Bitcoin DeFi Breakthrough: First Bitcoin-Backed Synthetic Dollar to Launch with 25% Yield

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The first-ever Bitcoin-backed synthetic United States dollar, USDh, is set to launch with an attractive 25% yield, marking a significant development for Bitcoin-native decentralised finance.

Hermetica, a Stacks-native DeFi protocol on Bitcoin, announced the launch of USDh, allowing users to earn up to 25% yields. According to Jakob Schillinger, the founder and CEO of Hermetica Labs, USDh will provide Bitcoiners with a reliable way to hold and earn a yield on their U.S. dollars, eliminating the need to rely on traditional banking systems or invest in non-Bitcoin-related products.

The new synthetic dollar, scheduled for release in June, is poised to bring increased liquidity and new use cases to Bitcoin DeFi. It will enable Bitcoiners to trade, lend, and transact using a dollar asset fully backed by Bitcoin.

The launch of USDh follows the recent release of Ethena’s USDe, which offered holders a 27.6% yield. However, concerns about the sustainability of such high yields have been raised. Hermetica’s 25% annual percentage yield (APY) is notably higher than the 20% yield offered by Anchor Protocol on TerraUSD (UST) before Terra’s collapse in May 2022.

Despite concerns, Schillinger assures that the yield is sustainable and derived from future funding rates. He explained that the Bitcoin-native yield fluctuates with the market’s demand for long leverage. According to backtest data from January 2021 to March 2024, the average APY was 11.71%, reaching 26.11% during the 2022 bull market.

Schillinger is confident that the demand for Bitcoin futures will keep USDh yield sustainable, stating that the structural demand for long leverage in the futures markets supports this.

As more protocols develop utility and DeFi capabilities around Bitcoin, Schillinger believes that Bitcoin DeFi will surpass Ethereum DeFi in the next five years. He pointed out that Ordinals trading volumes have already exceeded Ethereum and Solana NFT volumes combined in certain months, indicating the potential for explosive growth in Bitcoin DeFi, backed by over $1 trillion in latent BTC capital.

Recent analysis has shown just how long it takes to mine 1 Bitcoin

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Bitcoin mining is essential for validating transactions and generating new Bitcoins. With around 19.5 million Bitcoins already in circulation and a capped total supply of 21 million, mining is a race to unlock the remaining 1.5 million Bitcoins.

Finding a new Bitcoin requires powerful computers to solve complex mathematical puzzles, which takes time. The average time to mine 1 Bitcoin, considering the current mining difficulty and the 10-minute block time is roughly 10 minutes to mine not just one but 3 Bitcoins. However, given the immense computing power needed, it’s highly improbable for one miner to win the entire block reward.

Mining hardware plays a significant role in determining how long it takes to mine a Bitcoin. Those with higher hash rates have a better chance of earning Bitcoins, often joining mining pools to combine their computing power and improve their chances.

Solo mining Bitcoin is incredibly challenging due to intense global competition. Block rewards are almost impossible for a single miner to obtain due to Bitcoin’s proof-of-work consensus protocol.

With the increasing complexity of mining and the high energy costs involved, earning 1 Bitcoin per day without investment is nearly impossible. Even those willing to invest substantial sums may find competing with large-scale mining operations difficult.

While it’s enticing to imagine earning a full Bitcoin daily, it’s essential to approach the cryptocurrency market cautiously, avoiding scams promising quick and easy returns. Understanding crypto trading, blockchain technology, and market trends is crucial for those interested in investing in cryptocurrency mining.

Bitcoin Soars While Ethereum Lags: Analysing 2024 Year-to-Date Returns

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Ethereum’s performance this year has fallen behind Bitcoin’s, with the arrival of Bitcoin spot ETFs making all the difference.

What’s Going On: Bitcoin surged past its all-time high last month, driven by the high demand for new investment products tracking its spot price. Year-to-date, Bitcoin has increased by 47%.

However, Ethereum hasn’t followed the same pattern. Unlike Bitcoin, Ethereum hasn’t come close to its 2021 peak this year. Its year-to-date gains have been modest, sitting at 32%.

According to on-chain analytics firm Glassnode, Bitcoin’s Short-Term Holders’ Realised cap nearly matched the peak of the last bull run. In contrast, Ethereum’s STH-Realised Cap is less than half of the previous cycle’s level.

In simple terms, newer market participants have shown much more interest in Bitcoin than in Ethereum, where new capital inflows have been relatively weak.

Why It Matters: The introduction of new Bitcoin spot ETFs has made cryptocurrency investing more accessible, attracting more participants to the market, Glassnode explained.

However, Ethereum is still awaiting a decision on its spot ETFs, which is expected later this month. British multinational bank Standard Chartered, which initially forecasted approval by May, reversed its stance last month. Bloomberg ETF analyst Eric Balchunas also made a pessimistic statement regarding this matter.

Ethereum’s status has become a significant concern, with reports suggesting that the SEC is covertly assessing whether Ethereum should be classified as a security.

Potential Impact: If Ethereum is declared a security, it could negatively affect sentiment and investment in the coin, potentially leading to a price crash.

Price Movement: At the time of writing, Ethereum was trading at $3,015.99, marking a 1.56% drop in the last 24 hours.

Pizza Day Prague 2024 to Explore Bitcoin’s “Scaling Wars”

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Prague, Czechia – Bitcoin enthusiasts and blockchain experts are gearing up for Pizza Day 2024, set to take place in Prague from May 18 to May 19. This year’s conference promises an in-depth exploration of the “Scaling Wars,” a crucial chapter in Bitcoin’s ongoing development.

The Scaling Wars refer to the technical and ideological challenges surrounding Bitcoin’s scalability, network capacity, transaction speed, and rising fees. These issues are central to maintaining Bitcoin’s status as a viable peer-to-peer electronic cash system.

At the 3rd annual Pizza Day Prague Bitcoin Conference, participants will engage in vital discussions about the delicate balance between scalability and Bitcoin’s decentralisation ethos. The conference aims to address questions surrounding on-chain scaling versus layer-two solutions and how to maintain inclusivity and avoid centralization while ensuring efficiency.

The event promises to be a pivotal moment in Bitcoin’s journey, where the community comes together to navigate the challenges of scaling, foster innovation, and ensure that the original spirit of Bitcoin thrives. Pizza Day 2024 will be a landmark event in the ongoing saga of Bitcoin’s evolution, offering a platform for intellectual exchange and exploring freshly baked ideas.

Vodafone Plans to Integrate Crypto Wallets into SIM Cards to Foster Blockchain Adoption on Mobile Devices

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Vodafone, the U.K. telecommunications giant, is exploring the integration of crypto wallets directly into mobile phone SIM cards. David Palmer, the Vodafone Chief Product Officer (CPO) of Pairpoint, discussed this strategy in an interview with Yahoo Finance Future Focus.

Palmer outlined Vodafone’s initiative to drive blockchain adoption by enabling crypto transactions on mobile devices through SIM card-embedded crypto wallets. The company aims to leverage the cryptographic capabilities inherent in SIM cards for seamless blockchain integration.

Highlighting Pairpoint’s efforts, Palmer explained how Vodafone’s subsidiary is advancing Web3 and Internet of Things (IoT) services using SIM card technology for blockchain-based digital wallets on mobile devices. He projected that by 2030, approximately 5.6 billion blockchain-based digital wallets would serve as gateways to financial services.

Palmer estimated that by 2030 around eight billion cell phones would be in use globally, providing at least 70% of the world’s population with access to this technology.

These revelations come shortly after reports surfaced indicating Vodafone’s 10-year strategic partnership with Microsoft to offer its customers generative artificial intelligence (AI) services.

Vodafone’s interest in Web3 and blockchain technology was also demonstrated when Pairpoint, formerly Digital Asset Broker (DAB), unveiled a proof of concept in collaboration with Sumitomo Corporation and Chainlink Labs. The proof of concept aimed to streamline the exchange of trade documents across various platforms and blockchains, addressing inefficiencies in the global trade ecosystem estimated at $32 trillion.

This initiative showcased the capability to seamlessly exchange crucial trade documents across different platforms and blockchains, overcoming the challenges of fragmented and incompatible systems.

Ethereum Developers Introduce EIP-3074 to Enhance Crypto Wallets

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The Ethereum community is divided over EIP-3074, a code change to enhance user experience with blockchain wallets.

As blockchain developers aim for mainstream adoption, improving the usability of crypto wallets has become a top priority.

Ethereum developers are progressing with their discussions and including specific Ethereum Improvement Proposals (EIPs) for the blockchain’s upcoming major hard fork, Pectra.

One of these proposals, EIP-3074, has garnered support and concern within the Ethereum community. This code change is intended to enhance user experience with blockchain wallets.

Previously, Ethereum developers addressed issues to simplify the wallet user experience and deployed features unlocking new capabilities. They are striving to make the experience even more user-friendly and permanently embedded in the blockchain.

EIP-3074 is designed to make a specific type of wallet, known as externally owned accounts (EOAs), more programmable by authorising smart contracts.

Ethereum has two wallet accounts: EOAs, such as MetaMask and Coinbase wallet, and smart contract wallets like Argent and Safe.

EOA account users have a public and private key pair. However, if the private key to an EOA account is lost, no help desk or key recovery process is available to regain access to the funds.

Previous proposals, like ERC-4337, aimed to make EOAs easier to use, introducing the concept of account abstraction (AA) and allowing users to recover their crypto with smart contract features.

EIP-3074 represents another innovation in this realm, allowing transaction capabilities to be delegated to smart contracts. The proposal enables users to batch transactions together and sign off once. Additionally, it allows third parties to sponsor users’ transaction fees, covering gas costs for their users.

EIP-3074 also permits users to sign transactions submitted by a different party, such as signing transactions from a different interface or signing them offline.

However, while many community members support the proposal, others have raised concerns, particularly regarding the security implications of the batched transactions feature.

Lukas Schor, co-founder at Safe, has expressed concerns about the proposal’s lack of a clear pathway to full account abstraction and its potential negative impact on AA adoption.

Itamar Lesuisse, co-founder of Argent wallet, has raised security concerns, highlighting the risk of allowing scammers to drain entire wallets with a single off-chain signature.

For security reasons, experts called for wallets to ban EIP-3074 MAGIC signatures on a per-wallet basis.

Bitcoin indicators suggest a potential bullish trend

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According to market analysis, bitcoin traders are eyeing two key indicators, the funding and three-month annualised basis rates, indicating a potential upward price movement.

A crypto expert, Will Clemente, noted in a recent post on X, “Looks like we’re consolidating before the next leg up,” highlighting that both indicators have “cooled off” after briefly dipping into negative territory.

The funding rate, a significant indicator of overall trader sentiment, recently recovered from negative territory. This recovery suggests an increasing confidence among traders in Bitcoin’s price. Exchanges use the funding rate to balance traders entering long positions with those opting for short positions, mitigating the risk of overexposure.

According to open-source data, the open interest-weighted funding rate is 0.0091%, indicating a positive shift from a negative rate of -0.0050% on May 4.

“The Bitcoin funding rates remaining this low, while Bitcoin is bouncing makes me feel extremely bullish,” echoed pseudonymous crypto trader Mister Crypto to their 98,000 X followers.

However, liquidation data contradicts this bullish sentiment, suggesting that futures traders are still leaning bearish and anticipate a near-term price drop.

A 3.5% rise in price to the key $65,000 level could liquidate $1.36 billion in short positions, whereas a 3.5% drop to $60,500 would only wipe out $650 million in long positions.

In addition to the funding rate, traders are also monitoring the three-month annualised basis rate, which measures the cost difference between Bitcoin futures contracts and the actual price of Bitcoin.

Major exchanges have seen an increase in the annualised basis rate, reaching the higher end of the 5–10% neutral range. Traders often view rates above 10% as a neutral-to-bullish signal.

With both indicators showing signs of a potential bullish trend, traders are cautiously optimistic about Bitcoin’s price movement in the near term.

Ether’s Underperformance Raises Concerns, but Market Trends Positive

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While Ethereum’s (ETH) price struggles to match Bitcoin’s 2024 gains, analysts suggest that the cryptocurrency market remains on an upward trajectory.

Ethereum continues to underperform Bitcoin. Despite Bitcoin’s gains, Ethereum lags, leading to a weaker ETH/BTC ratio. According to Glassnode, the ratio reached its lowest point since April 2021, hitting $0.04622 on May 1.

Glassnode explains that Ethereum’s underperformance is due to a lag in speculative interest among short-term holders (STH). This cohort comprises investors who acquired their coins within the last 155 days and reflects new investor demand.

While Bitcoin experienced a surge in speculative activity leading up to its all-time high in March, Ethereum has yet to match this trend, as it has not reached its previous all-time high.

The lack of new capital inflows reflects Ethereum’s underperformance relative to Bitcoin. Glassnode’s on-chain data reveals that while Bitcoin’s STH-Realised Cap is almost at the same level as the last bull run peak, Ethereum’s STH-Realised Cap is less than half of the previous cycle levels, indicating a lack of new capital inflow.

The market is still in the early stages of an uptrend. While Ethereum’s performance has historically been closely linked to Bitcoin’s, the recent price action suggests this trend continues.

Both Bitcoin and Ethereum experienced a sell-off after the fourth halving. However, Bitcoin has steadily recovered, consolidating within a specific price range.

As measured from its all-time high, Bitcoin has experienced a deeper correction than Ethereum.

Despite recent challenges, Bitcoin and Ethereum still have a relatively low Realised Cap associated with Long-Term Holders (LTHs), suggesting that the market is still in the early stages of an uptrend.

Capital inflows into Ethereum typically lag behind those into Bitcoin. While Bitcoin has received the majority of inflows, Ethereum has seen weaker speculative activity.

These factors suggest that Ethereum has underperformed relative to Bitcoin, raising investor concerns.

Bank of England Proposes Stablecoin Safeguards

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The Bank of England is drafting regulations to protect against the collapse of major stablecoin issuers, focusing on ensuring funds are returned to customers during a crisis.

As global regulators grow concerned about stablecoins’ potential systemic risks, the U.K. is joining efforts to establish targeted regulations for cryptocurrencies pegged to the value of other assets.

Following the collapse of Terra’s algorithmic stablecoin terraUSD (UST), regulators like the Bank of England (BoE) are determined to establish safeguards to protect citizens against future stablecoin collapses.

The BoE is concerned about the increasing integration of stablecoins into the financial system and its potential impact on financial stability. To address this, it plans to establish a regime to monitor stablecoins that could affect the financial system. A consultation on the proposed regulations is expected in the coming weeks.

The BoE’s proposed stablecoin regime includes several key objectives. One such objective is to ensure the return of funds to investors if a large stablecoin issuer collapses. This additional objective aims to give consumers confidence in the stability of stablecoins as a means of payment.

To implement this objective, the BoE is looking to amend the Financial Market Infrastructure Special Administration Regime (FMI SAR) to cover large digital settlement assets, including stablecoins. The FMI SAR acts as an insolvency regime, allowing critical crypto businesses to continue operating to prevent negative financial stability impacts.

However, ensuring the return of funds to customers in the event of a stablecoin issuer’s collapse may pose significant challenges. The lack of ownership details on underlying ledgers and the pseudo-anonymous nature of blockchain technology could complicate efforts to return funds to affected investors.

Despite these challenges, the BoE’s stablecoin regime aims to allow systemic stablecoin providers to continue operating during a crisis while ensuring that consumers are protected. As stablecoin adoption grows, regulators take preemptive measures to mitigate potential systemic risks associated with stablecoins and digital settlement assets.

Sweden’s New Tax Hike Deals Blow to Bitcoin Mining Industry

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Sweden, once a stronghold for bitcoin miners in Europe, is ending tax incentives for data centres in July, potentially sounding the death knell for the industry in the region.

The surge in energy prices in Europe, driven by the war in Ukraine, has pushed bitcoin miners out. Even in the northernmost regions of Norway and Sweden, where the industry was still profitable due to cool climates and cheap hydroelectricity, miners have been affected.

Energy prices began to stabilise in 2023, but the upcoming tax increase may deter new investments in Sweden. According to the financial budget published in November 2022, the tax will jump from SEK 0.006 ($0.0006) to SEK 0.36 ($0.035) per kilowatt-hour (kWh) starting in July.

Jaran Mellerud, a senior analyst at mining services firm Luxor Technologies, estimates that based on last year’s average electricity prices, this tax hike could raise the total energy cost to $0.093/kWh. This increase could put machines like the MicroBT Whatsminer M30s, a moderately efficient and commonly used machine, at the break-even point.

Norway, another significant host for mining with 250-300 MW capacity, also raised its taxes from $0.0086 to $0.015 per kWh in January.

According to Denis Rusinovich, co-founder of mining consulting firm Cryptocurrency Mining Group, although Norway’s energy is cheaper overall and the tax hike is more modest, the industry will continue to develop there.

Mellerud says the new tax in Sweden may make mining “prohibitively expensive” and could ultimately destroy the country’s industry.

Miners are now exploring alternative solutions. Some are considering diversifying their operations elsewhere, while others are looking into self-mining instead of hosting others’ machines. Some are even exploring ways to reuse the heat produced in data centres to be taxed as heat producers.

However, the buyer market is drying up. Fewer than a handful of real buyers are left, making it difficult for miners to sell their equipment.

It’s unclear whether Sweden’s new taxes were targeting miners specifically or the entire data centre industry. The tax hike was proposed by the Swedish Ministry of Finance, which also lobbied for a ban on bitcoin mining in the European Union last year.

Sweden had enacted a 98% tax cut for data centres in 2017, hoping to attract businesses. However, according to the budget report, the industry has failed to create the jobs the country had hoped for, and the macroeconomic environment has changed.

Miners are disappointed by the sudden tax hike, with little notice or communication from the authorities. Firms like Hive Blockchain, which has significant operations in Sweden, are concerned about the abrupt regulatory changes.

Microsoft, which operates data centres in the region, has protested the suddenness of the decision, especially given that a government-commissioned report on the energy impact of data centres was not yet completed at the time of the tax hike decision.

Rusinovich says there has been no official communication with Bitcoin miners in the region except for an update on the tax authority’s website.

Enerhash, while still profitable in Sweden, is not planning additional investments in the country. The legal framework’s abrupt changes make it too risky for further investment, according to CEO Daniel Jogg.