This week CryptoCompare data shows the price of Bitcoin (BTC) started testing the $12,000 area once again, but moved back down below $11,200 during a correction. Since then, thanks to the Federal Reserve’s new attitude towards inflation, it has been moving up and is now trading at $11,600.
Ether (ETH), the second-largest cryptocurrency by market capitalization, started the week at $405 but started moving up after dipping to $370. CryptoCompare data shows the cryptocurrency is trading at $423 as the decentralized finance space keeps growing.
This week the International Monetary Fund (IMF), an organization of 189 countries established in 1945 working to foster global monetary cooperation and secure financial stability, explained in a tutorial the problems with existing centralized payments solutions and addresses cryptocurrencies, their pros and cons, and how they could be the future of money.
In the explainer, the IMF pointed out that when we buy or sell things payments are more often than not processed by a bank or credit card company, and that these companies often take a cut of the transaction. We have to trust these companies to protect the data from hackers, and international payments take a long time and are expensive.
The answer to these problems, the IMF’s video points out, could be a “special type of currency that is secure and based on the science of cryptography, which is a way of protecting information using mathematics. The IMF added these are cryptocurrencies, which only exist in computer networks.
The organization did point out there are some risks associated with using cryptocurrencies: some are entirely anonymous and untraceable. Which “can make it easier for the bad guys to make payments without being noticed.” Moreover, if a password is lost the funds in a wallet can be lost forever, and their prices are highly volatile at the moment, among other things. The IMF nevertheless pointed out that if the risks can be countered, cryptocurrencies “could be the next step in the evolution of money.”
Headlines in the cryptocurrency space were also dominated by the Federal Reserve’s new attitude toward inflation in a major policy shift, where the organization’s Chairman Jerome Powell revealed the central bank will allow inflation to rise “moderately” above 2%, as it focuses on increasing broad-based employment.
Former macro hedge fund manager Raoul Pal reacted to the Federal Reserve’s desire for higher inflation by claiming it’s good for “the two hardest assets – gold and bitcoin.” As the Fed’s attitude towards inflation changed, a report from CoinMetrics revealed that “months of rapid growth” have seen Tether’s USDT stablecoin flip bitcoin’s 7-day average adjusted transfer value.
The stablecoin’s average transfer value surpassed $3.55 billion on August 20, while bitcoin’s average transfer value was $2.94 billion. Economist John Paul Koning pointed out on social media that Tether’s average daily transfer value of $3.55 billion is above PayPal’s $2.93 billion per day, reported in the company’s Q2 report.
Cryptocurrency miners have signaled they are still bullish on bitcoin, as miner holdings hit a two-year high this week, and the cryptocurrency’s mining difficulty hit a new all-time high. This means miners are working to keep as many BTC as possible form their coinbase rewards, while also adding more hardware to their operations.
The trading volume of Bakkt’s Bitcoin Monthly Futures contracts have also hit a new all-time high close to $150 million this month, as institutional interest in the space keeps on growing. Similarly, companies are betting on BTC in a bid to hedge against a potential economic downturn, with Canadian startup Snappa revealing this week it’s holding bitcoin “as a reserve asset,” shortly after MicroStrategy made a $250 million investment in the cryptocurrency.
‘DDoS-for-Bitcoin’ Trend Hits PayPal and MoneyGram
A group of cybercriminals has reportedly been launching distributed denial of service (DDoS) attacks against financial service providers while demanding bitcoin payments as extortion fees for the attacks to stop.
This type of attack is known as “DDoS-for-Bitcoin” and has already hit a number of financial behemoths, including MoneyGram, YesBank India, WorldPay, PayPal, Braintree, and Venmo, before moving to the New Zealand stock exchange (NZX). On the NZX, these attacks caused various outages.
Notably, the darknet’s largest market exit scammed with $30 million worth of bitcoin under its control. An anonymous moderator from the market has claimed the administrators of the market decided to shut it down after being forced to pay a DDoS attacker between $10,000 and $15,000 in BTC per week to keep the attacks at bay.