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A Legendary Billionaire Market-Maker Issued A Serious Bitcoin Price Warning—And A Bold Ethereum Prediction

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Bitcoin and ethereum have rocketed to fresh all-time highs this week, propelling the combined crypto market to around $3 trillion.

The bitcoin price has since fallen back slightly, dropping toward $60,000 per bitcoin, while ethereum has also retreated from highs of near $5,000 per ether. Bitcoin’s market capitalization is currently around double ethereum’s at $1.2 trillion, however, ethereum has closed the gap this past year.

Now, legendary market-maker and hedge fund billionaire Ken Griffin has warned bitcoin will eventually be replaced by ethereum—but that ethereum will in turn be replaced by the next generation of cryptocurrencies.

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“The early generation cryptocurrencies, bitcoin for example, are incredibly expensive to manage payments on. Bitcoin is a huge contributor to global warming, bigger than any form of payments we use around the world in aggregate,” Griffin told The New York Times’ Andrew Ross Sorkin, speaking at the 2021 DealBook Summit. Griffin sees payments disruption as “the most attractive theory” for giving cryptocurrencies value.

“Visa V +0.8% and Mastercard MA +2.6% will be replaced by a crypto solution that will be a lower cost of making payments happen between businesses and consumers,” said Giffin, who added: “I don’t fully buy that for a lot of reasons,” asking: “Who deals with fraud risk?”

Griffin, who founded and runs the Chicago-based hedge fund Citadel that manages around $40 billion in assets, pointed to card companies’ willingness to cover fraud and theft costs as one of “a number of issues that haven’t been addressed by crypto as to how payments will be made more efficient.”

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“I think we’re going to see bitcoin replaced conceptually by ‘the ethereums’,” said Griffin, referring to a handful of ethereum rivals, including Binance’s BNB, solana and cardano, that have seen their prices soar at a blistering rate over the last year. “The train is still in the station.”

Griffin predicts these newer cryptocurrencies will then be replaced by the next generation that will have “the benefits of higher transaction speeds, lower cost per transaction, perhaps people will start thinking about how to better deal with security and fraud prevention.”

The ethereum price has surged in recent months thanks to booming interest in blockchain-based decentralized finance (DeFi) and non-fungible tokens (NFTs)—both largely built on top of ethereum’s network.

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Many in the crypto community have previously predicted ethereum could eventually overtake bitcoin as the most valuable cryptocurrency, with DeFi—the idea that traditional financial services could be replaced by blockchain-based protocols—and NFTs—using crypto technology to tokenize all manner of digital media and assets—helping to drive ethereum adoption and, in turn, the price of its ether tokens.

Griffin also revealed he regrets not buying bitcoin years ago when advised to by a Citadel intern.

“There was a 21-year-old intern [that tried to tell me] the big picture I was missing with bitcoin, I wish I had bought the bitcoins he recommended I buy, but I didn’t,” said Griffin. “We talked about the power of blockchain but we still don’t see many solid commercial use cases [for blockchain], [which] is a really interesting technology, a powerful way to maintain a decentralized ledger around the world, but for most problems, it’s really not the solution that we need.”

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Partly inspired by bitcoin, and spurred on by Facebook’s recent attempts to create a private digital currency, governments around the world have begun experimenting with digital versions of their currencies, with the U.S. Federal Reserve exploring a potential digital dollar and China already rolling out an early version of its digital yuan.

“I think we are all still trying to understand if we want to hit this world of decentralized finance and want a payment system that is low cost and effective, is it going to be solved by the crypto community? Or is it going to be solved by a digital dollar,” Griffin asked. “The Chinese are all in on a digital renminbi. I think this is still in the early innings.”

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The bitcoin price has added 300% over the last year, however, the ethereum price has added almost … [+] COINBASE

Griffin is skeptical of the valuation bitcoin, ethereum and other major cryptocurrencies have soared to in recent years, asking “when it comes to cryptocurrencies what is the basis of valuation? It’s whether someone will pay me more for it tomorrow.”

Over the last year, pandemic-induced lockdowns and huge government stimulus injections into the financial systems have boosted the price of assets across the board.

“We’ve created a whole new class of savers because we couldn’t spend money a year ago, like the meme stocks and like cryptocurrency,” said Griffin. “People are very focused on the world of new ideas and new creations. I worry that some of this passion is misplaced when it comes to cryptocurrencies.”

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VanEck Filed for Digital Assets Mining ETF

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Global investment manager VanEck, with more than $60 billion assets under management, has filed an application to establish an exchange-traded fund that will track the price and yield performance of the Global Digital Asset Mining index.

Fund’s investment principles

The Global Digital Asset Mining index is being used to track the performance of companies that are somehow engaged in digital assets mining activities, including Bitcoin or altcoin mining operations. Additionally, companies that provide various services like software development, as well as hardware suppliers, also fall into the category of mining operations providers.

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The fund will invest at least 80% of its total assets in securities in the DAMC but, at the same time, the company is not allowed to invest in digital assets by using derivatives products like options or futures. Hence, the fund is not going to track the price movement of any cryptocurrency.

The VanEck ETF will be able to provide exposure to companies that are in fact operating with digital assets or holding them on their balance sheet and are also being presented in the Global Digital Assets Mining index.

Risks for investors

The application also contains a section related to the risks behind the digital assets mining industry. According to the filing, the main risks for investors are technological obsolescence, supply chain issues and certain issues with obtaining new hardware.

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Additionally, the fund agrees that most digital assets mining companies are exposed to the issue of relying on third-party companies that are located and functioning overseas.

Bitcoin Daily Chart
Source: TradingView

In addition to risks tied to hardware wearing, digital assets miners generate revenue from selling their assets on various cryptocurrency exchanges, and the price of their assets is a subject of high volatility that could lead to the value loss of their holdings.

While most cryptocurrency miners remain in high profit from their operations, rapid change of assets like Bitcoin may potentially lead to additional losses of those companies and, therefore, losses for investors that receive direct exposure to the aforementioned index.

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Bitcoin Senator Rallies For Support Against Powell’s Renomination As Federal Reserve Chair, Here’s Why

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Popular Bitcoin Senator, Senator Cynthia Lummis is reportedly soliciting for the support of her fellow Republicans in her stance against Jay Powell after the latter got renominated to chair the Federal Reserve.

Bitcoin Senator Wary of Crypto-unfriendly Nominees

As reported by Decrypt who first broke the news, a source in Lummis’ office says her reasons border on her belief that there is an unlawful treatment of crypto-based institutions in her home state, Wyoming.

Meanwhile, the Bitcoin senator is not only against the nomination of Powell. The source still claims that Senator Lummis is also asking her Republican colleagues to help block Leal Brainard’s nomination as well. Brainard is another nominee of President Biden’s for the Fed positions.

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Lummis’ skepticism might be as a result of the Special Purpose Depository Institutions or SPDIs as they are otherwise called. They are a new type of crypto-based bank that Wyoming lawmakers granted a special operational license to, just last year.

Two crypto-based companies that received the license in 2020 include Kraken exchange and Avanti — the stablecoin issuer. However, the Federal Reserve’s decision to not approve their applications for central bank-issued accounts has placed a hold on their banking ambitions.

Speaking about the Federal Reserve’s delay in a Wall Street Journal feature article by Lummis on Wednesday, she says it is an intentional and unlawful obstruction. She added that the Fed’s reasons are ambiguous at best. According to the Bitcoin Senator, Lummis claimed that the Wyoming entities have met all requirements for being a bank under the Federal Reserve Act.

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Lummis insists that Powell and Brainard are only avoiding their legal obligations in their continued treatment of SPDIs and like many other U.S lawmakers, she wants to know why.

Could Lummis’ Pressure Affect Powell’s Confirmation?

As Lummis continues to apply even more pressure on her colleagues, the possible extent to which this pressure can truly go in affecting the confirmation process of both Powell and Brainard, remains to be seen.

But with the chair of the Senate Banking Committee, Sherrod Brown, reportedly holding a vote on the pair sometime this month, both of them could be confirmed.

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Also, there’s a possibility of a potential tight vote now that some progressive Democrats — most notably Elizabeth Warren — are saying they will not be voting for Powell.

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PlanB’s Floor Model First Miss: Bitcoin Price Closed Way Below $98K In November

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PlanB’s floor model was wrong about BTC’s November closing price. The stock-to-flow model, though, is still on track.

Bitcoin’s closing price for November below $60,000 meant that PlanB’s floor model, which was particularly accurate until now, was finally broken.

At the same time, though, the analyst confirmed that the more popular stock-to-flow model was still valid as BTC is on track towards $100,000.

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PlanB’s Floor Model Fails

PlanB is among the most popular analysts in the cryptocurrency space, predominantly known for the Bitcoin stock-to-flow model, which he published in early 2019. However, he also posted another model, which he referred to as the “worst-case scenario,” in July this year.

Also known as the floor model, it’s based on technical aspects, such as the 200-day moving average, and saw BTC closing August at $47,000, September at $43,000, and October at $63,000.

The first two months were spot on. BTC closed in October at $61,000, which was still very near to the model’s predicted price, and PlanB said it was “good enough” for him.

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However, November’s closing actual closing price of way below $60,000 was quite different from what the model envisioned – $98,000. As such, the analyst admitted that this was the model’s first miss after nailing the previous few months.

S2F on Track

As mentioned above, the floor model works separately from the stock-to-flow model, which sees the stock as the size of existing reserves (or stockpiles) and the flow as the annual supply of new bitcoins to the market.

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It’s actually even more bullish as the original version sees bitcoin tapping $100,000 by the end of the year. The upgraded stock-to-flow cross-asset model, which introduced different phases of bitcoin’s development, predicted a price tag of $288,000 until 2024.

Although bitcoin still struggles below $60,000 at the time of this writing, PlanB believes that the original S2F hasn’t been broken as the asset is on its way towards $100,000. If BTC is indeed to go into a six-digit price territory, it would have to increase its USD value by more than 66% in the next 30 days.

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