Not All Bad News Is FUD
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Not even in the crypto markets. Sometimes setbacks are real, and shooting the messenger won't make the message untrue.
Read more in the THE TAKEAWAY below.
OP TRENDS ON COINDESK
Market mayhem
After a months-long run-up that surely emboldened a few Lambo purchases and steak dinners, the prices of most cryptocurrencies tumbled in the first half of the week. But you probably know that. The important question is, why?
We at CoinDesk humbly admit epistemic uncertainty, but editors Bailey Reutzel and Marc Hochstein identified a few plausible theories that would help explain the severity of the sell-off: anxiety over looming regulatory actions from South Korea, which had recently emerged as a trading hub; the triggering of stop-loss orders; and continued service disruptions at the major crypto exchanges, such as Kraken, which was down for several days for a systems upgrade that was supposed to take only a few hours.
That last issue probably discouraged institutional investors who might otherwise have smelled buying opportunities. In their minds, "if that can happen, then this market's not ready for institutions," said Michael Graham, an analyst at Canaccord Genuity, an investment bank in New York.
Onward and upward, though: the markets stabilized later in the week and began to show signs of recovery. Meanwhile, two milestones were reached: the first bitcoin futures on the Cboe expired and settled successfully, and the first blockchain ETFs launched on the NYSE and Nasdaq.
And speaking of ETFs, the Securities and Exchange Commission outlined the reasons for its reluctance to approve bitcoin-related ones, which could be read as a positive, since it may provide hints on how to get the nod.
Never-ending blockchain
Those three words aptly describe the ever-increasing data storage requirements of the two biggest cryptocurrencies: bitcoin and ethereum. But the developers of both projects are working on the problem in an effort to allow the respective networks to scale while preserving decentralization.
As CoinDesk's Alyssa Hertig reported this week, Bitcoin Core developer Jonas Schnelli has made it his mission to enable Average Joe users to run full nodes from their homes. This is important because it means individuals can validate the transaction history themselves rather than take a third party's word for it that the miners aren't engaging in mischief.
Similarly, our colleague Rachel Rose O'Leary details how ethereum developers have been optimizing the software clients so they don't take so long to synchronize with the network or require so much storage space. You could say they're kicking the can down the road, but long-term solutions such as database "sharding" are still a ways off, so the tweaks perhaps buy some time for ethereum's "world computer" to keep hosting new tokens without consolidating into a handful of server farms. (Of course, some people would say ethereum lost its decentralization card two years ago when the dev team forked the network to bail out the DAO's bagholders, but that's a separate conversation...)
In other scaling-related news, several bitcoin developers released a research paper on how Schnorr signatures might be applied to the blockchain, a measure that could save disk space in addition to enhancing security.
Say hello to my lil' friend
Keep an eye on Ledger, the maker of pocket-size hardware wallets.
This week the company raised $75 million of venture funding in a series B round, which it will invest in R&D and scaling the business. In addition to its flagship handheld consumer wallet, Ledger is working on an institutional-grade crypto storage product for banks and hedge funds called the Ledger Vault.
But perhaps most importantly, Radar Relay, a decentralized exchange startup, has added support for the Ledger wallet. This means that users will be able to trade ether and ERC-20 tokens with one another straight from their storage devices via the 0x protocol, no middleman required.
Announcements like this one offer a glint of hope for a truly peer-to-peer future, notwithstanding the scaling challenges and centralizing forces mentioned above.