Cryptocurrency Corner: July/August 2021

ETF Report takes the pulse of the cryptocurrency space, including the performance of leading cryptocurrencies and the top related news items.

June’s Crypto Plunge
By Sumit Roy

Cryptocurrency investors were reminded in late June that with the potential for great returns comes great risk. Both bitcoin and ether tumbled to multimonth lows on June 22 before clawing back some of those losses in the days that followed.

Bitcoin briefly wiped out all of its gains for the year after it fell below $29,000. The No. 1 cryptocurrency by market value reached a peak of more than $63,000 in April—more than double where it stood after its big fall.

At one point, bitcoin’s market capitalization was nearly $1.2 trillion, making it more valuable than either Facebook or Tencent. As of June 24, all of the bitcoin in the world was worth about $620 billion.

Meanwhile, ether prices tumbled to a low of $1,700 on June 22, down nearly 60% from its record high set just a month prior, but still more than double the $740 level where it started the year.

This year’s varying performance between bitcoin and ether illustrates that while most crypto tokens tend to move in the same direction on a day-to-day basis, returns can deviate sharply over longer periods of time.

Bitcoin Under ESG Scrutiny
By Jamie Gordon

How bitcoin stacks up from an ESG perspective is an increasing concern for investors after a coal mine shutdown in Xinjiang in mid-April shined a light on the cryptocurrency’s operations and plummeted bitcoin’s price 23% as the digital asset’s global computing power was cut by a third.

The University of Cambridge Centre for Alternative Finance says coal power uses two-thirds of the energy in the “proof of work” process key to bitcoin’s secure production process.

At present, research from Bank of America notes the carbon emissions associated with bitcoin equal that of Greece, while the Cambridge Bitcoin Electricity Consumption index said the bitcoin network consumes more energy in a year than countries like the Netherlands, Argentina and the UAE.

Other experts in the space such as CoinShares’ Chris Bendiksen see the concerns as overblown, citing the use of cheap electricity sources other than coal to mine bitcoin and the ability to purchase carbon credits to offset the impact of the mining.

Other ESG-related concerns encompass bitcoin’s use in money laundering and Ponzi schemes, though proponents say its structure allows it to thwart corruption and promote transparency.

Buying Ethereum
By Sumit Roy

Ether has been around for a much shorter amount of time than bitcoin and it’s a little harder to grasp exactly what it is. But the world’s second most valuable cryptocurrency has slowly made a name for itself as it’s grown in importance within the broader crypto space.

Ether is the native cryptocurrency of the Ethereum platform, a blockchain-based network designed to support decentralized applications. Ether is the currency that pays for the computing power necessary to run those applications.

Initial coin offerings, decentralized finance and nonfungible tokens are some of the first use cases Ethereum has helped support, and there may be plenty more use cases to come.

While bitcoin is treated as a store of value, an investment in ether is a bet on the growth of the Ethereum ecosystem. The more applications that are built on top of the platform, the better ether should do.

Ether can be bought and sold just like bitcoin—on exchanges like Coinbase; with digital wallets like Venmo and PayPal; and via brokerages like Robinhood. While U.S. investors can also access the Grayscale Ethereum Trust (ETHE), there are more choices listed internationally, including ETFs.

Source: CoinMetrics; data as of 6/30/2021