1/21 FAL Weekly Digest
Welcome to the FAL Weekly Digest, a source for this week’s biggest news articles and crypto market updates.
Here is what you need to know:
Cryptocurrency markets undergo severe losses as the Fed’s interest rate hikes loom closer.
Crypto Falls as Global Markets Turn Red
Global markets have endured a week of tumultuous price action as investors flee risk-on assets due to the looming threat of interest rate increases and the end of quantative easing programs from the U.S. Federal Reserve. Growth and technology sectors, including cryptocurrency, have taken the brunt of the losses while participants prepare for a shift in the market environment as the Fed ends its loose fiscal policies enacted through the Covid-19 pandemic in an effort to combat inflation.
Bitcoin has continued its trend of producing noticeable price correlations with the S&P 500 throughout Q4 2021 and Q1 2022, where we see as the S&P moves in a given direction, Bitcoin will often follow that direction with greater volatility.
Bitcoin’s (blue line) correlation with the S&P 500 (orange) throughout 2021 and into 2022.
The overall cryptocurrency market capitalization is about $1.73 trillion USD, a 16.01% decrease from last week’s valuation of $2.06 trillion. At the time of publication, Bitcoin ($BTC) is valued at $36,616 per bitcoin with a market capitalization of $699 billion making up 41% of the overall market.
For a more in-depth perspective on where Bitcoin could go, please see our technical analysis found here.
Bitcoin Mining Grows Despite Price Fall
While the price of Bitcoin (BTC) has fallen to levels not seen since August 2021, the Bitcoin mining network has continued to expand over time. New data from analytics provider Glassnode shows that Bitcoin’s mining difficulty has reached a new all time high.
Mining difficulty is a measurement of how much miners need to “work” to process transactions on the blockchain. It is encoded to automatically adjust depending on the amount of miners on the network, where an increase in miners will result in an increase in mining difficulty and vice versa. The increase in mining difficulty above suggests that the Bitcoin mining community is growing, and is supported by the general increase observed in Bitcoin’s hash rate shown below.
According to MiningPoolStats, Bitcoin’s hash rate (the measurement of processing power utilized by miners on the blockchain) reached a new all time high of 218 exahashes per second (EH/s) on January 10, giving further credence to the idea that mining participants are optimistic on Bitcoin’s price valuation over the long term and the profitability of their investments.
Cryptocurrency mining continues to make headlines as high profile companies and individuals enter the space. Intel and Block (formerly Square) have both announced plans to develop hardware specifically for Bitcoin mining. Even “Mr. Wonderful” Kevin O’Leary has recently revealed his interest in Bitcoin mining investments and the increasing demand for “sovereign mining operations”. Despite criticism from the European Union and the United States regarding its energy consumption, Bitcoin mining continues to mature as the industry evolves to meet the needs of an expanding digital market.
Cardano’s First DEX Goes Live
The Cardano network has achieved a significant milestone this week with the launch of its first decentralized application (DApp) called SundaeSwap. SundaeSwap is a decentralized exchange (DEX) that functions similar to Uniswap ($UNI) where users can trade tokens on an exchange that facilitates transfers using the Cardano blockchain.
The mainnet launch on Thursday was met with much excitement, but many users reported issues of failed transactions and network congestion. The SundaeSwap development team released several statements anticipating the network issues and congestion before the launch, recognizing the Cardano blockchain’s “conservative initial parameters” in regards to block size, transaction size, and speed for the time being.
While the exchange currently has a backlog of transactions to fulfill, the team is “very confident that the protocol can meet the normal day-to-day load once things settle down.” For more information on Cardano and the first major utilization of its smart contract functionality, read our article found here.
What is an Oracle?
Blockchain oracles have come to represent an integral part of the cryptocurrency ecosystem. As more and more decentralized applications are built on various blockchains, the demand for verifiable sources of off-chain data that is not supplied by a centralized entity has grow as well.
Oracle systems such as Chainlink and others have filled a necessary role that powers the smart contracts behind all of our favorite decentralized applications including DEXes, liquidity pools, blockchain games, and more. For a complete breakdown of blockchain oracles and how they function in today’s cryptocurrency environment, please read our full article found here.
NFTs and Social Media Collide
Social media giants Twitter and Meta (Facebook) are leading the charge into the future as the industry continues to embrace non-fungible tokens (NFTs). Twitter announced on Thursday that it will finally release iOS support for NFT avatar verification to paid subscribers of Twitter Blue.
The feature will allow users to link their Ethereum wallet to their Twitter account and select one of the NFTs on the wallet to serve as a verified profile picture. The profile picture will be displayed in a new hexagonal border as opposed to the traditional circle to represent ownership of the NFT and act as a deterrent to users fraudulently claiming ownership of NFTs that they have not actually purchased.
Meta is also reportedly looking into ways to permit greater interconnectivity with NFTs. According to a report from the Financial Times, Meta is exploring ways to let users create, display, and buy/sell NFTs on Facebook and Instagram. The teams at Meta are allegedly working on an NFT profile picture system similar to Twitter and discussing the “launch of a marketplace for users to buy and sell NFTs.” While Meta’s plans are still in development, it is clear to see that the future of social media will heavily involve Web3 capabilities such as NFTs and blockchain technology.
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