EU votes against banning proof-of-work | BetaShares %

EU votes against banning proof-of-work

BY Justin Arzadon | 22 March 2022

Bitcoin inched higher over the last week, breaking the US$40K level once again, and was trading at $41,920 at the time of writing.

Ether’s price action outperformed bitcoin, up 13.07% vs bitcoin’s 7.06% over the last seven days.

Bitcoin’s market cap rose to $796B, market dominance is at 42.07%, and the entire crypto market is valued at $1.89T.

Price High Low Change from previous week
BTC (in US$) $41,920 $42,316 $37,680 7.06%
ETH (in US$) $2,924 $2,979 $2,503 13.07%

Source: CoinMarketCap. As at 20 March 2022. Past performance is not indicative of future performance. Performance is shown in U.S. dollars and does not take into account any USD/AUD currency movements.

Source: Glassnode

News we are keeping an eye on

The European Union Parliament Committee voted against banning mining and the use of proof-of-work (PoW), which is the consensus mechanism used by Bitcoin and other crypto assets. PoW has been criticised for being energy-intensive and harmful to the environment. According to the Cambridge Bitcoin Electricity Consumption Index, Bitcoin mining consumes 133.65 TWh of power every year, which is more than the total amount of power consumed by many small countries. The European Commission should now present an alternative legislative proposal by January 2025 to “include in the EU sustainable finance taxonomy any crypto-asset mining activities that contribute substantially to climate change mitigation and adaptation.”The vote is a relief to the crypto community as a ban would have been seen as a de facto bitcoin ban.

South Korea’s new president is being welcomed by the crypto community and should be positive for the adoption of crypto in the country. South Korean President-elect Yoon Suk-yeol is keen on driving the adoption of blockchain technology and has announced pro-crypto policies such as not imposing taxes on gains from cryptocurrency up to $40,000 (currently imposed on profits generated above $2,000 per annum) and treating crypto trading gains the same as stock winnings.  The secretary-general at Korea Blockchain Association, Yoon Seong-han, was quoted as saying: “We definitely welcome his stance as he is confident about boosting the industry. As ICOs are banned now, we have no choice but to issue coins in Singapore and other countries. Ventures and startups will be able to raise money easily from investors if the ban is lifted.”2

A debt deal of $45 billion with the International Monetary Fund (IMF) was approved by the Argentine Senate linked to an agreement that includes a provision discouraging the use of cryptocurrencies. The provision, titled “Strengthening financial resilience”, says: “To further safeguard financial stability, we are taking important steps to discourage the use of cryptocurrencies with a view to preventing money laundering, informality and disintermediation.” The debt deal will serve to restructure a $57 billion program the country received in 2018.3  

On-chain metrics

Bitcoin: Number of Addresses with Balance ≥ 1k (7d Moving Average) shows the number of unique addresses holding 1,000 coins or more. This metric is interesting as holders of 1,000 or more bitcoin are considered ‘smart-money’ or ‘whales’ given their balance size, and tend to lead the retail market when making investment decisions.

Looking at data from on-chain analytics company Glassnode, the number of unique addresses holding at least 1,000 coins has increased since 27 February and continues to move higher. The last time there was an increase this strong was from late December 2020 to early February 2021, when the price went from $27K to $46K.

Source: Glassnode.

Bitcoin: Liveliness is a quantitative measure that gives insight into the behaviour of investors. It is calculated as the ratio of Coin Days Destroyed (the sum of coins spent that day multiplied by the number of days since each coin was last spent) and the sum of all coin days ever created. Liveliness increases as long term holders liquidate positions and decreases while they accumulate. A reading between 0 and 1 is used as a measure of Liveliness.

Bitcoin Liveliness has continued to decline since August of last year. With the bitcoin price trading rangebound for weeks, older coins continue to be held and unmoved. You will notice that there was a large spike in early February, but that can be attributed to the $3.6 billion that was seized by the U.S Justice Department that was linked to the 2016 hack of Bitfinex and can be considered an anomaly.

Source: Glassnode.

Altcoin news

Ethereum, which currently runs under proof-of-work (PoW), is one-step closer to running entirely under a proof-of-stake (PoS) network. As of 15 March,  Kiln, the merge testnet execution layer, has been running entirely under a proof-of-stake consensus algorithm. The website for the Ethereum Foundation blog stated: “Kiln is expected to be the last merge testnet created before existing public testnets are upgraded. Application and tooling developers, node operators, infrastructure providers and stakers are strongly encouraged to test on Kiln to ensure a smooth transition on existing public testnets.”4 However, it is important to note that a date for the Ethereum main net proof-of-stake transition has not yet been set.

Investing in crypto assets or companies servicing crypto-asset markets should be considered very high risk. Exposure to crypto assets involves substantially higher risk when compared to traditional investments due to their speculative nature and the very high volatility of crypto-asset markets.

Investing in crypto assets or crypto-focused companies is not suitable for all investors and should only be considered by investors who (i) fully understand their features and risks or after consulting a professional financial adviser, and (ii) who have a very high tolerance for risk and the capacity to absorb a rapid loss of some or all of their investment.

Any investment in crypto assets or crypto- focused companies should only be considered as a very small component of an investor’s overall portfolio.





Off the Chain will be published every Tuesday, and provide the latest news on bitcoin and the rest of the crypto market along with analysis and insights into the world of crypto.

It provides general information only and is not a recommendation to invest in any crypto asset, crypto-focused company or investment product.

Leave a Reply