Ether and Other Cryptocurrencies Regain Ground; China Corporations Unconvinced of Blockchain Technology

Good morning. The following is a summary of key news:

Prices: Bitcoin's price is just above $20K.

Key Points: China's blockchain revolution may not be as revolutionary as some people think.

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Bitcoin (BTC): $20,244 +5%

Ether (ETH): $1,152 +7.3%

Bitcoin's Price Remains Below $20K as Its Value Continues to Grow

The U.S. celebrated with fireworks and bombast, while crypto had a little to celebrate, too.

Bitcoin retook the $20,000 threshold that has been a psychological observation point since the start of the summer for investors assessing the length of the current bear market. The largest cryptocurrency by market capitalization was recently trading at about $20,300, up 5% over the past 24 hours. Bitcoin fell to below $19,000 at one point last week before gaining ground during a Friday rally.

Ether rose even more in Monday trading, along with several other major altcoins. Investors seemed more receptive to risk. At the time of writing, the second-largest cryptocurrency by market cap was changing hands at over $1,150; a nearly 8% gain since the previous day. Among other major cryptos, SOL and SAND jumped more than 9% and 8%, respectively.

Despite the latest market downturn, the crypto Fear & Greed Index remained stuck in extreme fear territory, and analysts were pessimistic about prices for at least the near-term. Bitcoin and ether have fallen more than 5% and 6% from their highs early last week, while most other cryptos are also well in the red over that period.

FxPro Senior Market Analyst Alex Kuptsikevich said that Bitcoin has been under pressure for almost all last week. A brief bounce at the beginning of the day on July 1 was more likely due to excitement from the start of a new period (month, quarter, half-year) than fundamental changes in the situation.

Ether's price drop

The price of ETH continues to fall as The Merge, the change from a proof-of-work to proof-of-stake protocol that's coming soon, approaches. Trading was light as the U.S. celebrated its Independence Day. U.S. equity markets were closed in observance of the holiday, but European indexes were up with the Stoxx Europe 600 rising 0.5% on Monday

The crypto winter has been good for investors who can wait out the next bull market, according to Binance CEO Changpeng Zhao. A survey by Mastercard (MA) revealed that over 51% of Latin Americans made at least one transaction with cryptocurrencies between March and April of this year.

But more bad news followed for the crypto industry as CoinLoan limited withdrawals; American-Israeli crypto lender, Celsuis, laid off over 150 employees as it battles a financial crisis that saw it halt customer withdrawals last month; Three Arrows Capital filed for bankruptcy late Friday after weeks of speculation that it was functionally insolvent; and Vauld suspended all withdrawals, trading and deposits on its platform while looking at restructuring options.

Economic downturn

Kuptsikevich pointed out that the economic situation will continue to affect cryptocurrency markets.

"The global outlook remains bearish as stock markets do not show any signs of central banks' tightening financial conditions," Kuptsikevich wrote. "On the weekly charts, BTCUSD is still below the 200-week average, having failed a brief attempt to rise higher last week."

Markets are the most efficient way to allocate resources.

S&P 500: +1%

DJIA: 31,097 +1%

Nasdaq: 11,127 +0.9%

Gold:  +2.02%

Understanding the key

China's Blockchain Push May Not Be Far-Reaching Enough

In his 2019 New Year address, President Xi of the People's Republic of China said that Beijing is prioritizing blockchain technology, and it will be a key component of the country's five-year plan.

President Xi has been quoted as saying that the government will integrate blockchain technology into the IT fabric of the bureaucracy, according to its policy of encouraging independent innovation in core technologies.

The Blockchain Service Network (BSN), a state-funded program that makes it easier for enterprise developers to assemble and create blockchain-based applications, was introduced.

This is not real blockchain. It's a neutered version called "permissioned blockchain." No corporation or government wants their key data to be in a decentralized state they can't control.

The South China Morning Post said that China has nearly 1,800 blockchain services companies that are claimed to be integrated into most parts of the economy and bureaucracy.

Many companies have doubts

IBM, which is the standard for enterprise computing, has disbanded its blockchain team. Microsoft shut down its Blockchain service on Azure cloud soon after. The U.S. Food and Drug Administration, once a proponent of blockchain in "a smarter era of food safety," has dropped the initiative.

In its 2021 hype cycle for blockchain, Gartner identified a lack of successful enterprise blockchains.

Gartner said that although decentralized finance, payments, and tokenization have some appeal, enterprise blockchain is not catching on because "most users are trying to align use cases to the technology."

Gartner explained in another article that "it is hard to understand the value of permissioned blockchains since they do not implement the most revolutionary aspect of public blockchains - i.e., trust minimization and elimination of central authority, achieved via decentralized consensus," as it stated.

Rewards

In China’s case, companies are doubling down on blockchain because of the many incentives available, such as a $140 million thinks that it will help its economic ambitions and wants to throw money at it, companies will happily oblige and play along.

When investors are involved, it is especially true that they can use this to juice a funding round. At one time, China was home to nearly 35,000 blockchain companies, according to publicly available corporate registration data. Many firms were just trying to access development subsidies by adding blockchain to their name and outright frauds were also present. AccordingInput

It's unclear what these 1,800 companies actually do. On-chain data is essential for verifying any claims involving blockchain. However, with private chains, block explorers can't be used to inspect the data and verify claims of data volume, which is a central tenet of the "trust machine” that is blockchain.

Events that are important

Jibun Bank Services PMI (June)

Caixin (China) Services' PMI (June)

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Three Arrows Paper Trail Leads to Trading Desk Hidden Via Offshore Entities: As Three Arrows Capital was pressured by the market, its trading desk, TPS Capital, remained active, according to sources. But a complex ownership structure could make it difficult for creditors to collect.

Crypto Lender Celsius Will Lay Off 150 Employees as Part of Restructuring: Withdrawals are still suspended and the firm has hired restructuring experts as it faces a financial downturn.

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CoinDesk's Chief Content Officer: The recent woes of crypto have echoes in the past, and LTCM is one example.

Other voices: Bitcoin Prices Struggle Below $20,000; What May Happen Next? (Barron's)

An individual who is speaking and listening can hear the words that are said.

"The Vauld management wishes to inform that we are facing financial challenges despite our best efforts. This is due to a combination of circumstances such as the volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate... Vauld trading platform/blog ... "We are introducing a temporary measure - a reduction of the account withdrawal limit - in order to balance the flows of funds and prevent liquidity-related interruptions. Please note that this is only a precaution, as the current level of liquidity meets our users' needs. This temporary restriction applies to total amount daily withdrawals per account: every user can withdraw up to $5,000 per 24-hour rolling period." CoinLoan crypto lending platform/blog