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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
-
Private school fees soar and VAT threat looms – what does it mean for you?Rising private school fees could see more than one in five parents pull their children out of their current school. Before you remortgage, move house or look to grandparents for help, here’s what you need to know.
-
Best and worst UK banks for online banking revealedWhen it comes to keeping your money safe, not all banks are equal. We reveal the best and worst banks for online banking when it comes to protecting your money from scams
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsWe round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
