Bitcoin Crosses 13K, Ethereum At 2 Year High And Gold Prices Nearing All-Time Highs!
Ethereum 2.0 final testnet launches in just two weeks. Bitcoin Crosses 13K, Ethereum At 2 Year High And Gold Prices Nearing All-Time Highs!
The Genesis block of the platform’s long-awaited upgrade could be as early as November 4.
* The Final Testnet Before Ethereum 2.0 Is Due To Launch In Two Weeks.
* Launch Organizer Danny Ryan Said The Testnet Would Launch On August 4, Assuming All Conditions Are Met.
* Several Months Of Testing Are Needed Before Ethereum 2.0 Can Launch, With November 4 Considered The Earliest Date.
The stage is almost set for full-scale testing of Ethereum 2.0—the blockchain platform’s much-anticipated upgrade. The final public testnet, which will enable Ethereum to scale and grow to accommodate decentralized finance.
(DeFi) and other, myriad use cases, is to launch on August 4.
Developers have previously said that the testnets should run for at least three months—which means the launch of the Ethereum 2.0. mainnet could be as early as November 4.
The testnet will support Ethereum’s multiple clients—different ways of running the blockchain. The launch date given is the earliest, assuming the right conditions are met, said the platform’s launch coordinator, Danny Ryan, who shared the news in the testnet’s discussion board on Discord.
“After discussions with client teams, the next multi-client testnet (mainnet config including min validator numbers) will have a min genesis time of aug 4 (likely 1 or 2pm utc),” he wrote.
He added that “Launchpad”—the test educational deposit interface aimed at hobbyists—would be included in the testnet, and that further details would be made public in a couple of days.
Ethereum 2.0 Testing Is Well Underway
Phase 0 of the Ethereum 2.0 upgrade kicked off in mid-April, with users able to test small deposits of ETH. Two further testnets went live in May and June. Developers reported that the testnets are stable and had over 20,000 validators by late June.
In the same month, Ryan published a State of the Eth2 blog post with a timeline upgrade and highlighting some of the technical challenges still to be overcome before the full release.
Then, on Monday, the penultimate testnets, the “Attacknets” launched, giving hackers the opportunity to blow up consensus on the testnets, pushing them to the limit.
But It Needs To Hurry Up
The long-awaited upgrade can’t come soon enough. Ethereum is getting dangerously close to reaching its technical limits. DeFi is on fire, and the number of transactions on the Ethereum network is drawing close to a new all-time high. Meanwhile, Ethereum’s gas fees are hitting the roof and pushing the platform architecture to breaking point.
In addition, advances made by competing blockchains, such as Tezos and Cardano, are compounding the need for a more competitive Ethereum alternative.
But delays and technical issues have threatened to delay Ethereum 2.0 even further. Earlier this month, developers voiced fears that the upgrade would not be ready before 2021. Yet the platform’s co-founder Vitalik Buterin is convinced that the upgrade will launch this year.
This announcement would suggest that everything is on track—for now.
Ethereum Is The Best-Performing Asset Class of 2020
Digital assets issued on Ethereum appear to comprise the strongest asset class of 2020 with an average year-to-date gain of 130%.
The average performance across Ethereum (ETH)-based assets has been a nearly 130% year-to-date (YTD) gain, according to data published by market data aggregator Messari.
The data provides an overview of the 178 assets that currently exist on Ethereum, totaling a combined market capitalization of $63.7 billion — just shy of 20% of the entire crypto capitalization.
Including stablecoins, 124 of the assets have posted a YTD gain, meaning that 70% of Ethereum-based tokens have increased in value despite the shocks felt across the global economy amid the COVID-19 pandemic.
70% of ETH-based Assets Post Gains
10 ETH-based tokens have posted YTD gains exceeding 500%, including major decentralized finance protocols Bancor (BNT) and Kyber Network (KNC).
One-third of Ethereum-based markets have more than doubled in value since the start of the year, with Ether ranking as the 41st-strongest performing asset with YTD gains of 142%.
15 tokens have suffered single-digit percentage losses, while nine assets have shed over half of their value during 2020 so far.
Stablecoins Dominate Ethereum Token Rankings
Excluding Tether, only Ether and Crypto.com Coin (CRO) sit among the top 10 crypto assets by market cap, closely followed by the 12th-ranked Chainlink (LINK).
Bitfinex’s Unus Sed Leo (LEO) token and the USD Coin (USDC) stablecoin are also ranked among the 20-largest cryptocurrencies.
The rankings highlight Ethereum’s popularity among stablecoin issuers, with seven of the 25-largest ETH-based assets comprising stable tokens.
Dollar Falls To Lowest Level In Over 2 Years While Gold, Silver, Bitcoin Continue To Shine
The dollar on Thursday dropped to its lowest level since May 2018 as the Federal Reserve said it plans to keep interest rates close to zero, and inflation hedges continue to show strength.
* The dollar’s trade-weighted index – a measure of its value relative to a basket of other dominant currencies – dropped to $93.04 Thursday afternoon.
* The last time the index traded this low was on May 15, 2018, according to TradingView.
* As the dollar weakens, gold continues to trade near its new all-time highs, reaching $1,980 on Tuesday.
* The yellow metal has gained more than 10% in July.
* Silver has rallied nearly 30% in July, trading at $23.26 at last check.
* Bitcoin, previously stuck trading in a tight range between $9,000 and $10,000 for nearly two months, followed the rallies in precious metals when it broke above $11,400 on Tuesday.
* Bitcoin has soared 53% in 2020, according to Messari.
“In the coming weeks you’ll see the dollar weakening further,” Qi Gao, a currency strategist at Scotiabank, told the Financial Times.
3 Reasons Why Ethereum Price Rallied 75% To Hit A 2-Year High At $395
Ethereum price hit a 2-year high today and 3 factors suggest the altcoin could rally even higher.
In the last two weeks, Ether (ETH) price increased by 75% as the price rallied from $222 to $390. Many investors believe Ether’s momentum is buoying the entire market, and possibly even pushing Bitcoin (BTC) upwards.
Three factors that appear to be triggering the strong Ether rally are: DeFi, ETH 2.0, and the current prolonged rally taking place in the altcoin market.
DeFi Growth Is Pumping Altcoins But There Are Bearish Signs
Since mid-June, the total value locked in decentralized finance (DeFi) protocols has continuously surged. The launch of protocol-specific tokens, like Compound’s COMP as an example, led to growing demand for DeFi.
Eventually, users discovered a phenomenon called “yield farming”, which involves users searching for higher yields in the DeFi market and switching from one protocol to another to obtain incentives.
The explosive growth of the DeFi market in a short period led many DeFi-connected tokens to surge rapidly. In July, investors seemingly sold off DeFi tokens and other small market cap altcoins, moving back to Ether and Bitcoin.
Today Ether price reached a 2-year high as it surged to $395 on BitMEX but this has traders warning against a potential pullback. In fact, crypto-trader Edward Morra said:
“Yeah, parabola coming out of another parabola is a sight to behold tbh. Also, this isn’t sustainable and will correct. If you are new to this space – buy dips, don’t FOMO at the top.”
ETH 2.0 Bolsters Ether’s Momentum
A consistent positive factor that supports the upward momentum of Ether is the anticipation for ETH 2.0. In August, Ethereum developers expect to launch the final testnet of ETH 2.0 called Medalla.
When fully launched, ETH 2.0 would gradually eliminate miners from the network and reward users for participating in the network. The incentive system would enable users to earn a yield on their Ether holdings over a long period.
Kelvin Koh, the co-founder of a venture capital Spartan Black, recently suggested that every phase of Ether would strengthen Ethereum. Koh said:
“Every phase of ETH 2.0 over the next 2-3 years brings Ethereum closer to its final state and will be catalysts for ETH.”
Altcoin Season Continues
The Ether and Bitcoin rally over the last three days coincided with a drop-off in altcoin prices. In the near-term, the cycle of profit taking could continue if altcoins see regular uptrends.
In previous bull markets, major cryptocurrencies and small altcoins showed an inverse correlation, meaning, as the price of Bitcoin surged, altcoin values dropped.
The opposite remains true when Bitcoin price is stable or consolidating. This creates a cycle that causes BTC and ETH to benefit from multiple profit-taking rallies.
Satoshi Flipper, a popular trader on Twitter, suggested that in the longer-term there is a key resistance for Ether at $780.
It remains to be seen whether the confluence of ETH 2.0, profit-taking rallies, and DeFi growth could push Ether price to higher resistance areas. For now, the sentiment around the altcoin generally remains positive in the medium-term.
Bitcoin Hater Peter Schiff Says Dollar Approaching ‘Wile E. Coyote Moment’
Gold price reached a new all-time high and the same factors behind its rally could also push Bitcoin price higher.
Today the price of gold hit a new record-high at $2,008 and the asset is now in the price discovery phase.
The precious metal appears to be rallying due to the declining U.S. dollar and this could also positively affect Bitcoin (BTC) in the medium-term due to the correlation between the two assets.
In trading, the term price discovery refers to when an asset’s price surpasses its previous all-time high. Given that gold is now seeking a new peak, and its momentum remains strong, traders expect that the asset will continue to appreciate until a clear resistance level is established.
A Weak Dollar Is Good For Gold, And Possibly Bitcoin
According to Peter Schiff, the chairman of SchiffGold and a well-known gold advocate, the weakening dollar has pushed gold upwards. Schiff said:
“The price of #gold is now above $2,000 per ounce for the first time ever. For now, the significance of the dollar’s record low is lost on the vast majority of investors. But as thousand-dollar milestones fall like dominoes the gravity of the problem will be more widely apparent.”
In recent months, the value of the U.S. dollar has fallen substantially in comparison to other top reserve currencies. Consequently,this boosted alternative and safe-haven assets, including gold.
As Cointelegraph reported, industry executives believe a weakening dollar could also strengthen the price trend of Bitcoin. OKEx CEO Jay Hao, trader Scott Melker, and researcher Mark Wilcox said the drop of the dollar benefited Bitcoin.
“No one seems worried about the falling dollar. That’s likely to remain the case until the fall becomes a crash, which I don’t think will begin until the Dollar Index breaks 80. At its current rate of decline that level could be breached before year end, perhaps by election day.”
Similar factors are seemingly buoying investor sentiment around gold and Bitcoin. In the near-term, due to rising virus cases and investor uncertainty, analysts are bracing for a gloomy trend for the dollar.
The confluence of the recent correlation with Bitcoin and gold, and the falling dollar could benefit BTC heading into 2021.
Is Bitcoin Really Digital Gold?
Researchers at Cryptowat.ch, a market data provider, recently explained that gold matches many of the features exhibited by Bitcoin, except BTC has additional unique characteristics like portability and transactability. The researchers said:
“In terms of traits as money, gold matches Bitcoin in the categories of fungibility and costliness to forge.”
Since Bitcoin price reached its peak in 2017, the perception of the digital asset as a store of value continues to improve.
As gold surges to new highs, Bitcoin is receiving more interest from institutions and continuously being associated with gold.
These are all factors that could positively impact BTC price in the medium-term, especially considering BTC’s 24% rally in the past month.
When Real US Treasury Yields Are Negative, Gold’s Lack Of Yield Becomes It’s Strength (#GotBitcoin?)
Why Gold Prices Are Hitting All-Time Highs
A guide to the surge in the precious metal’s prices during the current recession.
Gold prices hit a record at the end of last week, notching a new milestone in a bull run that began in late 2018 and has gathered momentum during the coronavirus pandemic. The precious metal has soared roughly 30% in 2020 to stop just short of closing at $2,000 a troy ounce—which would be an all-time high in New York trading—as it outstrips the Nasdaq Composite Index of highflying technology stocks.
Here is how the gold market works, and why prices are on the rise now.
What Is The Gold Market?
There are two gold markets, closely linked because investment banks and other big players are active in both.
The first is the physical market, which brings together miners, refiners, jewelers, central banks, electronics manufacturers, banks and investors. London is the focal point, dating back to the first gold rush from Brazil in 1697. Shanghai, Zurich, Dubai and Hong Kong are also hubs.
The second market is the futures market, for swapping financial contracts based on gold. This market is electronic, hosted by New York’s Comex exchange, and sets the prices you read about in The Wall Street Journal. It gives investors an opportunity to speculate on gold prices rising or falling without holding the metal, and miners a way to insulate themselves from unexpected price drops.
How Does The Physical Market Work?
Deals to buy, sell and lend gold in London are struck privately, rather than on an exchange. To reduce the amount of metal that has to be shunted from vault to vault, five banks act as a clearing house, balancing out each other’s sales and purchases.
Some of them provide vaults, offering clients a safe place to stash gold. The Bank of England guards more than 400,000 bars beneath the narrow streets of the City of London, largely on behalf of the U.K. government and other central banks, a hoard second only to that of the Federal Reserve Bank of New York
Prices are quoted by troy ounce (14.6 troy ounces to the pound, instead of the standard 16) of pure gold, and bullion trades in batches of 400-ounce bars. London prices are fixed in twice-daily auctions and act as a benchmark throughout the physical market. When a watchmaker buys gold from a refiner, it usually does so at a premium to the London price.
To avoid paying for tons of gold, tying up millions of dollars in cash, industrial users often borrow metal instead of buying it outright. Banks either lease it to them, charging interest, or lend with more complex forward, swap and repurchase deals.
How Does The Financial Market Work?
Futures are standardized contracts that lock in prices for gold that will change hands at a specified date. Buyers and sellers agree to swap 100 troy ounces (a new Comex contract that allows delivery of 400 ounces has barely traded). Gold futures trading data go back to the final day of 1974, when Comex launched the market to coincide with a law allowing Americans to own bullion for the first time in four decades.
Most traders exit futures trades before they actually exchange gold. Recently, however, more investors have taken delivery of gold on the Comex, a sign demand for physical gold is unusually high.
How Do The Physical And Futures Markets Interact?
In good times, gold costs roughly the same amount in London’s physical market and on New York’s Comex. If prices move out of whack, banks bring them back in line by buying bullion on the cheap in one city, flying it across the Atlantic (normally in the cargo hold of a passenger plane) and selling at a profit where prices are higher. They must factor in the small sum it costs to recast the gold, since Comex requires smaller bars, weighing either 100 troy ounces or a kilo.
The pandemic scrambled this self-correcting mechanism in March. A dearth of flights led to fears of a shortage in New York, sending futures well above spot prices in London.
The concerns proved unfounded, but the violent price moves led to losses at banks including HSBC Holdings PLC. That has prompted banks to trade less actively on the Comex, which could make futures more volatile, said David Govett, head of precious metals at brokerage Marex Spectron.
How Do Investors Buy And Sell Gold?
Professional fund managers bet on gold prices with futures. To avoid taking hold of a large amount of bullion, investors typically sell futures before they expire and buy later-dated contracts, in a process known as rolling. This comes at a cost because longer-dated futures cost more than spot gold. The difference is pocketed by the investor’s counterparty—normally an investment banker—who gets to buy low and sell high.
Mom-and-pop investors buy physical bars and coins, which they can either stow at home or in a vault. One-ounce gold eagles, produced by the U.S. Mint and sold by dealers like Kitco Metals Inc., are among the most popular.
Demand for bars and coins has shot up during the pandemic, said Robert Higgins, chief executive of Argent Asset Group, though clients are also selling to profit on rising prices.
“When things go crazy and the surety of everything is questioned, the two things everyone turns to are gold and silver,” he said. This wasn’t always the case: In 1933, Franklin D. Roosevelt ordered Americans to hand over all gold coins, bars and certificates to banks, seeking to staunch a rush to exchange paper money for bullion during the Great Depression.
Investors who want exposure to gold prices without the hassle of storing bullion or trading futures found an alternate solution in 2003: exchange-traded funds.
These funds, which have surged in popularity, buy gold and issue shares that trade on the stock exchange. ETFs bought a record 734 metric tons of gold in the first half of 2020, according to the World Gold Council, taking overall holdings to 3,621 tons.
This buying offset a 46% slump in sales of jewelry, a common means of investing in gold in Asia. India and China led the decline, which the WGC attributed to shop closures, economic uncertainty and high prices.
Why Are Gold Prices Soaring?
The main reason is this year’s precipitous drop in yields on U.S. Treasurys to levels below the expected pace of inflation. Unlike bonds or bank deposits, gold doesn’t pay any income. As a result, owning gold means missing out on yields from other assets when interest rates are high. When real yields are negative, gold’s lack of yield becomes a strength.
The Federal Reserve’s March decision to slash interest rates to just above zero and buy hundreds of billions of dollars of bonds has pulled down yields in fixed-income markets, prompting investors to buy gold instead. Some money managers expect inflation to pick up once the economic crunch is over, which would act as a further drag on real yields if nominal rates don’t rise.
Investors are also buying gold because they think it will hold its value if stocks take another tumble. Enthusiasts take this argument a step further, contending that gold is the ultimate insurance policy against a scenario in which the U.S. government defaults or kindles inflation to alleviate the burden of debt.
“Gold is a haven,” said Rhona O’Connell, head of market analysis for Europe, the Middle East, Africa and Asia at StoneX Group. “It doesn’t have anyone else’s political or financial risk associated with it.”
Another tailwind for gold right now is the depreciation in the dollar. Buyers outside the U.S. are willing to pay a higher dollar price when the greenback weakens, making gold cheaper in terms of their home currencies.
This relationship doesn’t always hold: Gold and the dollar shot up in tandem in March during a period of turmoil in financial markets.
How Does This Compare With Previous Bull Runs?
Two other run-ups have taken place since President Nixon cut the link between gold and dollars in August 1971. The most dramatic spanned the rest of the 1970s, when inflation exacerbated by twin oil crises led the gold price in London to soar from $43 a troy ounce to a peak of $850 in early 1980.
“We’re in World War Eight, if you believe the market,” a commodities broker named James Sinclair told the New York Times on Jan. 21 of that year, the day prices crested.
Prices jumped again from 2008-2011, when interest rates fell because of aggressive stimulus measures by the Fed and a recession that was, at that point, the worst since the Great Depression. Worries that bond-buying by the Fed would lead to runaway inflation—which didn’t transpire—also contributed to the advance
Will Gold Prices Keep Rising?
It took three years after the start of the previous financial crisis for gold prices to peak, notes Edmund Moy, who was director of the U.S. Mint at the time.
“They kept on going up until it was very clear that the U.S. economy would recover slowly and that there would not be inflation,” he said. “I think we’re at the very beginning of momentum for gold prices going up.”
Gold prices tend to overshoot, according to Fergal O’Connor, an economist at University College Cork who has studied the market’s history. Still, he expects them to fall back to a higher level than they were before the pandemic because institutional investors are adding to their gold holdings, removing a chunk of available supply. The return of jewelry demand in China and India could also boost prices.
The biggest deciding factor will be the direction of interest rates, adjusted for inflation, said Suki Cooper, an analyst at Standard Chartered. “It’s real yields that are really driving the flows into gold.”
Where Does Gold Come From?
Gold ores are mined from rocks in underground and open pits all over the world. China has emerged as the biggest miner, digging up 420 metric tons in 2019, according to the U.S. Geological Survey. Other sources include Russia, Australia and the U.S.
Toxic cyanide solutions are used to dissolve gold, extracting it from crushed rocks, before miners partially refine the metal into impure bars known as doré. These are sold to specialist refiners, which transform doré into gold that has close to 100% purity with either gaseous chlorine or electrolysis.
Refiners Play Another Crucial Role: Recycling
Since gold is chemically inert and malleable, it lasts for thousands of years and can be endlessly refashioned. Around one-quarter of demand is met with recycled gold, according to the World Gold Council. Of that, 90% comes from jewelry.
Recycling has picked up as people have sold bullion to cash in on rising prices.
Is Gold A Commodity Or A Currency?
Both. Gold is a commodity in that it derives its value, in part, from its use in products like jewelry. Banks that are active in the physical market trade gold on their commodities books, and the futures market in the U.S. is regulated by the Commodity Futures Trading Commission.
Gold is treated like any other commodity on banks’ balance sheets under the Basel III regulatory guidelines, designed to avoid a repeat of the 2008-9 financial crisis.
Gold is also a currency. For millennia, the metal has functioned as a store of value, unit of account and medium of exchange.
“The Egyptians were casting gold bars as money as early as 4000 B.C., each bar stamped with the name of the Pharaoh Menes,” the financial historian Peter Bernstein writes in “The Power of Gold: The History of an Obsession.”
Bullion played a foundational role in the monetary system from 1717, when Isaac Newton, master of England’s Mint, established a price ratio between gold and silver, to 1971, when President Nixon ended the convertibility of dollars into the precious metal.
Though gold stopped underpinning exchange rates after the “Nixon Shock,” the metal still plays a part in currency markets. Central banks in emerging markets have, for instance, boosted their gold holdings in recent years in an attempt to diversify their reserves away from dollars.
“It is more a currency than a commodity,” said Dr. O’Connor. “Everything else, to one degree or another, gets used up and doesn’t come back into the market. Gold just stays there.”
Ethereum Transaction Fees Fall By 75% As Congestion Eases
Ethereum gas fees appear to be finally going down as activity levels fall from the highs of July.
The cost of sending a transaction on Ethereum plummeted today as congestion appears to be finally clearing.
According to EthGasStation, the average gas fee on Wednesday is between 30 and 40 Gwei, with a notable 6 Gwei as the minimum to get a transaction confirmed in less than 30 minutes.
This comes after a period of more than two months of elevated fees, touching at times more than 140 Gwei. Taking a standard Ether (ETH) transaction as an example, the average cost of sending it came down from about $1 to less than $0.25. The improvement is even more noticeable for DeFi users, where some interactions would regularly consume up to $15 in fees.
Activity Going Down
This appears to be part of a trend that began several days ago with the gradual decrease in transaction count, according to Etherscan data.
Total gas usage and the number of token transfers have also decreased slightly, though seemingly less than the total transaction count. This could suggest that a decrease in DeFi transactions accounts for the majority of the relief, as transactions related to Tether and Forsage, an alleged Ponzi scheme, are topping the charts.
It is worth noting that Etherscan data does not yet include Wednesday, making it difficult to pinpoint what is driving the sudden lowering of the gas fees.
The Ethereum community raised the gas limit, the Ethereum equivalent of block size, up by 25% in June. This was not enough to immediately ease the congestion as demand was too high.
As Cointelegraph previously reported, Ethereum has a fairly elastic gas demand. When prices are high, lower value transactions in industries like blockchain gaming tend to decrease.
The congestion resulted in new users being unable to “dip their toes” in Ethereum DApps and DeFi, as some commentators noted.
Bitcoin, Gold Prices Drop As Trump Praises ‘Big Stock Market Numbers!’
A correction in gold and silver prices coincides with a 3.45% drop in Bitcoin as its price fell below $11,500.
After an exciting weekly close that saw the price of Bitcoin (BTC) rally above the $12,000 mark for the second time this month, the digital asset has lost momentum and slipped below $11,500.
The former resistance level at $11,800 has again failed to function as support, and at the time of writing, Bitcoin’s price has dropped below $11,600 to test the ascending trendline support at $11,550.
Bitcoin’s inability to sustain above the $12,000–$11,800 zone comes as the price of gold corrected 3.6% and dropped below its all-time high to $1,950. The price of silver also fell by 6.85%, which is the first significant pullback since it reached a 2020 high at $29.85 on Aug. 7.
The price correlation between Bitcoin and gold is an oft-discussed topic among analysts, and through July, the price action between the two followed each other to new highs. Thus, it is not surprising that Bitcoin’s price is now correcting alongside gold and silver.
Meanwhile, United States markets showed a strong open, with the S&P 500 this morning up by nine points and the Dow Jones Industrial Average up by 300. This comes after President Donald Trump signed an executive order extending federal pandemic relief benefits to furloughed and jobless Americans.
“Big Stock Market Numbers!” the president also tweeted today, which coincided with the market’s opening rally.
Markets Expect More Economic Stimulus From The Fed
Last week, a breakdown in negotiations between U.S. lawmakers meant that the unemployment benefits expired, as did a moratorium on residence evictions, and some analysts feared this would negatively weigh on markets.
While gold, silver and Bitcoin appear to have reached a temporary top, investors might be interpreting Trump’s executive order and the expected second phase of economic stimulus as a sign that the Federal Reserve will continue to bolster the economy until the pandemic abates.
Whether or not this is strong enough to encourage investors to drop their hedge in gold, silver and Bitcoin is to be determined.
As Bitcoin’s price pulled back, a number of altcoins also saw small losses. Ether (ETH) dropped 2.57%, Chainlink’s LINK corrected by 7.51% and Bitcoin Cash (BCH) saw a loss of 4.72%.
Meanwhile, Tezos (XTZ) is a standout among altcoins, maintaining a 7.44% gain after reaching a new all-time high at $4.46 on Aug. 11.
According to CoinMarketCap, the overall cryptocurrency market cap now stands at $354.2 billion. Bitcoin’s dominance index currently sits at 60.5%, the lowest value since the June 2019 price peak.
Recession Has Indians Selling The Family Gold
Demand for jewelry made of the precious metal has plunged across the country during the pandemic, and many are hocking their gold.
Investors across the globe are hoarding gold in the Covid-19 pandemic. In normally gold-obsessed India, there’s a glut, as struggling families stop buying and start hocking jewelry.
International investors have lifted the price of gold to all-time highs this year, trying to get their hands on more gold coins, bars and exchange-traded funds. Many are seeking shelter in the commodity from the storm of coronavirus and geopolitical concerns, such as the U.S.-China relationship and November’s U.S. presidential election.
At the same time, jewelry demand in India, the world’s second-largest consumer of gold behind China, plunged by 74% in the three months through June, according to the World Gold Council. That’s 124 metric tons less gold jewelry than a year earlier—about as much gold as the U.S. buys in a year.
A nationwide lockdown and fear of the pandemic has meant fewer Indians are visiting jewelry stores and holding weddings, which are the main sources of gold demand, say industry officials and jewelry store owners.
The coronavirus crisis has also squeezed employment, incomes and small businesses, forcing many Indians to sell gold or borrow against it.
In July, Delhi resident Jasmine Nair had to sell her family gold—including the gold bangles her mother gave her for her wedding—when the family’s cash ran out at the same time as they had to pay for the construction of their new home.
“There was no other way to arrange the quick cash, which we really needed,” she said.
With loans hard to obtain since Covid-19 hit, “Gold remains our last hope for survival,” she said.
Jewelry chain owner B. Govindan says business is still only half of what it used to be before the virus arrived, and about one in five customers who come to his shops are selling jewelry rather than buying.
“We are hoping people will come back to buy gold from September-October when the wedding season begins,” he said.
The imbalance of supply and demand is showing up in Indian gold prices, which have been significantly lower than global prices. India’s prices have been as much as $70 an ounce less than the global benchmark.
The companies that lend against gold have had people lining up to put the yellow metal down as collateral for short-term loans.
Businesses and consumers have seen their incomes plummet and at the same time are unable to get new loans from their regular lenders who have become more cautious because the Indian economy has been hit so hard by the virus.
On Monday, India reported the worst impact from the coronavirus pandemic of any of the world’s major economies. The country recorded a 23.9% drop in gross domestic product in the three months ending in June, compared with the same period a year earlier.
Manappuram Finance, one of the biggest lenders specializing in gold loans, expanded a doorstep service nationwide this summer. Its agents show up on motorcycles to pick up, weigh and estimate the value of gold jewelry and approve loans at borrowers’ homes so they don’t have to risk going out and being exposed to Covid-19.
“From time immemorial gold has been the savings and insurance policies for India’s poor,” said George Alexander Muthoot, managing director of Muthoot Finance, another lender specializing in gold-backed loans. “They need funding, and this is quick, easy financing.”
The World Gold Council said this year is too unpredictable to make full-year projections, but the last quarter had the largest dive in demand it had ever recorded. Meanwhile, annual sales in India of recycled gold, or used gold jewelry, could jump to a new record of more than 120 metric tons, said P.R. Somasundaram, managing director for India at the World Gold Council.
“There is going to be a lot of pain in many categories of people particularly lower down the social pyramid,” he said. “Our expectation is this year [gold recycling] could be very high.”
India has the world’s biggest reservoir of gold in the form of bracelets, nose rings and other ornaments. It has more than 25,000 tons of it as jewelry, not only because it looks nice but it has always been the most important way Indians store wealth. Buying shiny things is even a part of regular religious ceremonies, for celebrations as well as for offerings to gods and saints.
The family gold is usually the last thing the average Indian will consider selling, so the rise in gold sales and borrowing against jewelry shows the pain many are going through. The pandemic has forced tens of millions back into poverty in India, economists say.
Padmavati Haripuri, who manages a Muthoot Finance branch in Hyderabad, says there are people lined up outside her branch every day.
“They need to pay school fees, they need to pay medical expenses,” she said. “People are in need of money because they have no incomes and no business.”
India’s central bank last month acknowledged gold-backed loans as an important avenue of finance, easing restrictions on gold lending by allowing loans of up to 90% of the value of the gold held as collateral, up from 75%. That means borrowers can get 20% more cash for their collateral.
Outside a Delhi jewelry store, Asha Goel and her sister waited for their turn to sell the gold bangles their mother gave them more than 20 years ago. They needed the money to support their families and pay for school fees as the virus has led to lower incomes.
“Our mother bought these for us when gold was a lot cheaper,” she said, pointing to the solid gold bracelets on her wrist. “We need to have some cash at home since these are unpredictable times.”
Ethereum Set To Become First Blockchain To Settle $1 Trillion In One Year
The Ethereum network is processing more than double the transaction volume of Bitcoin, and is on-course to process $1 trillion this year.
The third-quarter decentralized finance boom has resulted in the Ethereum (ETH) network processing more than twice the daily transaction volume of Bitcoin (BTC).
According to crypto market data aggregator Messari, the 30-day rolling daily average for Ethereum transaction volume is currently $7 billion, with Bitcoin processing less than $3 billion.
If the current trend continues, Messari predicts Ethereum will become the first public blockchain to settle $1 trillion in transfers over a calendar year.
Ethereum’s previous strongest calendar year relative to Bitcoin was 2018, when it processed half a billion in volume, which was 59% as much as Bitcoin’s $849 million that year.
Bitcoin is on-track for its second-strongest year behind 2018, projected to process $800 million.
It’s not a straightforward comparison between the two blockchains, however. With the DeFi bubble largely taking place on top of Ethereum-powered smart contracts, the Ethereum network now processes the volume of an entire sector, while Bitcoin largely represents transfers of value denominated in BTC.
Messari’s Ryan Watkins attributes much of Ethereum’s volume spike to increased ERC-20 stablecoin volumes, with the majority of Tether (USDT) transactions now taking place on Ethereum and yield farming-driven demand pushing supply growth of more than 600% for MakerDAO’s Dai stablecoin.
Watkins also notes booming on-chain liquidity from decentralized exchanges, with Uniswap and Curve generating more than $20 billion in volume combined during September. DEXs now represent more than 13.6% of total exchange volumes.
However, Messari predicts “the next twelve months could come to define the platform wars” in crypto, noting Ethereum’s ongoing high fees as a problem that rival blockchains will seek to solve, alongside “the rise of parallel DeFi ecosystems.”
“Look for all would-be ETH Killers to continue to empty out their treasuries to build a parallel DeFi sector throughout the end of 2020 and beyond.”
In August, Chris Burniske, a partner at PlaceHolder Capital, asserted that Ethereum and Bitcoin are racing each other to reach the first $1 trillion market cap in crypto.
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