In sharp contrast to former US President Joe Biden's tighter regulatory approach, Trump is a big advocate of a free market approach to cryptocurrencies. And a look at the price charts shows investors have taken note.

Here's what I mean.

On 5 November, the world's first and biggest cryptocurrency, by market value, was trading for US$67,811.

By 20 January, the day Trump was sworn into office, the token hit an all-time high of US$109,115, up a blistering 61%.

But with risk assets coming under pressure in February, Bitcoin joined the sell-off, dropping to US$79,049 on 28 February.

As for these early days in March, the Bitcoin price surged 11% on Monday to hit US$94,811.

And it wasn't the only crypto to go ballistic.

The Ethereum (CRYPTO: ETH) price soared 17%; XRP (CRYPTO: XRP) rocketed 33%; Solana (CRYPTO: SOL) surged 26%; and the Cardano (CRYPTO: ADA) price roared 75% higher.

And once again, crypto investors have Donald Trump to thank for the big moves higher.

How Trump just goosed the Bitcoin price…again

Over the weekend, Trump threw some greater light on his January executive order that the US would build a strategic reserve of cryptocurrencies.

As you may have guessed from Monday's big move for the Bitcoin price and the other four cryptos named above, Trump posted on Truth Social that the strategic reserve will include Ethereum, Bitcoin, Cardono, Solano, and XRP.

What are the experts saying?

Commenting on the US announcement that sent the Bitcoin price and other cryptos soaring, Josh Gilbert, market analyst at eToro, said, "We always knew that Trump's presidency would be pivotal for crypto throughout his term, and this is a sign of how quickly the market can turn on a dime. "

He noted that the rebound this week "follows the broader crypto market sell-off last week as the largest cryptocurrency heist in history and the implementation of tariffs in the US sent ripple effects across markets".

Gilbert added:

Sentiment in the crypto market has dropped significantly but has recovered from the 'extreme fear' of last week to just 'fear' territory this week, thanks to Trump's announcement over the weekend.

Federico Brokate, head of US business at 21Shares, said (quoted by Reuters):

This move signals a shift toward active participation in the crypto economy by the US government. It has the potential to accelerate institutional adoption, provide greater regulatory clarity, and strengthen the US's leadership in digital asset innovation.

The Bitcoin price is currently at US$87,648.

The post Bitcoin price surges on Donald Trump's cryptocurrency strategic reserve update appeared first on The Motley Fool Australia.

What happened 

The cryptocurrency market went into free fall overnight after Binance CEO Changpeng Zhao and FTX and Alameda Research founder Sam Bankman-Fried escalated their feud. The fallout has been widespread but there were some key moves among certain digital currencies.

As of 7:30 a.m. ET, FTX Token has fallen 22.7% in the last 24 hours, Solana (CRYPTO: SOL) is down 10.2% and hit a low of $25.51, and Dogecoin (CRYPTO: DOGE) has dropped 13%. The one token that hasn't lost a significant amount of value is BNB (CRYPTO: BNB), which is off 1.8% in the past day.

So what 

Over the last week, a feud between Bankman-Fried and Zhao has erupted. The exact origins aren't clear, but the two have been publicly sparring on Twitter in recent days. A final straw for the market was when Binance said it would sell the $500 million in FTX tokens that it owns. 

Alameda's CEO offered to buy the tokens back for $22 apiece in an over-the-counter deal, but that doesn't appear to have been completed. Late Monday night, the bottom fell out of FTT's price and it appears Bankman-Fried is selling tokens like Solana to buy back FTT and Binance is selling FTT and buying BNB. We don't know exactly whether these trades are being completed by Zhao and Bankman-Fried, but the market is reacting to them even if they aren't. 

Where this gets dangerous for the crypto market broadly is the collateral positions FTX and/or Alameda might have. According to a report from CoinDesk, Alameda has $8 billion in liabilities and much of that may be backed by $5.8 billion in FTT tokens (the value CoinDesk reported before last night's drop). It's not clear the terms of the debt or what the exact collateral is and when positions might be liquidated, but investors are certainly worried. If FTT is used as collateral in a meaningful way and gets liquidated, it could fuel continued selling pressure on the token and send a shockwave across the crypto market. 

The worry about contagion or any insolvency is largely tied to Alameda Research's trading, but FTX is at least tied to the trades because of the FTT token the company owns. It's not clear if FTX has provided any loans to Alameda Research.

Now what 

We only have to look back to the summer of 2022 to see how quickly a leveraged trading firm can cripple the crypto market. The insolvency of Three Arrows Capital eventually cost investors millions and brought down Celsius Networks and Voyager with it.

The big move in FTT tokens is understandable today, but we don't know exactly what Bankman-Fried may be forced to sell if Alameda is indeed in trouble. Alameda had a large position in Solana, which is why that token is down today, but there could be others.

Not only is Alameda a big player in crypto trading, but FTX is a widely used crypto exchange, so there have been a lot of traders moving off the exchange. That could make the declines even worse, which is something for everyone in crypto to watch over the next few days.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why cryptocurrencies went into free fall overnight appeared first on The Motley Fool Australia.

What happened

Yet another massive hack in the world of cryptocurrency could be considered par for the course. This year, more than $2 billion has been exploited from various crypto projects, with Tuesday's hack of Solana-based decentralized lending platform Mango Markets creating a tremendous amount of concern among investors. 

As of 2 p.m ET on Thursday, Solana (CRYPTO: SOL), XRP (CRYPTO: XRP), and Cardano (CRYPTO: ADA) were down 2.6%, 1.4% and 2.9%, respectively, over the past 24 hours. That said, it should be noted that these cryptocurrencies have regained much of their losses throughout the trading day. Earlier this morning, these 24-hour declines had been as much as 9%, 8.7%, and 10.4%, respectively.

This hack has resulted in Solana losing approximately one-quarter of its total value locked (TVL) on its protocol. Total value locked is a key metric used to determine aggregate use of a network, with declines suggesting investors are pulling their capital out of a given ecosystem.

This recent hack appears to be the result of a sophisticated investor taking out large positions in leveraged perpetual contracts on the Mango Markets platform. This allowed for a mark-to-market surge in the perpetual contracts held by the trader, boosting the value and allowing the hacker to then essentially withdraw all of the liquidity on the protocol. 

So what

This sort of attack on a given project's collateral is one that clearly took a tremendous amount of time and effort. Now, the hacker in question is reportedly open to returning the exploited funds back to the protocol, so long as "bad debt," which arose from a bailout paid to a highly leveraged whale, is repaid. In any case, the ability of one individual to effectively shut down a large and important decentralized lending protocol is big news.

For Solana specifically, this is the latest in a string of security-related issues that have concerned investors. For investors in other projects such as XRP and Cardano, exploits of top-10 projects have clearly provided concern. XRP is battling its own project-specific headwinds tied to an ongoing battle with the Securities and Exchange Commission over whether its token constitutes a security, and Cardano's ecosystem has lost some of its luster following its highly anticipated Vasil Hard Fork upgrade.

Now what

Exploits (or hacks) will remain a key focal point for investors, particularly those who might be skeptical about the underlying technology to begin with. It's still early innings for the nascent crypto sector, and mistakes are going to be made. That said, until the kinks are worked out, many institutional investors might choose to stay on the sidelines. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post A $100 million hack hit Solana, XRP, and Cardano hard today appeared first on The Motley Fool Australia.

What happened

Several of the largest cryptocurrencies have jumped higher today as investors digest monetary policy and also monitor the foreign exchange markets, which have been active lately.

Over the last 24 hours, the price of the world's largest cryptocurrency, Bitcoin (CRYPTO: BTC), has traded roughly 5% higher as of 10:27 a.m ET. The price of the world's second-largest cryptocurrency, Ethereum (CRYPTO: ETH), traded roughly 4.1% higher, and the price of Solana (CRYPTO: SOL) was up 5%.

So what

Cryptocurrencies have struggled as the Federal Reserve has raised its benchmark overnight lending rate, the federal funds rate, aggressively this year, making riskier assets like cryptocurrencies less appealing. The Fed did a 0.75% rate hike at each of its June, July, and September meetings, and the Fed's median forecast shows that another jumbo 0.75% hike could happen before the year is over.

But recently, the price of Bitcoin has split off from those of other cryptocurrencies and tech stocks. For much of the year, the two have traded similarly. However, over the last five days, the price of Bitcoin, which is back above $20,200, has risen about 5%, and the Nasdaq Composite has fallen about 4.6%.

Analysts seem to think that crypto investors are now turning their attention to the foreign exchange markets, which have been dominated by an incredibly strong U.S. dollar, which not too long ago overtook the euro. The U.S. dollar has also overtaken the British pound sterling, which has hit a record low.

A strong dollar has contributed to Bitcoin's struggles this year because cryptocurrency is an alternative to traditional currencies and therefore moves inversely to the dollar. Vijay Ayyar of the international crypto exchange Luno said he thinks the dollar index, which measures the U.S. dollar against other currencies and has risen 18% this year, could be nearing its peak.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Bitcoin, Ethereum, and Solana moved higher on Tuesday appeared first on The Motley Fool Australia.

What happened

The market rout that drove the value of nearly all risk assets lower on Tuesday appears to have paused for stocks on Wednesday, but it's continuing in the world of cryptocurrencies. The Bureau of Labor Statistics delivered its August consumer price index report Tuesday, and the inflation rate clocked in at a higher-than-expected 8.3% year over year. That was lower than July's 8.5% result, but it still hit most major tokens hard. Continued selling pressure has resulted in declines in top tokens Bitcoin (CRYPTO: BTC) and Solana (CRYPTO: SOL) of 3.5% and 4.1%, respectively, over the past 24 hours, as of 11:15 a.m. ET Wednesday.

For investors in Terra Luna Classic (CRYPTO: LUNC), some disheartening token-specific news has driven a 21.6% decline over this same period. On Wednesday, a South Korean court issued arrest warrants  for Terraform Labs founder Do Kwon and five other involved individuals. It may be the last nail in the coffin for this embattled project, which had previously seen speculative buying pressure from traders.

So what

Nearly all talk about the potential for low-beta exposure to risk assets via cryptocurrencies is over. There has been an impressive degree of correlation between digital assets and equities over the past two years, which has been very unfavorable to crypto investors during this year's sell-off. While this correlation has diminished from its all-time peak, generally speaking, the same macroeconomic forces that drive equities higher or lower appear to have significant influence over the price action of many top tokens.

Bitcoin and Solana are both attracting a significant amount of institutional investor interest. Accordingly, during this period of de-risking, these assets could continue to see outflows until the rhetoric around monetary policy shifts. In general, more expensive money means less liquidity searching for growth. For these high-upside, higher-risk assets, that could spell continued downward pressure, at least over the near term.

For investors in Terra's ecosystem of tokens, word that arrest warrants have been issued is probably the last thing they wanted to hear. Whether one is involved in LUNC or other Terra-related assets, the advance of the regulatory probe to this degree is just the latest in a barrage of negative catalysts. Investors have reason to be concerned about the viability of the Terra ecosystem following this news, particularly given the turmoil within the Terra community.

Now what

Whether investors are considering quality crypto projects or more speculative options, it's a tough time to be an investor right now. Macro headwinds abound, providing a bearish backdrop for all digital assets. And when it comes to those with token-specific issues such as LUNC, now does not seem like the time to throw good money after bad.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Bitcoin and Solana are sinking today appeared first on The Motley Fool Australia.

What happened 

Today's inflation report sent the crypto world reeling as a sell-off hit the entire industry. Headline inflation was 0.1% month over month in August, but core inflation (which excludes energy) was up 0.6%. On a year-over-year basis, overall inflation was 8.3%. The market had rallied in recent days on hope that inflation is slowing, but that doesn't appear to be the case, at least for now. 

Three of the big movers in crypto today are Coinbase Global (NASDAQ: COIN), which fell as much as 9.3% and is down 6.6% as of 2:30 p.m. ET; Silvergate Capital (NYSE: SI), which fell 7.4% and is now down 6.4%; and cryptocurrency Solana (CRYPTO: SOL), which is down 7.2% today. 

So what 

From a trading perspective, the move is pretty simple. Higher inflation likely means the Federal Reserve will increase interest rates for longer than investors were hoping. That results in a lower valuation for assets like stocks, especially growth stocks, and that's why the Nasdaq Composite is down 4.3% today. Crypto values are generally correlated with stocks, which is why crypto valuations plunged today. 

A drop in crypto prices is generally seen as negative for Coinbase and Silvergate, which offer crypto solutions to their customers. Coinbase's trading, for example, tends to fall in down markets and that's where the company generates most of its revenue. Silvergate may not see adoption of crypto and digital banking products increase if crypto values drop. 

As much as the crypto industry would like to think that it's independent of the broader market, trading has been driven by traditional financial trends like interest rates and economic activity. Given the fact that inflation is still high and the Federal Reserve is likely to act aggressively next week to increase rates, that means lower valuations for crypto and crypto-related companies. 

Now what 

The market is trying to grapple with multiple competing trends right now. Employment is strong and much of the economy is doing well, but inflation is high and interest rates are going up, which generally leads to a recession. 

As these macro factors persist, the crypto market continues to innovate and build, which is a chaotic process. There are days when it seems like crypto could enable great innovations and others that it seems like hacks and scams are more common than real builders. 

I think the crypto industry has a lot going for it long-term, but this is like investing in internet stocks in the 1990s when the industry was very immature. No one knew exactly which companies would win or what business models would be best, but it was clear there was an opportunity.

As painful as days like this are, they can also be great buying opportunities. A few years from now no one will remember a single day's drop, but investors never forget buying great companies when the market is down because that's where the big money is made. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Crypto stocks plunged today appeared first on The Motley Fool Australia.

What happened 

The crypto market was up sharply on Monday morning as investors turned bullish once again on riskier assets. The S&P 500 is up about 0.9% and the Nasdaq Composite is up 1% as of this writing, which often correlates with rising crypto prices. 

At 11:30 a.m. ET, Bitcoin (CRYPTO: BTC) was up 3.4% in the last 24 hours, Solana (CRYPTO: SOL) was up 7.9%, and Near Protocol (CRYPTO: NEAR) jumped 6.3% today. On the flip side, TerraClassicUSD (CRYPTO: USTC) is down 13.8% following a big jump last week.  

So what 

A rising stock market certainly helps cryptocurrency values. Investors are currently bidding up stocks on speculation that August inflation data won't be as bad as feared. Inflation and high energy prices have both hurt the economy and caused the Federal Reserve to increase interest rates over the past year. If that trend reverses, it could be bullish for stocks and cryptocurrencies.

Founder Michael Saylor's MicroStrategy said today it would sell as much as $500 million in stock to buy more Bitcoin. Saylor continues to be the most consistent Bitcoin bull in the market and seems to be willing to risk the company's future on the cryptocurrency. But for Bitcoin itself, the buying would be incrementally positive for the market. 

TerraClassicUSD is the other big mover, but it's moving lower. The legacy "stablecoin" from the Terra ecosystem saw speculative buying last week, but that rally is fading. With very little fundamental reason to keep the cryptocurrency moving higher, this isn't one I would be taking any position in because it's just a trading mechanism at this point.

Now what 

If inflation is indeed coming under control that would be a good thing for all riskier assets, whether you're looking at growth stocks or crypto. The risk was that high inflation would force the Federal Reserve to raise interest rates dramatically, which could hurt cryptocurrencies because they would be competing against higher yields for low-risk bonds from the U.S. government. And higher interest rates would likely hurt economic growth and investment in start-ups, which is why crypto investors aren't fond of higher rates. 

As much as macro factors are playing into the crypto market right now, what I think investors need to keep in mind is the innovation happening right now. A blockchain like Solana is seeing rapid innovation in everything from decentralized finance to non-fungible tokens and software-as-a-service business models. As these products become more usable, they're gaining adoption across the business world. 

I'm still bullish on crypto long-term, but think investors should focus on cryptocurrencies like Solana and Near Protocol that have a path toward innovative utility in the digital world. They're likely to be the places where developers create the next phase of disruptive technology and that's why I'm excited about the industry. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Bitcoin and Solana jumped on Monday appeared first on The Motley Fool Australia.

What happened 

The crypto market is once again seeing a lot of volatility, but right now the moves have been positive. Investors are moving back into crypto assets broadly, and the big cryptocurrencies are leading the way. 

At 11:40 a.m. ET on Thursday, Bitcoin (CRYPTO: BTC) was up 2% in the last 24 hours, Ethereum (CRYPTO: ETH) was up 6%, and Solana (CRYPTO: SOL) has risen 7.3%. These major tokens have pulled the entire crypto space higher. 

So what 

The theme of the day is regulation, and there were mixed signals for the crypto industry. Securities and Exchange Commissioner (SEC) Chairman Gary Gensler said in a speech this morning that the agency has all of the rules it needs to regulate cryptocurrencies. Gensler reiterated that he thinks "most crypto tokens are investment contracts," which would indicate that most cryptocurrencies will need to be registered as securities, in his eyes.

Gensler's comments followed those of Michael Barr, a member of the Federal Reserve Board of Governors who is in charge of regulating U.S. banks. Barr said he's pushing for congressional action on stablecoins. In his view, stablecoins can present systemic risk, and investors should have transparency around how they work and what they own. This might mean increased scrutiny for cryptocurrencies, but Barr doesn't seem hostile to the industry.

The push for increased regulatory oversight isn't surprising, but it's taking a long time for Congress and federal agencies to finalize rules for the industry. Gensler would like companies like Coinbase Global (NASDAQ: COIN) to register as brokers and have increased disclosures from token operators, whether they're companies or decentralized organizations. 

In a very surprising move, Coinbase also announced that it is funding a lawsuit brought by six people who are challenging the Treasury Department's sanction of Tornado Cash open-source smart contracts and its users. This is an aggressive move by Coinbase to push back against regulators who are starting to having an effect on commonly used crypto products.

Coinbase acknowledged that Tornado Cash could have been used by criminals, but that doesn't mean the code itself or other users of the code should be affected by sanctions. This will take time to play out, but Coinbase is planting a flag on the side of crypto developers. 

Now what 

Every day there seems to be another big move in cryptocurrencies, and today the market is more bullish on the space. While there's a lot of regulatory uncertainty, I do see a willingness to find regulatory solutions for the industry that will encourage innovation. 

At the same time, it's interesting that Coinbase, which has tried to be friendly with regulators, is aggressively defending the industry through funding the Tornado Cash lawsuit. That could give it some good public relations within the community, for now. 

I see today's moves as typical volatility, but investors will want to watch regulators' actions in the crypto space. Some tokens could eventually become securities, and it's possible that companies will need to register with the SEC as well. It's all part of the maturation of crypto as an industry. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Bitcoin, Ethereum, and Solana were up Thursday morning appeared first on The Motley Fool Australia.

There are thousands of cryptocurrencies out there, but few can match the ecosystem or activity of Ethereum (CRYPTO: ETH). With a market cap approaching $190 billion, Ethereum trails only Bitcoin (CRYPTO: BTC) in terms of market value, and it is by far the largest smart contract platform in the world. Here are three top reasons all investors should consider getting some exposure to Ethereum. 

Ethereum has a deep ecosystem 

Neil Patel: Launched in 2015, Ethereum is the world's first functional blockchain, allowing the ability for smart contracts to be built on top of the network. Smart contracts are computer programs that execute automatically when two unrelated parties meet the conditions of a particular transaction. The need for middlemen is completely eliminated. For example, think of collateral that becomes unencumbered once a loan is fully repaid. All of this is possible thanks to software called the Ethereum Virtual Machine, which runs these smart contracts. 

This setup differs completely from Bitcoin, which was created with the sole purpose of being a peer-to-peer digital cash system. And unsurprisingly, it's why Ethereum has attracted the most engineers and computer scientists working on expanding the platform. According to venture capital firm Electric Capital, at the end of 2021, there were more than 4,000 monthly active developers working on Ethereum, with 20% of new Web3 developers joining this blockchain. That's a significant share. 

As a result, Ethereum now has the biggest ecosystem of decentralized applications (dApps) compared to any other cryptocurrency out there. There are nearly 3,000 dApps running on Ethereum, according to the non-profit crypto directory State of the DApps. They can have various use cases ranging from decentralized finance protocols and gaming to social media and marketplaces for non-fungible tokens. And although the overall market has taken a beating in 2022, $36.5 million in dApp transaction volume occurred on Ethereum over the past 24 hours (as of this writing). 

The incredibly deep ecosystem surrounding Ethereum increases its chances of continuing to create real-world utility and greater user adoption over time. And that's a compelling reason to buy this cryptocurrency and hold it for the long haul.

Ethereum is about to get even better

RJ Fulton: Out of the plethora of reasons crypto investors should make sure they own some Ethereum, arguably the most compelling one happens to be an event scheduled for launch in just a few weeks. The date isn't concrete, but sometime between Sept.16 and Sept. 20, Ethereum will be transitioning from the slow, energy-intensive proof-of-work consensus mechanism to a faster, more efficient proof-of-stake consensus mechanism known as the Merge. It's estimated that the blockchain will use 99% less energy once fully moved over to proof of stake.

It could be a bit of a stretch, but the Merge is arguably one of the most significant events to occur in cryptocurrency history. When considering that the Merge has been under development for the greater part of eight years and now finally has an end in sight, it's a little difficult to fully grasp that this highly anticipated day is just around the corner.

Once The Merge is fully rolled out, the hope is that Ethereum will become more conducive to the development of applications. On the current proof-of-work mechanism, network fees are high and speeds can be slow, which hampers the efforts of smart-contract developers.

Ethereum's price skyrocketed over the last two and a half years primarily due to the widespread popularity of the blockchain as the favorite for developers using Ethereum's smart contracts to build DeFi applications. But that increased popularity has made the network congested and costly to use, warranting a necessary change from proof of work. When Ethereum transitions to proof of stake, the blockchain should be able to support more applications without sacrificing speeds or costs, which will hopefully bring even more utility to the network and greater returns for investors. 

In anticipation of the Merge, it seems as though Ethereum's popularity is still continuing to escalate. Since the beginning of 2022, Ethereum has added 142,000 validators representing more than a 50% increase. Furthermore, it looks like more users are creating Ethereum-compatible wallets. In just eight months, more than 20 million new wallet addresses were created.

If Ethereum was able to put in a more than 1000% return since 2020 on the clunky proof-of-work consensus mechanism, imagine the long-term value Ethereum will hold once it fully transitions to the streamlined proof-of-stake mechanism. 

Ethereum is still the king of NFTs 

Michael Byrne: While blockchains like Solana (CRYPTO: SOL) and Polygon (CRYPTO: MATIC) have been gaining traction in the world of non-fungible tokens (NFTs), Ethereum is still the 800-pound gorilla in the room when it comes to NFTs. Data from CryptoSlam, an aggregator for NFT data, shows that Ethereum's all-time NFT sales volume dwarfs those of all other blockchains. Ethereum NFTs have accounted for over $29 billion in sales all time, compared to about $4 billion for the runner-up, Ronin (CRYPTO: RON) (which is almost entirely comprised of Axie Infinity sales), $2.5 billion for Solana, and nearly $1.1 billion for Flow (CRYPTO: FLOW), which is mainly thanks to NBA Top Shot).

While NFT sales on Ronin or Flow are more or less dominated by one high-profile project, Ethereum boasts a deep and well-diversified NFT marketplace, with 11 different collections that have generated over $500 million in sales volume since inception. As the original blockchain that introduced smart contracts to the world and enabled the advent of NFTs, NFTs on Ethereum have a cache that other blockchains have yet to match, and individual pieces from collections like CryptoPunks and Bored Ape Yacht Club have routinely sold for hundreds of thousands of dollars or more. These two collections have a collective value of nearly $3 billion.

Ethereum NFTs have created a large ecosystem of their own. NFT marketplace OpenSea, which originally was exclusively for Ethereum NFTs, was valued at $13 billion in its most recent funding round. Magic Eden, which was previously exclusively for Solana NFTs, achieved unicorn status with a $1.6 billion valuation in its last funding round and recently added Ethereum NFTs to its platform. If you are bullish about the growth of NFTs, Ethereum is a must-own.

With a rich ecosystem, a major upgrade on deck in the form of the Merge, and a dominant position in NFTs, Ethereum is worth a look for all investors. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 reasons to invest in Ethereum right now appeared first on The Motley Fool Australia.

What happened

Today's rather bumpy price action in the stock market is reverberating through cryptocurrencies once again. As of noon ET, Ethereum (CRYPTO: ETH), Dogecoin (CRYPTO: DOGE), and Solana (CRYPTO: SOL) declined 1.8%, 1.6% and 3.6%, respectively, over the past 24 hours.

Today's price action appears to be driven by increased concerns around higher interest rates, as shorter-dated bond yields hover around levels not seen since 2007, which was prior to the Great Recession. For these major cryptocurrencies, which have continued to trade in historically high correlation to equities, the pain is being felt across the sector. Additionally, record-high levels of open interest leverage have exacerbated the volatility with which cryptos move relative to equities.     

So what

Ethereum, Dogecoin, and Solana are among the most-traded cryptos and continue to garner significant attention from investors looking for signals of where the overall crypto market could be headed. Ethereum, the world's second-largest cryptocurrency, has seen meaningful volatility over the past month, as investors price in the network's upcoming The Merge, which will result in Ethereum shifting to a more energy-efficient proof-of-stake blockchain network.

Notably, Ethereum has recently seen its perpetual futures open interest hit an all-time high ahead of this big catalyst. Investors looking to put on leveraged derivatives trades are doing so en masse, increasing the likelihood of forced liquidations, which can create more volatility in the short term. While Dogecoin and Solana see significant interest from derivatives traders, Ethereum's massive volume is indicative of this token's status in the crypto market.

Now what

Crypto has historically been a more speculative asset class than equities, though driven by many of the same macro forces. Higher interest rates provide a headwind that will likely continue to affect both asset classes moving forward. 

That said, the prevalence of leverage in the crypto market could accelerate moves higher or lower in the near term. Thus, investors concerned about short-term volatility may be sitting this ride out. That's fair, considering the moves we've seen this year.

However, long-term investors may look at these outsized moves as potential buying opportunities, should one consider a bottoming process at some point soon. While it may be too soon to tell when the crypto market will start to turn higher, these levels are becoming increasingly enticing for those with a long investing time horizon.   

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Ethereum, Dogecoin, and Solana lost altitude on Thursday appeared first on The Motley Fool Australia.

Investing in cryptocurrencies can be an intimidating endeavor. There are tens of thousands of options, making it a daunting task to narrow down the list. And while most digital assets aren't worth even a penny of your savings, the top crypto, Bitcoin (CRYPTO: BTC), deserves a much closer look. 

That said, here are three of the most important factors investors need to consider before buying Bitcoin. 

Bitcoin is extremely volatile 

This probably goes without saying, but Bitcoin is extremely volatile, even more so than growth tech stocks. Daily price swings of 10% are par for the course. And worse, major bear markets are a usual occurrence. In 2021, Bitcoin's price fell more than 50% from peak to trough at one point, only to shoot back up. And currently, Bitcoin is off about 69% from its all-time high of nearly $69,000 achieved in November last year. 

For anyone looking to put some money into Bitcoin, understand that you must be able to stomach the inevitable ups and downs. Otherwise, you'll be inclined to sell quickly after any major price move and lose out on the potential for monster returns over the very long term. Volatility is normal in this situation. In fact, it should be expected for such a new (Bitcoin is 13 years old), still-developing, and nascent asset. 

If Bitcoin keeps gaining widespread adoption as a legitimate store of value, it won't be in a straight line. That's because it will continue to fall in and out of favor with investors based on various factors, like the macroeconomic environment, any regulatory updates, and their own personal finances. Therefore, it's best to only allocate to Bitcoin what you're willing to lose, say 1% to 2% of a well-diversified portfolio. 

Bitcoin runs a proof-of-work consensus mechanism 

Unlike Ethereum (CRYPTO: ETH) after "The Merge," as well as Cardano (CRYPTO: ADA) and Solana (CRYPTO: SOL) currently, Bitcoin operates what is known as a proof-of-work consensus mechanism. This means that large amounts of electricity are needed to solve complex math problems to validate new transactions and create new Bitcoin, a process known as mining. Bitcoin naysayers argue that the network is awful for the environment, often citing data showing that it consumes the same amount of energy as a small country.  

However, Bitcoin mining flows to the cheapest sources of energy, like wind and solar. And not only does Bitcoin support the development of renewable energy, but it can also help to balance out a power grid. When excess energy is produced, instead of it being wasted, it can be used to mine Bitcoin. And during times of peak power demand, say during a major heat wave, miners can quickly turn off their machines and sell energy back to the grid. This is an incredible feature that most people don't consider. 

The next time someone tries to tell you that Bitcoin is inefficient and bad for our planet, just remember the quirks you just saw. We could get to a point in the future when Bitcoin is entirely powered by green energy while acting as a demand-balancing portion of the power grid. That one-two punch would certainly be viewed favorably by society. 

Bitcoin aims to change money 

While Web3 and its potentially disruptive applications garner a lot of attention, primarily from venture capitalists, Bitcoin is attacking arguably the biggest addressable market in the world -- money. Sure, its use as a medium of exchange is essentially nonexistent today, and it is mainly being viewed as a store of value like digital gold. 

Bitcoin's network is only able to process fewer than five transactions per second (TPS), and every new block is created on average every 10 minutes. On the other hand, Visa (NYSE: V), the largest payments network in the world, has the capacity to handle a whopping 65,000 TPS. It's strikingly clear that for Bitcoin to be used in daily transactions, something needs to change. 

Luckily, developers are working hard on a layer-2 solution, known as the Lightning Network, that runs on top of Bitcoin's main blockchain. The idea is that different parties can open payment channels with each other, allowing transactions to be instant with almost zero fees. For example, I could open a channel with my local coffee shop, with my balance decreasing (and the coffee shop's balance increasing) every time I make a purchase. Once a month, or at any frequency for that matter, this channel can be closed, and the ending balance is settled up on the main Bitcoin network, thus reducing congestion on the main blockchain.  

Bitcoin could fundamentally change the nature of money, which today is heavily controlled and manipulated by the actions of governments and central banks. To be fair, it will be a long and bumpy road for Bitcoin to achieve mainstream adoption, but the potential is definitely there. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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What happened

Along with stocks, several cryptocurrencies fell out of the gate today as investors continue to weigh the macro outlook and look ahead to a critical Federal Reserve meeting later this week.

The price of the world's largest cryptocurrency, Bitcoin (CRYPTO: BTC), is only slightly down over the last 24 hours but is down nearly 13% over the last week and trades at about $21,300 as of this writing.

Over the last 24 hours, the world's second-largest cryptocurrency, Ethereum (CRYPTO: ETH), had traded 3% lower at 10:46 a.m. ET today. The price of Solana (CRYPTO: SOL) traded 4.3% lower, and the price of the meme token Dogecoin (CRYPTO: DOGE) was down 3.7%.

So what

After rallying in July and part of August, stocks and cryptocurrencies have taken a breather, as investors are still in the dark when it comes to where the economy could be headed over the next six to 12 months and how aggressively the Fed will raise interest rates.

After new data showed inflation may have peaked in July, the market seemed to think that the Fed might be able to start to slow the pace of rate hikes. That sparked a rally in tech stocks and many cryptocurrencies, which have traded a lot like tech stocks this year.

But now the market thinks it may have gotten ahead of itself and the Fed could still be aggressive. The market is penciling in another 50-basis-point (0.50%) hike for the Fed's next meeting in September, but a 75-basis-point hike is not out of the question. The market will be looking for more clues on Friday when Fed chairman Jerome Powell speaks at the Fed's annual Jackson Hole economic symposium.

Last Friday, the crypto market declined suddenly for no obvious reason, although some analysts now believe the sell-off was caused by the bankruptcy of the Celsius Network, which may have led the network to sell thousands of Bitcoin tokens into the market last week. Most cryptocurrencies and crypto stocks trade with a heavy correlation to Bitcoin. This upcoming Friday, however, could be a chance for the Fed to reset the market's expectations.

"Bitcoin's outlook for the week is quite unclear and the price will likely fluctuate within a narrow range until Powell's speech," Yuya Hasegawa of Bitbank said in a recent research note. "The $20,000 psychological level could be a reliable support for the price and $22,000 will likely be a resistance until then."

Now what

It's been a tough year for the crypto market, and there is still a lot of uncertainty when it comes to the macro outlook, with traders still wondering where inflation and rates are heading, as well as what will happen with the labor market.

The Fed is also in the process of pulling liquidity out of the economy in a process known as quantitative tightening. That process is beginning to ramp up and could lead to fewer funds flowing into risky assets.

With the uncertainty, expect near-term volatility in the crypto market. I like Ethereum for the long term and think the upcoming completion of the network upgrades will be a catalyst. Solana looks interesting as well, given its technical capabilities. I'm not a fan of the meme token Dogecoin, which doesn't seem to have any unique capabilities or use cases.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Ethereum, Solana, and Dogecoin are falling today appeared first on The Motley Fool Australia.

Do you remember the heady days of 2021, when Bitcoin (CRYPTO: BTC) surged past $60,000, and the entire crypto market was hitting new heights? There were plenty of people saying that they wish they had bought Bitcoin when it was $20,000 or that they wish they had bought Ethereum (CRYPTO: ETH) below $2,000. After 2022's sell-off, patient, risk-tolerant long-term investors can do just that as prices have returned to these levels. Here are three cryptos that I would regret not buying during the dip. 

1. Bitcoin

Bitcoin has shown some signs of life as of late, rallying 33% off the 52-week low of $17,664 that it hit in June. Bitcoin is still a long way off from its all-time high of over $68,000 last November, and I like the fact that investors don't have to try to "catch a falling knife" now that the largest digital asset by market cap has stabilized and looks like it is building momentum again.

As the original cryptocurrency and the largest digital asset with a market cap of nearly $450 billion, Bitcoin is a blue chip cryptocurrency that I would buy during this pullback. When the stock market is down, it is a great time to start or add to discounted positions in top global companies, and the crypto market is no different -- during this downturn, investors can accumulate a position in Bitcoin at a discounted price rather than gambling on smaller altcoins with questionable utility that are down 95% from all-time highs they are unlikely to ever approach again. 

Bitcoin's Lightning Network has made using and transacting in Bitcoin easier and more accessible than ever before. Companies like Block (NYSE: SQ) are leveraging Lightning to allow their customers to be paid in Bitcoin and to round up credit and debit card purchases for Cash Card users. These services are making Bitcoin more widely available to the general public than ever before and can help it reach even further adoption. 

I like the idea of all investors holding at least a small amount of Bitcoin in their portfolios. The hard cap of 21 million Bitcoin that will ever exist stands in stark contrast to the inflationary nature of all other global currencies. Bitcoin is a worldwide network that anyone on the planet with an internet connection can participate in, so it remains an attractive asset to individuals in countries that have seen their currency suffer from serious inflation over the years, such as Turkey and Venezuela. The increasing ease of using Bitcoin and its global appeal as a decentralized asset with a capped supply make it an attractive investment to allocate at least some investment toward, especially during the current market weakness.

2. Ethereum 

Ethereum has rallied over 100% from its cycle low in June, but the second-largest cryptocurrency is still down 60% from its all-time high. Ethereum is also benefiting from a major upcoming catalyst in The Merge, its long-awaited switch from the proof-of-work consensus to proof of stake. After completing a successful trial run on its Goerli testnet, The Merge is now expected to take place between Sept. 15th and Sept. 16th. The transition will make Ethereum less energy-intensive and thus more climate-friendly. It will also make Ethereum more decentralized, which proponents say will make it more secure. Furthermore, Ethereum will no longer be an inflationary asset and will instead become deflationary in nature, which will make it more scarce over time and should add to its value as demand increases. Some observers also point out that Ethereum will become more scalable as sharding is implemented. Lastly, more users will be able to earn staking rewards by participating in the Ethereum network. With this array of improvements in the wake of a major catalyst, Ethereum is another blue chip cryptocurrency that I have been adding to on the dip. 

3. Solana 

With a market cap of $15 billion, Solana (CRYPTO: SOL) is much smaller (and much newer) than Bitcoin and Ethereum but is also worthy of a position during the current downturn for investors who are looking to diversify and are comfortable moving a bit further down the risk curve. Solana is down 84% from its all-time high but is starting to catch some momentum as well, with a 56% increase since hitting its cycle low in June. 

Solana is establishing itself as a smaller but viable competitor to Ethereum in the world of non-fungible tokens (NFTs), with leading Solana marketplace Magic Eden recently achieving unicorn status with a valuation of over $1 billion in a private funding round. OpenSea, which is viewed as the bellwether for the NFT market, recently opened up its platform to Solana NFTs after previously exclusively featuring Ethereum and Polygon (CRYPTO: MATIC) NFTs. Solana is now the second-largest protocol for NFTs as measured by secondary sales, trailing only Ethereum. Solana is home to a talented team of developers, and its uses are not limited to just NFTs or DeFi applications like many other cryptos -- Solana developers are even working on a phone that will make it easier to interact with decentralized applications when using a mobile device. This phone is scheduled to launch in early 2023 with a price point of $1,000. While this may seem a tad esoteric to some observers, I'm loath to count Solana out because co-founder Anatoly Yakovenko and other key figures from Solana all have prior experience at Qualcomm (NASDAQ: QCOM), which creates semiconductors for the mobile phone industry.

The crypto bear market has created the opportunity to start or add to positions in the top two assets that drive the entire industry, Bitcoin and Ethereum, as well as emerging challengers like Solana, at steep discounts to where they traded just a few months ago. For risk-tolerant investors, this could be the right time to allocate a percentage of their portfolios toward cryptocurrency with some smart buys. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 cryptos I would regret not buying on the dip appeared first on The Motley Fool Australia.

What happened 

The crypto market went on a wild trajectory over the past 24 hours, shooting higher late in the day on Sunday only to crash again on Monday morning. At the end of the day, values are down almost across the board. 

Celsius Network (CRYPTO: CEL) was the wildest mover today, trading as high as $4.46 and as low as $2.70. That's a gain of 65% from the low or a loss of 39% from the high, depending on what your reference point is. Ethereum (CRYPTO: ETH) didn't swing quite as much but is down 5.7% from its high, and Solana (CRYPTO: SOL) is down 7.1% from today's peak. 

So what 

The biggest news item of the day was a Celsius Network filing with a bankruptcy court that showed $6.6 billion in net liabilities compared with $3.8 billion of assets. There's a $2.85 billion gap in funding, and on top of it there were 100,669 Bitcoin deposited by investors and only 37,926 Bitcoin remains. 

There's been a short squeeze in Celsius Network tokens since the company filed for bankruptcy protection, but this was more concrete news today. A massive hole in the balance sheet won't be filled without new capital, and that seems like a stretch. 

Reports over the past few days have indicated that Celsius Network is for sale, but in bankruptcy the courts and creditors hold all of the cards. It's not clear who would want to buy the company or what value they would get after paying back some of customers' frozen funds.

Ethereum and Solana are riding the Celsius wave today, it seems, with very little news out of either ecosystem. Ethereum continues to move slowly toward The Merge and investors have bid that cryptocurrency up sharply in anticipation. Solana's network continues to be upgraded slowly, but activity has slowed like with most blockchains over the past few months. 

Now what 

The black cloud over crypto the past two months has been the insolvency of some of the biggest asset owners, like Three Arrows Capital and Celsius Network. They had immense leverage in the system, and that led to a collapse that still hasn't fully played out yet. 

What we've learned today is more about the scale of the problem. Rumors have been circulating that Celsius Network indeed had a $2 billion to $3 billion hole in the balance sheet, and that appears to be the case after all. 

I'm not sure why markets surged after the Celsius report came out, but they're trading lower today, and I think that's natural. It'll likely be months before creditors and investors find out what's left to be divvied up, but it seems the entire market is taking a cautious approach until we learn more. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Ethereum and Solana were trading wildly today appeared first on The Motley Fool Australia.

The Polygon (CRYPTO: MATIC) blockchain made a name for itself over the last few years thanks in part to Ethereum's (CRYPTO: ETH) rise. Polygon is a Layer 2 scaling solution for Ethereum. This means that Polygon helps make Ethereum more efficient, since Ethereum suffers from congestion and high traffic at times. Users flock to Polygon because it offers the security and decentralization of Ethereum, but with faster speeds and lower fees. 

Polygon has a proven track record, but its future is what's most exciting. Even with a brutal bear market gripping most cryptocurrencies, Polygon's developers continue to create new solutions to support more and more use cases. 

zk-What?

Arguably the most important development coming from Polygon is known as the zero-knowledge Ethereum Virtual Machine (zkEVM). This technological feat allows the Polygon blockchain to support further use cases without sacrificing speeds or costs. 

Without getting too technical, zkEVMs make Polygon more versatile to support not only new smart contracts but even old smart contracts that were originally written on Ethereum. These zkEVMs allow developers to migrate their Ethereum-based smart contracts to Polygon's blockchain without having to rewrite any code. Developers might want to do this because Polygon offers those lower fees and faster speeds previously mentioned. In addition, a move to Polygon won't sacrifice any of the highly desired security and decentralization that comes with the Ethereum blockchain.

It is planned that the zkEVMs will be live in early 2023. Timelines in crypto are notoriously unstable -- look no further than Ethereum's merge to proof of stake, which has been delayed multiple times -- but zkEVMs could enable Polygon to reach a new level of usefulness, something that might be worth waiting a few more months for. 

Polygon pairs with Meta

As if the last month wasn't good enough for Polygon, the blockchain garnered attention from one of the most well-known companies in the world. In late July, Disney (NYSE: DIS) announced that its latest round of participants in the Accelerator Program was finalized -- and Polygon was one of them.

In those next few months, an increased number of users might start realizing that Polygon offers a world of opportunities. Just a few weeks ago it was announced by Meta (NASDAQ: META) CEO Mark Zuckerberg that Instagram will unveil NFTs to users in over 100 countries across Asia, Africa, the Middle East, and the Americas. The plan is for NFTs from Solana (CRYPTO: SOL), Flow (CRYPTO: FLOW), Ethereum, and -- last but not least -- Polygon to be compatible with Instagram.

Rather than being a marketplace to purchase NFTs, users will be able to show off and share their digital assets with followers. The NFTs will have basic information like the creator, name of the piece, and the blockchain on which it was purchased. 

This is likely the most exposure Polygon NFTs have ever received. Now that Polygon has a presence in front of Instagram's two billion users, hopefully more users will learn of its lower fees and faster transaction speeds compared to Ethereum.

Disney does crypto

The Accelerator Program is a "business development program designed to accelerate the growth of innovative companies from around the world." As one of six members to be part of this year's class, Polygon receives investment capital, access to co-working space at Disney's creative campus, and mentor support. Disney hopes that eventually a collaboration will come out of these ventures.

Imagine what this could do for Polygon's growth -- and its price. Serving as the blockchain of choice for Disney could propel Polygon to heights that we haven't seen before. When taking into account that zkEVMs are on the horizon, a presence with Instagram is looming, and the possibility of joining forces with Disney -- it almost seems too good to be true.

Despite being down nearly 70% from its all-time high, out of all the other beaten-down cryptocurrencies, Polygon might have the most upside in the entire market. Even if Polygon were to only return its previous high of almost $3, that would present investors with a possible 300% return. Nothing is guaranteed in investing, but if Polygon could reach that price before its associations with Instagram or  Disney and the introduction of zkEVMs, imagine where it could head in the future.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 reasons I'm buying this crypto hand over fist appeared first on The Motley Fool Australia.

What happened

Today's price action among various altcoins that have outpaced the broader market by a wide margin are grabbing attention. As of noon ET, Polkadot (CRYPTO: DOT), Solana (CRYPTO: SOL), and Cardano (CRYPTO: ADA) are tokens that are gaining steam, surging 7.2%, 5.1%, and 2.7%, respectively, over the past 24 hours. 

Amid a range of bullish catalysts that have taken the cryptocurrency sector higher, many investors remain focused on Ethereum's upcoming Merge. With this update set to revolutionize the world's largest decentralized finance (DeFi) ecosystem via a move to proof-of-stake consensus validation, other proof-of-stake altcoins are starting to pick up steam as Ethereum alternatives.

Polkadot's surge appears to be tied to recent reports that the Web3 Foundation exceeded 400 project grants on Polkadot. This suggests that Polkadot's ecosystem growth rate could be better than many investors expect. 

Solana has moved higher, brushing off concerns around a controversial report released this past weekend that indicated much of the DeFi growth the Solana ecosystem may have seen over the past year was fraudulent. Investors are instead seemingly choosing to focus on the positives with Solana today, including bullish commentary from a Solana Labs co-founder around the future of the non-fungible token sector, and where Solana fits into this future.

Finally, Cardano has continued to battle headwinds of its own, tied to delays with the network's Vasil hard fork. However, data showing a surge in Cardano wallets (to more than 3.5 million), and developer interest in the Cardano blockchain (which makes this among the most developed blockchains in the world), is prompting buying interest from investors today.

So what

Polkadot, Solana, and Cardano are three projects that have been called "Ethereum killer" projects in the past, due to the ecosystem growth they have seen over time. Despite broad-based token price declines in the crypto sector, activity on these blockchains has certainly enticed investors to stay invested during this period of volatility. If activity is any gauge, these altcoins could be poised for outsize strength during the next crypto rebound, which may or may not be underway right now.

That said, concerns around the quality of the data currently being published on the crypto sector does provide investors with some pause. Reports that Solana developers may have been able to fake total value locked metrics makes differentiating crypto projects with "real" growth versus those with exaggerated growth more of a task.

Now what

This risk-on rally we've seen play out in recent weeks has led to impressive rallies across a number of select cryptocurrencies. The extent to which this crypto rally, which has more than kept pace with the rise in stocks of late, can continue remains to be seen.

That said, these three projects are ones worth keeping on the radar. For long-term investors looking for growth, these cryptos are ones with growth data that appears to support a growing valuation over time. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Polkadot, Solana, and Cardano are 3 altcoins in focus today appeared first on The Motley Fool Australia.

What happened

Like other top cryptocurrencies, Solana (CRYPTO: SOL) has seen some significant selling pressure Tuesday. As of 12:50 p.m. ET, the proof-of-stake project's tokens had sunk by 8.4% over the previous 24 hours. That positioned Solana as the second-worst performer among the top 10 tokens by market cap, just behind Ethereum (CRYPTO: ETH), which had declined by 9.5%.

Macro factors are certainly among the drivers of Solana's decline. Most major tokens are down substantially Tuesday as investors consider the risks associated with this week's Fed rate hike decision, among other factors.

However, Solana has been grabbing the attention of prominent crypto proponents, who have cited a rather compelling bear case for it. Among the most ardently bearish individuals on Solana of late is Justin Bons, founder and chief investment officer of the crypto venture capital fund Cyber Capital. Bons is well-respected in this space, and his opinion carries weight with many who follow him on social media.

The bear thesis Bons has outlined is multifaceted.

First, in recent months, Solana's blockchain has seen significant downtime relative to other top projects in this space. In fact, Bons highlights the fact that Solana is the only blockchain to have undergone seven outages in recent months, making it a worrisome outlier.

Second, Bons has called into question Solana's peak throughput metrics. Solana Labs claims its blockchain maxes out around 400,000 transactions per second. In reality, it typically operates at a much slower throughput level, even at peak times.

Additionally, Bons and others believe that Solana's recent launch of an Android smartphone could be a decoy the Solana Labs team will use as a way to "cash in" before the selling pressure really beings.

Finally, overarching issues of the blockchain's security have Bons concerned. He suggests that relative to other blockchains, a 51% attack may be more likely with Solana, given centralization issues with how the network's validators operate. Among the reported issues causing validator centralization are higher comparative equipment costs.

So what

There's a lot to digest when it comes to Bons' bear thesis on Solana. Many may be aware of the various outages the blockchain has experienced. This isn't a new issue, and we've been covering it for months. 

However, these concerns are certainly worrisome for investors. When well-known individuals in this space such as Bons highlight why these concerns should be taken seriously, many ears in the crypto community perk up. Mine certainly did as I read through his previous threads on Solana.

Now, the Solana Labs team has responded to many of these concerns, suggesting that Bons' theses have largely been debunked. Many networks experience outages or downtime. Accordingly, the recent attention Solana has received from distributed denial-of-service (DDoS) attackers isn't out of the ordinary.

Additionally, developers behind the Solana blockchain have come up with some detailed fixes they hope will provide long-term solutions for many of these issues. While these fixes may take time to implement, the suggestion is that investors need to be patient through these growing pains.

Now what

Solana's speed and cost advantages, relative to behemoth Ethereum and other competitors, are what make this project enticing for long-term investors thinking about the high-level problems crypto could eventually help solve. Many have touted Solana as a potential "next-generation" or "improved" version of Ethereum, and one that could see similar price appreciation over time, assuming its ecosystem growth follows a similar trajectory.

However, the question is whether Solana's blockchain gives up too much in the way of security and stability in the pursuit of these advantages. Ethereum's blockchain has been remarkably stable, and that's one of the reasons why it's the top dog. It's hard to make the argument that Solana could surpass Ethereum given its stability concerns.

Thus, Bons appears to highlight some pertinent issues which could provide near-term headwinds for this project. While I'm bullish on Solana in the long term, in the medium term, it's clear there's plenty of work to be done. Accordingly, as always, when considering this token as a potential investment, investors ought to consider the risks as well as the catalysts.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why is the Solana price sinking today? appeared first on The Motley Fool Australia.

What happened 

A strong bull run that's lasted all week came to a screeching halt on Thursday as crypto values fell and pulled Coinbase Global (NASDAQ: COIN) down with them. Some of the move was simply trading volatility, while some was because of very real concerns about the health of the market. 

Shares of Coinbase dropped as much as 6.6% today and were down 2.9% at 3 p.m. ET. Solana (CRYPTO: SOL) fell as much as 10.1% in the past 24 hours and is currently down 1.8%, while Cardano (CRYPTO: ADA) fell as much as 7.3% and is currently down 4.1%. 

So what 

The biggest news out of crypto was Blockchain.com announcing it will cut staff by 25%. The company said it will close an office in Argentina, cancel expansion plans in other countries, and cut back institutional lending.

It hasn't been widely reported, but Blockchain.com had lent $270 million to Three Arrows Capital, and when the company filed for bankruptcy, it exacerbated an already down market. 

Funds Blockchain.com raised earlier this year are expected to keep the company solvent for the foreseeable future, but there was a need to cut back expenses dramatically. With customers' funds being frozen at some exchanges, it wouldn't be surprising if the company also loses customers as a result. 

Another big story was an insider at Coinbase and two related people being charged with insider trading in relation to trades made ahead of tokens being listed on Coinbase. The U.S. Department of Justice made the announcement this morning, and Coinbase has been cooperating for months on the investigation. At the very least, this is a black eye for the company.

The broader crypto sell-off seems to be simply taking a breather from a relatively hot week of trading. Some cryptocurrencies are up over 50% in just a few weeks, and naturally there can be a pullback when that happens. 

Now what 

As fast as the crypto industry moves, we continue to see fallout from the Three Arrows Capital collapse, and Blockchain.com is the latest victim. This may ultimately be good news as companies eventually take fewer risks and focus on their core businesses. Coinbase said earlier this week that it wasn't impacted significantly by recent bankruptcy filings and hasn't taken any losses on loans. 

I would expect more volatility for tokens and crypto stocks, but the companies that survive are well positioned to generate tremendous value for shareholders. Coinbase is currently proving that a conservative business model with a long-term vision is better than taking risks no one in crypto fully understood. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why crypto and Coinbase dropped on Thursday appeared first on The Motley Fool Australia.

Could a class action lawsuit filed against the creators and early investors in Solana (CRYPTO: SOL) impact your ability to invest in crypto?

Some commenters worry it might. A new lawsuit circulates around the question of whether cryptocurrency is a security. 

Alleging that the defendants were involved in illegal securities trading, the suit could be a harbinger of disruptive rulings revisiting whether crypto is a security and whether non-accredited investors can participate – or it could be a nothingburger.

Although this suit uses some of Solana's problematic features to argue it is a security, many similar lawsuits have been filed against various crypto entities and businesses using similar lines of reasoning.

The gist of the complaint: Solana is a centralized security, and its creators misled the public in order to profit 

On 1 July, a class action lawsuit was filed against Solana Labs, the Solana Foundation, Solana Labs CEO Anatoly Yakovenko, the venture capital firm Multicoin Capital, and its CEO, Kyle Samani.

Filed by lead plaintiff Mark Young "on behalf of all investors who purchased Solana tokens," the suit alleges that Solana Labs' negotiations prior to their initial coin offering (ICO, the crypto world's equivalent of an IPO) constitute multiple violations of the Securities Act. 

Deploying the Howey test (a court precedent for determining whether something is an investment contract), the suit alleges that SOL is an unregistered security. The suit claims the defendants used a series of negotiations to sell lots of SOL among themselves at rock-bottom prices, and then chose to sell relatively few SOL at much higher prices during the public ICO in order to maintain control over the platform before dumping SOL on gullible investors.  

The core questions in the lawsuit relate to both the specifics of Solana and to crypto investing in general – and that is what concerns some crypto commenters.

The complaint alleges that Solana creators used a series of private deals and their ICO to deliberately centralize and consolidate control of both the tokens and the network infrastructure. Many have criticized Solana for its centralization: Its network and governance structures make it possible for some stakeholders to have more power than others.

However, the broader legal argument suggests that purchasing almost any cryptocurrency with an expectation of profit would meet the threshold of a security -- and that the average retail investor lacks the knowledge and skills to make an informed investment.

The lawsuit could have major implications for retail crypto investing

Any class action lawsuit hitting the developers of one of the top 10 cryptocurrencies will turn heads. But one thing about this case that has particularly concerned commenters is that it rests on the argument that Solana is a security.

This classification is more than pedantic hair-splitting: For decades, American courts have used the Howey test to evaluate whether a transaction is a security.  

Many lawsuits have claimed that various crypto entities operate as securities. However, U.S. law generally considers crypto to be a commodity, so it falls under the purview of the Commodities Futures Exchange Commission (CFTC).

There would be many implications if this classification changes, but one of the most direct potential consequences could be restrictions in which kinds of investors can purchase crypto or participate in ICOs. 

It's important to know that only accredited investors – wealthy individuals with a specific license and high net worth – can purchase certain types of investments. The mere idea of accredited investors is anathema to many who see crypto as a way to even the financial playing field. 

Plus, many businesses in the crypto sector, such as Coinbase (NASDAQ: COIN), use a business model that relies on retail investors to provide revenue.  

Yet many of the lawsuits claiming that crypto is a security rest on the argument that creators defrauded unsophisticated investors.  

That's why any legal proceeding that threatens to change this status quo could have ramifications that "ripple" beyond Solana. Ripple (CRYPTO: XRP) is already embroiled in a similar lawsuit with the SEC, and legal experts involved with that case are already warning that if Ripple loses, the case could transform the crypto sector.

But then again, maybe it won't

The Solana suit is hardly breaking new legal ground: As of May 2022, there had been at least 200 lawsuits concerning cryptocurrency, many of which alleged that crypto creators defrauded investors by illegally selling securities.  

Though the initial complaint never specifies whether the plaintiff was an accredited investor, Young purchased more than $117,000 USD of Solana in August and September last year via altcoins such as Cardano and Ethereum.  While nobody wants to watch a $117,000 investment plummet in value, it is also probably more than most retail investors are able to invest in crypto.

The complaint's emphasis on the defendants' use of Twitter to promote Solana also suggests that the plaintiff, or others in the class of plaintiffs, might have influenced their investment decisions. 

No matter how this lawsuit turns out, this is a great occasion to remind yourself that all investments carry risk, crypto is highly volatile, and you should only invest in proportion to your risk tolerance.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Solana Foundation slapped with class action lawsuit alleging SOL is a security appeared first on The Motley Fool Australia.

What happened

The entire cryptocurrency market is rallying today, with more defensive and higher-beta tokens trading higher almost in lockstep. For meme tokens Shiba Inu (CRYPTO: SHIB) and Dogecoin (CRYPTO: DOGE), 24-hour price increases of 15% and 6.5% as of 12:45 p.m. ET, respectively, reflect increasingly bullish sentiment in the crypto sector. As a gauge for retail investor interest, these tokens are often looked to as directional indicators of where the market may be headed. 

Shiba Inu's surge appears to be related to a recent community vote to reduce mining rewards with the network's upcoming Layer 2 blockchain, Shibarium. Similarly, Dogecoin is seeing interest surge ahead of its Dogecoin Core 1.14.6 release, which is intended to harden node and network security while also incorporating fixes and adjusting rewards on the network.

Solana (CRYPTO: SOL), while not a meme coin in its own right, does have one meme token on its blockchain investors are watching. Solana-based Samoyedcoin is also up approximately 7% over the past 24 hours, at the time of writing, as investors look for high-leverage options to gain exposure to this crypto rally today. 

So what

Amid the fallout from other high-yielding projects, and those offering rewards many now view as unsustainable, the moves Shiba Inu and Dogecoin have made to reduce rewards and focus on network stability certainly make sense.

The saying "if it's too good to be true, it probably is" has taken on a whole new meaning in the crypto world. At the end of the day, rewards come from somewhere, and whether it's inflation from minting new tokens, or Ponzi-like structures that only work when prices go up, crypto investors certainly have reason to worry about projects over-offering rewards.

Now what

Meme tokens remain among the most volatile and high-risk assets investors can consider for their portfolios. While there's certainly more developer activity being seen with the likes of Shiba Inu, Dogecoin, and other projects, the ultimate valuation investors can place on the real-world utility generated from these projects likely remains negligible. Accordingly, aside from bullish investor sentiment, there really aren't many fundamental drivers that can take these tokens higher over the long term.

That might change, but for now, investors may want to view these tokens as ultrasensitive gauges of investor sentiment. In today's session, that means some nice near-term rallies in these tokens. However, if the selling pressure isn't over, investors may want to prepare for more downside risk in the medium term with these dog-inspired tokens. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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