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‘George Soros Scenario’ Could Destroy Ethereum, Report Claims

A trading strategy famously used by George Soros in the 1990s could ruin the Ethereum economy, according to the crypto finance firm Amber Group.

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In brief

  • The Ethereum market is ripe for a large investor to corner the market, says crypto finance firm Amber Group.
  • A “George Soros type of trade” in which an investor hoards gas tokens and purposely collapsed the network could be very profitable, the group suggests.
  • The theory may have merit say crypto insiders, even if it currently remains unlikely.

There’s a way to destroy the economy of the world’s second-largest cryptocurrency, Ethereum—and it’s a scheme not dissimilar to a trading strategy used by billionaire investor George Soros in the 1990s, who made billions of dollars by shorting the British Pound. 

That’s according to researchers from crypto finance firm Amber Group, which earlier this week published its findings on the matter in a Medium post.

The Ethereum network is fit to burst; as of September 4, 97.16% of the network is used up. It’s not hard to think of reasons why: in the past three months, users have poured $8 billion into so-called decentralized finance protocols, such as lending services. But the DeFi boom of 2020 and the massive influx of both money and activity on the Ethereum network could have some intended consequences.

All Ethereum protocols are powered by “gas,” the name for the fuel that pays for smart-contract transactions. It’s paid in ETH, the native currency of the Ethereum blockchain network. Gas fees are now ridiculously high—getting your transaction processed within 30 seconds now costs about $5, according to Ethereum block explorer Etherscan.

And there’s a way to push those fees even higher, postulates Amber Group. One way to do it could be to hoard Gas Tokens, a special type of token that are “essentially tokenized rent for block space,” wrote the research group.

Amber Group continued: “They take advantage of the storage refund mechanism in Ethereum; when you mint gas tokens, you are saving data into contract storage, and when you free (spend them), you are burning the tokens and freeing up the storage element previously saved.”

If someone bought a whole load of Gas Tokens, this could waste even more space on the blockchain, and make gas so scarce that the price would go up and up. 

“As fees continue to increase, demand for gas tokens increase, pushing prices higher, which in turn creates more minting. The minting process consumes more block space…which results in higher gas fees…and so on,” wrote Amber Group.

Eventually, Ethereum would become unusable, and the price of ETH would plummet. But if someone shorted ETH—i.e. stood to profit from its collapse—they could make a lot of money. 

That’s similar to what billionaire investor George Soros did in the 1990s. He bought up all British pounds he could, so that the pound became overpriced. Then the Bank of England was forced to buy up pounds itself, further overvaluing the pound. So when the pound started to fall in value, Soros, who had shorted the pound, made lots of money. 

So, does the Amber Group’s “George Soros scenario” theory hold water? 

Eden Dhaliwal, the global managing director of Conflux Network, told Decrypt that “there are real concerns of large scale acquisitions of gas tokens that would lead to wasted block space and thus even higher gas prices. Adding speculative pricing to the mix would again result in upward price pressure in my view.”

But Eric Wall, CIO of Arcane Assets, is not bowled over by the thesis. “I don’t think it’s going to cause any big feedback loop pressure on the system,” he said.

“We’re already suffering from insanely high gas costs right now. If this would cause people to flock to gas tokens in such droves that it would squeeze people out of the chain, it would probably already have happened by now.”

Wall said that the strategy makes sense only “if you think gas is going to go up even more.” But anyone trying this strategy must keep in mind that software to scale Ethereum—thus potentially freeing up space on the network—may come out in the next couple of months. 

”Whoever buys them now will definitely fear a collapse in their value when scaling solutions hit,” he said. “Whether that fear is justified is a bit too complex to answer in my opinion. But yes, it is likely.” 

Still, investors and the markets in which they operate aren’t always rational—a dictum that often rings more true in crypto than in most other markets.

Disclaimer

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.

Source: https://decrypt.co/40900/george-soros-scenario-could-destroy-ethereum

Blockchain

Ripple Price Analysis: XRP Suffers Hard As Fresh Lows Against Bitcoin Incoming

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XRP/USD – Bulls Trade Sideways After Triangle Break

Key Support Levels: $0.25, $0.245, $0.237.
Key Resistance Levels: $0.261, $0.271, $0.28..

Last week, XRP managed to break free from a symmetrical triangle pattern but has since moved sideways since the breakout. The coin seems to remain supported at the $0.25 level but struggles to break the resistance around $0.261 (bearish .5 Fib Retracement).

To turn bullish, XRP would need to close a daily candle above the $0.261 level to show that the buyers are ready to push higher toward $0.28.

xrpusd-oct26
XRP/USD Daily Chart. Source: TradingView

XRP-USD Short Term Price Prediction

Looking ahead, if the buyers rebound from $0.25 and penetrate above the $0.261 level (bearish .5 Fib), higher resistance lies at $0.271 (bearish .618 FIb), $0.28 (1.414 Fib Extension), and $0.286 (bearish .786 Fib).

On the other side, if the sellers push beneath the current $0.25 support, additional support lies at $0.245 (100-days EMA), $0.237 (200-days EMA), and $0.228 (.618 Fib Retracement).

The volume looks like it is dropping, and the Stochastic RSI produced a bearish crossover signal in overbought territory, which is a strong selling signal when combined with the falling volume.

XRP/BTC – XRP Struggling Beneath 2000 SAT.

Key Support Levels: 1915 SAT, 1900 SAT, 1865 SAT.
Key Resistance Levels: 1960 SAT, 2000 SAT, 2035 SAT.

Last week, XRP penetrated beneath the 2000 SAT level. It continued to struggle over the weekend as it broke the support at 1960 SAT. Today, after a brief push toward 2000 SAT, the sellers emerged and pushed XRP back into the October lows at 1915 SAT – provided by a downside 1.618 Fib Extension.

XRP is in a tricky position right now against Bitcoin. If the sellers penetrate beneath 1900 SAT XRP would set fresh 2020 lows for XRP/BTC.

xrpbtc-oct26
XRP/BTC Daily Chart. Source: TradingVIew

XRP-BTC Short Term Price Prediction

Looking ahead, if the sellers break 1915 SAT, the first level of support lies at 1900 SAT – which is the July 2020 low. Beneath this, support lies at 1865 SAT, 1800 SAT, and 1780 SAT.

On the other side, the first level of resistance lies at 1960 SAT. This is followed by resistance at 2000 SAT, 2035 SAT, and 2100 SAT.

Both the RSI and Stochastic RSI’s are in extremely oversold conditions, suggesting that the selling pressure should end soon as the bears seem to be overextended.

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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.


Source: https://cryptopotato.com/ripple-price-analysis-xrp-suffers-hard-as-fresh-lows-against-bitcoin-incoming/

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Blockchain

Someone Just Transferred $1.15 Billion (0.4% Of Total Bitcoins) for $3.6 Fees

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  • An anonymous user just made what seems to be the largest fiat value transaction using Bitcoin.
  • In a single transaction, the user sent a total of 88,857.2449 BTC, which, at the current rates, is worth around $1.15 billion.
  • Being well-known for its low fees, the entire thing cost the user less than $4.
  • Large Bitcoin transactions have happened in the past, and most of them are characterized by their staggeringly low fees.
  • It’s also interesting to note that this wasn’t the largest transaction in terms of BTC.
  • As CryptoPotato reported earlier this year, a user sent a total of 124,946.622 BTC, representing a total of 0.07% of Bitcoin’s total supply. However, at the time, the amount was worth around $1 billion, and the user paid $80 in fees.
  • Back in 2011, Mt. Gox transferred 550,000 BTC, which today would be worth over $7.1 billion.
  • Meanwhile, Bitcoin’s price continues to trade around the $13,000 mark. It appears that the bullish momentum prompted by the PayPal news is somewhat fading. If bulls are to pick it up again, the next area of major resistance should lie somewhere around the important psychological resistance at $14,000.
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Source: https://cryptopotato.com/whale-alert-1-15-billion-0-4-of-total-bitcoins-transferred-for-3-6-fees/

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North America and Europe Control 88% of All Lightning Network Nodes, Research Finds

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As Bitcoin adoption grows more and more, concerns about the need for scalability solutions increase. Lightning Network is the most important layer-two development currently available on the Bitcoin blockchain, and it seems that North Americans are the favorite demographic for this efficiency-focused micropayment solution.

The Lightning Network is a layer-two solution currently under development. It focuses on the creation of channels between peers that allow for almost instant and extremely cheap transactions without the need to record it on the blokchain. The money is locked on a wallet in order for it to be available on the Lightning Network, and once a user needs to have its tokens on the Bitcoin blockchain, the channel is closed and the blockchain registers one transaction from the original wallet to the final one without registering what happened in between.

Graphic representation of how the Lightning Network works. Image: TheBlockPro
Graphic representation of how the Lightning Network works. Image: TheBlockPro

North America and Europe Rule the Lightning Network

According to a report from the University of Vienna, 45% of all Lightning Network nodes run in North America, with a large majority in the United States. Lightning Labs, the leading developer of this scaling solution, is registered in that country. Blockstream, Bitcoin’s largest development company, is registered in Canada.

Europe is the second region on the list, with 43.1% of the world’s nodes. The rest of the nodes are distributed among Asia (6.2%), Oceania (2.2%), with South America and Africa sharing a small fraction of 0.8% and 0.6%, respectively.

The contrast between the number of nodes and the adoption of Bitcoin is remarkable. Latin America has a high adoption rate of Bitcoin, according to data compiled by Chainalysis. However, it has just under 1% of Lightning Network nodes. Africa is also showing a similar picture, with a high volume of trading and adoption, but with little interest in the micro-payment system.

Channels Share Cultural Ties

Another important finding is that Lightning Network has become very popular in large urban centers. Researchers believe that this is mainly due to the better infrastructure and connectivity, which facilitates the operation of the nodes:

We could observe that LND is popular in almost all countries and also showed that within a country nodes form clusters around cities and expand into their metropolitan areas. Also infrastructure plays a significant role in the distribution of nodes within a continent or country.

They also realized that many of the nodes open channels with peers who speak the same language or have similar cultures. For example, 80% of Argentina’s payment channels are shared with Uruguay, 10% with Peru, and about 4% with Chile and Venezuela.

Most of the nodes are from large cities in Europe and North America. Image: University of Vienna
Most of the nodes are from large cities in Europe and North America. Image: University of Vienna

A similar cultural phenomenon happens in other latitudes: Kenya, for example, shares more than 70% of its channels with South Africa, while China has to share channels with Taiwan and Hong Kong, Croatia with Czechia and Bulgaria and Mexico with Colombia, Chile, Puerto Rico and Argentina.

Ethereum Grows Faster Than The Lightning Newtork

Despite being overshadowed by the DeFi hype, Lightning Network continues to grow steadily. According to data from the Lightning Network tracking site 1ML, there are currently over 14200 Lightning Network nodes in operation. The network has a capacity of over 1039 BTC.

Some of the Real-Time statistics of Bitcoin's Lightning Network. Image: 1ML
Some of the Real-Time statistics of Bitcoin’s Lightning Network. Image: 1ML

However, these statistics were recently exceeded by a somewhat heterodox solution: The number of synthetic Bitcoin tokens running on the Ethereum network already exceeded the total value of tokens moving on the Lightning Network.

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Source: https://cryptopotato.com/lightning-network-popular-north-america-europe/

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