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Crypto Currently

This Week in Crypto: a Weird Calm

The weekend saw Bitcoin stabilise, but that's not necessarily a good thing.

Welcome to our column, Crypto Currently, where we round up the latest developments in cryptocurrencies and try to make sense of it all.

Hey, remember last week when everyone thought Bitcoin was crashing… but then it mostly didn't? Well that's taken us to today, Monday, and the crypto markets remain stable.

Bitcoin, after climbing almost 10 percent within the space of three hours on Saturday night, has since given up almost all of its gains and finished the weekend pretty much where it started. Ethereum recovered some of its losses from last week to gain a solid eight percent while Ripple remains basically flat.


This relative calmness is probably a welcome change for the crypto community after the wild swings of last week, which rattled a few nerves. The mood was reflected on Reddit where the Canadian government’s decision to use Ethereum blockchain to publish financial data in real time had some users optimistic. But when trading volumes begin to pick up over the week, market sentiment will likely be revealed and the volatility experienced over the past week could return.

And actually that's a good thing. Because a stable crypto market is actually unsustainable.

One of the defining features of cryptocurrency—and indeed one its more common criticisms—is its lack of "intrinsic value." To understand what this means, just look at how traditional investments benefit investors. Shares in a company entitle a shareholder to profits, in the form of dividends. Holding traditional currency similarly entitles the owner to interest, while owning property generates rent.

But in contrast, crypto pays no interest nor dividends. It is only profitable to hold if the price rises. Because of this, a flat market is unsustainable because people will simply choose to hold more profitable assets. And like many other asset markets, some participants hold significant power and can influence prices. Last month it was reported that 40 percent of the world’s bitcoins are held by only 1,000 people. If enough of these people decide that the good times have come to an end, it could trigger a collapse. But on the other hand, if enough of those 40 percent find the market unprofitably stable, it will also trigger a collapse.

So bring back the instability, a little bit, please.

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