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Bitcoin Jumps as Much as 20% to a Six-Week High

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Bitcoin price jumped to a six-week high on Monday, with some investors blaming the rally on liquidation of short positions and speculation that Amazon.

AMZN 0.51%

com Inc. may venture into digital currencies.

Bitcoin rose to $ 39,544.29, according to CoinDesk, its highest level since mid-June. It is up 18% from its Friday at 5 p.m. ET after briefly rising more than 20% on Monday morning. The rival currency, Ether, rose more than 14%.

Recent bullish comments from high profile cryptocurrency supporters have helped prop up price gains. Last week, Elon Musk, chief executive of Tesla Inc., said he and his rocket company SpaceX are holding Bitcoin despite concerns about its environmental impact. Mr Musk also said that Tesla would likely accept the cryptocurrency as payment again if the process of creating it, known as mining, became less dependent on fossil fuels.

“There has been a lack of good news in the cryptocurrency market for the past two months,” said Bobby Lee, founder and CEO of Ballet, a hardware wallet for cryptocurrencies. “Now they are trickling out, so investors and speculators are taking this opportunity to build their positions and buy back Bitcoin, causing the price to go up pretty dramatically.”

Bitcoin is still about 40% below its high of nearly $ 65,000 in mid-April. The following month, China’s renewed efforts to crack down on Bitcoin mining and trading contributed to sharp falls in prices.

Speculation has risen in recent days about Amazon’s possible plans for cryptocurrencies and related technologies after the company posted a position for a digital currency and blockchain expert.

The online retail and cloud services giant said the person who would be on its payments team in Seattle will be tasked with developing “Amazon’s digital currency and blockchain strategy and product roadmap.” That sparked online chatter that the company might one day allow customers to pay in cryptocurrencies. Amazon did not immediately respond to a request for comment.

China’s recent warning about cryptocurrencies has left the market in a tailspin. WSJ’s Aaron Back explains why recent changes in the value of Bitcoin, Dogecoin, Ether and other cryptocurrencies may point to barriers to mainstream adoption. Photo: Dado Ruvic / Reuters

According to data from Bybt, short positions in Bitcoin worth around $ 740 million were liquidated on Monday, more than ever in the past three months.

Many cryptocurrency exchanges allow their users to bet on price drops by taking short positions in their margin trading accounts. As with stocks, traders do this by borrowing cryptocurrencies like Bitcoin – sometimes with leverage or borrowed money – and selling them before buying them back at a lower price to repay their lenders.

Mr Lee said that when prices rise unexpectedly – especially in cryptocurrencies where there are a large amount of futures and other derivatives – traders are caught short, causing what is known as a short squeeze and making the price go even higher.

Claire Wilson, partner at Singapore-based consulting firm Holland & Marie, said volatility in the crypto market caused by a variety of factors is nothing new. “In the past few months, however, these wild price fluctuations have been linked more often to comments from personalities on social media,” she said.

Write to Elaine Yu at elaine.yu@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Cryptocurrency

Coal to cryptocurrency: An answer to grid volatility?

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A Midwestern utility company is testing a new tool to cope with variability on the web: mining bitcoins.

St. Louis-based Ameren Missouri, the state’s largest utility company with 1.2 million customers, began mining cryptocurrency in April. When demand is low and electricity is cheap, computers in a 20-foot metal container on site at the Portage Des Sioux coal-fired power station in Ameren race to “mint” a digital coin by looping through complex mathematical calculations.

Ameren Missouri executives see the initiative as research and development rather than a speculative bet on Bitcoin, the price of which has fluctuated sharply this year. It is seen as a pilot project designed to help meet electricity demand with an intermittent energy supply as more and more wind and solar projects go online.

Electric utilities around the world are increasingly tied to the energy-hungry cryptocurrency industry. In the US, however, Ameren is unique among investor-owned utility companies as it is directly involved in mining bitcoins.

Critics argue that the industry is a lifeline for aging fossil fuel power plants at a time when the deepening climate crisis calls for a quick switch to carbon-free energy sources (Energywire, June 24). The fact that Ameren mines bitcoins on-site at a giant coal-fired power plant – one of four that encircle the St. Louis metropolitan area – will almost certainly be scrutinized.

Ameren Missouri, based in St. Louis, says the effort could help reduce its carbon footprint. The utility has to respond to more fluctuating wind and solar power on the regional grid and is looking for ways to avoid having its power plants ramp up and down to meet demand as this is inefficient and can increase emissions.

Warren Wood, vice president of regulatory and legislative affairs for the utility, likened it to using cruise control on the freeway to driving in stop-and-go traffic in the city.

“We have pretty dramatic load changes from minute to minute, sometimes from second to second,” Wood said in an interview. “We need something that can ramp up and down really quickly to be a really effective tool for balancing.”

He is quick to point out that the pilot is initially funded by the utility shareholders and is free to Missouri fee payers.

Ameren initially tried to include $ 8,000 in electricity bills for 309,000 kilowatt hours of bitcoin mining-related energy use in its fuel reimbursement formula, but withdrew the application to the Public Service Commission after the state’s consumer advocate had questioned him earlier this year.

“If Ameren Missouri wants to get into speculative commodities like virtual currencies, it should be done as an unregulated service where installment payers are not faced with their economics,” said Geoff Marke, chief economist for the Missouri Office of the Public Counsel, said on a file . “This endeavor goes beyond the scope of intended regulation of utility companies and, if allowed, creates a slippery slope that could ask fee payers to provide capital for virtually anything.”

However, executives said the initiative could benefit customers if the concept works. And they are encouraged after the first four months.

The pilot has also piqued the interest of Missouri’s top energy regulator, Public Services Commission Chairman Ryan Silvey, who said he was interested in convening a technical workshop on the matter before he even learned about the Ameren project.

Silvey, a former Republican senator, told E&E News that he has a personal interest in digital currency. And a recent piece of news about an aging hydropower dam in New York state being used to mine bitcoins made him think further about the potential of cryptocurrency as a network asset.

Silvey said it was appropriate for Ameren to take all risk of the project at this point as it has not been reviewed in front of the PSC and other parties. But Missouri law allows utility companies to run pilot programs and look for alternative sources of income that could be used to lower tariffs.

“When a company offers us a program that presents little or no risk for consumers to benefit from, I find it exciting,” said Silvey.

But can Bitcoin mining bring value to the web?

Joshua Rhodes, a research fellow at the Webber Energy Group at the University of Texas at Austin, has researched the impact of Bitcoin mining in Texas and changed his mind about the potential benefits. Texas has become a global hub for cryptocurrency mining after China announced a series of restrictions on digital currencies in May, some of which are aimed at curbing carbon emissions.

“I think that [miners] can add great value, especially how fast they can move up and down, ”said Rhodes. “They can move up and down faster than some traditional generators, which is of value … especially if they are able to monetize the crypto assets.”

According to Ameren, the mining operations at the Sioux plant initially only consume half a megawatt and, depending on grid conditions, can be started up within a minute and shut down again within 20 seconds.

“We talk for a minute or less to turn it on or off,” said Wood. “You really have a good mechanism to try to get a better balance of the grid between your generating resources and the load.”

Questions about coal

Bitcoin mining has been widely criticized for its enormous power consumption – more than 121 terawatt hours worldwide – an amount that exceeds the power consumption of countries like the Netherlands and Argentina, according to the Cambridge Center for Alternative Finance.

But industry defenders, including Twitter co-founder Jack Dorsey, claim that bitcoin mining can advance the energy transition and enable the development of renewable energy and energy storage by helping break down barriers to their disruption and lack of transmission are connected.

“Bitcoin miners as a flexible charging option could potentially help solve much of these disruption and congestion problems so that the grids can use significantly more renewable energy,” said Dorsey’s other company Square and shareholder Ark Invest in an April white paper.

Among the skeptics is Andy Knott, deputy regional director of the Sierra Club’s Beyond Coal campaign.

The Sierra Club recently began research into bitcoin mining and its impact on the power grid after news reports of bitcoin mining operations powered by coal waste, natural gas and nuclear power plants, Knott said.

These projects include a cryptocurrency miner in northwest Pennsylvania that plans to run its operations on waste coal.

“It clearly generates electricity demand, and what will it cover besides the existing electricity generation on the grid?” Said Knott.

However, Ameren officials said just because the pilot is physically housed at the Sioux plant doesn’t mean bitcoin mining is coal-tied. The aim of the project is initially to validate the concept.

Alex Rojas, director of distributed technologies at Ameren, said that because the mining operation is modular, it can be relocated to other locations on the utility’s grid, be it an underutilized substation or a wind or solar farm.

“Renewable energies that cannot be shipped, such as wind and solar energy, urgently need this capability,” he said. “Putting this technology in one place would be of great help.”

Rhodes didn’t reject the idea that mining bitcoins to balance electricity supply and demand can be a net benefit in terms of carbon emissions. But he said it depends on how this affects the shipping of different power plants.

“It can have a positive impact on emissions when operated properly,” he said. “It can also increase emissions when it doesn’t.”

Ameren’s executives did not specify how long the pilot would last or how its success would be defined.

However, Rojas, who leads Ameren’s research and development work, said the results so far are promising and he sees the potential to use bitcoin mining modules for grid balancing on the same scale as energy storage in California with 20 to 80 megawatts per location .

“Something similar could happen with that,” he said. “It’s that scalable.”

For now, the utility is content with keeping the project running unchanged.

So far, Ameren has mined about 20 “coins” and produces a new one about every 15 days.

The utility said it doesn’t care about the volatility of Bitcoin, which peaked above $ 63,000 in April and has hovered around $ 44,000 in recent weeks. That is still over 300% more than last year.

Rather, it sees the mining process itself as the primary value that is being created and bitcoins as a by-product.

“The goal is not to mine crypto,” said Wood. “It’s really running a data center that happens to be producing crypto.”

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US Senator Calls On SEC Chairman To Provide Regulatory Clarity On Cryptocurrencies – Regulation Bitcoin News

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A US senator has asked the chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, to provide clear guidance on cryptocurrency regulation. The Senator stated that in many enforcement actions, “the SEC has failed to identify the securities involved or the reasons for their status as securities, which would have provided much-needed public regulatory clarity.”

US Senator wants the SEC to provide clear guidelines on crypto regulation

Senator Pat Toomey, ranked member of the U.S. Senate Committee on Banking, Housing, and Urban Development, wrote a letter to SEC Chairman Gary Gensler on Friday regarding the regulation of cryptocurrencies.

His letter followed Gensler’s testimony before the Senate Banking Committee last week. Toomey began:

I’m writing to address the concerns I raised at the hearing about the need for regulatory clarity around emerging technologies such as cryptocurrencies, including stablecoins.

“In order for investors to benefit from a fair and competitive market, regulators must proactively provide rules on how to get to industry,” the Senator said that the SEC “has instead adopted a strategy of regulation through enforcement in this area.” To date, the commission has launched more than 75 enforcement actions against the crypto industry, fines and penalties totaling more than $ 2.5 billion against crypto companies and individuals.

At the Senate hearing, Gensler extolled “the SEC’s success in pursuing crypto-related enforcement measures.” Toomey noted, however, that “in many of these enforcement actions, the SEC failed to identify the securities involved or the reasons for their status as securities, which would have provided much-needed public regulatory clarity.”

SEC Commissioner Hester Peirce is also concerned about the SEC’s approach to crypto regulation. She criticized her own agency in August for taking an enforcement-oriented approach to crypto regulation.

The Senator from Pennsylvania noted that the SEC’s approach was tied to Gensler’s belief that “the likelihood is pretty slim” that a given cryptocurrency platform has no securities. For example, Gensler told Senator Elizabeth Warren at the hearing that the Nasdaq-listed crypto exchange Coinbase (Nasdaq: COIN) could have dozens of tokens, which could be securities.

Recently, Coinbase was forced to abandon its plan to launch a loan product after the SEC threatened legal action and the company alleged it had received no explanation from the regulator. In the meantime, the security guard is in an ongoing proceeding with Ripple Labs and its executives as to whether XRP is a security.

Senator Toomey emphasized:

The SEC has a responsibility to do more than just provide probabilistic estimates.

The Senator concluded his letter with a list of questions for Gensler to answer for additional guidance on crypto regulation.

What do you think of Senator Toomey asking SEC Chairman Gensler to provide clear guidance on crypto regulation? Let us know in the comment section below.

Photo credit: Shutterstock, Pixabay, Wiki Commons

Disclaimer of Liability: This article is for informational purposes only. It is not a direct offer or solicitation to make an offer to buy or sell, or a recommendation or endorsement of any product, service, or company. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author are directly or indirectly responsible for any damage or loss caused or allegedly caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Crypto plunge a wake-up call — and tax opportunity — for investors

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A detail of the statue of Satoshi Nakamoto, a presumed pseudonym of the inventor of Bitcoin, in Budapest, Hungary.

Janos Sorrow | Getty Images News | Getty Images

The price of popular cryptocurrencies like Bitcoin and Ethereum fell on Friday after Chinese officials stepped up crackdown and essentially ruled crypto illegal.

Government intervention, while substantial, does not necessarily mean that financial advisers believe investors should run into the mountains. But it’s another reminder that crypto holdings are subject to wild fluctuations in price, they said.

“I wouldn’t call this the end of the world,” said Leon LaBrecque, accountant and certified financial planner with Sequoia Financial Group, based in Akron, Ohio. “It’s just a wake-up call.”

“This should be in recognition of the fact that it is a volatile asset and that all the ups and downs are a match,” he said.

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This volatility opens up opportunities for tax planning that may only be a few months away, advisors said, depending on the Democrats’ final compromise on federal tax law.

Bitcoin prices had fallen 6% to around $ 42,000 at 3 p.m. ET Friday afternoon. Ether, the second largest digital currency, fell more than 8% to around $ 2,890.

The People’s Bank of China terrified investors after declaring all crypto-related activity illegal. These activities include, for example, trading services and foreign exchanges. This is the latest move in the country’s wider crackdown on digital currencies.

The ban on Bitcoin and other cryptocurrencies can be of concern for current and prospective investors as the government limits buyers for a significant segment of the world’s population, advisors said. And other governments are likely to have additional regulations as well, they said.

But these can’t make much of a difference in terms of long-term prices. A daily slump in crypto costs, which may feel significant at this point, is likely just part of a longer-term price correction towards an average price, advisors said.

“Will government regulation make cryptocurrencies volatile? Yes,” said Wayne Wilbanks, managing principal and chief investment officer at Wilbanks Smith & Thomas Asset Management in Norfolk, Virginia. “Will it make crypto redundant? No.

“I don’t think China’s regulation, or even US regulations, will make that much of a difference in the long run,” he added.

Bitcoin, for example, is still up around 40% year-over-year despite the slump on Friday. (It’s far from its April high of around $ 63,000, however.)

To this day, volatility is a signature of cryptocurrencies. This year, for example, prices have fluctuated sharply after tweets from Tesla co-founder and crypto enthusiast Elon Musk.

Advisors usually recommend that investors allocate a small portion of their portfolio (anything that they would lose entirely) because of the risk involved.

Tax advantage

Investors can take advantage of recent volatility, according to Jeffrey Levine, CFP, Accountant and Chief Planning Officer at Buckingham Wealth Partners in Long Island, New York.

Equity, crypto and other investors can “reap” investment losses for a tax advantage. Basically, you can sell a lost investment (e.g. Bitcoin) and use the loss to destroy the gain on a winning investment elsewhere in your portfolio.

This “tax loss harvesting” reduces (or eliminates) the capital gains tax owed on the estimated value of an investment sold.

However, unlike stock investors, crypto investors who are sold out can quickly buy back into the same or similar digital currency. As a result, if the volatile asset price recovers shortly thereafter, they can receive the above tax benefit as well as a portfolio benefit.

House Democrats proposed closing this crypto loophole after this year to reform tax law.

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