The week in review: Bitcoin booms while Fed considers inflation increase
It’s been another exhilarating week for Bitcoin, with the crypto hitting a 2020 all-time high and currently sitting at $11,837 at the time of writing. Not to be outdone, Ethereum hit $400 this week. Elsewhere, talk of the Fed increasing inflation has the crypto community bullish, while the recent Twitter hack has taken another turn, after one 17-year-old arrested for it has pleaded not guilty to the recent Twitter hack.
Let’s dive in.
Is it Bitcoin’s time to shine? US Fed considers inflation raise
The US Federal Reserve is preparing to draft a policy outline that favours low-interest rates and higher inflation in a bid to return to pre-pandemic levels of economic activity.
Past statements from Fed officials and economists suggest an “average inflation” of above 2% annually would be both tolerated and desired.
The economic outcomes of these could be good news for Bitcoin. Unlike the US dollar and other fiat currencies, Bitcoin has a fixed inflation rate that decreases over time, trending towards zero inflation. And the crypto community never misses an opportunity to showcase why this makes it better.
Jameson Lopp, CTO of Bitcoin storage company Casa, commented on the announcement of higher interest rates with: “The Fed is expected to make a major commitment to devaluing your money. Whatcha gonna do about it?”
Elsewhere, Robert Breedlove of crypto investment firm Parallax Digital said assets like gold and Bitcoin incentivise a savings-based economy, while inflation leads to debt.
Capitalist money (gold and #Bitcoin) incentivizes savings—since scarcity drives appreciation—and mitigates market distortions.
Socialist money (fiat currency) incentivizes indebtedness, as inflation erodes real debts burdens.
Savings + Accountability – Debt = Antifragility
— Robert Breedlove (@Breedlove22) August 5, 2020
Cameron Winklevoss also tweeted about rampant inflation with a bleak outlook on the future.
A General Store was once called a nickel store. Over time, it became called a five-and-dime store (all items priced at either 5 or 10 cents). Today, it’s called a dollar store. Soon, it will be called a ten dollar store. #Inflation #Bitcoin
— Cameron Winklevoss (@winklevoss) August 4, 2020
JPMorgan: younger investors like Bitcoin, older ones prefer gold
Gold is old and Bitcoin’s for the bold. JPMorgan strategists led by Nikolas Panigirtzoglou have determined younger investors are more interested in Bitcoin while their older counterparts prefer buying gold.
Bloomberg, citing a 4 August note by JPMorgan, further added that millennials prefer buying tech stocks, while older investors are selling shares and buying bonds.
The report explained: “The older cohorts continued to deploy their excess liquidity into bond funds, the buying of which remained strong during both June and July.”
Bitcoin and gold have both flourished in recent weeks, likely underpinned by their status as a safe asset amid global economic uncertainty and a weakening US Dollar. Importantly, the correlation between gold and Bitcoin remains unproven; their similarities unshared by fiat currencies are likely what’s kept them somewhat in line so far this year.
US Congressman Tom Emmer: “Bitcoin ain’t going away”
US Representative Tom Emmer (R-MN) said in a recent interview that the current pandemic wouldn’t hinder long-term prospects for Bitcoin.
Speaking to Anthony Pompliano, co-founder of Morgan Creek Digital, Emmer said the virus is simply forcing people to look for new ways to store their assets, making Bitcoin a more attractive deflationary alternative.
“As we come out of the crisis, Bitcoin ain’t going away. It’s gonna get stronger,” he said in the August 3 interview. “You just watch, it has value, when something has value, people are going to take risks and it’s going to advance,” the congressman said.
Emmer also criticised centralised monetary systems, pointing to Bitcoin as the future since it’s far more decentralised in comparison.
Noting crypto technology’s utility, the Congressman also recently signed a letter addressed to the Internal Revenue Service (IRS), calling for the tax agency to create a policy that supports proof-of-stake (PoS) technology.
Are his views more widespread among US politicians than it may seem?
Ethereum Classic suffers second 51% attack
Ethereum Classic has suffered its second 51% attack in a week, after more than 4,000 blocks were reorganised on Thursday morning.
Bitfly and crypto exchange Binance reported the reorganization, announcing all Ethereum Classic payouts, withdrawals and deposits had been suspended due to the attack.
The reorganised transaction history is currently the longest chain on the network, however, a majority of Ethereum Classic miners are continuing to mine on the shorter version.
Ethereum Classic developers tweeted minutes before Bitfly’s report that exchanges and mining pools are advised to “significantly raise confirmation times on all deposits and incoming transactions” in light of “recent network attacks.”
This new attack follows off the back of another recent attack that occurred between 29 July and 1 August, according to blockchain analytics firm Bitquery.
While Ethereum Classic developers initially said the network didn’t suffer from a reorganisation or a 51% attack in that previous attack, Bitquery said Wednesday that an attacker double-spent a little over 800,000 ETC (about $5.6 million), and paid about 17.5 BTC ($204,000) to acquire the hash power for the attack.
The attack follows the depreciation of the OpenEthereum client on 16 July. Nearly half the network’s nodes operated on OpenEthereum software which immediately became outdated following the first chain reorg on 31 July.
17-year-old pleads not guilty to Twitter hack
Graham Ivan Clark, the 17-year-old arrested as the mastermind behind July’s Twitter hack, pleaded not guilty to all charges brought against him by US authorities.
State authorities have described Clark as the “ringleader” for the coordinated attack on 30 high-profile accounts, promising to double the money of users who sent crypto.
In a bail hearing on Wednesday, Clark’s attorney said the $725,000 bail posted on Saturday was “grossly inappropriate” with the $117,000 believed to have been gained in the hack.
This isn’t Clark’s first run-in with the law – last year he was investigated by California authorities who confiscated 400 BTC belonging to Clark, subsequently having returned 300 BTC back to him.
The defence said the court could “fashion” a bail in which Clark hands over $117,000, forfeited if convicted, and returned if not, as well as restrict his access to the internet and electronic devices.
The ultimate outcome is pending.