Investments

How Bitcoin whales make a splash in markets and move prices

Are the Whales selling in this bear market? A deep dive into the on-chain data of whales.

Deriving their names from the size of the massive mammals swimming around the earth’s oceans, cryptocurrency whales refer to individuals or entities that hold large amounts of cryptocurrency. 

In the case of Bitcoin (BTC), someone can be considered a whale if they hold over 1,000 BTC, and there are less than 2,500 of them out there. As Bitcoin addresses are pseudonymous, it is ofte difficult to ascertain who owns any wallet.

While many associates the term “whale” with some lucky early adopters of Bitcoin, not all whales are the same, indeed. There are several different categories:

Exchanges: Since the mass adoption of cryptocurrencies, crypto exchanges have become some of the biggest whale wallets as they hold large amounts of crypto on their order books. 

Institutions and corporations: Under CEO Michael Saylor, software firm MicroStrategy has come to hold over 130,000 BTC. Other publically-traded companies such as Square and Tesla have also bought up large hoards of Bitcoin. Countries like El Salvador have also purchased a considerable amount of Bitcoin to add to their cash reserves. There are custodians like Greyscale who hold Bitcoins on behalf of large investors.

Individuals: Many whales bought Bitcoin early when its price was much lower than today. The founders of the crypto exchange Gemini, Cameron and Tyler Winklevoss, invested $11 million in Bitcoin in 2013 at $141 per coin, buying over 78,000 BTC. American venture capitalist Tim Draper bought 29,656 BTC at $632 apiece at a United States Marshal’s Service auction. Digital Currency Group founder and CEO Barry Silbert attended the same auction and acquired 48,000 BTC.

Wrapped BTC: Currently, over 236,000 BTC is wrapped in the Wrapped Bitcoin (wBTC) ERC-20 token. These wBTCs are mostly kept with custodians who maintain the 1:1 peg with Bitcoin.

Satoshi Nakamoto: The mysterious and unknown creator of Bitcoin deserves a category of his own. It’s estimated that Satoshi may have over 1 million BTC. Although there is no single wallet that has 1 million BTC, using on-chain data shows that of the first 1.8 million or so BTC first created, 63% have never been spent, making Satoshi a multi-billionaire.

Centralization within the decentralized world

Critics of the crypto ecosystem say that whales make this space centralized, maybe even more centralized than the traditional financial markets. A Bloomberg report claimed that 2% of accounts controlled over 95% of Bitcoin. Estimates state that the top 1% of the world control 50% of the global wealth, which means that the inequality of wealth in Bitcoin is more prevalent than in traditional financial systems: an accusation that breaks the notion that Bitcoin can potentially break centralized hegemonies. 

The charge of centralization in the Bitcoin ecosystem has dire consequences that can potentially make the crypto market easily manipulatable.

However, insights from Glassnode show that these numbers seem to be exaggerated and don’t take the nature of addresses into account. There might be some degree of centralization, but that may be a function of free markets. Especially when there are no market regulations and some whales understand and trust Bitcoin more than the average retail investor, this centralization is bound to occur.

The “sell wall”

Sometimes, a whale puts up a massive order to sell a huge chunk of their Bitcoin. They keep the price lower than other sell orders. That causes volatility, resulting in the general reduction of the real-time prices of Bitcoin. This is followed by a chain reaction where people panic and start selling their Bitcoin at a cheaper price. 

The BTC price will only stabilize when the whale pulls their large sell orders. So, now the price is where the whales want it to be so they can accumulate more coins at their desired price point. The following tactic is known as a “sell wall.”

The opposite of this tactic is known as the Fear of Missing Out, or the FOMO, tactic. This is when whales put massive buy pressure on the market at higher prices than with current demand, which forces bidders to raise the price of their bids so they sell orders and fill their buy orders. However, this tactic needs substantial amounts of capital that aren’t required to pull off a sell wall.

Watching the selling and buying patterns of whales can sometimes be good indicators of price movements. There are websites like Whalemap that are dedicated to tracking every metric of whales and Twitter handles like Whale Alert, which has been a guide for Twitter users around the world to stay updated on whale movements.

When a whale makes a splash

Sixty-four of the top 100 addresses have yet to withdraw or transfer any Bitcoin, showing that the biggest whales might be the biggest hodlers in the ecosystem, ostensibly because of the profitability of their investment.

The evidence that whales mostly stay profitable is clear from the above graph. When calculated for a 30-day moving average, for the past decade, whales have remained profitable for over 70% of the time. In many ways, their trust in Bitcoin is what fortifies the price action. Being profitable (month-on-month in this case) during most of their investment period helps reinforce their faith in the hodl strategy. 

Even in 2022, one of the most bearish years in the history of Bitcoin, exchange balances have gone down, showing that most HODLers are stocking up on their Bitcoin. Most seasoned crypto investors refrain from keeping their long-term Bitcoin investments in exchanges, using cold wallets for hodling.

Kabir Seth, the founder of Speedbox and a long-term Bitcoin investor, told Cointelegraph:

“Most whales have seen multiple market cycles of Bitcoin to have the patience to wait for the next one. In the Bitcoin ecosystem now, the faith of whales is reinforced by the macroeconomics of inflation and more recently, the correlation with the stock markets. On-chain data of whale wallets show that most of them are hodlers. The ones that have come during this market cycle have not made realized profits to be selling. There is no reason to believe that whales will abandon the Bitcoin ship, especially when there is an economic fear of an impending recession looming.”

Kabir’s point on macroeconomics and correlation with the stock market can be observed in the graph below, which shows that since the last market cycle in early 2018, Bitcoin has closely followed traditional investment assets.

The silver lining in this trend is that Bitcoin has entered the mainstream in terms of consumer sentiment, changing its reputation of being a peripheral asset. On the other hand, a 0.6 Pearson correlation with the S&P 500 in no way means a hedge against the traditional markets. Other experts within the crypto ecosystem also seem to be frustrated with this trend.

Broader macroeconomics might be an important reason for the correlation between stocks and Bitcoin. The past couple of years saw inflows of funds to stock markets that were unparalleled in history. There are theories that in an elongated bear market or in terms of financial catastrophes, the correlation with the stock market might break. 

What does it mean when a whale sells?

Although, just looking at the on-chain data for the past three months shows that the number of whale wallets decreased by almost 10%. However, there has been a corresponding increase in wallets that own from 1 BTC to 1,000 BTC. The whales seem to be derisking their positions and the bigger retail investors have been accumulating in turn, providing liquidity to the whales. The historical trend shows that whenever this occurs, there will be a short-term decrease in Bitcoin prices which will eventually lead to whales starting to aggressively accumulate more. 

When asked about the very recent whale sell-off, Seth said:

“It’s almost inevitable that there will be some a period of a few weeks when the Whales will start selling. This is the mechanics of market movements. Currently, the broader market sentiment of Bitcoin is that the Bottom is in. There are sentiment analysis tools to confirm this. Some whales might be playing against this trend, in turn creating a bigger panic in the market. If there is a major sell-off now, Bitcoin prices might tank as the retail support will break. Only whales will have the liquidity to accumulate then.”

What the market can learn from Kabir’s point and the whales is that the future of Bitcoin is where one’s bet should be. Locally, the sentiments can be manipulated and the prices can be influenced. However, in the long run, when the dust settles, hodlers will prevail. 

Interview with Kevin O’Leary: $28K Bitcoin next or lower? | Market Talks with Crypto Jebb

Kevin O’Leary gives his outlook on the current state of the crypto market in this exclusive live interview with Cointelegraph.

With the price of Bitcoin (BTC) holding above $22,000, more and more market players are turning bullish again. Does this mean that we could see BTC go to $28,000 in the short term or will it fall below its current levels? Join us as we discuss this and other topics with Crypto Jebb and Mr. Wonderful, himself, Kevin O’Leary.

In this week’s episode of Market Talks, we welcome businessman, entrepreneur, author, winemaker and television presenter, Mr. Kevin O’Leary.

O’Leary, best known as the shark on the hit reality TV show Shark Tank, is the chairman of O’Shares Investments and a strategic investor in WonderFi. Mr. O’Leary’s success story starts where most entrepreneurs begin — with a big idea and zero cash.

The main topic of discussion on the show is whether BTC will go as high as $28,000 or re-test the bear market lows of June. With so much uncertainty in the market right now, we also discuss the best way to navigate digital assets for the remainder of the year.

Following the collapse of Terra (Luna) — now renamed Terra Classic (LUNC) — and the insolvencies of Celsius and Three Arrows Capital, we ask Kevin if he thinks, from a business perspective, these companies should have been bailed out.

Although Mr. O’Leary is a huge supporter of Bitcoin and cryptocurrencies, we have still not seen large institutional investors in the space yet. As such, we ask Kevin what needs to happen before large institutions enter the crypto market. We also pick his brain on the regulatory outlook for crypto in the United States and abroad.

Ether (ETH) has been a top crypto performer in recent weeks, but are the gains justified, or are they merely a byproduct of hype surrounding the Merge? We ask Kevin what he thinks about the future of Ethereum and if a $2,000 ETH is possible in 2022.

Tune in to have your voice heard. We’ll be taking your questions and comments throughout the show, so be sure to have them ready to go.

Market Talks with Crypto Jebb streams live every Thursday at 12 pm ET (4:00 pm UTC). Each week, we feature interviews with some of the most influential and inspiring people from the crypto and blockchain industry. So, be sure to head on over to Cointelegraph’s YouTube page and smash those like and subscribe buttons for all our future videos and updates.

Beyond the headlines: The real adoption of Bitcoin salaries

Bitcoin wages are becoming more common globally, particularly among “borderless” remote workers and in certain regions like Latin America.

Are cryptocurrency wages an idea whose time has come? Maybe not. It’s one thing, after all, to dabble in Bitcoin (BTC) with one’s excess cash and quite another to take a significant portion of one’s salary in BTC.

Moreover, there are often tax and custody questions about crypto, as well as concerns about price volatility. There’s the matter, too, that few actual items and services can be purchased at present with cryptocurrencies.

It’s not surprising, then, that aside from some celebrity athletes like Tom Brady and Aaron Rodgers and some high-profile big-city United States mayors, relatively few people outside the cryptoverse appear to have embraced this next step in crypto adoption.

It’s in that context that one has to evaluate NYDIG’s recent announcement of a “partnership” with the New York Yankees baseball team that will allow players and other employees “to convert a portion of their paycheck to bitcoin via the NYDIG platform.” Is this the start of something new, given that it comes on the heels of a harsh crypto winter? Or is it just another public relations stunt, jumping on the bandwagon already established by professional U.S. football and basketball players?

Interestingly enough, NYDIG offered some hints that Bitcoin salaries could actually become a secular trend above and beyond recent headline cases, especially among younger workers. According to its press release:

“NYDIG research shows that 36% of employees under 30 said they would be interested in allocating a portion of their pay to bitcoin. Nearly 1 in 3 of those employees said that when choosing between two identical jobs at different employers, they would choose an employer that helped them get paid in Bitcoin.”

NYDIG isn’t alone in identifying Millennials and especially Gen Zers as prime candidates to take crypto salaries to the next level. Indeed, one global hiring firm’s recent analysis of 100,000-plus employee contracts suggested that crypto wages appear to be on the rise, particularly among “borderless” remote workers, and especially residents of certain high-inflation regions or those with shaky banking systems, such as Latin America. 

Others have suggested, too, that employee demand for a portion of one’s regular wage in cryptocurrencies or stablecoins may be impervious to market fluctuations in the price of Bitcoin and other cryptocurrencies, though that sometimes seems hard to believe.

Younger generations are still keen

To this last point: In November, a deVere Group survey reported that a third of millennials and half of Generation Zers would be happy to receive 50% of their salary in Bitcoin and/or other cryptocurrencies. This survey was conducted when crypto market prices were soaring, however. Does the financial advisory group believe that younger generations are still eager to receive their salaries in cryptocurrencies following a 50%-plus drawdown in crypto prices since that time?

“Younger generations are still keen to receive their salaries in cryptocurrencies as they have grown up on technology. They are ‘digital natives,’” Nigel Green, CEO of the deVere Group, told Cointelegraph, and more comfortable using cryptocurrencies than older generations. Moreover, “they know the future lies in tech and appreciate the inherent value of borderless, digital, global, censorship-resistant and nonconfiscatable currencies.”

“From our company, 90%+ [of employees] still stack Bitcoin regularly on a monthly basis,” Danny Scott, CEO and co-founder at the United Kingdom’s CoinCorner LTD, which has held Bitcoin on its balance sheet for some years and offers employees a BTC salary option, told Cointelegraph. “If anything, we have received more inquiries over the last few months from companies looking to pay their staff in Bitcoin.”

In June, an Ascent survey reported that “44% of Americans would consider receiving part of their salary in cryptocurrency, and 36% said they would consider receiving all of their salary in cryptocurrency.” Still, that survey of 2,000 American adults was conducted on May 6, 2021 and May 25, 2022, when BTC was still close to $30,000. The price stood at around $23,000 on Aug. 1 in comparison.

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Adam Poulton, CEO at Get Paid In Bitcoin — a Bitcoin payroll solutions platform based in Australia — challenged the notion that the #PaidinBitcoin phenomenon was wholly resistant to market price influences. “Our business, while designed to take away the speculative nature of Bitcoin, still does suffer from the emotional rollercoaster of price rises and crashes,” he told Cointelegraph, further explaining:

“Our service does see an influx of new customers during bull markets and a drop away in transactions during bear markets. It’s an issue that we are still actively trying to address over the longer term.”

People that stop and start the process of accumulating Bitcoin are actually worse off by trying to time the market, Poulton added, “rather than just doing the raw dollar-cost averaging strategy that our platform enables.” 

Trending higher in 2022

Deel, a global payroll platform, regularly examines 100,000-plus cross-border hiring contracts in 150 countries to uncover trends. The firm reports that more and more employees are taking crypto as part of their salary. 

In the six-month period from January 1 to June 30, around 5% of all payments from the Deel platform monthly were taken in crypto, up from only around 2% in the previous six-month period. Dan Westgarth, chief operating officer at Deel, told Cointelegraph that he expects this growth to continue, with 8% in the 2nd half of 2022 a real possibility. Moreover, this trend is mostly “market agnostic” — i.e., not correlated with the market price of crypto.

There is considerable variation by geographic region, however. Sixty-seven percent of Deel’s crypto salary withdrawals in the first half of 2022 were from Latin American (LATAM) countries, and another 24% from Europe, the Middle East and Africa (EMEA). By comparison, North America accounted for only 7% of crypto salary withdrawals and the Asia Pacific (APAC) region just 2%.

How can these differences be explained? Three different groups are driving this trend, in Westgarth’s view. First are investment types, looking for a good longer-term investment. The second group is remote workers who reside in countries with aging banking systems. And, the third group is remote workers in high inflation countries, like Turkey or Argentina.

Many of the banking systems in the LATAM region are old, and the cost of payment transfers to these countries is time-consuming and costly, explained Westgarth. Crypto transfers, in comparison, are fast and cheap, so workers take part of all of their salary in crypto and often convert it right away into local currency. Employees in places like Argentina might fall into all three groups, such as investors living in high inflation areas with old banking systems.

When employees opt to take all or part of their salary in crypto, it isn’t always in Bitcoin either, according to Deel. Less than half (47%) in the most recent Deel survey received some payment in BTC, though this was still the leading option, followed by USD Coin (USDC) (29%), Ether (ETH) (14%), SOL (8%) and Dash (2%).

Asked about the surprisingly high USDC component, which was more popular than Ether, Westgarth suggested that the stablecoin might be the first choice in some high-inflation countries where trust in government is low and exchange rates aren’t always transparent. Those workers don’t want to take the investment risk of BTC or ETH, however, so a stablecoin like USDC represents a sort of middle ground, he suggested. In any event, “We let the workers choose how they want to get paid — local currency, crypto or USDC.”

Green sees sustained growth in crypto wages over the next five years as Bitcoin becomes more widely distributed generally. As this happens, “Liquidity will continue to soar, and volatility will continue to ease.” It is all part of continuing a decade-long trend, and Green expects that “Most major corporations will offer workers a crypto payment option within five years.”

Taking custody of one’s own BTC

There are many other questions about crypto as salary, including custody. To this last point, if people are going to take crypto for wages, then they need a place to store it safely. NYDIG, for its part, isn’t actually paying New York Yankee baseball players in Bitcoin but in a BTC-denominated portfolio asset. Not all agree that is the best way to go. 

“Our platform is directed toward people taking custody of their own Bitcoin,” Poulton told Cointelegraph. “From our point of view, the actual asset and delivery of Bitcoin is extremely important as it cuts out the counter-party risk of having to rely on other parties for the safe delivery of your value into the future.”

Others ask why employees would want to take a salary in Bitcoin when there is almost nothing that you can buy with it. “I understand that ‘brick and mortar’ adoption of Bitcoin acceptance is still very low,” answered Poulton, though Bitcoin-enabled credit cards have been proliferating. Nonetheless:

“By simply receiving a bit of your wages in Bitcoin and holding it in a secure wallet, one is saving for the future and preparing one’s family for a potential future inflationary environment.”

Another interesting aspect of the “crypto as salary” movement is gender participation. The proportion of female Bitcoin wage recipients has been growing, according to Poulton. “Our female representation was in the order of 7%–8%,” but with the firm’s new business-to-business platform, “It’s now more like 38%–40%.”

Macrotrends favor growth

Other employment trends favor crypto salaries too. In many industries, there is a “high demand for talent and a shortage of available candidates,” according to Deel’s hiring report, so “more companies are looking outside of higher-cost countries to find quality talent.” Demand for product and design roles, for example, is shifting from the U.S. to countries such as Argentina and India.

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Deel’s most recent survey saw a dramatic uptick in worker contracts in places like Georgia, Armenia and Belarus in the EMEA region, Kyrgyzstan, Azerbaijan and Thailand in APAC, and Trinidad and Tobago in LATAM, noted Westgarth. It is often much easier, cheaper and faster to pay remote workers in relatively “exotic” locations in cryptocurrencies than through traditional bank channels like the SWIFT system.

Overall, mass cryptocurrency adoption — along with crypto salaries — is probably inevitable over time, according to Green. “But there are still obstacles to be overcome, including a lack of understanding among older senior executives, scalability and regulatory concerns.”

Borrowing to buy Bitcoin: Is it ever worth the risk?

Borrowing to buy crypto has often been advocated for by various influencers, but the consequences may be dire.

The cryptocurrency space is expected to reach 1 billion users in 2030. While some have been known to make a fortune off of it, others have ruined their finances, chasing similar results, going as far as getting credit to buy crypto by putting up valuable assets, including their homes, as collateral.

Borrowing to invest can make sense under very specific conditions, but using a home equity loan is also extremely risky. For example, it means that an investor’s home is being put up as collateral on loan.

Cryptocurrencies have, in the past, delivered spectacular results to investors, but also saw them go through long drawn-out bear market periods in which many lost hope and sold at a loss, with those who managed to hodl on reaping the biggest rewards. As any analyst or financial adviser would say, past results are not indicative of future results.

When Bitcoin (BTC) was trading at $57,000, MicroStrategy CEO Michael Saylor suggested investors should use all of their money to buy Bitcoin and “figure out how to borrow more money to buy Bitcoin.” At one point, Saylor suggests they should “go mortgage their house” to get more BTC.

At the time of writing, Bitcoin is changing hands near $23,000, meaning investors who followed Saylor’s words would now be deeply underwater. MicroStrategy has taken out loans from Silvergate Bank and raised capital by issuing debt to buy more Bitcoin, to the point that it now holds 129,698 BTC.

While corporate lending differs from personal lending, it’s important to understand what may happen when investors borrow against their assets to buy more crypto and what’s in store for them.

Being prudent in a high-risk environment

Mortgaging a home to buy cryptocurrencies has been a strategy employed by some investors, one that, if done at the right time, could lead to significant returns. However, it could have disastrous consequences if done at the wrong time.

Speaking to Cointelegraph, Stefan Rust, CEO of inflation-tracking platform Truflation, noted it’s “definitely a high-risk strategy” that is “always an alternative” as it’s a “reasonable and cheap source of capital.” Rust added that if the house being mortgaged is paid off and there are “residual assets available to be able to take out a mortgage then why not leverage that mortgage to buy Bitcoin.”

The CEO referenced fintech startup Milo, which offers 30-year crypto-mortgages and allows users to leverage their cryptocurrency holdings to purchase real estate as an option, and added:

“I personally would not go all out and ‘maximize’ by putting all my earnings into Bitcoin. That’s basically putting all your eggs in one basket. This is a super high risk allocation of capital.”

Rust added that for investors with a family to take care of and bills to pay, mortgaging their property “might not be the most advisable strategy.” Per his words, it’s “typically best to deploy common sense and appropriate risk management.”

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Dion Guillaume, global head of PR and communications at crypto exchange Gate.io, expounded upon Rust’s words, telling Cointelegraph that the “easiest way to ruin is to play with shitcoins and try to time the market” and told investors to “never use excessive leverage” and instead “reign in” their greed.

Guillaume said that investors must avoid falling for the hype, and while “this can be tough in crypto, discipline is key.” Commenting on leveraging assets to buy more BTC, he advised caution instead of going all-in as Saylor suggested:

“We need to be more prudent with the way we use our money. Despite all its greatness, crypto is still a high-risk asset. Are you a billionaire with seven houses? If yes, then you can probably mortgage one to buy BTC. If not, then be smarter.”

Speaking to Cointelegraph, Dennis O’Connell, chief technology officer and portfolio manager at crypto portfolio company Peregrine Digital, noted that borrowing to buy crypto is a “textbook case of what never to do with your finances,” as a “house is a great investment over the long term and one of the primary ladders to grow wealth.”

O’Connell added he has read “too many articles of destroyed families or of people who have taken their lives tragically by doing this very thing.” He added one should never take out loans or use leverage to invest in Bitcoin if they cannot afford to lose.

Cryptocurrency markets are known to be extremely volatile and filled with significant ups and downs, where leading assets can nearly double in a month and bear markets can see BTC lose over 80% of its value.

Expect the unexpected

Because of the cryptocurrency space’s inherent volatility, O’Connell noted that investors need to take into account that Bitcoin is affected by monetary policy the same way other assets are and has “proven not to be an inflation hedge” while being highly correlated to other risk assets.

The portfolio manager suggested investors need to expect the unexpected, especially when using leverage:

“They should expect the unexpected. Market cycles in crypto are highly volatile. Depending on their local regulations they can try and buy some protection through hedging perpetual futures (not yet legal in the United States) to off their risk.”

Per his words, the volatility in risk assets seen amid climbing interest rates make it difficult to “justify borrowing against any asset traditional or crypto and going to into Bitcoin.” Addressing suggestions investors could borrow to buy crypto, O’Connell said they must be “highly skeptical and always question the motivation of the source” telling them to borrow.

He added the cryptocurrency space is known to be filled with scammers and is heavily influenced by investor sentiment, and as such, caution must be exercised.

Thomas Perfumo, head of business operations and strategy at cryptocurrency exchange Kraken, told Cointelegraph that educational resources exist that “everyone should read” before using leverage to buy any cryptocurrency.

Perfumo noted that leverage is generally a tool used to maximize returns on capital and, in some cases, leverage it in a tax-efficient manner while also increasing the risk profile of transactions in which it’s being used. This means it’s “important for anyone looking to employ leverage to understand their risk tolerance and manage their risk effectively.”

With any risk asset, Perfumo said, investors should never invest more than they are willing to lose, concluding:

“When making important financial decisions, it is important for everyone to consider their personal risk tolerance and financial goals. We often recommend people consult with advisers to determine the most appropriate investment strategies.”

These important financial decisions should likely also include the composition of investors’ potential crypto portfolios and their role in their overall investment portfolio. To investors who put in more than they can afford to lose, crypto exposure may seem like a nightmare.

Reacting to levered positions gone awry

Guillaume stated that investors who have a leveraged position in the cryptocurrency space need to consider how much longer they can afford to maintain them, as given enough time, they can keep on holding onto it and hope for their “fortunes to turn.”

Guillaume said leveraged traders should use a bull market to turn crypto into cash when they break even so they can pay off their debts and promise themselves they will never mortgage their house for crypto “ever again.”

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O’Connell said that investors underwater on a leveraged position should “should immediately seek the advice of licensed financial planner and expert to structure a plan.” Mental health, he added, should not be set aside:

“They should also take care of their mental health and seek help from therapists or licensed mental health professionals. They should know there is professional support both financially and mentally.”

At the end of the day, investors need to recognize that cryptocurrencies are risky assets based on technological innovations. Things can change overnight, as the collapse of the Terra ecosystem and subsequent contagion to other firms made clear.

To stay safe, investors need to appropriately manage their risk, which may mean their portfolios will be “boring” for quite some time. However, this “downtime” can give them the break they need to heal mentally and improve their outlook.

Michael Saylor will step down as MicroStrategy CEO but remain as executive chair

The soon-to-be former CEO said splitting the roles of MicroStrategy’s chief executive officer and chair would help the firm pursue its strategy of “acquiring and holding Bitcoin.”

Bitcoin (BTC) maximalist Michael Saylor has announced that he will step down as the chief executive officer of MicroStrategy, the business intelligence firm he helped co-found in 1989.

In a Tuesday notice on its second quarter earnings for 2022, MicroStrategy said Saylor would be assuming the new role of executive chair at the company, while president Phong Le will become CEO. The changes are expected to take effect on Aug. 8.

“I believe that splitting the roles of Chairman and CEO will enable us to better pursue our two corporate strategies of acquiring and holding Bitcoin and growing our enterprise analytics software business,” Saylor said.

Le was MicroStrategy’s chief financial officer from August 2015 to July 2019 before combining his responsibilities with those of president of the company until May 2022, when he took on the latter role full time. According to MicroStrategy, Le will continue his duties as both president and CEO in “handling day-to-day execution of the company’s corporate strategies” while Saylor will focus on “Bitcoin acquisition strategy and related Bitcoin advocacy initiatives” in his role as executive chair.

MicroStrategy reported that it held more than 129,699 Bitcoin — worth roughly $2 billion after considering the company’s cumulative impairment losses — as of June 30, with total revenues for the second quarter of 2022 coming in at $122.1 million, compared with $119.3 million in the first quarter. The business intelligence firm disclosed to the U.S. Securities and Exchange Commission that it had acquired 480 BTC for $10 million in June.

Related: BTC bull Michael Saylor: Ethereum is ‘obviously’ a security

Amid the market downturn in June — in which the price of Bitcoin fell under $18,000 — Saylor said MicroStrategy would “continue to HODL through adversity,” adding that the firm had prepared for volatility and structured its balance sheet accordingly. According to the soon-to-be former CEO, this strategy will allow MicroStrategy to post collateral even “if the price of BTC falls below $3,562” — an event that happened briefly during the market crash in March 2020.

‘Nothing issue’ — MicroStrategy CEO plans to hodl Bitcoin ‘through adversity’

Investment banking firm Jefferies reported on July 26 that it had downgraded MicroStrategy’s stock to underperform from hold, with a price target of $180. At the time of publication, MSTR shares traded at $278.26, having risen by more than 48% in the last 30 days.

Hedge fund billionaire Steve Cohen exits crypto startup Radkl amid bear market: Report

The hedge fund manager was part of a $50-million funding round for NFT company Recur, and backed a $21-million round for crypto analytics firm Messari through Point72.

Steve Cohen, the founder of hedge fund Point72 Asset Management, has reportedly exited his investment in crypto trading firm Radkl.

According to a Tuesday report from Bloomberg citing a Radkl spokesperson, Cohen has reduced his exposure to crypto investments following his exiting the trading firm. However, the spokesperson reportedly said Radkl was still “extremely well capitalized with its current investors” and was continuing to grow.

Cohen, whose net worth was estimated at more than $17 billion, has backed crypto and blockchain projects both using his personal portfolio and through Point72. Cointelegraph reported in September 2021 that the hedge fund manager was part of a $50-million funding round for nonfungible token company Recur, and backed a $21-million round for crypto analytics firm Messari through Point72.

While four managing directors reportedly left Radkl in 2022, the company only listed one job opening on its website at the time of publication — for a Linux engineer based in New York. In contrast, Point72 reportedly hired Elie Galam in June to head the hedge fund’s crypto arm in an effort to increase digital asset trading.

The reported investment came amid extreme volatility in the price of many cryptocurrencies including Bitcoin (BTC) and Ether (ETH) in what many have referred to as a bear market or the next crypto winter. However, a June report from PricewaterhouseCoopers suggested that despite bearish trends, roughly 66% of the 89 hedge funds surveyed planned to increase their exposure to crypto by the end of 2022.

Related: 3AC: A $10B hedge fund gone bust with founders on the run

“We are interested in investment opportunities in the new set of infrastructure companies that are bridging the crypto and non-crypto worlds for financial services, enterprises, and consumers,” said Point72 in an April blog post. “Ultimately helping to bring crypto to millions of businesses and billions of people around the world.”

Point72 reported as of April 1 that it had more than $24 billion in assets under management. The firm also reportedly sublet some of its office space in New York City to Coinbase in June 2021.

$200M BitGet BTC-USDT protection fund hints at investor-centric trend

Bitget’s reasoning behind using a combination of a stablecoin and Bitcoin in the protection fund is to counter massive unforeseen volatility in crypto markets.

With the ultimate goal to regain investor confidence amid a prolonged bear market, crypto derivatives exchange Bitget launched a $200 million fund to safeguard users’ assets. Bitget joins the growing list of crypto companies, such as Binance, that have taken an investor-centric approach to gain investors’ trust via protection funds.

The Bitget Protection Fund comprises 6,000 Bitcoin (BTC) and 80 million Tether (USDT), valued at $200 million at the time of writing. Considering the fact that crypto winter currently shows almost no signs of slowing down, Bitget pledged to secure the value of the fund for the next three years.

While Bitget chose to self-fund the entire protection fund without relying on a third-party insurance policy, Binance set up its user protection insurance fund, Secure Asset Fund for Users (SAFU), by allocating 10% of the trading fee. Starting off in 2018, SAFU reached a $1 billion valuation by early 2022. Sharing details about the newly founded fund, Gracy Chen, managing director of Bitget, added:

“The protection fund will help us mitigate investors’ concerns and attract potential users. As we continue to endure the crypto winter, it is crucial that our users can rest assured that their funds are kept safe.”

Bitget’s reasoning behind using a combination of stablecoin and BTC in the protection fund is to counter massive unforeseen volatility in crypto markets. Further safeguarding investors, Bitget implemented stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) policies to disallow bad actors from using its services.

Related: Voyager can’t guarantee all customers will receive their crypto under proposed recovery plan

Soon after filing for bankruptcy, crypto lending firm Voyager Digital revealed that it might not be able to reimburse all of its customers under the proposed recovery plan.

Upon court’s approval, Voyager’s proposed recovery plan involves reimbursing users’ funds worth roughly $1.3 billion in a combination of Voyager tokens, cryptocurrencies, “common shares in the newly reorganized company,” and funds from any proceedings with Three Arrows Capital (3AC).

“The plan is subject to change, negotiation with customers, and ultimately a vote […] We put together a restructuring plan that would preserve customer assets and provide the best opportunity to maximize value.” said the lending firm.

Can blockchain be used without cryptocurrency?

Blockchain technology supports cryptocurrencies but can also be used for supply chain tracking, identity management systems, healthcare and more.

Can smart contracts exist without blockchain?

Blockchain technology is necessary for smart contracts to function because it enables automated agreements to be conducted and carried out without the involvement of a third party. 

Similar to smart contracts, database systems can have self-executing components such as triggers and stored procedures. Still, they cannot enforce immutability because anyone with administrator rights can undo any transaction, purge transaction logs, etc., and make it appear like it never happened. As a result, blockchain will always be required for smart contracts that need to be safe and tamper-proof. Unfortunately, complicated smart contracts are not supported by Bitcoin, the most popular cryptocurrency.

Without blockchain, no other contemporary technology would enable the widespread use of smart contracts. Nonetheless, smart contracts need blockchain oracles to call off-chain data that is pushed to the distributed ledger at predetermined times. Oracles offer a simple way to access off-chain resources, but doing so requires the parties to enter into a contract with a new party, which may undermine the decentralized advantages of smart contracts. 

Additionally, it creates a possible point of failure. For instance, an oracle may encounter a system defect and be unable to distribute the required information, deliver inaccurate data or cease operations. Therefore, before being more widely adopted, smart contracts must address these problems.

Can you invest in blockchain without buying cryptocurrencies?

There is no direct way to invest in a blockchain. However, investing in blockchain-based startups is one way by which you can explore blockchain beyond cryptocurrency investments.

The blockchain industry offers many opportunities as users and organizations want to streamline corporate procedures, speed up transactions, improve security and transparency and use blockchain as a service (BaaS). One can invest in companies offering BaaS like IBM or Microsoft to understand blockchain technology. 

In addition, you can buy stocks of a company that is developing blockchain solutions to gain indirect exposure to distributed ledger technologies without making any cryptocurrency investments. Meaning that there are many benefits of blockchain other than supporting cryptocurrencies.

The supply chain is one area where blockchain has a significant impact. For example, you may track a crop back to the farm where it was grown with an immutable public record of every transaction. The manufacturing, transportation and delivery of a waste picker’s recycled item to a recycling facility or station can all be tracked with a distributed ledger. One can invest in the companies working in these areas. 

Whether directly or indirectly investing in blockchain-based startups, however, be aware of the risks like technical glitches, hard forks or human errors. Never risk more than you can afford to lose when investing.

Does a blockchain need cryptocurrency to work?

Only public blockchain needs cryptocurrency to function, while private blockchains do not need it.

Public and private blockchains are the two main categories of blockchains. Public blockchains are permissionless, allowing anyone to join the network and participate in the blockchain. Private blockchains, on the other hand, lack decentralization and are invitation-only networks run by a single organization.

Permissionless blockchains like the Bitcoin blockchain reward network participants called miners for solving a complex mathematical puzzle. This incentive, often rewarded in the form of a network’s native token, is a motivator for the system as a whole and, in particular, as a means of achieving consensus. 

Since Bitcoin mining incentivizes its participants, thousands of computers are currently engaged in it. By eliminating the cryptocurrency rewards, the motivation to run a node and participate in the consensus mechanism is decreased, which raises the risk of crypto heists.

Private blockchain examples include Hyperledger and Corda. The Linux Foundation created the Hyperledger project, which uses private blockchains to create distributed ledgers to support confidential commercial transactions. Another permissioned blockchain project developed by R3 is called Corda, and it is intended for companies who wish to develop interoperable distributed networks with private transactions. There is neither a mandate nor a requirement for cryptocurrencies to power and incentivize members on the network because centralized corporations manage these private blockchains.

What is blockchain without cryptocurrency?

A blockchain without cryptocurrency is a distributed ledger that stores data associated with nonfungible tokens (NFTs), supply chain initiatives, the Metaverse and more.

Even though Bitcoin (BTC) is the most known application of a decentralized ledger or blockchain, there is a wide range of other uses of blockchain technology. For instance, blockchain technology can be utilized in various financial services including remittances, digital assets and online payments because it enables payments to be settled without a bank or other middleman.

Furthermore, the next generation of internet interaction systems including smart contracts, reputation systems, public services, the Internet of Things (IoT) and security services are among blockchain technology’s most promising applications. 

A blockchain without cryptocurrency refers to a distributed ledger that keeps track of the status of a shared database across numerous users. The database can include the history of cryptocurrency transactions or confidential voting data related to elections, for example, that cannot be updated or deleted once added.

Therefore, blockchain technology is not only relevant to cryptocurrencies. Blockchain, however, is mainly concerned with the decentralized storage of information and the consensus of particular digital assets, which can or cannot be cryptocurrencies. So, can blockchain be used for anything?

Ideally, blockchain technology has the potential to replace business models that rely on third parties and centralized systems for trust. For instance, NFTs were initially introduced on the Ethereum network in late 2017 and are one of the disruptive innovations based on blockchain — beyond cryptocurrencies — that influence intellectual property. However, be aware of the risks and returns associated with NFTs before making any investments.

Charles Schwab’s asset management arm launches crypto-linked ETF

Schwab said the investment vehicle will offer exposure to firms involved in mining and staking as well as those developing blockchain-based apps or distributed ledger technology.

Schwab Asset Management, the asset management arm of financial giant Charles Schwab, has launched an exchange-traded fund (ETF) with exposure to firms linked to cryptocurrencies. 

In a Friday announcement, Schwab said its Crypto Thematic ETF was expected to be available for trading on the New York Stock Exchange’s Arca under the ticker STCE on Aug. 4. The fund tracks Schwab’s Crypto Thematic Index, providing an investment vehicle with exposure to companies “that may benefit from the development or utilization of cryptocurrencies and other digital assets.”

Likely because the United States Securities and Exchange Commission, or SEC, has not given the green light to ETFs providing direct exposure to Bitcoin (BTC), the Schwab fund will indirectly invest in crypto through companies. Schwab said the firms included those involved in mining and staking as well as those developing applications on the blockchain or distributed ledger technology.

“For investors who are interested in cryptocurrency exposures, there is a whole ecosystem to consider as more companies seek to derive revenue from crypto directly and indirectly,” said David Botset, Schwab Asset Management’s managing director and head of equity product management and innovation.

The anticipated launch of the crypto-linked ETF followed the firm announcing a Crypto Economy ETF in March. According to Schwab, the exposure to companies dealing in cryptocurrencies between the two funds would be similar — while the former would track the firm’s Crypto Thematic Index, the latter would invest “at least 80% of its net assets” for companies listed on its Crypto Economy Index.

Related: Grayscale reports 99% of SEC comment letters support spot Bitcoin ETF

The SEC has not approved spot Bitcoin ETFs — those directly investing in the cryptocurrency — in the United States. However, some asset management firms in the U.S. have launched ETFs offering indirect exposure to crypto through futures contracts, and Canadian regulators first approved a Bitcoin spot ETF from Purpose Investments in February 2021.

Crypto contagion deters investors in near term, but fundamentals stay strong

Many experts believe that the recent slew of insolvencies may be good for the market in the long run, weeding out any weak players from the industry.

The past six-odd months have been nothing short of a financial soap opera for the cryptocurrency market, with more drama seemingly unfolding every other day. To this point, since the start of May, a growing number of major crypto entities have been tumbling like dominoes, with the trend likely to continue in the near term.

The contagion, for the lack of a better word, was sparked by the collapse of the Terra ecosystem back in May, wherein the project’s associated digital currencies became worthless almost overnight. Following the event, crypto lending platform Celsius faced bankruptcy. Then Zipmex, a Singapore-based cryptocurrency exchange, froze all customer withdrawals, a move that was mirrored by crypto financial service provider Babel Finance late last month.

It is worth noting that since December 2021, nearly $2 trillion has been wiped out from the digital asset industry. And, while markets across the board — including equities and commodities — have been severely affected by the prevailing macro-economic climate, the above-stated slew of collapses have definitely had a role to play in the ongoing crypto drain. To this point, Ben Caselin, head of research and strategy for crypto exchange AAX, told Cointelegraph:

“The contagion has played a big part in the recent downturn, but we cannot ignore the wider market conditions and the change in fiscal policy as important factors playing into price. The situation concerning Celsius, Three Arrows Capital but also Terra is expressive of an over-leveraged system unable to withstand severe market stress. This should in the least serve as a wake-up call for the industry.”

He went on to add that increasing mass adoption of digital currencies in the future should be done by expanding the scope of crypto beyond its prevailing “sound money narrative.” Caselin highlighted that the market as a whole now needs to take into account and implement financial practices that are sound and sustainable in the long run.

What do the recent insolvencies mean for the industry?

Felix Xu, CEO of decentralized finance (DeFi) project Bella Protocol and co-founder of ZX Squared Capital, told Cointelegraph that the past month has been a “Lehman moment” of sorts for the crypto market. For the first time in history, this industry has witnessed the insolvency of major asset managers such as Celsius, Voyager and Babel Finance within a matter of months. 

According to his personal research data, while ailing projects like Voyager and Genesis collapsed due to the fact that they had the most exposure to Three Arrows Capital (3AC), the collapse of 3AC, Celsius and Babel Finance emanated due to rogue management practices associated with the assets of their users. Xu added:

“I believe the first wave of forced liquidation and panic selling is now over. As asset managers and funds file for bankruptcies, their crypto collaterals will take a long time to be liquidated. On the other hand, DeFi lending platforms such as MakerDAO, Aave and Compound Finance performed well during this downturn, as they are over-collateralized with strict liquidation rules written into their smart contracts.”

Going forward, he believes that the crypto market is likely to move in correlation with other asset classes including equities, with the industry potentially taking some time to rebuild its lost investor confidence. That said, in Xu’s opinion, what happened last month with the crypto market is nothing new when it comes to the traditional finance space. “We’ve seen it in the 2008 financial crisis and the 1997 Asian financial crisis,” he pointed out.

Recent: Metaverse visionary Neal Stephenson is building a blockchain to uplift creators

Hatu Sheikh, co-founder of DAO Maker — a growth technologies provider for nascent and growing crypto startups — told Cointelegraph that the aftermath of this contagion has been strongly negative but not for the reason many people would imagine:

“A key loss here is that many of the centralized finance platforms that went bankrupt due to the contagion were active onramps to the industry. Their unsustainable and often deceptive means of attracting new industry participants brought millions of people to trickle deep into nonfungible tokens and DeFi.”

In Sheikh’s view, while DeFi onboarding may come to a halt or at least slow down in the near term, many venture capital firms operating within his space have already raised billions and are thus capable of continuing to inject funds into many upcoming startups. “We’ll have a new roster of companies that’ll replace the lost ones’ role of being an on-ramp to the industry,” he said.

Undisputed damaged to the market’s reputation 

Misha Lederman, director of communications for decentralized peer-to-peer and self-custody crypto wallet Klever, told Cointelegraph that the recent crash has definitely damaged the reputation of the industry but believes that the aforementioned insolvencies have helped cleanse the industry of bad players, adding:

“This presents a huge opportunity for blockchain platforms and crypto communities with a responsibility-driven approach to innovation, in which user funds are protected at all costs. As an industry, we have to be better than the fiat debt system we aim to replace.”

A similar opinion is shared by Shyla Bashyr, public relations and communications lead for UpLift DAO — a permissionless and decentralized platform for token sales and swaps — who told Cointelegraph that the industry has been hit hard and is currently shrouded with more negativity than ever before. 

However, she believes such scenarios are sometimes needed since they present new opportunities to build transparent products that provide additional insurance, hedging and security for peoples’ investments.

Sheikh pointed out that while there’s rampant criticism that DeFi apps have lost billions, it is worth noting that the losses accumulated by CeFi lenders are notably higher:

“The fact remains that the notable blue chips of DeFi have remained mostly unscathed, yet the losses in CeFi are from industry leaders. However, as crypto CeFi is a stepping stone in people’s journey to DeFi, the industry’s adoption will be steeply hurt in the short term.”

He concluded that the “CeFi contagion” could eventually prove to be a powerful catalyst for the growth of its decentralized counterpart as well as a validation of crypto’s core use case, such as being self-sovereign wealth. 

The future may not be all bad

When asked about what lies ahead for the crypto market, Narek Gevorgyan, CEO of CoinStats, told Cointelegraph that despite the prevailing conditions, the market has already started showing promising signs of recovery, stating that institutional investors are back on the playing field and exchange inflows are on the rise. 

In this regard, banking titan Citigroup recently released a report stating that the market slide is now in recession, with researchers noting that the “acute deleveraging phase” that was recently in play has ended, especially given that a vast majority of large brokers and market makers in within the industry have come forth and disclosed their exposures.

Not only that, but the study also shows that stablecoin outflows have been stemmed while outflows from crypto exchange-traded funds have also stabilized.

Gevorgyan believes that the trust investors had built up over the last couple of years has been somewhat dissolved due to recent events. Nevertheless, the blockchain community is still better funded than at any point in its short history, with development most likely to continue. He then went on to add:

“The Terra implosion triggered a meltdown that brought several CeDeFi platforms down with it. The community has become more aware of the shortcomings of the CeDeFi model. Overall, the string of insolvencies has provided the crypto market with a chance to start afresh, as DeFi2 and Web3 are continuing to become more significant. Maybe the Metaverse will take center stage in this new configuration.”

CeFi vs. DeFi

Sheikh believes that the best of CeFi has lost more than the worst of DeFi, highlighting that Bitcoin (BTC) has continued to remain one of the most liquid assets in the world. In his view, the next wave of retail adopters will have glaring references to the problem of skipping self-custody, thus paving the path for greater focus on decentralized apps, especially as the market continues to mature.

On the other hand, Bashyr sees a lot of protected projects such as insurance protocols and hedged products flourishing from here on out. In her opinion, decentralized autonomous organizations (DAOs) will become more prominent and functional, providing real governance and allowing users to participate in instrumental decisions by voting on proposals that make a difference.

Recent: Decentralized storage providers power the Web3 economy, but adoption still underway

Lastly, in Xu’s opinion, the insolvencies have resulted in millions of users calling for regulations like those governing traditional finance within the global crypto economy so as to increase transparency on investment of user assets. Xu added that since DeFi benefits from no single point of control while offering full transparency and autonomous rules, it will eventually take over the crypto asset management business.

Therefore, as we head into a future plagued by economic uncertainty, it will be interesting to see how the future of the crypto market plays out. This is because more and more people are continuing to look for ways to preserve their wealth — thanks, in large part, to the recession fears that are looming large on the horizon — and therefore consider crypto to be their way out of the madness.