Crypto Beans Newsletter Dec 31st

Read time - 3 mins

Hey there everyone! Happy New Year- 👋 This is Shivam

I bring to you the final weekly edition of Crypto Beans for the year 2022, an effort through which I try to share my thoughts on the crypto space and help you stay updated on the basics of the industry.

What is in it for you?

If you are looking to learn more about crypto and what exact challenges does it aim to solve, this is for you. Okay done selling it 😛, lets get started:

State of Crypto affairs? A quick look at the market

The global cryto market currently stands at $829 Billion. It is still down more than 60% down(👎) from its all time highs of ~$3 Trillion which it hit in the month of November.

The global cryptocurrency market cap today : $829 Billion

Weekly change: -1.78% | Yearly change: -64.23% 

Bitcoin (BTC) which is the largest cryptocurrency with a market cap of $318.5 Billion.

Weekly change: -1.69% | YTD change: -65.29%

Another important metric is the Bitcoin dominance which can be used as a rough indicator of the relative strength of Bitcoin versus other cryptocurrencies.

A high Bitcoin dominance means that Bitcoin has a large market share and is potentially more influential in the overall cryptocurrency market and vice-versa.

Bitcoin dominance: Current Year: 40.11% | Last year (Dec 2021): 39.85%

Top crypto projects/protocol by different metrics

Interesting thing to note here is that although Tether (USDT) has just $66B market cap, it is traded the highest with volume close to $20B given its use as a stablecoin for exchange of assets. Meanwhile, Stablecoins' market cap is at $139 Billion and has a 16.77% share of the total crypto market cap. 

Greed and fear index

The market has been mostly bearish in 2022 with the Fed hiking the interest rates (story on that later) and lots of leverage being flushed out of the system.

The sentiment is most likely going to carry over to early 2023 as well until the macro environment improves.

Note: The data used is based on metrics like Volatility, Surveys, Bitcoin Dominance, Social and Goggle Trends. Source: Coinstats

Is ETH really ultrasound money?

The most anticipated event of the year was Ethereum merging to a PoS blockchain from PoW. Experts, ETH developers and Vitalik himself had estimated that the ETH inflation will go down significantly as a result of merge taking place.

The graph highlights POS vs POW issuance since the merge. Impressive numbers, this seems to be super bullish for ETH long term given the supply of ETH is not growing as before

Supply change since merge POS - 4,665 ETH

Supply change since merge (If POW) - 1,266,553 ETH

Decrease in supply due to switch to POS - 99.63% 

Spill the beans (Explain to me like a 5 year old)

In this edition we start cover:

 "What is Ethereum"?

Ethereum is a special computer program that helps people send money and other things to each other without using a bank.

Imagine you have a bunch of stickers that you want to give to your friend. With Ethereum, you can use your computer to send the stickers to your friend without having to go to the bank or pay any extra fees. It's like magic!

Ethereum also has something called "smart contracts," which are like special rules that tell the computer what to do. For example, you can use a smart contract to make sure that you only get the stickers after your friend has paid you some money. That way, you can be sure that you will get paid for the stickers before you send them.

Ethereum is very fast and secure, because it uses special computer programs called "blockchains" to keep track of everything. This makes it hard for anyone to cheat or steal the stickers or the money.

Oh its magic then, but what are "Smart contracts", is it even important?

Smart contracts are like special computer programs that use math to make sure that everyone follows the rules. They are like a game with a bunch of rules that everyone has to follow, and the computer is the referee that makes sure that everyone is following the rules.

For example, let's say you have a toy that you want to sell to your friend. You can use a crypto smart contract to make sure that your friend pays you the right amount of money before they get the toy.

To do this, you can write a set of rules on a computer that says things like "If my friend gives me 10 magic coins, then they can have the toy." You can then give this set of rules to a special computer program that will read the rules and make sure that everyone follows them.

If your friend gives you the 10 magic coins, the computer will say "Okay, you can have the toy now!" But if your friend doesn't give you the magic coins, the computer will say "Sorry, you have to give me the magic coins before you can have the toy."

These are very useful because they can help to make sure that everyone follows the rules and that everything is fair. They can also be used for lots of other things, like buying and selling things online, making agreements with other people, and even voting in elections.

How do I do all these activities then, do I use some app?

Yes exactly, Ethereum has this concept of DApps, or decentralized applications, which are special computer programs that use Ethereum to run. This means that they are not controlled by any single company or person, but are instead run by lots of different computers all around the world.

DApps can be used for a wide variety of purposes, such as creating and managing digital assets, automating business processes, and enabling peer-to-peer interactions.

How did Ethereum come into picture, who started this?

Ethereum was founded by a group of developers led by Vitalik Buterin, who first proposed the concept in a white paper in 2013. Buterin had previously worked on the Bitcoin blockchain and was interested in the potential for using blockchain technology to enable the development of DApps.

The initial allocation of ether, the cryptocurrency of the Ethereum network, took place through a process called an "initial coin offering" (ICO).

An ICO is a way for a company or project to raise funds by issuing and selling new cryptocurrencies to the public. In the case of Ethereum, the ICO was used to fund the development of the Ethereum platform and the launch of the Ethereum mainnet.

Hmm, so is it going to change the world?

Lol, that I don't know - infact no one knows but there are some examples of web2 businesses that may resonate with the Ethereum model:

Online marketplaces: Decentralized marketplaces built on Ethereum could potentially offer a more secure, transparent, and efficient alternative to traditional online marketplaces.

Financial services: Ethereum could potentially be used to enable the development of decentralized financial services, such as peer-to-peer lending platforms, payment processors, and digital asset exchanges.

Supply chain management: Ethereum could potentially be used to improve transparency and traceability in supply chain management by enabling the creation of decentralized, immutable records of transactions and events.

Identity and reputation systems: Ethereum could potentially be used to build decentralized identity and reputation systems that are more secure, portable, and privacy-preserving than traditional systems.

Overall, the Ethereum model could potentially be used to enhance a wide range of web2 businesses, but it is important for businesses to carefully consider the potential benefits and challenges of implementing decentralized technologies before making any decisions.

What's brewing today? Bringing fresh beans to you:

Bitcoin Miners Got Crushed by Crypto Winter. 2023 May Bring More Pain: The mining industry started 2022 off strong with what seemed like ample capital to expand, but high energy prices, increasing competition for Bitcoin blocks and a bear market hit miners, knocking out those with high leverage.

Cathie Wood's Ark Invest Buys the Dip, Scoops Up $5.5M in Coinbase Stock: There’s no stopping Ark Invest, the investment house led by Wall Street veteran Cathie Wood, from pursuing its long-time dip-buying strategy as the firm snapped up another 158,116 shares of Coinbase shares (COIN) on Thursday.

FTX, Congress, Stablecoins: What 2023 May Bring for Crypto Regulations: This year did not play out quite as expected. While the idea that the bull market would end and a new crypto winter would hit was understood and expected, the sheer scale of this year’s failures seemed to catch a lot of people by surprise.

Whats meme-ing?

And now the funny part, is S&P related to BTC😂.

What did you think of today's edition?

Reach out to me on Twitter for any feedback :)

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.