Crypto weekly update
29. September 2022  • clock 5 min •  Daniel Mitrovsky

Ethereum Has Changed Its Inflation Policy – Crypto Weekly Update

This week, the total market capitalization exceeded €968 billion. The increase at the 7-day interval is 4.42%. Bitcoin increased by 4.47% during the week to a current value of over €20,000. Bitcoin dominance is 39.6%.

Source: Coinmarketcap

Ethereum Has Changed Its Inflation Policy

The transition of the Ethereum network to the Proof-of-Stake consensus algorithm has brought with it changes regarding the issuance of new ETH coins into circulation, in addition to a 99.9% reduction in energy consumption.

While during the operation on PoW, mining brought 12,000-13,000 new ETH coins into circulation daily, the change of consensus algorithm fixed the daily issuance of new coins at 1,600 ETH. This means that The Merge reduced the daily issuance of new ETH by up to 90%.

Since The Merge (15 September), the annualized net Ethereum issuance rate has fallen to a range between 0% and 0.7%, depending on the amount of fees burned on the Ethereum network. This is much lower than the annualized net issuance rate of 3.5% prior to The Merge update. The net annualized issuance rate is determined as the ratio of new supply to existing supply.

According to the, the total amount of ETH in circulation has increased by 8334 ETH in the last 14 days, meaning that an average of 595 new ETH have been issued per day in the first two weeks. The website puts the current net inflation rate at 0.19%.

The decline in Ethereum’s inflation rate stems primarily from two changes. The first is a reduction in the issuance of new ETH coins at the blockchain level, and the second is a burning mechanism known as EIP-1559, which burns transaction fees on the network. With these two significant changes, Ethereum has a much more attractive monetary policy that tries to approximate Bitcoin’s monetary policy. Source

Stricter Regulation on DeFi?

ECB President Christine Lagarde, Fed Chairman Jerome Powell and Bank for International Settlements (BIS) general manager Agustin Carstens attended an online panel hosted by the Bank of France on Tuesday to share their thoughts on the decentralized finance (DeFi) sector.

“DeFi applications facilitate borrowing, lending, and trading, but the intermediaries are also exposed to traditional risks such as liquidity, counterparty risks, and leverage risk, and DeFi has no infrastructure to deal with that,” BIS Director General Agustin Carstens said on DeFi. According to Carstens, the DeFi sector still has a number of intrinsic weaknesses that make it unstable.

US Federal Reserve chairman Jerome Powell thinks the normalization of monetary policy we have seen recently around the world has only exposed significant structural problems in the DeFi ecosystem, and as DeFi expands and begins to touch more and more retail users, Powell believes that more appropriate regulation of the sector needs to be put in place.

Christine Lagarde, President of the European Central Bank, joined the discussion, describing cryptocurrencies as an “enigmatic phenomenon” that has gone from a kind of cultural hype fostered by libertarians and promoted by Satoshi Nakamoto to a tool that is accepted and respected by the biggest companies in the world. Lagarde also mentioned the collapsed Terra ecosystem, which she said is a good example of why this sector needs regulation.

However, Lagarde said that it is very important for the ECB to be involved in experimentation and innovation in cryptocurrencies and the creation of a digital currency by central banks. However, all three agreed that stricter regulation would be necessary for the future functioning of the DeFi sector. Source

Jesse Powell Steps Down as CEO

Jesse Powell, a co-founder of the popular crypto exchange Kraken, has decided to step down from his position as CEO, which he founded back in 2011. According to available news, Kraken’s current chief operating officer, Dave Ripley, will take over as CEO once someone is hired to fill Ripley’s position.

Powell will become the company’s first chairman of the board and plans to remain active at the firm.

“Dave’s proven leadership and experience give me great confidence that he’s the ideal successor and the best person to lead Kraken through its next era of growth,” said Powell In a press release issued following the publication of this article. “I look forward to spending more of my time on the company’s products, user experience, and broader industry advocacy.”

Ripley’s adjusting CEO joined Kraken in 2016 when the exchange bought out Glidera, which Ripley co-founded and was CEO at. Source

The British Are Looking at Bitcoin

Trading volume in the GBP/BTC currency pair has increased significantly in recent days. The increased trading volume is in response to the massive depreciation of the British pound against the US dollar. The pound has fallen from $1.17 to $1.07 in the last month alone and is slowly but surely approaching parity, a situation in which one pound will equal one US dollar.

Data from crypto exchanges Bitfinex and Bitstamp showed that trading volume in the GBP/BTC pair was up to 1,100% higher than its average this Monday. Head of research at CoinShares, James Butterfill, said that the daily trading volume between the pound and Bitcoin has skyrocketed to more than $881 million, while the average daily trading volume between the currencies over the past two years is only around $70 million.

Butterfill also pointed out that while volumes between BTC and GBP were several times higher than their average, volumes between BTC and USDT were only 58% higher, and BTC/USD volumes were only 32% higher.

Thus, it seems that the British are trying to protect themselves from a weakening domestic currency by investing in Bitcoin. The market has already experienced a similar situation to the one it is experiencing now with the Turkish lira. When the Turkish lira collapsed against the dollar last year and inflation rose massively in the country, the BTC/TRY currency pair traded at record highs on all crypto exchanges. Source

Interpol Is Searching for the Founder of Terra

Interpol has issued a red notice against Terraform Labs co-founder Do Kwon. The notice is not an arrest warrant in itself – rather, it is a request to countries whose law enforcement officers collaborate with Interpol to locate and provisionally arrest the person in question on behalf of the nation where the fugitive is wanted.

So far, the red notice is not yet visible on Interpol’s official website. However, according to a Bloomberg report, authorities in Seoul have confirmed that such a request has been put out for Do Kwon. South Korean authorities issued a warrant for his arrest a few weeks ago, citing violations of local capital laws. At the time, Kwon was reportedly at his residence in Singapore – but law enforcement authorities confirmed on 17 September that he was not there.

However, Do Kwon continues to communicate via Twitter. He claims that he is not a fugitive and has no problem communicating with any government agency that expresses an interest in communicating. According to him, neither he nor Terraform Labs have anything to hide. More than a week ago, Do Kwon said that he and Terraform Labs are currently in the process of defending themselves in multiple jurisdictions and that he looks forward to the truth being revealed in the coming months. We are all collectively curious to see how this whole case plays out. Source

Interesting Fact: The Fed Raises Interest Rates Again

The Federal Reserve last week responded to persistent high-inflation problems by raising its key interest rate by 75 basis points (0.75%) to a target range of 3% to 3.25%.

Federal Reserve Chairman Jerome Powell said the rate hike was necessary to slow demand, ease upward pressures on prices and prevent long-term damage to the economy. However, he acknowledged that raising rates will take its toll over time.

Banks in almost every country, with the exceptions of Japan and China, face similar problems and have to raise interest rates to tame rising inflation.

Analysts are beginning to worry that the global rate hikes, which are spreading to the public in the form of more expensive mortgages, loans and credit card debt, could lead to a bigger economic slowdown than policymakers expect. Many analysts are even predicting a recession, but they hope it will be milder than past ones because households’ financial condition is in better shape than it has been in past recessions. Source

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Daniel Mitrovsky


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