- The EU aims to develop a new legal system by 2024.
- Fees for Ethereum double in a week as DeFi heats up.
- XAU / USD Forecast: Gold Price Aims Higher than Pressure Constructions.
In the last few editions of our Overbit releases, one of the significant trends we’ve covered is the governmental & institutional response to cryptocurrency. It remains a dominant theme in the space as opposers and supporters alike continually make strides to either adopt or reject cryptocurrency. In this week’s edition of Overbit Insight, we start off with just one of those stories.
In a groundbreaking headline, the European Commission announced plans to introduce a new legal framework to regulate and facilitate the market of cryptocurrency and digital assets. This new framework will last until 2024, presumably until a more concrete legal foundation is laid.
This is a major shift in the European Commission’s view of the cryptocurrency markets as the EU seeks to remain at the centre during this new generation of finance. According to two new documents released by the European Commission, the plan is to utilise blockchains and stablecoins to make cross-border payments both more accessible and cheaper. Furthermore, this framework will also seek to legitimise payments made in cryptocurrencies like Bitcoin, Ethereum and Litecoin. The most remarkable aspect of this new regulation, however, revolves around “instant payments”. In simpler terms, the EU is seeking to build an alternative payments system - one that does not rely on U.S. based companies like Visa and Mastercard. Time will tell how this framework eventually plays out, but it’s safe to say the EU appears to be fully on the cryptocurrency train. And one thing is certain for us after being in this space for years: the blockchain train waits for nobody.
Moving towards actual coverage of cryptocurrencies, we take a look at the Ethereum Network. With DeFi usage skyrocketing, we’ve seen the fees on the Ethereum Network double in just the last week. This continues the record-breaking streak of Ethereum’s fee in which they’ve never fallen below $2. For those who don’t know, fees for Ethereum are closely related to the network usage. As demand increases with users trying to send transactions and interact with smart contracts, so does the cost of performing said interaction. While it’s not an exact science by any means, it’s clear that interest in Ethereum, and particularly DeFI, is ramping up. Other statistics point to the same conclusion. The Ethereum blockchain hash rate—the amount of computational power that supports the network—has also increased to levels unseen since 2018. All of this leads us to believe that Ethereum is on a massive slope upwards.
This recent doubling of fees appears to be a direct result of UniSwap releasing their own token - $UNI. Uniswap is the leader in DeFI, acting as a decentralised exchange where millions of users across the world provide liquidity rather than having a central orderbook. That being said, this token release was of massive proportions: anyone who has ever interacted with Uniswap before 1 September 2020 was awarded hundreds of $UNI tokens, totalling more than a thousand dollars in some cases. This ‘airdrop’ as they call it in the cryptocurrency space caused an avalanche of transactions, as millions of people flocked to Uniswap to claim and sell this airdrop. While the $UNI release is undoubtedly a one-off event, it seems clear to us that interest in Ethereum is rapidly ascending. Though the price does not reflect this fact, we’re well aware of how quickly cryptocurrency markets can turn parabolic in order to find the actual value.
To close out this week’s edition of Overbit Insights, we take a look at traditional markets, and more specifically gold. Examining the chart, we can see that pressure is building up for XAU/USD, as price extended upwards yet failed to break the monthly August close. Bulls failed at this level, but signs point to a continued extension as they defend the 50-day moving average. In a topic we’ve spoken at lengths about, every market is undeniably tied to the American dollar, mainly due to the state of financial affairs in a pandemic-driven world. That being said, we could continue to see gold falter if liquidity deteriorates. That appeared to be the case when U.S. Federal Reserve Chairman Jerome Powell talked down on market conditions in September’s FOMC. Either way, the pressure is mounting in both directions for XAU/USD. And as has been the trend for most of 2020, it appears the U.S. dollar will be at the forefront of this move. If you want to stay ahead of the game and place your bets today, don’t forget to check out Overbit.com.
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