4/8 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:
CBDCs Spread Across the Globe
Several nations have released updates regarding their progress on developing a central bank issued digital currency (CBDC). China has recently announced that their “digital yuan” is now available for use in 23 cities including Bejing, Shanghai, Guangzhou, Tianjin, and Chongqing.
Yi Gang, governor of the People’s Bank of China, praised the success of China’s CBDC pilot program during the Olympics in February which saw over 2 million yuan transacted every day during the event.
“The number of users, merchants, and transactions participating in the pilot program have grown steadily, and it has dynamically improved the business technology design, building on innovative applications while focusing on solving financial service difficulties,” he said.
Sweden has also made notable progress on their CBDC rollout, announcing that the “e-krona” pilot project has successfully progressed beyond its second phase of trials. The Swedish central bank “Riksbank” announced that the successful tests during the phase proved that it is in fact possible to integrate the new CBDC with the nation’s internal banking systems, where users can exchange their traditional FIAT currency in their bank account with the new e-krona seamlessly.
A recent study by PwC estimates that more than 80% of the world’s central banks are exploring ways to launch a central bank issued digital currency or have already done so. The shift towards digital mediums of exchange has the potential to disrupt the status quo in regards to the U.S. dollar’s status as the reserve currency of the world, especially if competitors such as China’s digital yuan are able to launch with a large enough head start.
Market Update - Bitcoin
The overall cryptocurrency market capitalization is about $1.99 trillion, a -7.01% decrease from last week’s valuation of $2.14 trillion. At the time of publication, Bitcoin ($BTC) is valued at $42,756 per bitcoin with a market capitalization of $814 billion making up 41% of the total market.
Bitcoin finds itself once again testing the middle of the established $37-$46k price range that has been in play for most of 2022. The clean rejection from $48k in late March has pushed prices downward along with news from the U.S Federal Reserve that it may be considering a more aggressive stance towards interest rate hikes.
Bitcoin is currently holding the key $42k level, where it could form two scenarios: either buyers form a higher low/support at $42k for a greater push beyond $48k, or sellers continue to push BTC below $42k where we would likely revisit the mid to lower $30k ranges once again.
Bitcoin Turns 19 (Million)
On Friday, April 1st, 2022, the 19th millionth Bitcoin (BTC) was mined, pushing the leading cryptocurrency closer towards its fixed total supply cap of 21 million Bitcoin.
According to blockchain analytics platform Blockchain.com, the threshold was crossed during the addition of block 730002, which was mined at about 12:21 PM EST. The block of data was made up of 2,426 transactions, and the miner received 6.32 BTC (~$293,000) as a reward.
The Bitcoin mining industry continues to grow and legitimize itself over time as mining operations flourish around the world. A recent report from Arcane Research suggests that 19% of Bitcoin’s total hash rate is contributed from publicly traded companies such as Marathon and Riot, which is a considerable increase from the 3% figure recorded in January.
BTC’s network difficulty, a measurement of how difficult it is to mine/add a new block to the blockchain, has also recently produced a new all time high difficulty of 28.578 trillion suggesting that despite Bitcoin’s valuation losses in Q1 2022, mining operations continue to enter the field.
U.S. Policies Shift in a Changing World
The U.S. Federal Reserve released the minutes from its Federal Open Market Committee (FOMC) meeting back in March, detailing the course of action that the Fed board of governors plan to take in regards to combating the extreme state of inflation plaguing the U.S. economy. The Fed meeting signaled that there will be no slowdown in the general mission to combat inflation, where the Fed plans to lower the government’s $9 trillion dollar balance sheet by cutting monthly expenses and purchases by $95 billion a month.
Elsewhere in the U.S. government apparatus, Treasury Secretary Janet Yellen recently spoke on the topic of digital assets with a particular focus on regulation and the potentiality of a U.S. CBDC. Yellen’s speech showed signs of a notable shift from her previous stance’s towards CBDCs which have been much more dismissive in the past.
"The development of our currency to its current form has been a dynamic process that took place over centuries. Today, monetary sovereignty and uniform currency have brought clear benefits for economic growth and stability. Our approach to digital assets must be guided by the appreciation of those benefits," she said.
Yellen’s comments are focused primarily on the responsible adoption and regulation of digital assets to maintain the integrity of the American economy and financial system. She cites valid concerns with the existing crypto market, in particular with the fear of stablecoins that may not be legitimately backed by proper reserves. Yellen points to the recent example of the Iron Finance and TITAN token which Mark Cuban was famously a victim of: “This is not hypothetical. A stablecoin run occurred in June 2021, when a sharp drop in the price of the assets used to back a stablecoin set off a negative feedback loop of stablecoin redemptions and further price declines," said Yellen.
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