobius told CNBC&nbsp;he forecasts bitcoin to hit $10,000 in 2023.



<h2 class="wp-block-heading"><a></a>Carol Alexander: $10,000&nbsp;&nbsp;</h2>



In December 2021, a month on from bitcoin’s all-time high, Carol Alexander, professor of finance at Sussex University, said she expected bitcoin to drop down to $10,000 “or even more” in 2022.



Bitcoin at the time had fallen about 30% from its near $69,000 record. Still, many crypto talking heads at the time were predicting further gains. Alexander was one of the rare voices going against the tide.



“If I were an investor now I would think about coming out of bitcoin soon because its price will probably crash next year,” she said at the time. Her bearish call rested on the idea that bitcoin has little intrinsic value and is mostly used for “speculation.”



Bitcoin didn’t quite slump as low as $10,000 — but Alexander is feeling good about her prediction. “Compared with others’ predictions, mine was by far the closest,” she said in emailed comments to CNBC.

107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1

From $250,000 to $10,000 price calls: How market watchers got it wrong with bitcoin in 2022

GDB4YV3UQFNHJMGZVA7FACCKJ4

Binance’s books are a black box, filings show, as crypto giant tries to rally confidence

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="728" height="485" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI.jpg" alt="" class="wp-image-419501" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI.jpg 728w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI-135x90.jpg 135w" sizes="(max-width: 728px) 100vw, 728px" /><figcaption>A bitcoin representation is seen in a file photo, in Paris, France, June 23, 2017. REUTERS/Benoit Tessier/File Photo</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> on Wednesday rose to a two-week high as investors continue to weigh up the fallout from the collapse of cryptocurrency exchange FTX.



But one analyst warned that the bounce is likely just a bear market rally and would not be sustained.



Bitcoin topped $17,000 trading at its highest level since Nov. 15 before paring gains. The world’s largest cryptocurrency was trading 2% higher at $16,879.50 at around 2:37 a.m. ET.



Other digital coins were also up, including <a href="https://www.cnbcafrica.com/quotes/eth=x/">ether</a>, which rose 5% to $1,271.72.



Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said the move higher was likely a result of “over leveraged shorts covering.”



Someone who shorts an asset borrows some of that asset, sells it at a higher price then buys it back at a lower price and banks the profit from that. A short covering is when a trader buys the asset back at the lower price. That can cause the price of that asset to move higher.



Ayyar said the price of bitcoin has “hit resistance” at $17,000 and is likely to go lower from there.



“This is just a bearish retest,” Ayyar said.



Investor confidence in cryptocurrencies has been hammered after Sam Bankman-Fried’s exchange FTX collapsed and filed for bankruptcy this month, sending shockwaves through the entire industry.



Contagion from the fallout is spreading. Crypto lender and exchange BlockFi filed for bankruptcy as a result of exposure to FTX.



More than $1.3 trillion of value has been wiped off the cryptocurrency market this year, sparked by the failure of the algorithmic stablecoin terraUSD in May and implosion of hedge fund Three Arrows Capital. The FTX collapse has worsened the situation.



Traders will also be closely watching the contents of a speech by U.S. Federal Reserve Chair Jay Powell at the Brookings Institution on Wednesday for clues about the central bank’s interest rate plans. If the market thinks the Fed will slow the pace of rate hikes, it could give a boost to risk assets such as stocks and bitcoin.

FILE PHOTO: Bitcoin representation is seen in an illustration picture taken at La Maison du Bitcoin in Paris

Bitcoin tops $17,000 for the first time in two weeks but analysts don’t expect the bounce to stick

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="551" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1301210664-820x551.jpeg" alt="" class="wp-image-397334" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1301210664-820x551.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1301210664-300x202.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1301210664-768x516.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1301210664-1536x1032.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2021/02/GettyImages-1301210664-scaled.jpeg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption>PARIS, FRANCE &#8211; FEBRUARY 09: In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is on display in front of the Bitcoin course&#8217;s graph on February 09, 2021 in Paris, France. The value of Bitcoin (BTC) has exceeded the threshold of 48,000 dollars for the first time in history. Electric vehicle maker Tesla has invested $ 1.5 billion in the virtual currency and will begin accepting it as payment for the purchase of its cars, the group said. The move comes days after Elon Musk temporarily changed his Twitter mini-description to simply #bitcoin. (Photo illustration by Chesnot/Getty Images)</figcaption></figure>



The collapse of the world’s third largest crypto exchange&nbsp;<a href="https://nam10.safelinks.protection.outlook.com/?data=05%7C01%7CSALAVI%40imf.org%7Ce4707283914e4532e91108dac9b31d19%7C8085fa43302e45bdb171a6648c3b6be7%7C0%7C0%7C638044068398880592%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&amp;reserved=0&amp;sdata=d9aldIV1zhwvNhuKQaePamyZGWufDy3hNlFshw%2BNTIU%3D&amp;url=https%3A%2F%2Fwww.wsj.com%2Farticles%2Fftx-tapped-into-customer-accounts-to-fund-risky-bets-setting-up-its-downfall-11668093732%3Futm_medium%3Demail%26utm_source%3Dgovdelivery&amp;utm_medium=email&amp;utm_source=govdelivery">FTX</a>, and subsequent plunge in the prices of Bitcoin, Ethereum, and other major crypto assets, is prompting renewed calls for greater consumer protection and&nbsp;<a href="https://www.imf.org/en/Publications/fandd/issues/2022/09/Regulating-crypto-Narain-Moretti?utm_medium=email&amp;utm_source=govdelivery">regulation</a>&nbsp;of the crypto industry.



Regulating a highly volatile and decentralized system remains a challenge for most governments, requiring a balance between minimizing risk and maximizing innovation. Only one-quarter of countries in <a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2022/10/14/regional-economic-outlook-for-sub-saharan-africa-october-2022?utm_medium=email&amp;utm_source=govdelivery#Digital-Currency-Innovations-in-Sub-Saharan-Africa">sub-Saharan Africa</a> formally regulate crypto. However, as our <a href="https://www.imf.org/en/Blogs/chart-of-the-week?utm_medium=email&amp;utm_source=govdelivery">Chart of the Week</a> shows, two-thirds have implemented some restrictions and six countries—Cameroon, Ethiopia, Lesotho, Sierra Leone, Tanzania, and the Republic of Congo—have banned crypto. Zimbabwe has ordered all banks to stop processing transactions and Liberia directed a local crypto startup to cease operations (implicit bans).



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="538" height="538" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/crypto-map-africa-for-translation_crop.jpg" alt="" class="wp-image-421543" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/crypto-map-africa-for-translation_crop.jpg 538w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/crypto-map-africa-for-translation_crop-300x300.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/crypto-map-africa-for-translation_crop-90x90.jpg 90w" sizes="(max-width: 538px) 100vw, 538px" /></figure>



<h2 class="wp-block-heading" id="h-view-the-interactive-version-here"><a href="https://www.imf.org/en/Blogs/Articles/2022/11/22/africas-growing-crypto-market-needs-better-regulations?utm_medium=email&amp;utm_source=govdelivery" target="_blank" rel="noreferrer noopener">View the interactive version here.</a></h2>



Africa is one of the fastest-growing crypto markets in the world, according to Chainalysis, but remains the smallest, with crypto transactions peaking at $20 billion per month in mid-2021. Kenya, Nigeria, and South Africa have the highest number of users in the region. Many people use crypto assets for commercial payments, but their volatility makes them unsuitable as a store of value.



Policymakers are also worried that cryptocurrencies can be used to transfer funds illegally out of the region and to circumvent local rules to prevent capital outflows. Widespread use of crypto could also undermine the effectiveness of monetary policy, creating risks for financial and macroeconomic stability.



The risks are that much greater if crypto is adopted as legal tender—as the Central African Republic recently did. If crypto assets are held or accepted by the government as means of payment, it could put public finances at risk.



The Central African Republic is the first country in Africa, and the second in the world after&nbsp;<a href="https://www.imf.org/en/News/Articles/2022/02/15/cf-el-salvadors-comeback-constrained-by-increased-risks?utm_medium=email&amp;utm_source=govdelivery">El Salvador</a>&nbsp;to designate Bitcoin as a legal tender. The measure has put the country at odds with the Bank of Central African States (BEAC)—the regional central bank that serves the Economic and Monetary Community of Central Africa (CEMAC), which the Central African Republic is a member of—and violates the CEMAC Treaty. BEAC’s banking sector supervisory body—Central Africa&#8217;s Banking Commission—has banned the use of crypto for financial transactions in the CEMAC region.



—This blog is based on the October 2022&nbsp;<a href="https://www.imf.org/en/Publications/REO/SSA/Issues/2022/10/14/regional-economic-outlook-for-sub-saharan-africa-october-2022?utm_medium=email&amp;utm_source=govdelivery">Regional Economic Outlook&nbsp;</a>for sub-Saharan Africa

Novelty Coins Representing The Bitcoin Cryptocurrency : Illustration

Africa’s Growing Crypto Market Needs Better Regulations

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="431" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/AA14oQ0m-820x431.jpg" alt="" class="wp-image-421512" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/AA14oQ0m-820x431.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/AA14oQ0m-300x158.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/AA14oQ0m-160x84.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/AA14oQ0m-768x403.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/AA14oQ0m.jpg 1200w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption>The crypto market has been battered this year, with more than $2 trillion wiped off its value since its peak in Nov. 2021. Cryptocurrencies have been under pressure after the collapse of major exchange FTX. Jonathan Raa | Nurphoto | Getty Images</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> on Tuesday hit a two-year low as the cryptocurrency market takes a bruising following the collapse of major exchange FTX.



Bitcoin hit $15,480, its lowest level since Nov. 11, 2020, according to CoinDesk data. The digital coin has since bounced from that low and was trading at around $15,728.33 at 4:08 a.m. ET.



The entire cryptocurrency market has lost more than $1.4 trillion in value this year as the industry has been plagued with problems from failed projects to a liquidity crunch, exacerbated by the fall of FTX, once one of the world’s largest exchanges.



Crypto’s latest issues began after Changpeng Zhao, the CEO of Binance, said his exchange would sell its FTT tokens. FTT is the native digital currency of FTX’s crypto exchange. Binance’s move sparked the collapse of FTX, a company once valued at $32 billion. FTX has since filed for bankruptcy.



To make matters worse, hackers stole around $477 million of cryptocurrency from FTX, the bulk of which has been converted into the digital coin ether. But the hackers have begun to launder that money into bitcoin. Because they are selling ether, the price of ether has also been under pressure.



<a href="https://www.cnbcafrica.com/quotes/eth=x/">Ether</a> was trading down around 3.5% at $1,089.42 at 4:08 a.m. ET.



FTX may have more than 1 million creditors. It owes more than $3 billion to its top 50 unsecured creditors alone.



Disgraced FTX founder Sam Bankman-Fried stepped down as CEO earlier this month and was replaced by John Ray III.



Ray is looking to sell or restructure FTX’s global empire.



Meanwhile, Bankman-Fried is still holding out hope that he can broker some sort of deal to bail out FTX, CNBC reported.



But crypto prices remain under pressure as investors fear the FTX collapse could cause contagion across the industry.



Earlier this year, the collapse of a so-called algorithmic stablecoin terraUSD sent shockwaves across the crypto world and contributed to the fall of other entities such as hedge fund Three Arrows Capital.



Investors are concerned about similar ripple effects from FTX’s failure.

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Bitcoin hits 2-year low as $1.4 trillion wiped off crypto market this year after FTX collapse

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/107088919-1657818278630-gettyimages-1241445259-RAFAPRESS_20062022-01298-820x461.jpeg" alt="" class="wp-image-421235" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/11/107088919-1657818278630-gettyimages-1241445259-RAFAPRESS_20062022-01298-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/107088919-1657818278630-gettyimages-1241445259-RAFAPRESS_20062022-01298-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/107088919-1657818278630-gettyimages-1241445259-RAFAPRESS_20062022-01298-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/107088919-1657818278630-gettyimages-1241445259-RAFAPRESS_20062022-01298-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/107088919-1657818278630-gettyimages-1241445259-RAFAPRESS_20062022-01298-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/11/107088919-1657818278630-gettyimages-1241445259-RAFAPRESS_20062022-01298.jpeg 1600w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption>Photo: via CNBC</figcaption></figure>



Cryptocurrencies extended their slide for a second day Wednesday as the market absorbed the potential collapse of popular crypto exchange FTX.



Prices were pressured to start the day and plunged by late afternoon as Binance, the largest global exchange by volume, abandoned plans to acquire Sam Bankman-Fried’s FTX after a due diligence exam and recent reports of mishandled customer funds and alleged U.S. agency investigations of FTX.



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> fell 12% before 4:30 p.m. ET to just under $16,000, hitting a low not seen since November 2020, according to Coin Metrics. It reached its all-time high of $68,982.20 one year ago Thursday. Meanwhile, <a href="https://www.cnbcafrica.com/quotes/eth=x/">ether </a>tumbled 14%, to $1,128.87.



The Bankman-Fried empire quickly unraveled after a report last week showed a large part of the balance sheet at Alameda Research, the trading company where Bankman-Fried was also CEO, had been concentrated in FTX Token (FTT), the native token of the FTX trading platform.



After some light sparring on Twitter with Bankman-Fried, Binance CEO Changpeng Zhao announced his company was offloading the FTT on its books, leading to a run on the popular FTX exchange and a liquidity crisis.



FTX counts some of the biggest names in finance — including SoftBank, BlackRock, Tiger Global, Thoma Bravo, Sequoia and Paradigm — among its investors.



FTT slumped another 63% Wednesday, after plunging more than 75% the day before.



The Solana token also continued to fall. It was last down 45%, after dropping more than 26% Tuesday. Alameda Research, the trading firm owned by Sam Bankman-Fried, who also runs FTX, was an early backer of the Solana project.



“Market factors such as providing SOL token liquidity as well as support for Solana ecosystem projects on FTX exchange has been an important driver for Solana’s success,” Bernstein’s Gautam Chhugani said in a note Wednesday. “This is an adverse event for the Solana ecosystem in the short run. Further, given FTX/Alameda’s balance sheet situation, there may be near term pressure on its Solana holdings, as the situation resolves.”



The bombshell will set the crypto industry back. Analysts foresee further regulatory scrutiny of offshore exchanges, where the majority of crypto derivatives trading takes place. It’s also unclear how much financial contagion will spill into the rest of the market.



Additionally, Bankman-Fried, known as SBF, had recently been praised as a “white knight” in the industry, coming to the rescue of crypto service firms such as BlockFi and Voyager that succumbed to the crypto contagion last spring.



For newcomers to the crypto market, SBF and FTX became the faces of the industry, securing the naming rights to the Miami Heat basketball team’s stadium last year, bringing on Tom Brady and Giselle Bündchen&nbsp;as company ambassadors, and becoming a megadonor to Democratic politics.



“Given the public-facing nature of FTX CEO Sam Bankman-Fried and the size of FTX, we believe that the week’s events could cause some loss of consumer confidence in the crypto industry, beyond that seen in the aftermath of the 3AC, Celsius, and Voyager events that took place earlier this year,” especially if panic spreads and crypto prices keep dropping, KBW analysts said in a note Tuesday. “It may take time for customers to regain trust in the industry, broadly speaking (and we think regulation could help this).”

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Bitcoin falls to its lowest level in nearly two years as Binance abandons FTX deal

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="555" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-820x555.jpg" alt="" class="wp-image-420644" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-820x555.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-300x203.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-133x90.jpg 133w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-768x519.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-1536x1039.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/HJDYMEREYFLQFPCH6PHBFH2UTA-scaled.jpg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption>FILE PHOTO: Representations of cryptocurrencies are seen in this illustration, August 10, 2022. REUTERS/Dado Ruvic/Illustration</figcaption></figure>



JOHANNESBURG, Oct 19 (Reuters)&nbsp;&#8211;&nbsp;South Africa&#8217;s financial watchdog has classified cryptocurrency assets as financial products, a notice in the government gazette said on Wednesday, enabling them to be regulated.



In the brief notice, the Financial Sector Conduct Authority (FSCA) said a crypto asset, which it referred to as &#8220;a digital representation of value&#8221;, must be regulated in South Africa from the date of publication.



Regulations that the authorities have said they planned to introduce include applying foreign exchange controls and licensing crypto trading companies.



Financial watchdogs across the globe have been grappling with how to regulate new digital currencies and tokens, the prices of which have fallen since November last year.



Crypto assets are not issued by a central bank, but are capable of being traded, transferred or stored electronically.



South African Reserve Bank (SARB) Deputy Governor Kuben Naidoo&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL5N2XA2CZ&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">told Reuters in May</a>&nbsp;that regulation of crypto assets was in the offing and might come into force within nine to 15 months, after regulators said they intended to do so in November 2020.



He added the SARB wanted regulation of crypto assets to prevent theft, money laundering and undermining of monetary policy because an ubiquitous cryptocurrency could weaken the authority of the central bank.



&#8220;This was the first legal step that was required to bring the crypto asset industry within the South African legal framework,&#8221; Brent Petersen from Easy Crypto, a crypto buying and selling platform, said in a note.



He added the declaration would apply to crypto trading platforms, as well as those that provide advice or intermediary services for the buyers and sellers of digital financial assets.



(Reporting by Rachel Savage; Writing by Anait Miridzhanian; Editing by Mark Potter)

Illustration shows representations of cryptocurrencies

South Africa moves to regulate crypto assets￼

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-820x462.jpeg" alt="" class="wp-image-420480" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-1.jpeg 929w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption>Ether has hugely outperformed bitcoin since both cryptocurrencies formed a bottom in June 2022. Ether’s superior gains have come as investors anticipate a major upgrade to the ethereum blockchain called “the merge.” Yuriko Nakao | Getty Images</figcaption></figure>



Cryptocurrencies were slightly higher on Wednesday after investors shrugged off a higher-than-expected inflation report in anticipation of another key inflation indicator due to come out on Thursday.



The price of&nbsp;<a href="https://www.cnbc.com/quotes/BTC.CM=/">bitcoin</a>&nbsp;edged higher by about 0.4% and was trading at $19,072.00, while&nbsp;<a href="https://www.cnbc.com/quotes/ETH.CM=/">ether</a>&nbsp;rose 0.6% to $1,290.73.



The September producer price index, a gauge of final-demand wholesale prices, came in <a href="https://www.cnbc.com/2022/10/12/producer-price-index-september-2022.html">higher than expected</a>, suggesting to investors that the Federal Reserve is likely to continue aggressively hiking rates until inflation comes down.



Cryptocurrencies were slightly higher on Wednesday after investors shrugged off a higher-than-expected inflation report in anticipation of another key inflation indicator due to come out on Thursday.



The price of&nbsp;<a href="https://www.cnbc.com/quotes/BTC.CM=/">bitcoin</a>&nbsp;edged higher by about 0.4% and was trading at $19,072.00, while&nbsp;<a href="https://www.cnbc.com/quotes/ETH.CM=/">ether</a>&nbsp;rose 0.6% to $1,290.73.



The September producer price index, a gauge of final-demand wholesale prices, came in <a href="https://www.cnbc.com/2022/10/12/producer-price-index-september-2022.html">higher than expected</a>, suggesting to investors that the Federal Reserve is likely to continue aggressively hiking rates until inflation comes down.

Crypto prices are higher ahead of key inflation data, bitcoin holds at $19,000

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="547" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107130793-1665128197293-gettyimages-1238536714-porzycki-cryptocu220216_np7mt-820x547.jpeg" alt="" class="wp-image-420386" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107130793-1665128197293-gettyimages-1238536714-porzycki-cryptocu220216_np7mt-820x547.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107130793-1665128197293-gettyimages-1238536714-porzycki-cryptocu220216_np7mt-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107130793-1665128197293-gettyimages-1238536714-porzycki-cryptocu220216_np7mt-135x90.jpeg 135w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107130793-1665128197293-gettyimages-1238536714-porzycki-cryptocu220216_np7mt-768x512.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107130793-1665128197293-gettyimages-1238536714-porzycki-cryptocu220216_np7mt-1536x1024.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/10/107130793-1665128197293-gettyimages-1238536714-porzycki-cryptocu220216_np7mt-scaled.jpeg 2048w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption>Binance is the world’s largest crypto exchange by trading volume. Jakub Porzycki | Nurphoto | Getty Images</figcaption></figure>



Cryptocurrency exchange Binance temporarily suspended its blockchain network after hackers made off with around $570 million worth of its BNB token.



Binance said late Thursday a cross-chain bridge linking with its BNB Chain was targeted, enabling hackers to move BNB tokens off the network. So-called cross-chain bridges are tools that allow the transfer of tokens from one blockchain to another.



The company said it had worked with network validators — entities or individuals who confirm transactions on the blockchain — to pause creation of new blocks on BSC, suspending all transaction processing while a team of developers investigates the breach.



Binance is the world’s largest crypto exchange by trading volume.



“An exploit on a cross-chain bridge, BSC Token Hub, resulted in extra BNB. We have asked all validators to temporarily suspend BSC,” Changpeng Zhao, Binance’s CEO, said in a tweet Thursday evening.



“The issue is contained now. Your funds are safe. We apologize for the inconvenience and will provide further updates accordingly.”



BNB Chain has since resumed operations.



In total, hackers drained 2 million BNB tokens — about $570 million at current prices — from the network, Binance’s BNB Chain said in a blog post on Friday. The exploit was enabled “through a sophisticated forging of the low level proof into one common library,” BNB Chain said.



The value of BNB sank more than 3% Friday morning to $285.36 a coin, according to CoinMarketCap data.



An earlier estimate from the company placed the total amount withdrawn in a range of $100 million to $110 million. The company also said it managed to freeze $7 million of funds with the help of its security partners.



A Binance spokesperson told CNBC the company coordinated with BNB Chain validators to enact an upgrade. That meant that most of the funds remained in the exploiter’s crypto wallet, while about $100 million was “unrecovered.”



BNB Chain has 26 active validators at present and 44 in total in different time zones, the spokesperson added.



BNB Chain, originally known as Binance Chain, was first developed by Binance in 2019. Like other blockchains, it features a native token, called BNB, that can be traded or used in games and other applications.



It is the latest in a series of major hacks targeting cross-chain bridges, with instances of sloppy engineering making them a prime target for cybercriminals.



A total of around $1.4 billion has been lost to breaches&nbsp;on cross-chain bridges since the start of 2022, according to data from blockchain analytics firm Chainalysis.



The crypto industry has had a rough year, with roughly $2 trillion in value being erased since the peak of a blistering rally from 2020 to 2021. The implosion of $60 billion blockchain venture Terra and a worsening macroeconomic environment have severely impacted market sentiment.

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$570 million worth of Binance’s BNB token stolen in another major crypto hack

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="594" height="396" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002.jpeg" alt="" class="wp-image-419950" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002.jpeg 594w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-300x200.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/09/107105674-1660812664654-gettyimages-1292707878-yn_crypto_ethereum_002-135x90.jpeg 135w" sizes="(max-width: 594px) 100vw, 594px" /><figcaption>Photo: via CNBC</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a>&nbsp;fell to its lowest level in three months on Monday as investors dumped risk assets amid expectations of higher interest rates.



The world’s largest cryptocurrency dropped as much as about 5% to hit an intraday low of $18,276, its lowest level since June 19, according to Coin Metrics. It was last down 1.2% at $19,465.00. Bitcoin is down 3.77% this month and on pace for the second straight negative month after plunging 15% in August.



“Regulatory pressure, rising base rates, and inflation are pressing heavily on riskier asset classes, especially crypto, and are thus forcing liquidations, reducing capital available for investment, and increasing concerns over undefined regulatory controls,” said Sadie Raney, co-founder and head of operations at Strix Leviathan. “These forces may mute the overall crypto complex until the financial system stabilizes and a regulatory framework becomes more clear.”



<a href="https://www.cnbcafrica.com/quotes/eth=x/">Ether</a>&nbsp;also fell a similar 5% to $1,281 apiece Monday, hitting its lowest level since July 15. It was last lower by 1.6% at $19,465.00. It’s currently down -13.8% this month, on track to post its worst month since June.



Risk assets have been under massive pressure as the Federal Reserve is expected to stick to its aggressive tightening schedule. The central bank is widely expected to approve this week&nbsp;a third consecutive 0.75 percentage point interest rate increase&nbsp;that would take benchmark rates up to a range of 3%-3.25%.&nbsp;



“Retail buyers have a long term outlook on bitcoin while institutional traders are treating digital assets like tech stocks and adopting a short term mentality that’s contributing to the selloff we’re seeing,” said Chris Kline, chief revenue officer and co-founder of Bitcoin IRA. “The tightening policy at the Fed is strengthening the dollar and is weighing down risk assets, overall.”



So-called “whales” — institutions, miners, or other holders of large amounts of bitcoin, typically with more than 1,000 bitcoins in a wallet — have been hedging the macro condition and selling their coins since June, according to Julio Moreno, senior analyst at blockchain&nbsp;analytics firm&nbsp;CryptoQuant.



That’s evidenced by the increasing amount of coins being sent to exchanges and dumped onto retail investors, who believe bitcoin is finding a bottom at these levels, though it actually has further to go, he said.



CryptoQuant data shows bitcoin bottoming at between $10,000 and $14,500 this cycle.

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Bitcoin briefly drops to its lowest level in 3 months as risk assets continue to get crushed

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/11/106943534-GettyImages-1234636440.jpeg" alt="" class="wp-image-413313" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/11/106943534-GettyImages-1234636440.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/11/106943534-GettyImages-1234636440-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/11/106943534-GettyImages-1234636440-160x90.jpeg 160w" sizes="(max-width: 740px) 100vw, 740px" /><figcaption>Representation of Ethereum cryptocurrency is seen in this illustration photo taken in Sulkowice, Poland on August 12, 2021.
Jakub Porzycki/NurPhoto | Getty Images</figcaption></figure>



Ethereum’s biggest-ever upgrade just took effect, in what industry experts are calling a game changer for the entire crypto sector. Thus far, all signs suggest the so-called merge — which is designed to cut the cryptocurrency’s energy consumption by more than 99% — was a success.



The very first proof-of-stake block of transactions has finalized with a nearly 100% client participation rate. This was, by far, the best-case scenario.



The overhaul to the ethereum network fundamentally alters the way the blockchain secures its network and verifies transactions. Most of these changes are happening under the hood and the hallmark of a successful upgrade is if the end user doesn’t feel a difference in the hours and days ahead.



Cryptocurrencies such as ethereum and bitcoin are often criticized for the process of mining to generate new coins. Before the merge, both blockchains had their own vast network of miners all over the planet running highly specialized computers that crunched math equations in order to validate transactions. Proof-of-work uses a lot of energy, and it is one of the industry’s biggest targets for critiques.



But with the upgrade, ethereum has migrated to a system known as proof-of-stake, which swaps out miners for validators. Instead of running large banks of computers, validators leverage their existing cache of ether as a means to verify transactions and mint new tokens.&nbsp;This requires far less power than mining and experts say it will make the protocol both more secure and more sustainable.



The price of ether jumped following the merge. It is trading at around $1,640, up more than 3% in the last hour.



Nine teams and more than 100 developers worked on the merge for years. In the hours ahead, this decentralized network of programmers spread out across the planet will monitor the rollout and, if needed, debug as fast as possible.



Danny Ryan, a core developer based in Denver who has been working on the merge for five years, tells CNBC that they will be watching for any irregularities via both automated and manual monitoring systems. If issues come up, the corresponding team will debug and release a patch to users, but Ryan says they are pretty confident going into the merge given all the successful dry runs in the last few months.



“There might be some sort of small fire that gets put out very quickly,” said Ryan. “But the network as a whole — because of the redundancy across all this different software — will very likely be stable and fine.”



<h2 class="wp-block-heading" id="h-what-changes"><a></a>What changes</h2>



Part of why the merge is such a big deal has to do with optics.



Last week, the White House released a report warning that proof-of-work mining operations could get in the way of efforts to mitigate climate change. Slashing energy consumption by roughly 99.95% will not only establish greater sustainability for the network, but it will also go a long way toward lowering the barrier to entry for institutional investors, who struggled with the optics of contributing to the climate crisis.



Bank of America said in a note on Sept. 9 that the significant&nbsp;reduction in energy consumption post-merge “may enable some institutional investors to purchase the token that were previously prohibited from purchasing tokens that run on blockchains leveraging proof of work (PoW) consensus mechanisms.”



Analysts have said that institutional money entering the digital asset space at scale is critical to its future as an asset class.



The upgrade also changes the tokenomics around ethereum’s native coin, ether.



“Ether itself becomes a productive asset,” said Ryan. “It’s not something you might just speculate on, but it’s something that can earn returns.”



In this post-merge era, ether takes on some of the characteristics typical of a traditional financial asset, such as a certificate of a deposit, which pays interest to holders.



“It’s probably the lowest risk return inside of the ethereum ecosystem,” explained Ryan, who added that yield in other corners of decentralized finance, or DeFi, involve taking on smart contract risks and other types of counter-party risk.



The upgrade will also result in a significantly reduced supply of ether tokens in circulation, which could pave the way for ether to become a deflationary currency in the weeks and months ahead. Some investors say this could also help drive up the price of the token.



That reduced supply is the result of the new verification model that replaces miners with “validators.” The rewards for validators are much smaller than those that went to proof-of-work miners, meaning that less ether will be minted as a result of this upgrade. Validators are also required to lock up their tokens for a prolonged period of time, pulling ether out of circulation.



Additionally, as part of an upgrade that went into effect August 2021, the network is already “burning” or permanently destroying a portion of the digital currency that would otherwise be recycled back into circulation.



Developers say that enhanced network security is another critical feature of the upgrade.



“There are changes to the security guarantees of the chain,” said Sean Anderson of Sigma Prime.



Take a 51% attack, in which someone or a consortium of people control 51% or more of a cryptocurrency and subsequently weaponize that control to make changes to the blockchain.



Anderson says that it is much easier to recover from a 51% attack on a proof-of-stake network, because there are built-in mechanisms to financially punish malicious actors by reducing their stake.



“Because that economic asset is inside of the protocol, you get much better recovery mode, so you end up with a better kind of security profile,” Ryan told CNBC.&nbsp;



<h2 class="wp-block-heading"><a></a>Next few hours, days are key</h2>



The next few hours and days will be key to gauging the health of the ethereum network post upgrade. Behind the scenes, developers will be monitoring metrics like the participation rate of validators to determine how things are going. But coders tell CNBC that in an ideal world, users would be totally oblivious to the upgrade.



“If everything goes perfectly, then an end user wouldn’t notice a difference,” said Anderson. “If anyone who’s trying to transact on ethereum doesn’t realize it, then it was smooth.”



The upgrade doesn’t immediately make ethereum faster, cheaper or more scalable.&nbsp;But those features come with future upgrades that are now possible post-merge.



Scalability, in particular, is something that Ryan says is desperately needed for the network going forward.



At the moment, layer two technologies such as sharding and roll-ups are working to address just that.



“More scalability, more ability to process user transactions is coming online in parallel through layer two constructions called roll-ups, but the scale is not being enhanced at the core protocol itself,” continued Ryan. That comes in subsequent upgrades instead.



Katie Talati, head of research at asset management firm Arca, says that her team is closely watching anything in the layer two space, especially the projects that are trying to offer scalability.



“The biggest issue right now is that it’s very fragmented,” said Talati. “You end up with these people who are now on ethereum, but they’re siloed from each other, because the L2s don’t necessarily talk to each other very easily. And so it’s just not a seamless experience,” she said.

106943534-GettyImages-1234636440

Ethereum’s massive software upgrade just went live — here’s what it does

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="728" height="485" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI.jpg" alt="" class="wp-image-419501" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI.jpg 728w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI-135x90.jpg 135w" sizes="(max-width: 728px) 100vw, 728px" /><figcaption>A bitcoin representation is seen in a file photo, in Paris, France, June 23, 2017. REUTERS/Benoit Tessier/File Photo</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> topped $22,000 as it continues a week-long rally ahead of U.S. inflation data and a highly anticipated <a href="https://www.cnbcafrica.com/quotes/eth=x/">Ethereum</a> network upgrade.



The world’s largest cryptocurrency hit $22,341.50 at 9:45 p.m. ET Sunday before dipping slightly, according to CoinDesk data. Bitcoin was trading at $22,203 at around 4:03 a.m. ET on Monday.



After falling below $19,000 on Wednesday to its lowest level since June, bitcoin has since rallied around 17%.



This also comes off the back of a winning week last week for U.S. stocks. Bitcoin has been closely correlated to equity markets, particularly the Nasdaq, and often moves higher when the tech-heavy index rises.



Crypto investors are looking ahead to the August consumer price index report, scheduled to be released Tuesday, to see the direction inflation is headed which could give hints toward future policy moves by the U.S. Federal Reserve.



Stocks have been under pressure this year as the Fed has hiked interest rates to try to control rampant inflation.



Cryptocurrencies, which are also risk assets, have been battered. Nearly $2 trillion has been wiped off the entire crypto market since its all-time high in November. Bitcoin is down more than 50% this year.



That decline has also been driven by crypto-specific issues including the collapse of key projects and bankruptcies that have spread across the industry.



Meanwhile, the Ethereum network will complete a long-awaited upgrade called the merge. This will transform the Ethereum blockchain from a proof-of-work to proof-of-stake model and significantly reduce the amount of energy required for the network to operate.



Proponents say this could pave the way for a broader use of ether, the token that runs on Ethereum.



“Crypto faces an unusual double whammy this week: U.S. inflation data and [hopefully] the long-awaited and oft-delayed Ethereum Merge. Hold your breath for a rollercoaster ride,” Antoni Trenchev, co-founder of Nexo, said in a note on Monday.



“In a time awash with narratives, there’s none bigger than the Merge in crypto and it’s one which the wider world should take notice of with Ethereum’s carbon footprint set to be slashed by 99%.”



However, analysts cautioned that the merge will not necessarily speed up the Ethereum network, which is known to be slow, nor will it reduce the fees associated with transactions.



Still, excitement has been growing for the merge. Since ether hit its low for the year in mid-June, the price for the world’s second-largest cryptocurrency has far outpaced bitcoin’s. Ether is up more than 90% since June. 19 while bitcoin has risen just over 20%, begging the question of how much the merge has already been priced in.



The Federal Reserve is also widely expected to increase interest rates again next week when its Federal Open Market Committee (FOMC) meets, which is another dark cloud hanging over the crypto market.



“The Merge may trigger a ‘sell the fact’ situation in the crypto market and we still need to be careful for next week’s FOMC meeting. Bitcoin could continue to rally but it could be quite short lived,” Yuya Hasegawa, crypto market analyst at Japanese exchange Bitbank, said in a note Monday.

Bitcoin tops $22,000, hitting highest in nearly a month ahead of inflation data and Ethereum merge

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="728" height="485" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI.jpg" alt="" class="wp-image-419501" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI.jpg 728w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/VWGGGHRVGFNNBKICEKKB2G2CXI-135x90.jpg 135w" sizes="(max-width: 728px) 100vw, 728px" /><figcaption>A bitcoin representation is seen in a file photo, in Paris, France, June 23, 2017. REUTERS/Benoit Tessier/File Photo</figcaption></figure>



BANGUI, Aug 29 (Reuters)&nbsp;&#8211;&nbsp;Central African Republic&#8217;s Constitutional Court on Monday ruled that the purchase of citizenship, &#8220;e-residency&#8221; and land using a cryptocurrency the government launched last month was unconstitutional.



The &#8220;Sango Coin&#8221; went on sale on July 21 despite a sharp fall in bitcoin prices during recent months, and doubts over the project&#8217;s viability in a poorly connected and war-torn country.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL8N2YW38J&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



Under the initiative, foreign investors would have been able to buy citizenship for $60,000 worth of crypto &#8211; with the equivalent Sango Coins held as collateral for five years &#8211; and &#8220;e-residency&#8221; for $6,000, held for three years, according to the Sango website.



A 250 metre square plot of land had also been listed as $10,000, with the Sango Coins locked away for a decade.



But the country&#8217;s top court deemed those purchases &#8220;unconstitutional&#8221;, arguing among other reasons that nationality did not have a market value and that residency required a physical stay in Central African Republic (CAR), a decree showed.



The impact on the Sango Coin initiative was not immediately clear.



Government spokesman Serge Djorie told Reuters he did not have a response to the ruling.



CAR, one of the world&#8217;s poorest countries, became the first in Africa to make bitcoin legal tender in April &#8211; raising eyebrows among cryptocurrency experts and prompting the International Monetary Fund to warn it was not a &#8220;panacea&#8221; for the continent&#8217;s challenges.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL3N2WQ3XY&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



President Faustin-Archange Touadera has defended the Sango Coin as a solution to financial exclusion that will facilitate investment in CAR&#8217;s vast mineral resources.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL1N2YK0E0&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



But sales of the initial $21 million on offer have been slow, with just over 5% of the target bought in the hours after its launch.&nbsp;<a href="https://www.reutersconnect.com/all?search=all%3AL8N2Z732L&amp;linkedFromStory=true" target="_blank" rel="noreferrer noopener">Read full story</a>



(Reporting by Rachel Savage and Judicael Yongo; Writing by Sofia Christensen; Editing by Bhargav Acharya; Editing by Andrea Ricci)

Central African Republic top court blocks purchases with new cryptocurrency

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/107070828-1654264879215-gettyimages-905283738-99016973.jpeg" alt="" class="wp-image-419448" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/107070828-1654264879215-gettyimages-905283738-99016973.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/107070828-1654264879215-gettyimages-905283738-99016973-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/107070828-1654264879215-gettyimages-905283738-99016973-160x90.jpeg 160w" sizes="(max-width: 740px) 100vw, 740px" /><figcaption>Cryptocurrencies have taken a tumble in 2022. Chesnot | Getty Images</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> could be poised for outsized gains if recent technical signals are to be believed.



Investors have been searching for a bottom to bitcoin since the cryptocurrency lost more than 60% of its value from the all-time high of nearly $69,000 it hit in November. Nearly $2 trillion has been wiped off the entire crypto market in recent months.



A measure of activity of bitcoin miners could give investors a clue as to where the digital currency is headed next.



Miners validate transactions on the bitcoin network using highly-specialized and power-intensive computers to solve complex mathematical puzzles. They are rewarded in bitcoin for their efforts. As more bitcoin is mined, solving these puzzles becomes more difficult.



During market slumps, a depressed bitcoin price can make it unprofitable for many miners to continue operations. They then sell some bitcoin to keep afloat. But they also turn off their mining rigs to save money.



That has happened in the latest market slump and can be demonstrated by “hash rate,” a measure of computational power used to mine bitcoin. Since mid-May, when the market really started to sell-off, the 30-day average hash rate (a monthly average value) fell more than 7% and at one point saw a 10% dip. That signaled that miners were turning off their machines.



Hash rate, studied in various ways, is used by crypto investors to try to figure out when the market might bottom, because capitulation and a shakeout of the miners is often associated with the late stage of a bitcoin cycle.



“Historically speaking, capitulation&nbsp;in the mining market has tended to correspond strongly with overall market bottoms,” Matthew Kimmell, digital asset analyst at CoinShares, told CNBC via email.



<h2 class="wp-block-heading" id="h-hash-rate-and-a-buy-signal"><a></a>Hash rate and a buy signal</h2>



Following on from this, Charles Edwards, founder of quantitative crypto fund Capriole Investments, came up with the idea of “hash ribbons” in 2019 to identify buying opportunities for bitcoin.



When the 30-day moving average for hash rate dips below the 60-day moving average, this is called a bearish cross, and signals that miners are shutting down machines. Usually selling is associated with these events. As more miners are taken out of the market, the difficulty of mining bitcoin reduces because there is less competition.



Because of the reduced competition, more miners may re-enter the market and a recovery may occur.



“These ‘capitulations’ are painful events for miners within the ecosystem,” Edwards told CNBC.



But using Edwards’ method, when the 30-day moving average for hash rate crosses back above the 60-day moving average, the worst of the miner capitulation tends to be over.



When this happens along with the 10-day moving average price of bitcoin going above the 20-day moving average price, then this is when a “buy signal” flashes, according to Edwards.



He said those crosses occurred on Saturday.



In the past, buying bitcoin at these points would have yielded strong returns depending on how long you held the cryptocurrency for, according to Edwards.



For example, purchasing bitcoin at the buy signal of August 2016 would have given an investor a more than 3,000% return if held to the peak of December 2018, which was at the time when bitcoin hit a new record high.



More recently, buying during the recent buy signal in August 2021, would have yielded a more than 50% return if bitcoin was sold at the November 2021 record high.



“I created Hash Ribbons in 2019 as a way to identify when major Bitcoin mining capitulation had occurred, as once recovery resumes from these events, they typically mark&nbsp;major Bitcoin price bottoms,” Edwards said. “Historically, these have been great times to allocate into Bitcoin, with incredible returns.”



Kimmell from CoinShares said that the logic behind the buy signal is that if the bitcoin price “tends to steadily outpace hashrate before a period of high price growth, then a trending rebound in hashrate,” marked by the 30 day moving average for hash rate crossing above the 60 day moving average, it “may mean the rebound in bitcoin price has already begun.”



“I find this metric should not be solely relied upon to make an investment decision, but can certainly be helpful if coupled with a suite of other metrics and qualitative evidence,” he added.



<h2 class="wp-block-heading"><a></a>Bottom near?</h2>



CoinShares has put together a graph to show the correlation between hash rate and the bitcoin price. And it is split into areas where there is “gold rush” as bitcoin’s price rises, and a subsequent inventory flush and miners’ shakeout as the price declines.



In a chart provided to CNBC, CoinShares suggests that the market is currently in the shakeout period which typically precedes rebalancing and a rally in prices. Right now, according to the chart, the bitcoin price line is below the hash rate.



But this could signal a bottom is near, according to Kimmell.



“It is impossible to say if we have reached full capitulation, however there is evidence we are in the phase of the mining cycle where capitulation most often occurs. Secondarily, if previous cycles carry predictive power, then yes, bitcoin price steadily outpacing hashrate would likely precede a period of high price growth,” Kimmell said.



Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, holds a similar view.



“I think we have seen broad signs of capitulation given the events in the previous months. Hence it is likely we could have the beginnings of a bottom being formed. Usually bitcoin consolidates in a range for a whole which indicates accumulation, which is what we may be seeing,” Ayyar told CNBC via text message.



Bitcoin has been trading in a tight range of around $18,000 to $25,000 since mid-June.



However, there are risks that these indicators do not prove as positive as they have been in the past because of the broader macroeconomic environment.



The current global economy is in a very different state versus previous cryptocurrency cycles. There is rampant inflation and rising interest rates globally, aspects which have not been present before.



Risk assets such as U.S. stocks, and in particular the Nasdaq, to which bitcoin is closely correlated, have seen a big sell-off this year.



“Of course all this is still based on historical similarity, and we are in a different macro environment,” Ayyar said.



“The major risk remains the economy and inflation, but even then we are closer to an inflation peak than not, and hence this also shows that on risk assets we are closer to a bottom than not.”

107070828-1654264879215-gettyimages-905283738-99016973

A closely-watched bitcoin metric is pointing to a possible price bottom for the cryptocurrency

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/107080916-1656319994349-gettyimages-1030734176-s3s_04sep2018_cw0016.jpeg" alt="" class="wp-image-419326" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/107080916-1656319994349-gettyimages-1030734176-s3s_04sep2018_cw0016.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/107080916-1656319994349-gettyimages-1030734176-s3s_04sep2018_cw0016-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/107080916-1656319994349-gettyimages-1030734176-s3s_04sep2018_cw0016-160x90.jpeg 160w" sizes="(max-width: 740px) 100vw, 740px" /><figcaption>Bitcoin and ether ended Thursday in the red, but ether has surged more than 100% since mid-June. Yu Chun Christopher Wong | S3studio | Getty Images</figcaption></figure>



<a href="https://www.cnbcafrica.com/quotes/btc=x/">Bitcoin</a> on Friday fell to its lowest level in more than three weeks, dipping below $22,000 amid a sudden crypto sell-off in early European trading. 



Bitcoin briefly plunged from $22,738 to below $21,500 at 2:30 a.m. ET, according to CoinDesk data, before recovering slightly to just under $22,000 over a 10-minute period.



It comes shortly after the world’s largest digital coin surpassed the $25,000 level for the first time since June following a rise in U.S. stocks.



<a href="https://www.cnbcafrica.com/quotes/eth=x/">Ether</a> fell from $1,808 to $1,728 at the same time before staging a muted rebound. By 3:05 a.m. ET, it stood at $1,733, a level it has not traded at since Aug. 10. 



A specific cause for a drop at that time, which also sent Binance Coin, Cardano and Solana falling, was not immediately clear. 



“US equity markets have pulled back since Wednesday’s release of the July Fed meeting minutes, the key takeaway being that the Fed likely won’t be finished with rate hikes until inflation is tamed across the board, with no guidance offered on future rate increases either,” Simon Peters, crypto market analyst at eToro, told CNBC.



“With the tight correlation between US equities and crypto in recent months I suspect this has filtered through to crypto markets and it’s why we are seeing the sell-off. The trend has also perhaps been exacerbated by liquidation of long positions on bitcoin perpetual futures markets.”



Citing Coinglass data, Peters said today had been the biggest liquidation of long positions on futures since June 18, also the date bitcoin reached its lowest price of the year around $17,500.



Bitcoin and ether ended Thursday in the red, but ether has surged more than 100% since mid-June as investors prepare for a massive upgrade in the ethereum network.

107080916-1656319994349-gettyimages-1030734176-s3s_04sep2018_cw0016

Sudden crypto market drop sends bitcoin below $22,000

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="550" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/OENJDLFACZIANF23Q23HPESQNY-820x550.jpg" alt="" class="wp-image-419212" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/08/OENJDLFACZIANF23Q23HPESQNY-820x550.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/OENJDLFACZIANF23Q23HPESQNY-300x201.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/OENJDLFACZIANF23Q23HPESQNY-134x90.jpg 134w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/OENJDLFACZIANF23Q23HPESQNY-768x515.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/08/OENJDLFACZIANF23Q23HPESQNY.jpg 960w" sizes="(max-width: 820px) 100vw, 820px" /><figcaption>Photo: via Sharenet</figcaption></figure>



Aug 16 (Reuters) – It looks like ethereum’s mega-upgrade is happening. Finally.



After years of delays, the “Merge” seems all but certain to take place in September, with the cryptography underlying the blockchain undergoing a radical shift to a system where the creation of new ether tokens becomes far less energy-intensive.



“It’s an exciting time for the ethereum ecosystem,” said Omar Syed, co-founder of smart contract platform Shardeum. “I think there will be drama surrounding the Merge, but I don’t think there will be any technical hiccups.”



Investors seem to agree, with ether outstripping big brother bitcoin.



Ether has seen six consecutive weeks of gains, pushing it up from a 1-1/2-year low of $880 in mid-June to levels closing in on $2,000, even though it’s way off its November 2021 peak of $4,868.79.



Bitcoin has paled in comparison, rebounding 37% from its June low to $24,116.



Ether is gnawing away at behemoth bitcoin’s market share: it now accounts for nearly a fifth – 19.7% – of the total crypto market capitalization of $1.14 trillion, up from less than 14.9% two months ago, according to CoinMarketCap. Bitcoin’s share has dropped to 40.2% from 44.9% in the same period.



“Crypto is still very tightly coupled, I think when the Merge successfully completes it could drive up the price of bitcoin as well,” said Alex Miller, CEO of Hiro, which builds developer tools to create applications for bitcoin.



If ethereum’s creators succeed, as is largely expected, it could be a game-changer for the blockchain, making it cheaper to mine and easy to adopt for fintech and other crypto apps.



Of course little is assured about the elusive transition, which has been delayed several times, with developers most recently axing plans to push the button in June, unnerving investors who began to fear it might never see the light of day.



The Merge is also is fraught with risk, and the fortunes of the roughly 122 million ether in circulation, worth about $232 billion, could be at stake should it fail.



If the upgrade doesn’t go well, it would “set the entire crypto world back five or 10 years,” Hiro’s Miller said.



<h2 class="wp-block-heading">‘DIFFICULTY BOMB’</h2>



The ethereum blockchain currently uses the energy-intensive proof-of work (PoW) method of validating blocks, wherein miners use massive amounts of power to quickly solve complex computational problems to win newly minted coins.



On a parallel chain, ethereum has been testing a proof-of-stake (PoS) system that only requires miners to “stake” their coins to validate transactions and create new blocks. It promises 99.95% reduction in the blockhain’s energy consumption and prepares it for faster transactions.



Not everyone’s happy about the imminent merger of the two systems – notably ether miners, whose expensive mining rigs will be rendered obsolete, and can’t be used for mining bitcoin either.



Ether mining has hitherto been more profitable than bitcoin mining. Ether miners made $18 billion in 2021 versus $17 billion for bitcoin miners, according to Arcane Research.



Some miners have decided to shift to mining the next best option, such as the tokens ethereum classic or ravencoin.



At least one miner has declared plans to resist and continue mining ethereum, raising the spectre of some people keeping the PoW chain running in its current form even after the merge, likely competing with the upgraded blockchain.



However, that option has perils.



Ethereum creators have designed a “difficulty bomb” to exponentially increase mining difficulty in order to discourage the PoW parallel chain after the Merge.



Moreover, both Tether and USDC – the largest stablecoins – have thrown their weight behind the Merge, reducing the likelihood of a wider adoption of the parallel PoW chain.



<h2 class="wp-block-heading" id="h-frothy-futures">FROTHY FUTURES</h2>



“The likelihood of a long-lasting chain split of Ethereum following the Merge remains slim,” said Alex Thorn, head of firmwide research at Galaxy Digital.



Nonetheless, at least some investors are preparing for a hard fork, or a parallel PoW chain, positioning in the derivatives market indicates.



Ether futures were also trading at premium at $1,905 on the CME exchange, “reflecting expectations around a proof of work fork,” said Matthew Sigel, head of digital assets research at fund manager VanEck.



“But that gap is not so huge so as to think there is extreme froth,” he added.



(Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru Editing by Vidya Ranganathan and Pravin Char)

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