CryptoCompare data shows the price of Bitcoin (BTC) has dropped below the $30,000 support level in a downward move that broke a support level that had been holding for weeks. The break below $30,000 may not last long as at $29,500 it found some support.
Ethereum’s Ether, the second-largest cryptocurrency by market capitalisation, went from a $2,000 high over the week to under the $1,800 support that had been holding. The cryptocurrency is now trading at about $1,750.
After weeks moving sideways, cryptocurrency prices appear to have broken their trading ranges downward, even as data shows cryptocurrency exchange balances have been steadily dropping over the week. The amount of BTC held on these exchanges has been dropping since late May, with around 2,000 BTC leaving their wallets every day.
In April, according to a report, Bitocin reserves on exchanges also fell significantly, preceding the run that saw BTC hits its all-time high near $64,000. At the time, the funds moved of exchanges to either the Grayscale Bitcoin Trust (GBTC) or to secure wallets held by institutional investors.
The exchange outflows may now have another culprit: Bitcoin’s layer-two scaling solution, the Lightning Network. While the Bitcoin blockchain handles around seven transactions per second, the Network is estimated to be able to handle as much as 25 million.
Data shows it has recorded its fastest 100 BTC capacity growth to date in only five days, growing to over 1,800 BTC this month. In April, the network reached the 10,000 node milestone, and it has now doubled that figure to over 22,000 nodes.
It took nearly a year for the number of Lightning Network nodes to move from 5,000 to 10,000. The growth can partly be attributed to El Salvador adopting bitcoin as legal tender, as the network allows for faster and simpler transactions that would benefit Salvadorans.
Another factor that could be motivating users is the ability to earn yield by contributing liquidity to the network. Lightning Labs’ liquidity marketplace Lightning Pool, launched in 2020, lets users lease liquidity on payment channels.
Cryptocurrency exchange balances may have also dropped because of a regulatory crackdown on leading trading platform Binance. The firm saw a string of regulatory bodies warn against it, including the U.K., Japan, the Canadian province of Ontario, Hong Kong, Singapore, and others.
In response, several major banks in Britain, including Barclays and Santandar, blocked their customers from using their cards on Binance’s platform. Similarly, one of the firm’s payments partners in Europe, Clear Junction, suspended facilitating payments for the exchange.
The decision was made in response to the U.K:’s Financial Conduct Authority’s decision Binance wasn’t allowed to undertake any regulated activity in the country. In response to the regulatory crackdown, Binance users may have moved their funds to wallets under their control.
Crypto Market Draws Criticism From DOGE Co-Creator
The week was also marked by a Twitter thread published by Dogecoin co-creator Jackson Palmer about the market. In the thread, he said he believes the cryptocurrency market is “almost purpose built to make the funnel of profiteering more efficient for those at the top and less safeguarded for the vulnerable.”
Palmer added: “[The crypto market is] inherently right-wing, hyper-capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight and artificially enforced scarcity.”
Coinbase CEO Brian Armstrong responded to Palmer on the platform, saying cryptocurrencies create “wealth mobility and more equal opportunity for everyone”. To Armstrong, cryptocurrencies are a “breath of fresh air” for those who believe “government solutions are often inefficient, overpromise/underdeliver, and come with unintended consequences”.
This week also saw payments firm Square reveal it’s planning to create a “new business” with the “goal of making it easy to create non-custodial, permissionless, and decentralised financial services.”
Jack Dorsey, CEO of both Twitter and Square, revealed on the microblogging platform that the firm had “some ideas around the initial platform primitives we want to build”. He added the business is called TBD and will be “completely in the open”.
Most DeFi projects are built on top of the Ethereum blockchain, as Bitcoin currently does not have smart contract capabilities. These smart contracts are essentially code that automatically executes when specific criteria are met.
Interest in Ethereum has been steadily growing over the last few months, so much so that an Ethereum exchange-traded fund (ETF) was listed on Brazil’s B3 stock exchange this week after winning approval from the markets regulator.
The ETF, with the ticker QETH11, will buy ether and offer investors exposure to the cryptocurrency without them having to worry about managing wallets or private keys.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies but has no bias in his writing.
Featured image via Unsplash.