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Internet shutdown smashes Kazakh mining operations

Rising energy prices for the general public led to huge protests and civil unrest in Kazakhstan. In a bid to reduce social tensions, Kazakhtelekom restricted internet access on 5 January, leading to a decline in the number of connections to 2% by midday.



The lack of a stable internet connection hit miners hard, with the Bitcoin network's capacity falling by 13.4% to 177 exahash/second.



Last year, Kazakhstan moved up to second place in terms of Bitcoin mining following Chinese regulators' ban on any transactions involving cryptocurrencies and their classification of all coin mining activities as undesirable. The lion's share of Chinese farms moved operations to Kazakhstan due to its proximity, low electricity costs, and loyal support for mining.



Beyond the temporary shutdown of the second-largest player in the mining market, the Fed's decision to accelerate its monetary tightening continues to weigh on BTC. On 5 January, the minutes from the Fed's latest meeting were published. They confirmed that the regulator expects to raise its key interest rates three times in 2022, while also potentially reducing its balance sheet. If taken, these measures could restrict inflation growth and lead to long-term strengthening of the dollar.



However, Galaxy Digital chief Mike Novogratz believes that the $38,000-$42,000 range is a key support for Bitcoin. Institutional investors have been expecting a correction since November 2021 and are ready to mobilise to buy crypto. The fear and greed index, which has dropped to lows unseen since the summer of 2021, would seem to corroborate this point of view.



The internet switch-off in Kazakhstan will most likely be temporary, and the situation should normalise in the near future. As for the Fed, inflation is currently outstripping both the regulator's forecasts and target levels. And this is a compelling reason to buy Bitcoin, an asset that most analytics agencies see as a preferred insurance policy against price growth for major investors.


StormGain analytics group
(cryptocurrency trading, exchange and storage platform)

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Miners shift focus to Bitcoin

Miners' behaviour is cyclical and directly linked to the price of Bitcoin. Consequently, when BTC is at an all-time high, they increase supply in order to take profits and cover their operating costs. When the price corrects and mining difficulty drops, their profitability falls significantly. This then incentivises miners to accumulate coins and wait for better days ahead.

Bitcoin has already declined 40% from its November highs. This, in turn, has reduced the daily profitability of one of the best rigs on the market, the Antminer S19j Pro (which costs $11,000) from $25 to $15, similarly slashing the daily yield for one terahash from $0.45 to $0.22.



Major mining companies are increasing their production capacities by raising investment capital. They won't resort to powering down their rigs even if their profitability turns negative. For this reason, calculation difficulty is increasingly less correlated with price. That explains why it has increased three times despite the current 40% correction in Bitcoin's price. What's more, it will most likely rise a further 0.8% in the next 10 days.



In a bid to avoid operating at a loss, the majority of miners are switching to Bitcoin mining. According to data from Glassnode, they started to actively put aside coins once the price fell below $45,000. Miner reserves have now reached 1.9 million BTC or 10% of the total amount issued. If we exclude lost coins, this indicator is close to 15%.



On this occasion, miners' behaviour is in line with general sentiment: following the November sell-off, the market is mostly accumulating coins.



The reduced market supply will buoy Bitcoin. Another positive factor will be the normalisation of the situation in Kazakhstan, which is the second-largest player in the global mining market.


StormGain analytics group
(cryptocurrency trading, exchange and storage platform)

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BofA: Solana is stealing market share from Ethereum

Ethereum was the first blockchain to fully support smart contracts. This was largely behind its rise in popularity and helped drive the development of sectors of the crypto economy like decentralised finance (DeFi) and non-fungible tokens (NFTs). Just one year ago, Ethereum had a virtual monopoly, with a 97% share of all DeFi blocked funds, though this figure has now shrunk to 62%.



In addition to rising demand, there was also a significant increase in network load, something that Ethereum wasn't quite ready for. For security and maximum decentralisation, the blockchain was built on a proof-of-work protocol, but the downside of this was low throughput capacity. Ethereum is incapable of processing more than 20 transactions per second (TPS), which means that its users are required to pay higher commission to ensure their transactions are entered into the block. Competition between users led to record high commissions that frequently exceeded $50.



Ethereum's low speeds and high expenses incentivised the development of faster blockchains. One of the most forward-looking of these is Solana, which charges commission of less than one cent despite boasting speeds in excess of 50,000 TPS. Solana is based on a proof-of-stake protocol and is less stable and less decentralised than Ethereum. However, this has not discouraged Bank of America from calling it a "potential VISA of the digital asset ecosystem".

Over the course of the past financial year, VISA processed 165 billion transactions, while Solana managed just over 50 billion. Solana only entered the NFT market in August but now accounts for more than 6 million digital objects created using this technology.



Solana is a relatively young project that still has some teething problems to work out. The network was taken down several times by DDoS attacks on one of its decentralised exchanges, with the Solana Labs management team admitting that it had problems on multiple occasions. The viability of Solana and its potential to take further market share from Ethereum will largely depend on the project #DevelopmentTeam 's ability to solve these problems at the earliest possible opportunity.


StormGain analytics group
(cryptocurrency trading, exchange and storage platform)

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Current mining cost of Bitcoin: $34,000

The profitability of Bitcoin mining is directly dependent on total mobilised capacity, mining difficulty and the price of the coin itself. On 15 January, the network's hashrate hit a new all-time high of 231.2 EH/s.



An uptick in online capacity led to a rise in the expected increase in mining difficulty. While an increase of 0.7% was predicted early last week, difficulty is now expected to rise by 6.1%. In this case, mining difficulty could also hit a new all-time high within four days.



Difficulty increases both as a result of an increase in the number of active miners and due to improvements in ASICs. In November 2021, Bitmain unveiled its new Antiminer S19 XP — a machine that boasts 140 terahash capacity while still only using 3 kWh of electricity. This represents an energy efficiency gain of 37% and a profitability increase of 25% over the S19 Pro, thanks to its 5 nm chipset. According to analytics agency Luxor, by the end of 2022, the S19 XP will account for a quarter of the global hashrate.

Currently, the biggest order received by Bitmain for its new model was made by Marathon Digital, which plans to become the world's biggest publicly traded mining company over the next year. During this time, the total number of ASICs online should rise to 199,000, with a total computing power of up to 23 EH/s.

The current mining cost of Bitcoin is estimated at $34,000, while mining profitability stands at 25.6%. Any future increase in difficulty will lead to a reduction in mining profitability. Once it falls to zero or below, we typically see a rally in Bitcoin.



The lower the mining reward is, the more coins miners accumulate as they wait for the next wave of price growth. Their reserves currently exceed 1.9 million BTC or 10% of the total coins issued. What's more, not just miners return to accumulation; hodlers do, too.



All things remaining equal, the upcoming increase in difficulty will cause Bitcoin's price to rise in the long term as the accumulation of coins will lead to lower supply in the market.


StormGain analytics group
(cryptocurrency trading, exchange and storage platform)

[stormgain]

Cardano is back

Six months ago, Cardano was one of the Top 3 blockchains with a market cap of $100 billion. However, subsequent problems with integrating decentralised apps caused the coin to plummet from $3 to $1.50. Many thought that the project's days were numbered, and some users even dubbed the coin a "total scam". Nonetheless, it's too early to write Cardano off just yet. The fact that we're seeing new startups based on the project is proof of that.



The Alonzo hard fork in September 2021 integrated smart contract support, paving the way for the launch of decentralised apps and exchanges (DEX). This identified the presence of serious parallelism issues with the network, which led to errors when attempting to exchange tokens on its first iteration of DEX Minswap.



Without giving much in the way of detail, a part of the blogosphere predicted that Cardano would fade into obscurity. According to them, the network is capable of performing just one transaction per block, and only one user can interact with a contract at any one time. However, that's not true; everything depends on the DEX architecture used. The DEX SundaeSwap team refuted these claims, calling the problems experienced by its predecessor "an unsuccessful experiment".

We'll find out which side of the argument was right tomorrow (20 January), when the SundaeSwap exchange launches. This is doubly good news for Cardano since a positive start for the project will remove any doubts in the community as to the capabilities of its network when it comes to operating smart contracts while also increasing demand for ADA, which is necessary for participating in SUNDAE token stake pools and distributions.

A second positive factor for Cardano is the network's debut on the metaverse market. Pavia, a new competitor to Decentraland and Sandbox, launched on 15 January.



Out of 100,000 virtual land parcels, around 60% were sold via presales, with the rest going on sale at some point during 2022. Currently, there are more than 8,000 landowners registered with Pavia, with a record price for a single parcel of 58,000 ADA (~$84,000).

After its "unsuccessful September experiment", Cardano dropped from third to fifth place in the crypto rankings, losing half of its total market cap. However, this year the network has every chance of regaining its position.


StormGain analytics group
(cryptocurrency trading, exchange and storage platform)

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Bitcoin mining difficulty hits new all-time high

The Chinese ban on mining in May 2021 sent the ASICs market into a veritable frenzy as the subsequent reduced network capacity led to a drop in calculation difficulty and a rise in profitability. Western companies cashed in on this development by making huge equipment orders. In October 2021, for instance, Marathon Digital took out a $100 million loan to buy a fleet of the latest S19 XP machines, which boast a capacity of 140 Th/s. The company's aim is to become the most powerful publicly-traded miner in the world within one year.

The growth in computational capacity led first to a record increase in the network's hashrate, followed by a similar jump in calculation difficulty. These two indicators are inextricably linked since the system is programmed to try and maintain a block creation speed of 10 minutes. On 21 January, Bitcoin mining shot up 9.3% in a single day.



Despite the rise in difficulty, the profitability from one hashrate is two times higher than the all-time low. This is due to the relatively high price of Bitcoin and improvements in equipment. For example, the aforementioned ASIC S19 XP is estimated to guarantee an income of $18.50 at electricity prices of $0.10 per 1 kWh.



The current intrinsic cost of mining 1 BTC is estimated at $34,000, so a correction to $38,000 is no big inconvenience for miners with the latest equipment. However, it will induce an increasing number of market participants to shift their focus towards accumulating coins in anticipation of future price growth.



Reduced supply as a result of coin accumulation typically leads to price rises. That said, the crypto market (much like any other financial market) can experience periods of euphoria or panic. A potential ban on cryptocurrency transaction and mining in Russia — the third biggest contributor to the Bitcoin hashrate — could provoke a coin sell-off. In that case, we would see a repeat of last year's 'China scenario', which was characterised by a drop in network capacity followed by a prolonged Bitcoin correction.


StormGain analytics group
(cryptocurrency trading, exchange and storage platform)

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Bitcoin crash threatens El Salvador with default

In the 1980s, El Salvador's economy suffered from unbridled inflation, which reached a peak of 31.9% in 1986. In an effort to return some sense of normalcy, the government took radical measures. In 1994, they tied the national currency to the US dollar before totally removing the Salvadoran colón from circulation in 2003.



The dollarisation of the economy helped the Central American country get inflation under control but brought with it a host of other problems. For example, output quality requirements increased since the country was no longer able to take advantage of the exchange advantages previously afforded to it by its depressed national currency. Furthermore, the outflow of labour increased (predominantly to the US).

In 2019, the increase in money transfers from Salvadoran immigrants to their relatives back home reached 20% of the country's GDP ($6 billion). This then exposed yet another problem: the high rates of commission withheld by American payment systems. Salvadoran President Nayib Bukele cited the high commission rates on dollar transactions as one of the leading reasons for the adoption of Bitcoin as a second official currency. Thus, while the cost of sending funds from Los Angeles via Western Union can exceed $15 per transaction, Bitcoin transfers of any amount to anywhere in the world currently run at around $1.30.

El Salvador's risk of default lies in the fact that the present moment was not the best time for currency experiments. The country's international debt stands at $800 million and matures in January 2023. Bukele had been counting on assistance from the IMF in restructuring the debt, but last year the Fund spoke out against the idea to make Bitcoin legal tender and refused to help El Salvador do that. El Salvador's insistence on crypto innovation was not to the IMF's liking and was likely the reason it refused to help the Central American nation this year. After Bitcoin was declared legal tender, credit default swaps (investor insurance policies) rose by 400%.



Bukele must immediately seek out funds to refinance the debt in 2022. His last hope could be the issue of a 10-year Bitcoin-denominated bond worth $1 billion.



However, Bitcoin's correction and ongoing strong volatility are fuelling doubts over El Salvador's ability to attract investors with this new financial instrument. El Salvador's own investments in Bitcoin are currently in the red as much of its purchasing was done in Q4 2021.

Without the IMF's help, a continuation of Bitcoin's correction will mean El Salvador's default is virtually inevitable. Last year, ratings agency Moody's lowered the country's credit rating to Caa1 (very high risk of failure to fulfil credit obligations).


StormGain analytics group
(cryptocurrency trading, exchange and storage platform)

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Feeling the pressure? How to stay calm when Bitcoin crashes

The holiday season was not kind to Bitcoin and other cryptocurrencies as the original coin dropped almost 20% over the last 30 days. BTC has been in steady decline since peaking in early November and is hovering around $43K at the time of writing. Where Bitcoin goes, the whole crypto market usually follows, and the price of everything from altcoins to NFTs all took a hit.

Longtime crypto hodlers may not be too fazed about this development, but if you're new to crypto, you might be concerned to see prices go down. If this is you, don't panic; there are many people in the same boat as you and plenty who have seen it all before, too. In 2020 and 2021, many individuals invested in crypto for the first time. StormGain reached over 1 million active users in 2021, part of a wider trend of new sign-ups to crypto platforms around the world.

For many new crypto holders, this could be their first experience of a temporary crash or even a bear market period. Crypto is not unique in this regard; it can happen with any investment. The most important thing is to manage the psychological pressure of playing the market so you can make rational, profitable decisions. Here are a few tips to help you weather the storm.

Look at the historical data

It's important in any investment to have a long-term perspective. Ask anyone who has been in the crypto space for years, and they'll tell you that Bitcoin's current price is far from a disaster. BTC only broke 40K for the first time back in January 2021. Bitcoin dipped even lower last summer to under $30K in July.

In 2020, BTC's price even dropped below $6K before going on to hit record highs later that year. BTC also faced a dramatic crash in 2018 that wiped out over 80% of its value. Nonetheless, when you look at the historical data, it confirms that it's still a great time for cryptocurrency, and veteran investors who held on or even bought through previous dips will be aware of this because of their long-term view.



In fact, crypto's volatility is part of the appeal for many traders as it increases the profits that can be made by buying low and selling high. A crash can benefit traders, but they should be emotionally prepared to take advantage of them.

Mentally prepare for ups and downs

Cryptocurrencies are easy to invest in and a trendy topic in the news and among influencers who will draw attention to any market movement with all the drama and intensity that it takes to attract views in today's fast-paced news cycle. FOMO and greed, on one side, and fear on the other can lead to short-term investors rapidly buying in during moments of hype and selling off en-masse when frightened.

A multitude of things can affect this, from proposed government regulations to viral tweets from influencers, venture capital fads, etc. It's important to follow the market news, sure, but be aware that much of it is trying to play on your emotions.

New crypto traders need to accept that this isn't the first crash, and it won't be the last. If it's not currently the optimal time to sell BTC for profit, who says it needs to be done now? Look at everything that happens in the context of the long-term development of the currency and your personal needs. If you're not desperate to cash out, it might be better to simply wait for a better time or even accumulate. Make your decisions based on what the numbers mean to your own situation. Asset prices and media hype both go in cycles: you want to use them, not be used by them.

Make a plan

One of the best ways to save your mental health during market movements is to make a plan. Set aside the assets you want for long-term investing and which ones you can use to play around and take risks with. StormGain's crypto indices, for example, are good to leave untouched for a longer period as a hedge against volatility. Options, on the other hand, are good for speculation. For all your assets, decide for yourself in advance what prices you're comfortable buying/selling at. That way, when the ups and downs come, they're part of the plan rather than a shock.

Always be learning

Cryptocurrency is an emerging technology that is not always fully understood by new investors who entered to chase a trend. We can expect more developments that affect the price of BTC before it settles, but crypto adoption by individuals and institutions is steadily increasing, and it's not going away anytime soon.

The best way to position oneself in this adoption period is to learn as much as possible about crypto and its market context. It's not even necessary to risk your assets to turn a crash into a learning experience. StormGain's demo account, for example, lets you trade virtual crypto under real market conditions, allowing you to test ideas that can be put into play over the next market cycle. On top of that, StormGain also features a built-in education programme, with resources and webinars available to gain crypto knowledge that helps you make calm, rational decisions during any market situation.

Not a StormGain customer yet? Register now to try the demo account and access the tools you need to make a profit from crypto in 2022.

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Bearish Bitcoin metrics

The cryptocurrency market has already corrected by 45% from all-time highs as investors took $2.5 billion in net losses in the last week alone. Bitcoin has bombed 50% from its recent peak, with the lion's share of the sell-off attributable to short-term holders.



However, Bitcoin's latest correction is far from its most dramatic. Indeed, in July of last year, it declined by 54%, and in 2018, it fell by 83%.



And once again, it was short-term holders (those holding for 155 days or less) who were hit the hardest, either selling close to the price they paid or taking losses. By increasing the volume of coins on the market, they actually served to strengthen the bearish trend. Currently, this investor group controls 18.3% of total supply, and virtually all of them are down on their initial investment at present (light red section of the chart).



They are counterbalanced by long-term 'HODLers' who stopped the sell-off brought about by Bitcoin's reaching a new all-time high. In this group, only 6.1% of coins held currently represent a loss. What's more, the total volume of coins that have been dormant for more than a year has risen to 5.8%. Once again, we can see a difference in the behaviour of short-term holders and HODLers during this cryptocurrency market correction.



We previously explained that the current intrinsic cost of mining 1 BTC is $34,000. As prices approach this level, the vast majority of miners will hoard coins and wait for the next bullish phase. As short-term holders calm down and market supply falls, prices should start to rise, provided no additional political factors come to the fore.

Beyond the 'Russian threat' against Bitcoin, there is a further risk in the form of IMF pressure on El Salvador. El Salvador famously recognised Bitcoin as legal tender last year despite the IMF's negative opinion of the move and the poor state of the economy of the country, whose YoY budget deficit stands at around 5% of GDP. El Salvador is banking on the IMF providing it with a $1.3 billion loan, which it needs to restructure its external debt. In a report released yesterday, the IMF called upon El Salvador to restrict the scope of the law on Bitcoin and remove its status as an official payment method, hinting that this would be a necessary step to receive a loan. If El Salvador relents, this will provoke a further correction.


StormGain analytics group
(cryptocurrency trading, exchange and storage platform)

[stormgain]

Hype and fake: Grimacecoin up 300.000%

Elon Musk was once again involved in the latest crypto hype, though the glory for the emergence of fake coins this time goes to McDonald's. Grimacecoin is an excellent example for traders of the need to properly think through investment decisions.

The story began with a run-of-the-mill attempt by Elon Musk to breathe some life into his beloved Dogecoin. On 14 January, Tesla announced that it would be accepting DOGE as a payment method for several of its products. Within hours, the coin's price had risen by 30%. But over the coming days, Doge's newfound optimism waned once more.



Then, on 25 January, Musk called upon McDonald's to add Dogecoin to its list of accepted payment methods, promising to livestream himself eating a Happy Meal if they did. As a joke, the fast-food chain replied: "only if @tesla starts accepting grimacecoin" (Grimace is one of McDonald's brand characters).



After McDonald's statement, the Binance Smart Chain network was flooded with dozens of fake Grimacecoins, the best-performing of which rose from $0.0007 to $2.00 to reach a market cap of $2 million. The coin managed to rack up more than 6,000 transactions and is now held by 1,179 people.



The bulk of its trading was on decentralised exchanges, but it has since fallen significantly. With no official word from McDonald's about it launching its own coin, a growing number of participants in the hype are removing their rose-tinted glasses.



This isn't the first time scammers have taken advantage of crypto investors' trusting nature. In November, we covered the story of SQUID coin, which was launched amid the global interest in the TV series 'Squid Game'. In that case, the tokens were sold as tickets for an online game. In the end, no game even took place.

The internet is full of examples of little-known tokens gaining huge popularity in the span of a year by promising investors earth-shattering returns. Unfortunately, however, investors in such projects typically end up losing their money. But what do you think: is it worth buying start-ups, or is it wiser to focus on well-established projects? Tell us your thoughts in the comments section!


StormGain analytical group
(cryptocurrency trading, exchange and storage platform)

[stormgain]

Free crypto and fantastic bonuses awarded to our lucky holiday draw winners

Over the holiday season, StormGain ran one of our most exciting promotions to date: a multi-round prize draw with escalating prizes, starting with account upgrades and culminating in a cryptocurrency giveaway in the final round!

From 6 December to 9 January, active traders on StormGain who maintained a certain trading volume received tickets for a series of four prize draws on StormGain.

The winners of these draws received a free upgrade to their account status in the StormGain loyalty programme. Each upgrade (Gold to Diamond, Diamond to VIP, etc.) grants extra bonus funds on deposits, lower commissions, and, most importantly, increased speed on the Bitcoin cloud miner that allows users to earn free BTC while using StormGain. Only one status upgrade could be awarded per user.

Here's how many prizes were awarded on each draw:

- Draw 1 (10 Dec) - 50 upgrades
- Draw 2 (17 Dec) - 100 upgrades
- Draw 3 (24 Dec) - 150 upgrades
- Draw 4 (10 Jan) - 200 upgrades (+5 crypto prizes)

To ensure fairness and security from any tampering, all the draws were conducted with Random.org, an optimised randomiser tool that offers truly random selections by leveraging atmospheric noise rather than predictable mathematical formulae. The draws were open to the public, so anyone could watch (https://youtu.be/Jb-_nsLzjjo) as they happened in real-time. Now 500 StormGain clients, new and old, are enjoying their supercharged accounts.

Five high-value cryptocurrencies as top prizes

As an extra-special reward to ring in the new year, the final draw also included free cryptocurrency as VIP prizes. As part of the final draw on 10 January, StormGain gave away five different crypto coins in addition to the account upgrades. These were:

- Bitcoin (BTC), current value $41,747
- Ether (ETH), current value $3114
- Bitcoin Cash (BCH), current value $381
- Litecoin (LTC), current value $140
- ZCASH (ZEC), current value $130

The prizes were in real crypto, not in their USDT equivalents, so the winners are free to trade, hold or withdraw their prize coins based on their own strategies. What would you do with a free coin if you received one?

Keep your eye on the prize with StormGain

Whether you were one of the lucky prize winners or not, there's still every chance to win some extra goodies during the next promo event. As 2022 begins, the new season of trading has just started, bringing more opportunities on StormGain.

"At StormGain, we believe that the spirits of trading and gaming go hand in hand, and we love to offer a little extra to our clients in the form of trading tournaments, contests, and sweepstakes with great prizes," said StormGain CEO Alex Althausen. "The community response has been fantastic and heartwarming, with users really motivated to play smart and keep up their trading volume to qualify for the prizes. The fact that some of our sweepstake winners registered just in time to participate shows just how easy the platform is for new people to pick up and use all our tools to become successful traders. This has been our biggest giveaway yet, but of course, we're already thinking about exciting new promos and events to top it. Watch this space!"

The benefits of the StormGain loyalty status and cloud miner can be earned by anyone during the course of normal trading, so if you're not a StormGain client, make sure why not register for free to find out how StormGain can maximise the gains you earn in crypto trading. Remember to keep an eye on your news section for new events. When the next giveaway comes around, you could be one of the lucky ones to get some valuable bonus crypto on top!

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The butterfly effect: LUNA down on Wonderland scandal

LUNA is down 37% within the space of a week, or 56% from its December peak. A sloppy choice of business partners has led to an increased risk that could translate to further declines for the cryptocurrency.



LUNA is a balancing coin for the Terra project's algorithmic stablecoin UST. Simply put, LUNA's value rises as demand for the stablecoin increases. Interest in independently issued stablecoins is extremely high right now, a trend that allowed UST to become the fourth-largest stablecoin by market cap in December, while LUNA has risen 130-fold in value over the past year.

In November 2021, Terra and Abracadabra launched their Degenbox service, which enables users to generate income from arbitrage operations using their stablecoins: UST and MIM (for more information, see this article). Meanwhile, Abracadabra CEO Daniele Sestagalli noted that this kind of cooperation is the future of the DeFi (decentralised finance) market.



Beyond Abracadabra, Daniele Sestagalli is also the developer of Popsicle Finance and Wonderland. The crisis started with Wonderland when it was revealed that the company's CFO was Michael Patryn, a criminal with multiple convictions for fraud.

The truth only came out last week since Michael Patryn had been working under the pseudonym 0xSifu. It was Twitter user @zachxbt who revealed that these two were one and the same person. A short time later, Daniele Sestagalli confirmed Patryn's identity, noting that "a person's past does not define their future". In actuality, Michael Patryn is an alias of Omar Dhanani, who was found guilty on multiple counts of fraud, theft and computer crimes. In 2018, the company he founded, QuadrigaCX, went belly up when the Canadian regulator deemed it a "Ponzi scheme". Its investors lost more than CAD 169 million.

Another user noted that the personal wallet of 0xSifu/Patryn/Dhanani had risen ten-fold over the previous month (from $45 million to $450 million).



The scandal provoked huge capital outflows from both Daniele Sestagalli's projects and those of his partners. Wonderland coin's value halved overnight to reach a total correction of 96% from November highs.



The stablecoin MIM, which is tied 1:1 with the US dollar, was worth less than 98 cents on 28 January. Since MIM and UST are mutually tied through various pools, the key liquidity providers moved to liquidate their positions. On 27 January, Alameda Research alone lost around $500 million worth of capital.

Since UST is an algorithmic stablecoin, it's unlikely that the current situation will lead to a severe lack of liquidity. In response to the growing criticism, Daniele Sestagalli has already fired "Master Sifu", despite any personal affection he might have for the man. When the furore calms down, the situation will normalise, and LUNA should return to growth.


StormGain analytical group
(cryptocurrency trading, exchange and storage platform)

[stormgain]

Understanding the crypto market crash

The crypto crash has come, and everyone interested in the blockchain space is feeling it. Bitcoin and Ether fell to their lowest levels since July, and, as is typical for the crypto market, the wide range of altcoins tend to follow Bitcoin on the way down. Bitcoin (BTC) fell below the $34,000 mark on Monday, trading for around $33,050 following its all-time high of $69,000. Ether (ETH), the second-most-popular digital currency, fell to $2,201 on Monday, down 53% from its all-time high. Note that both of the top two cryptocurrencies reached those all-time highs as recently as November 2021. Popular altcoins, such as Solana (SOL) and Shiba Inu (SHIB), fell by 64% and 75%, respectively. The entire crypto market has so far lost a combined $1.5 trillion in market capitalisation since May 2021.

As we have previously discussed, one has to disregard hype and see the market movement in its long-term context. It's not the crypto crash but rather a crypto crash, and the crypto market has had dramatic drops before it went on to smash record highs again. But the situation right now is clear: it appears we're seeing the beginnings of a crypto winter or possibly even a bear market. So, what brought us to this?

Inflation and risk aversion

Despite the headlines, there is more going on in the markets than just crypto. Bitcoin and Co. are part of a larger trend, i.e., a broader market sell-off of technology stocks and other high-risk assets. As is often the case, geopolitical events affect global trade, and, despite a myth to the contrary, Bitcoin is not immune to politics. The main drivers of recent market anxiety appear to be tied to concerns about a possible Russian attack against Ukraine and the US Federal Reserve's upcoming meeting to tighten monetary policy and decide on raising the dollar's interest rate.

Amidst soaring inflation, the Federal Reserve is discussing the prospect of up to four interest rate hikes in 2022. Analysts have also pointed out that the drawdown of quantitative easing measures in the US may also be a factor. Either way, uncertainty reigns in the market, causing an aversion to risky assets. Crypto is closely correlated with tech stocks, and both are seen as riskier sectors. Apple, Microsoft, Tesla, the Nasdaq 100 and others have all seen a recent sustained slump. Crypto is part of the same trend but with higher volatility, making for more dramatic chart movements.

Over-regulation of cryptocurrency

Another factor in the crypto market's downturn is the apparent hostility of certain governments toward the sector, especially in countries that were important for mining and developing crypto. Last week, the Russian central bank called to ban the use and mining of cryptocurrencies. Among the reasons cited were risks to financial stability and security threats from crime or terrorism.

Then, there is China's ongoing and extensive crackdown of Bitcoin mining operations, which caused a 50% drop in Bitcoin's mining hash rate. China's strict regulation has already pushed BTC's price down and may continue to be a consideration in the short term, at least until miners find a new stable base to relocate to.

One such country was Kazakhstan, a large country with a cool, dry climate and plenty of available space that made it an attractive alternative for Chinese miners to relocate to. Unfortunately for them, this central Asian nation is not taking kindly to miners' use of electricity. The recent energy crisis and related political and social instability in Kazakhstan have also harmed the overall cryptocurrency market. Kazakhstan pointed the finger at energy-hungry cryptocurrency miners (energy consumption increased by 8%) for triggering the energy crisis.

What comes next?

A market correction like the current one hitting cryptocurrency offers a great opportunity to 'buy the dip' and pick up new assets at low prices. Bitcoin and Ether have historically bounced back from similar falls, although the value of meme coins such as Dogecoin remains untested in these cases. And although regulation is currently putting pressure on crypto, both the US Federal Reserve and the Chinese Central Bank have recently been clear about their considerations of their own digital currencies (CBDCs), which could boost digital assets in the future.

To make the right market moves in this climate, one should be equipped with the best analytical tools and most favourable trading conditions possible. StormGain provides both, combining a powerful and easy-to-understand platform with a range of assets for both speculation and risk management. New to StormGain? Sign up in just a few seconds and try our demo account to see what this all-in-one crypto platform can do for you!

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$1.1 billion worth of Ethereum burned in January

Since 5 August, there has been a deflationary mechanism on the Ethereum network: transaction commission is being burned, while miners are only working for "tips". Over the past six months, 1.7 million ETH worth $6.4 billion has been burned, $1.1 billion in January 2022 alone.



The number of coins burned is getting closer to the number issued with each passing month, with the ratio currently standing at 73%. All things remaining equal, the reduced supply should lead to a deficit in the market and a subsequent rise in value. On 5 August, 1 ETH was equal to 0.07 BTC, a level that has remained a long-term support for the altcoin. It is expected to switch to a fully deflationary mechanism once the network transitions to a proof-of-stake protocol. The latest estimates predict that this crossroads should be reached no later than Q2 2022.



In January, the NFT trading platform OpenSea was the main Ethereum burn node. The platform recorded turnover of more than $3.5 billion in January, with Ultra Sound Money calculating the total number of liquidated coins at 65,778 ETH.



OpenSea was helped to its new record by Justin Bieber, who purchased a Bored Ape NFT for $1.3 million.



Currently, the lowest-priced NFT was sold for $271,000. Bieber paid slightly more at auction to ensure that he got his ape. And this wasn't the Canadian star's first notable purchase: statistics show that he owns 619 NFTs from 49 collections.

The Bored Ape is part of the Bored Ape Yacht Club collection, which consists of 10,000 images and occupies pole position in terms of capitalisation with $3.3 billion. Beyond Justin Bieber, celebrity owners of the collection's NFTs include Shaquille O'Neal, Steve Aoki, Jimmy Fallon and Paris Hilton, to name but a few.

Despite the general decline of the cryptocurrency market, the NFT segment continues to set new records. More and more companies are joining the new trend and minting their own tokens, while an increasing number of celebrities are starting to amass digital collections. The practical application of smart contracts will support Ethereum's price and help the altcoin strengthen further against Bitcoin.


StormGain analytics group
(cryptocurrency trading, exchange and storage platform)

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Bitcoin mining revolution

The Bitcoin network's algorithm is predicated on one block being processed every 10 minutes, which means that calculation difficulty changes once every two weeks. Until 2017, mining was predominantly carried out by crypto enthusiasts. This was why such a large drop in the network hashrate was seen after a significant price correction. Miners would turn off their equipment when it stopped being profitable for them to mine. Now, however, we are seeing difficulty continuing to set new records, even after a 50% correction from all-time price highs.



During the 2017 rally, institutional investors entered the mining space as publicly-traded mining companies began to appear. Starting in 2020, individuals investing more than $1 million became the key source of funding for the crypto industry.



The method of assessing profitability has changed completely. When miners were building farms in their back garden, they used to try and squeeze every last penny out of them. When prices fell, they didn't think to buy more powerful equipment and push back their time of recovery of outlay further into the future in order to remain on the network. It's a completely different story altogether for a publicly-traded company, where investor appeal is directly dependent on capacity.

Last year, Marathon Digital announced its wish to become the No. 1 publicly traded miner by the beginning of 2023, adding an additional $100 million to its debt burden with its purchase of the latest Antminer S19 XP ASICs from Bitmain. By the end of the year, its total calculating capacity should total 23 EH/s (12% of the global hashrate). Marathon Digital hasn't been profitable for the past four financial years in a row.

But it would seem that Marathon Digital's dream is not written in the stars. NuMiner has now unveiled its "Antminer" killer, the NM440, which boasts a record-breaking capacity of 440 TH/s. According to the manufacturer's presentation materials, the NM440 is 4.5 times more profitable than current ASICs and, if the entire world were to transition towards this model, global energy costs would fall by 75%.



It was revealed today that Sphere 3D has placed an order with NuMiner for 60,000 NM440s worth $1.7 billion. After it's rolled out, its total hash speed will stand at 32.4 EH/s (16% of the global hashrate). Now, Sphere 3D is in the running to become Miner No. 1 by 2023.

The news was met by the market with enthusiasm, with the company's share price rocketing 25% in post-market trading. The arms race continues, and calculation difficulty is becoming increasingly less correlated with Bitcoin's price. Will Sphere 3D achieve its aim, or will it meet the same fate as Marathon Digital?


StormGain analytical group
(cryptocurrency trading, exchange and storage platform)