The news about Bitcoin and cryptomoney is in constant turmoil. It can happen that vital information gets lost in the daily news flow and you miss the important points.
This format is here to help you do just that. We look back on last week’s news in Crypto Weekly to keep you informed about the current state of cryptomoney.
🔬 The unmistakable of the corner
For this week’s unmissable event, we find Thomas returning to the mother of all financial bubbles, namely the South Sea bubble. This bubble occurred 300 years ago, but it is still interesting to study.
What’s a bubble?
Before we delve into the history of the South Sea Company, let’s define what a financial bubble is. A bubble is a rapid and often irrational increase in the price of an asset, followed by a sharp decline: the bursting of the bubble.
Our story takes place in 1720, when the British crown was heavily indebted after a war of succession with Spain (1701-1714). Trade with the colonies is flourishing. The Company was granted a monopoly of trade in the South Seas in exchange for its management of the British debt.
The South Sea Company had been importing slaves from Africa to the Americas for some years. However, these operations have not been a great commercial success. Taxes imposed on this trade as a result of the war with Spain have reduced profits.
In order to facilitate the management of the UK debt, the Company is in the process of consolidating all outstanding debt securities. It proposes a simple exchange: one debt security for one company share with a guaranteed minimum dividend of 5%. This 5% was therefore a dividend floor with a strong upside potential due to the Company’s monopoly.
Daniel Defoe, Director of the Company, then undertook to manipulate the share price by all the means at his disposal. False rumours about profits in the South Seas, corruption of parliamentarians, use of prestigious personalities to attract small investors. This market manipulation, partially approved by the British government, bore fruit. The price of securities was at 128 pounds sterling in January 1720 and reached 1,050 in June 1720.
Read the article in its entirety to understand everything about this bubble: The South Seas, chronicles of speculative madness.
🗞 News in brief
▶ Andre Cronje is in the news again. The developer behind yEarn unveiled a new yCredit project on 31 December. However, a few days after the launch the project was the target of a hack.
▶ Anonymous currencies left out of the exchange. The Bittrex exchange platform announced that it was withdrawing Monero, Dash and Zcash from its offer, without giving any reason.
▶ Optimism should arrive on Ethereum on January 15. This second layer solution should improve the scalability of the Ethereum network. Many DeFi applications have already expressed their willingness to migrate to it.
▶ American banks will be able to use the stablecoins for their operations. This will happen after an authorization granted by the OCC.
▶ VanEck is back with its Bitcoin ETF. VanEck has been repeatedly refused by the SEC and has now reiterated its request for the creation of a Bitcoin ETF in the United States.
▶ Rogzy’s latest video, ideal in this period of bull run to remind people of the basics of not getting ripped off.
📊 The 4 metrics of the week
➤ $692 million is the revenue recorded by the miners of the Bitcoin network in December 2020. While this is not a record, it had not been recorded since the bull run of 2017.
➤ $280,000 is the amount in BTC (or 8.5 BTC) that was donated to Julian Assange by a generous donor. This donation came in the wake of England’s rejection of the US extradition request.
➤ $1.2 billion is the amount of BTC held by the investment fund Three Arrows Capital. This exposure is made through Grayscale.
➤ $3.97 billion is the record for open interest on Ethereum derivatives. Ethereum futures and options have never been more in demand.
✉️ Tweet of the Week
This week’s tweet goes to Augustin and his super thread for beginners.
Have a good week on the Journal du Coin! 🙂