Cryptocurrency roundup: US overtakes China as biggest bitcoin miner

The US becomes the world’s biggest bitcoin miner, Russia’s Vladimir Putin gets onside and JP Morgan’s Jamie Dimon gets sceptical. Saloni Sardana rounds up the biggest crypto stories of the week.

Welcome back, 

Bitcoin continued to hold on to its gains following the previous week where the world’s most popular cryptocurrency approached its all-time high. Even warnings by the Bank of England, that cryptocurrencies could spark the next market meltdown failed to derail bitcoin and other cryptos. 

Here are the stop stories that caught our eye. 

Cryptocurrencies could spark the next financial meltdown as bad as 2008

Cryptocurrencies could trigger the next big global financial crisis in the absence of stringent laws to regulate the industry, said Jon Cunliffe, the Bank of England’s deputy governor for financial stability. 

Cunliffe compared cryptocurrencies’ growth in recent years – which has seen the market balloon from $16bon five years ago to $2.3trn today – to the $1.2trn subprime mortgage market which contributed to the financial crisis back in 2008: “When something in the financial system is growing very fast, and growing in largely unregulated space, financial stability authorities have to sit up and take notice,” he said. 

But Cunliffe’s assessment wasn’t just gloomy; he emphasised that regulators should distinguish between approaches that are actually dangerous or just simply new. 

Back in May, Andrew Bailey, the Bank of England’s governor, warned that cryptocurrency investors should brace themselves to lose all of their money because of the volatile nature of cryptocurrencies and the fact that digital currency appears to have no intrinsic value.  

US overtakes China as world’s biggest bitcoin mining hub 

The US has become the world’s largest bitcoin mining hub, months after China – formerly the biggest – outlawed bitcoin mining. 

China’s global hashrate – an indicator used to show the collective power of cryptocurrency miners – fell from 44% to zero between May and July, says the Cambridge Centre for Alternative Finance, a think-tank. The US’s global hashrate, meanwhile, rose from 17% in April to 35% in August. 

In May, China banned cryptocurrency mining activities and prohibited the country’s financial institutions from participating in the sector. Since then, it has taken numerous other drastic measures and intensified its crackdown, most recently by dubbing all cryptocurrency transactions as “illegal”. 

The recent statement by the People’s Bank of China added that all cryptocurrencies, including both tether and bitcoin, do not represent fiat currency and cannot be traded on the market. China’s government will "resolutely clamp down on virtual currency speculation, and related financial activities and misbehaviour in order to safeguard people's properties and maintain economic, financial and social order," it said.

Russian president Vladimir Putin warms to cryptocurrencies 

Russian president Vladimir Putin has hinted that he is warming to cryptocurrencies. Digital currencies have “the right to exist and can be used as a means of payment,” the Kremlin told CNBC this week. 

Though the president fell short of claiming that digital currencies can be used to purchase the country’s exports. 

Putin’s comments contrast with earlier remarks from the central bank, the Bank of Russia, which reiterated that cryptocurrencies cannot be used as a means of payment due to their highly unpredictable and volatile nature. 

And Bloomberg reports that Russia has no plans to outright ban cryptocurrencies in the way China has done. 

JPMorgan’s Jamie Dimon questions bitcoin’s limited supply

The bitcoin price may be approaching its record high, but Jamie Dimon, the boss at JPMorgan, Wall Street’s biggest bank, isn’t convinced, dubbing the digital currency as “worthless”.

Dimon is sceptical about bitcoin’s limited supply of 21 million coins. Cryptocurrency bulls have touted this limited supply as a key reason to buy digital currencies – and even provide a hedge against inflation – as a limited supply is expected to have a bullish force on digital currencies. 

“How do you know it ends at 21 million [bitcoins]? You all read algorithms? You guys all believe that? I don't know, I've always been a skeptic of stuff like that," Dimon said, according to a report by Yahoo Finance. 

Here’s what happened in the cryptocurrency market in the last seven days:

  • Bitcoin is up 9% to $59,021. 
  • Ether is up 4% to $ 3,761.
  • Dogecoin is down 7% to $0.23. 
  • Cardano is down 6% to $2.16
  • Solana is up 3% to $160.38

What you need to watch out for

Ethereum network’s long-planned upgrade

Ether’s upgrade to a proof-of-stake upgrade is happening in October. The first part of the upgrade, called Altair, is scheduled to take place on 27 October.

The upgrade represents “a ‘low stakes warm-up’ to prepare for the coming “Merge”, when Ethereum will transition from a proof-of-work to proof-of-stake consensus mechanism, reports Coindesk. 

Both are methods of verifying transactions on the blockchain, but proof-of-work uses a lot of energy, while proof-of-stake is considered more energy efficient and reduces the risk of attacks by miners on the network.

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