A major shift?

A series of very bullish headlines made its way across the crypto community in the last few weeks. Here are some of them:

American fintech giant PayPal is reportedly bringing crypto trading to its massive user base, via Paxos Crypto Brokerage. The New York-based firm will handle all regulatory compliance aspects through its brokerage solution, and provide a supply of cryptocurrencies to users of PayPal and its subsidiary Venmo, according to CoinDesk. As a qualified custodian, Paxos is legally permitted to hold digital assets on behalf of institutional investors.

Following suit, Mastercard announced the expansion of its cryptocurrency program, making it easier for crypto companies to issue their own debit and credit cards. The London-based startup Wirex became the first crypto-native company to be granted a Mastercard principal membership, allowing it to issue cards on the latter’s network.

Shortly after that, Visa Inc. published a blog post titled “Advancing our approach to digital currency”, in which the company pointed to its work with Bitcoin and regulated cryptocurrency service providers such as Coinbase and Fold.

The next day, the U.S. Office of the Comptroller of the Currency (OCC) allowed national banks to hold cryptocurrencies on behalf of their clients. The OCC also reaffirmed that banks can provide permissible banking services to regulated cryptocurrency businesses.

This new turn on their ways contrasts with their initial stance earlier in 2018, when payment giants and banks were cracking down on cryptos shortly after Bitcoin’s massive bull run of 2017. Recent news point to a major shift towards cryptocurrencies among institutions and well-established businesses amid the coronavirus pandemic. Such a change can be explained by a rapidly growing interest in cryptos among both retail and institutional investors, which is fueled by global economic uncertainty over centrals banks across the world printing fiat money like never before.

The return of the crypto-mania

Cryptocurrencies have recently decoupled from major Wall Street indices and Bitcoin rallied to over $11,000, while Ethereum crossed $320 mark. A surge in price of most cryptos was triggered by a combination of many factors:

• As we’ve already mentioned above, there were many bullish fundamental news hinting at growing adoption among institutions.

• Additionally, decentralized finance (DeFi) applications continue attracting new investors — now with more than $1 billion locked in the Maker Protocol, which backs and stabilizes the value of stablecoin DAI.

• Aside from that, a recent spike of COVID-19 cases around the globe contributes to growing concerns over the world economy.

• There is also a narrative that China is driving Bitcoin’s rise due to fears of potential US imposed sanctions, according to Trustnodes.

Such a rapid price increase came at a cost, though. Onchain transaction fees continued growing on the networks with a limited block size. Average Bitcoin transaction fees climbed over $5, while an average Ethereum fee jumped to almost $2 per regular transaction and $4-5 for interactions with DeFi protocols.

Even though Ethereum miners have recently increased the block gas limit to 12.5 million, they are now voting to increase the limit even further. This could lead to higher centralization, but will temporary unclog the network. The gas limit essentially determines the maximum size of new blocks, and can be increased by roughly 0.1% in each new block due to protocol restrictions.

In other news

• Popular hardware wallet manufacturer Ledger published a blog post explaining it has experienced a data breach, leaking approximately 1 million email addresses and even order details of its clients such as name, postal address and phone number.

• Peer-to-peer custodial platform LocalBitcoins announced the use of two blockchain-tracing tools from analytics company Elliptic. LocalBitcoins has introduced strong know-your-customer (KYC) and anti-money-laundering (AML) controls since 2019, in compliance with the EU’s Fifth Anti-Money Laundering Directive (AMLD5) and new Finnish business regulations.

• Brian Armstrong, CEO of American cryptocurrency exchange Coinbase, explained that the company hasn’t listed Monero (XMR) because US regulators are uncomfortable with privacy-oriented coins. Armstrong also admitted that the controversial acquisition of blockchain analysis platform Neutrino was “a mistake”. Key members of Neutrino were linked to an organization that sold a spyware to authoritarian regimes.

• The Russian government set aside its idea to criminalize Bitcoin transactions, while South Korea finalized plans to charge a 20% tax on cryptocurrency-related gains.