by admin | Aug 11, 2023 | Learn
Cryptos have reshaped the financial landscape, introducing innovative concepts and challenging traditional economic paradigms. One such concept is classifications into two distinct categories: inflationary and deflationary cryptocurrencies.
These terms are derived from the broader economic concepts of inflation and deflation, and they have important implications for the value, usage, and adoption of different cryptocurrencies. In this article, we delve into inflationary and deflationary cryptocurrencies, exploring their characteristics, benefits, drawbacks, and potential impact on the global economy.
Inflation and Deflation: A Brief Overview
Before delving into the specifics of inflationary and deflationary cryptocurrencies, it’s crucial to understand the underlying economic concepts.
Inflation occurs when the general price level of goods and services in an economy rises over time. This phenomenon erodes the purchasing power of money, as each currency unit buys fewer goods and services. Central banks often use controlled inflation as a tool to stimulate economic activity, encourage spending, and manage debt.
Deflation, on the other hand, refers to a decrease in the general price level of goods and services. While it might seem beneficial, sustained deflation can lead to reduced consumer spending, business contraction, and economic stagnation. Central banks typically seek to avoid deflation by implementing monetary policies to promote stability and growth.
Inflationary Cryptocurrencies: Features and Implications
Inflationary cryptocurrencies are digital assets designed to have a controlled and predictable increase in their supply over time. This mimics the concept of controlled inflation in traditional economies and contrasts with the fixed supply of assets like Bitcoin.
Characteristics of Inflationary Cryptocurrencies:
- Controlled Supply: Inflationary cryptocurrencies are often governed by algorithms that determine the rate of new token issuance. This controlled supply mechanism aims to balance stability and incentivizing network participation.
- Stimulating Activity: Proponents of inflationary cryptocurrencies argue that a controlled increase in supply encourages spending, investing, and network utilization. It incentivizes users to transact and use the cryptocurrency for various purposes, fostering a dynamic ecosystem.
- Reduced Scarcity: Inflationary cryptocurrencies may lack the scarcity-driven value proposition of deflationary assets like Bitcoin. However, this can make them more suitable for everyday transactions, as people are less likely to hoard them for speculative purposes.
Implications of Inflationary Cryptocurrencies:
- Stable Pricing: Inflationary cryptocurrencies may experience more stable pricing than highly volatile deflationary counterparts. This stability can make them more attractive for merchants and consumers seeking a reliable exchange.
- Economic Stimulus: Just as controlled inflation can stimulate economic activity in traditional economies, inflationary cryptocurrencies may help drive adoption and encourage spending within their respective ecosystems.
- Potential Drawbacks: Critics argue that inflationary mechanisms could lead to long-term devaluation, reducing the overall purchasing power of the cryptocurrency. The challenge lies in finding the right balance of inflation to avoid both hyperinflation and economic stagnation.
Deflationary Cryptocurrencies: Features and Implications
Deflationary cryptocurrencies are characterized by a fixed or decreasing supply over time, potentially increasing their value as demand rises and supply remains constant or reduces.
Characteristics of Deflationary Cryptocurrencies:
- Limited Supply: Deflationary cryptocurrencies are often designed with a capped supply, such as the case of Bitcoin, which has a maximum supply of 21 million coins. This limited supply is intended to mimic precious resources like gold.
- Scarce and Valuable: The scarcity-driven nature of deflationary cryptocurrencies can lead to increased perceived value over time. This characteristic attracts investors and individuals looking to preserve their wealth.
- Digital Gold: Deflationary cryptocurrencies are sometimes referred to as “digital gold” due to their potential to serve as a store of value and hedge against traditional economic uncertainties.
Implications of Deflationary Cryptocurrencies:
- Hedging Against Inflation: Deflationary cryptocurrencies can serve as a hedge against traditional fiat currencies that are susceptible to inflationary pressures. Investors may flock to these assets during periods of economic uncertainty.
- Hoarding and Reduced Spending: The potential for future value appreciation might lead to hoarding and reduced spending, which could hinder their use as a medium of exchange for everyday transactions.
- Economic Challenges: A deflationary cryptocurrency’s fixed supply could lead to economic challenges in the long term, including reduced liquidity and potential economic stagnation due to decreased spending.
Balancing Act: Finding the Optimal Approach
The debate between inflationary and deflationary models is ongoing in the realm of cryptocurrencies. Both approaches have merits and drawbacks, and the optimal solution likely lies in a nuanced combination of these models.
Hybrid Models: Some projects are exploring hybrid models that combine elements of both inflation and deflation. These models attempt to balance stability, adoption, and scarcity-driven value appreciation.
Economic Experimentation: Cryptocurrencies provide a unique opportunity for economic experimentation, allowing developers and communities to test different monetary policies in a digital environment.
Consideration of Use Case: The suitability of an inflationary or deflationary model depends on the specific use case of the cryptocurrency. For instance, a cryptocurrency facilitating everyday transactions might benefit from controlled inflation, while a store of value might lean towards a deflationary model.
Conclusion
Inflationary and deflationary cryptocurrencies represent two divergent approaches to the fundamental economic challenge of maintaining price stability and encouraging economic activity. Each model has its implications for adoption, use, and value appreciation. As the cryptocurrency landscape evolves, new models and approaches will likely emerge, further enriching the diversity of digital assets available to users and investors.
It’s important to recognize that cryptocurrency is still relatively young, and the long-term effects of different supply models are yet to be fully understood. As the industry matures and more data becomes available, a clearer picture will emerge regarding the impact of inflationary and deflationary mechanisms on the broader economy and financial ecosystem. In the meantime, investors, developers, and users should remain vigilant and informed as they navigate the exciting world of cryptocurrencies and their underlying economic principles.
by Chelsea Florence | Aug 10, 2023 | Regulation
Key Points
- France has updated its crypto licensing rules to match MiCa legislation
- The new amendments will come into effect on January 1, 2024, around the same time as the MiCA legislation
Applicants for DASP regulatory licenses in France starting in the year 2024 will have to follow MiCA legislation as the country has updated its licensing regime. The Eurozone is expected to enforce MiCA regulation in 2024, ushering in a new era of regulated blockchain and crypto adoption.
France ramps up crypto licensing rules to match MiCA
A press release from Autorité des Marchés Financiers (AMF), France’s main financial authority ushers in new policies that will see digital asset service providers take an “enhanced” registration process to comply with crypto licensing rules to match MiCA legislation.
The new registration requirements are captured by the AUMF’s article 721-1-2 of the MAF General Regulation that will include systems for managing conflict of interests, more disclosure obligations, and prohibition to use client assets without their consent, among others.
While these regulations were set in on January 1, 2024, any crypto exchange licensed before the new amendments will benefit from much lighter requirements set, which is protected by a “Grandfather clause” that comes as a simpler version of the MiCA regulatory framework.
Keep watching Fintech Express for more updates on this and other fintech-related developments.
by admin | Aug 5, 2023 | Learn
Introduction:
A sideways crypto market cycle, also known as a consolidation phase or a range-bound market, is a period when prices exhibit relatively little change, moving horizontally within a defined range. In the world of cryptocurrencies, volatility is a constant companion. Prices can surge to dizzying heights during bull markets and plummet to unexpected lows in bear markets. However, not all market conditions are characterized by dramatic price movements. Understanding the dynamics of sideways market cycles is crucial for investors looking to make informed decisions during these periods of apparent stagnation.
1. Defining a Sideways Crypto Market Cycle:
A sideways market cycle occurs when the price of a cryptocurrency remains relatively stable, with no clear upward or downward trend. During this phase, the market experiences low volatility, and prices fluctuate within a defined range, forming what traders refer to as a “trading range” or “price consolidation.”
2. Characteristics of a Sideways Market:
Several key characteristics distinguish a sideways market cycle:
a. Price Range: In a sideways market, the price of a cryptocurrency tends to move back and forth between a defined upper resistance level and a lower support level. Traders can identify these levels by analyzing historical price data and identifying areas where buying or selling pressure has been particularly strong.
b. Reduced Volatility: Sideways markets are marked by subdued price fluctuations compared to the more pronounced swings seen during bull or bear markets. This reduced volatility can make trading more challenging for some market participants.
c. Decreased Trading Volume: During sideways market cycles, trading volume often declines as investors adopt a wait-and-see approach, anticipating a clear trend before committing to significant buy or sell positions.
d. Extended Duration: Sideways market cycles can last for varying durations, ranging from a few days to several weeks or even months, depending on market conditions and the overall sentiment.
3. Causes of Sideways Market Cycles:
Sideways market cycles can result from various factors:
a. Market Indecision: When investors are uncertain about the future direction of the market, they may refrain from making significant moves, leading to price consolidation.
b. Technical Indicators: Certain technical indicators, such as Bollinger Bands or Moving Averages, can create support and resistance levels that contribute to the formation of a sideways market.
c. Market Manipulation: In some cases, market manipulation or attempts to maintain price stability can lead to periods of sideways movement.
4. Implications for Investors:
Investors should consider the following implications during a sideways market cycle:
a. Patience is Key: Sideways markets require patience, as it may take time for a clear trend to emerge. Traders and investors should avoid making impulsive decisions based on short-term price movements.
b. Trading Range Strategies: Traders can take advantage of sideways markets by employing range-bound trading strategies, buying at support levels and selling at resistance levels.
c. Accumulation Opportunities: Sideways markets can present opportunities for long-term investors to accumulate positions at relatively stable prices before a potential price breakout.
d. Risk Management: Although sideways markets may seem less volatile, risk management remains essential to protect against unexpected market shifts.
5. End of Sideways Cycle:
A sideways market cycle typically comes to an end when the price breaks out of the established trading range. A breakout above the resistance level signals a potential bullish trend, while a breakdown below the support level indicates a potential bearish trend.
Conclusion:
The sideways crypto market cycle represents a period of relative price stability and reduced volatility. While it may seem uneventful, understanding this phase is critical for investors seeking to optimize their strategies and navigate the crypto market effectively. Patience, range-bound trading strategies, and vigilant risk management are essential during these periods.
Moreover, being prepared for potential price breakouts can help investors capitalize on emerging trends once the consolidation phase comes to an end. By embracing a well-informed approach, investors can harness the opportunities presented by the sideways market cycle while maintaining a long-term perspective on their crypto investments.
by Samuel Mbaki | Aug 2, 2023 | Cryptocurrencies
Key Points
- MicroStrategy has added another 14.5M worth of Bitcoin after adding 12,333 in June.
- The company says it plans to raise upwards of 750 million dollars to invest in the currency, among other corporate duties.
MicroStrategy’s Bitcoin buying spree continues as the company bags 14.5 million dollars worth of Bitcoin amid a bigger plan to invest over $ 750 million more in the coin. The increased interest from MicroStrategy comes as its chair Michael Saylor thinks the next wave of institutional investments is imminent.
Saylor keeps filling MicroStrategy’s Bitcoin bags
Saylor’s MicroStrategy now holds 152,800 bitcoins worth over $4.53 billion after adding 467 more coins at $14.5 million. The company has also released a filing indicating that it plans to raise as much as $750 million via share sales to invest in the coin, among other general corporate purposes.
The $750 million would be allocated to Bitcoin investment and other roles like working capital deployment and debt repurchase. Saylor has been vocal about investments in Bitcoin for multiple years now. He started buying Bitcoin in 2020, citing the need for the company to hold cash due to an eroding threat of inflation.
He was bashed for the company losing millions in unrealized losses over the bear market from November 2021 through 2023. However, MicroStrategy continued “filling its bags” till Q2 2023, when it added over 12.3K bitcoins. It has now added 467 more coins and plans to keep buying as it is raising money to add to its capital.
Saylor is a strong believer in Bitcoin, and now that BlackRock and other TradFi institutions have started flocking into Bitcoin ETFs, he thinks that it’s “the best thing that ever happened to Bitcoin,” meaning he would keep buying the coin. Keep watching Fintech Express for more updates on this and other fintech-related developments.
by Chelsea Florence | Jul 30, 2023 | Learn
Introduction
As the popularity of cryptocurrencies continues to grow, so does the risk of cyberattacks targeting software wallets. Software wallets, though convenient, are susceptible to various online threats, such as hacking, phishing, and malware attacks. Protecting your software wallets is paramount to ensure the safety of your digital assets.
Practical Steps and Best Practices for Safeguarding Your Software Wallets From Cyberattacks
- Choose Reputable Wallets
The first step in protecting your software wallet is selecting a reputable and well-established wallet provider. Opt for wallets that have undergone thorough security audits and have a history of successful operation. Popular software wallets like Exodus, Electrum, and Trust Wallet are examples of trustworthy options with robust security features.
- Enable Two-Factor Authentication (2FA)
Two-factor authentication adds an extra layer of security to your software wallet. By enabling 2FA, you will need to provide a second form of verification, such as a one-time code sent to your mobile device, along with your password when logging in or conducting sensitive transactions. This significantly reduces the risk of unauthorized access.
- Keep Software Up-to-Date
Regularly update your software wallet to ensure that you are benefiting from the latest security patches and enhancements. Developers often release updates to address known vulnerabilities, so staying up-to-date is crucial to protect against emerging threats.
- Implement Strong Passwords
Choose strong and unique passwords for your software wallet accounts. Avoid using easily guessable information, such as birth dates or common words. A strong password should include a mix of uppercase and lowercase letters, numbers, and special characters. Consider using a password manager to securely store and generate complex passwords for all your accounts.
- Backup Your Wallet Securely
Regularly back up your software wallet’s private keys and recovery phrases. Store these backups securely in offline storage, such as a hardware wallet or a safe, away from the internet and potential hackers. This precaution ensures that you can regain access to your funds in case your device is lost, stolen, or damaged.
- Beware of Phishing Attempts
Be vigilant about phishing attempts, which often come in the form of fake websites or emails imitating legitimate wallet providers. Always double-check URLs and email addresses before entering any sensitive information. Legitimate wallet providers will never ask for your private keys or recovery phrases via email or other communication channels.
- Use Hardware Security Features
Some software wallets offer integration with hardware security features, such as Universal Second Factor (U2F) devices or hardware wallets. Utilizing these additional layers of security can help protect your software wallet from cyber threats.
- Secure Your Device
Keep your computer or smartphone secure by using strong antivirus and antimalware software. Regularly scan for potential threats and avoid downloading files or applications from untrusted sources.
- Limit Public Wi-Fi Usage
Avoid accessing your software wallet or conducting cryptocurrency transactions on public Wi-Fi networks. Public networks may lack encryption and can be susceptible to man-in-the-middle attacks.
Conclusion
Safeguarding your software wallets from cyberattacks is essential to safeguard your valuable digital assets. By following these best practices, you can significantly reduce the risk of falling victim to hacking, phishing, and malware attempts. Remember to stay informed about the latest cybersecurity trends and continuously update your security measures to stay one step ahead of potential threats. By taking a proactive approach to security, you can enjoy the benefits of software wallets while ensuring the safety of your cryptocurrency holdings.
