Federal Reserve Opens Debate on Digital Currencies with Long-Awaited Report �������������������������������������������������������������������������������������������������������������������

Crypto Weekly

On Thursday, the Federal Reserve released a report that examines the idea's potential costs and benefits and invites public comments. The news is the first step toward seriously investigating a central bank's digital currency. In the report, the Fed avoided taking sides, set out a list of arguments for and against a digital currency, and posed questions shaping the debate.

Jerome H. Powell, the Fed chair, said that the central bank would engage with the public, elected officials, and other stakeholders as it examines the advantages and disadvantages of a central bank's digital currency. Powell had said a report would be released in May 2021.

Central banks from the Bahamas to Sweden and China are experimenting with digital currency offerings, fueling concerns on Capitol Hill that the Fed might fall behind the competition. Breakneck innovation in the private sector has suggested that the Fed, a key financial regulator, needs to understand budding private digital payment technologies.

A central bank's digital retail currency would be electronic cash. While consumers already use digital money when swiping a credit card or making online purchases, that money is actually backed by the banking sector. A Fed version would be backed by America's central bank, just like a U.S. dollar bill.

Fasika Zelealem

Given the U.S. currency's dominant position in global finance, the Fed has clearly moved slowly and carefully as it weighs a digital dollar. And officials have emphasized that they would not move forward without congressional approval. "The Federal Reserve does not intend to proceed with the issuance of a C.B.D.C. without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing

Crypto Weekly

DIgital currencies

Central bank would engage with the public, elected officials, and other stakeholders as it examines the advantages and disadvantages of a central bank's digital currency

Jerome H. Powell

law," the report noted. Researchers from the central bank outlined how a digital currency could offer benefits and entail risks. Such a currency "could provide a safe, digital payment option for households and businesses as the payments system continues to evolve and may result in faster payment options between countries," the Fed release accompanying the discussion paper stated.

But the paper also noted that a central bank digital currency would raise policy questions, including its effect on the financial sector, the cost and availability of credit, the safety and stability of the financial system, and the efficacy of monetary policy. The Fed paper also seemed to slam the door on several possibilities — including the idea that a central bank digital currency could be created alongside consumer bank accounts at the Fed, something Democrats and proponents of broader financial inclusion has at times suggested.

A direct Federal Reserve account for individuals would "represent a significant expansion" of the central bank's role, the paper said, suggesting that banks and other financial institutions would operate such accounts.

Commercial banks, for their part, have been worried that the creation of a central bank digital currency and Fed accounts could take away their deposit base and upend their business model. The paper probably does not address all their concerns but may serve to calm worries that consumers could fully leapfrog the traditional banking system. The Fed's paper pointed out that a potential bank currency could be designed in a way that would mitigate disruption to the banking system.

"A C.B.D.C. could spur innovation by banks and other actors and would be a safer deposit substitute than many other products, including stablecoins and other types of non bank money," the paper said. "These forms of non bank money could cause a shift in deposits away from banks even without a C.B.D.C."

The Fed asks for public comment on more than 20 questions about central bank digital currencies and accepts responses for the next 120 days. 

New York Times

Crypto Weekly

Corporate buyers of Bitcoins are keeping an eye on critical BTC price levels

Martin Young

Over the past few days, Bitcoin prices have started to consolidate, following a fall of 22.3% this year. As of the writing of this article, BTC was changing hands for $36,135 in a rare gain of 1.7% over the past 24 hours. In late trading on Monday, the asset fell to a six-month low of around $33,500 but subsequently recovered slightly.

Following the formation of a large 'double top' chart pattern, Bitcoin prices are now approaching a critical juncture. A break below the psychological $30K barrier, where the market bounced in July 2021, could worry some big corporate investors.

Tesla and MicroStrategy's Bitcoin profits are evaporating

Michael Saylor's software firm MicroStrategy is the largest corporate holder of Bitcoin according to BitcoinTreasuries. The business intelligence company holds 124,391 BTC worth an estimated $4.5 billion at current prices.

MicroStrategy (MSTR) made its first BTC purchase in August 2020 when the asset was trading at around $11,500 but the firm has made several additional purchases in 2020 and throughout 2021. The dollar cost average for all of its BTC is around $3.7 billion, according to BitcoinTreasuries, meaning that Saylor's firm is still up approximately 18%.

Speaking to Bloomberg last week, Saylor confirmed the company's intentions to hold: "Never. No. We're not sellers," before adding, "We're only acquiring and holding Bitcoin, right? That's our strategy."

Tesla (TSLA), which has seen stocks slump this week, is the second-largest corporate holder of Bitcoin with 43,200 coins worth around $1.56 billion. It got in around the same time last year when BTC was hovering at around $32K, so profit margins there have pretty much evaporated, and the firm is closing in on a breakeven point.

El Salvador will be at a loss now; however, the pro-crypto president remains resolute and also has no plans to sell. In fact, on Jan. 23, Nayib Bukele bought the dip adding a further 410 BTC to the nation's treasury.

Market Approaching Critical Level

The next market move will be crucial for crypto. A bounce off previous support at $30K could see fresh momentum and investment. However, a fall below it is likely to result in a full-blown bear market that could last a couple of years. All other crypto assets will follow in the shadow of Big Brother Bitcoin as they have done previously. 

FX Empire

Crypto Weekly

NFT-Based Video Game Helps Gamers Earn Crypto While Playing Online

Fasika Zelealem

Many teenagers grow up dreaming of earning a living by making and playing video games. With the rise of non-fungible token based online games, that dream can be a reality for many. One of the hottest cryptocurrency trends in 2020 was playing video games to earn NFTs on platforms like Axie Infinity and Animoca.

Exactly what is an NFT?

Non-fungible tokens are digital assets that correlate to digital investments in art, video games, videos and music. The market first saw NFTs in 2014, although they didn't gain popularity until the last year or so.

Crypto Weekly

An NFT Has What Purpose? What You Need To Know

NFTs offer a way to monetize digital assets. For example, Jack Dorsey — one of Twitter's co-founders — sold the first tweet he ever wrote as an NFT and profited over $2.9 million. .

Are NFTs Cryptocurrency?

Unlike cryptocurrencies, NFTs do not exist as a currency. Cryptocurrencies and NFTs are similar in that they both operate on digital platforms and use similar technology. Money and cryptocurrency are "fungible" because they can be traded for one another based on a uniform price.

Building Wealth

The value of NFTs is not uniform, and they cannot be traded in the same way. NFTs have unique digital signatures. The NFTs are essentially digital versions of physical collector's items. Baseball cards, art on the walls, and autographed memorabilia.

What is the role of NFTs in online gaming platforms?

Gaming platforms that reward players often require an up-front investment to access the network. Some games cost over $1,000 before players can join. It's possible to join with less money, but a lower initial investment also lowers the profit margin of earnings within the game.

NFTs that are platform-specific

Each NFT has its own set of rules that outline how gamers can trade and use it. It is important to note that some gaming NFTs only exist within their platform.

For example, someone may create a character or avatar and sell or trade it to another gamer. The idea is to trade up and earn more valuable NFTs as time goes on.

The technology that regulates NFTs is called a smart contract. These are the rules for how an NFT may be used within a game. The smart contracts are then stored within a blockchain to establish a history of value and trading.

Video game ownership can be decentralized using NFTs. Gamers are shareholders in the platforms, not large corporations that take all the profits. There are two ways in which NFTs work in online gaming. In the first case, the NFTs are platformspecific. In the second, NFTs are earned for playing.

Playing video games and earning NFTs.

There are also ways to earn NFTs for playing on certain online gaming platforms like Axie Infinity and Animoca Brands. The platforms reward users with tokens and NFTs for playing longer. NFTs may exist within or outside the game in the general digital realm. Tokens are usually a more stable asset because they are easier to trade 1:1 for an enduring value, but many gamers enjoy earning NFTs, too.

Money and Cryptocurrency from NFTs

Many consumers have a question: How can you turn an NFT into real dollars or cryptocurrency? Players can sell and trade assets using an online market, auction house or exchange platform. How much a player earns is based on the perceived value of the asset within its platform.

If players sell NFTs for cryptocurrency tokens, they can use the tokens in digital assets with retailers and businesses that accept cryptocurrency as payment. They can also sell cryptocurrency tokens for real money if needed.

How Do NFTs Pose Challenges?

NFTs currently appeal to a small demographic of consumers. These products are highly technical, so they present challenges to consumers who aren't as tech-savvy.

Another obstacle is that a NFT's value is implied based on how gamers and other consumers value it. In the long run, consumers may lose money on NFTs. It is also possible that some gamers will not use NFTs as intended within their digital platforms. Selling an NFT outside of its platform for profit may negatively impact gaming platforms.

Final Take

Playing online games and earning NFTs may be a fun and lucrative way to earn money. The best way to cash in on NFTs safely and securely is to learn more about the rules and regulations before getting involved in trading. 

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Crypto Weekly

The Bitcoin 1% controls a disproportionate amount of wealth

By Khristopher J. Brooks

Cryptocurrencies have been touted as a new form of digital money that a government or central bank does not control, making them free from bias and unequal distribution. A new study by the National Bureau of Economic Research suggests that Bitcoin has developed its own group of one-percenters who are likely to reap the most benefits in the coming years.

The NBER study found that the top 10,000 Bitcoin investors own a combined 5 million Bitcoins, or roughly $230 billion's worth at recent prices. Those figures mean that, even though Bitcoin launched in 2009, "participation in Bitcoin is still very skewed toward a few top players even at the end of 2020," said finance experts Igor Makarov and Antoinette Schoar, who wrote the study.

According to the Wall Street Journal, the top players control 27% of Bitcoin, despite representing only 0.01% of Bitcoin holders. Data from the Federal Reserve indicates that the top 1% controlled 30% of total household wealth compared to the old-fashioned dollar. Makarov and Schoar state in their study that there is "significant skewness in ownership" of Bitcoin, which "implies that the majority of the benefits from further adoption will probably accrue only to a small group of participants." Bitcoin and other digital currencies have been at the center of many of this year's wildest financial gains and losses. Although considered a highly unstable form of money by most financial experts, Bitcoin reached new highs earlier this year, in part because more companies are accepting it as a form of payment.

This month, the messaging service WhatsApp began piloting a new feature it said allows U.S. users to send money without paying fees, using cryptocurrency. The new payment service marks yet another example of how digital currencies are becoming more accepted in the mainstream U.S. financial scene.

As their popularity rises, digital currencies have been the target of many multimillion-dollar scams in recent history. Between January and July, crypto accounted for $681 million in scam losses, according to a report from cryptocurrency intelligence firm CipherTrace.

Despite crypto's growing popularity, relatively few people own a large chunk of Bitcoin, making the digital currency much more vulnerable to large price swings from week to week, Makarov and Schoar said in their study. Makarov and Schoar collected data from Bitcoin's inception 13 years ago to the end of 2020, when roughly 15 million Bitcoin were in circulation. There are 19 million Bitcoins currently in circulation, according to Blockchain.com data. The maximum number of Bitcoins that can ever exist is 21 million.

The study does not reveal the names of people who own the most Bitcoin.

Still, Makarov and Schoar's work adds credibility to the lists floating around the internet of investors with the highest crypto fortunes. Matthew Roszak, chairman of blockchain company Bloq, has a crypto portfolio worth more than $1.5 billion, Forbes reported in April. The Winklevoss twins Cameron and Tyler also reportedly became billionaires from investing in Bitcoin.

"Our results suggest that despite the significant attention that Bitcoin has received over the last few years, the Bitcoin ecosystem is still dominated by large and concentrated players, be it large miners, Bitcoin holders, or exchanges," Makarov and Schoar concluded. 

CBS News

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Income Island Phase 1�5 METAVERSE January 2022

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