Crypto

Key facts:

• The hash rate reduction after halving has congested Bitcoin for the past few days.
• On Wednesday May 20 there was a -6% adjustment to the mining difficulty in Bitcoin

One of the first consequences of the third halving in the history of Bitcoin, which occurred just over a week ago, has been the reduction of the hash rate, or accumulated processing power of miners in the BTC network. With that reduction, the network has become congested and, currently, that is clearly reflected in transaction fees that have not been seen for almost a year.

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The United States Patent and Trademark Office (USPTO) released a patent application that Visa filed to create a digital currency. The system is described as a method to digitize fiat currencies issued by central banks, through a central computer and with blockchain technology.

The Visa application was originally submitted on November 8, 2018. However, it was made public on May 14, with the authorship of Simon J. Hurry and Alexander Pierre. The document proposes a system run by a central entity computer, which receives requests to generate a digital currency registered on a blockchain. The application includes the serial number and denomination of a fiat currency, for example a banknote or a metal coin.

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The cryptocurrency can only become an accepted form of payment if its volatility stabilizes, but that depends on a constant conviction that it represents the future of the money

The volatility of Bitcoin frightens many potential users of the cryptocurrency. This is due to the close relationship between volatility and risk: the higher the level of volatility, the greater the risk associated with the asset. In the same way, however, risk can be a source of attraction: the more volatile the price of an investment, the higher the yield – or loss – that can be obtained from it. These general rules also apply to Bitcoin.

Bitcoin is considerably volatile compared to other assets, but much less volatile than it was before. Over time, fluctuations in the price of the main cryptocurrency have been decreasing in percentage terms. On average, the daily volatility rate (how much the price changes per day) has been mostly below 5% since 2015, compared to an average volatility of 1.2% for gold. In 2016, Bitcoin was less volatile than Twitter shares, and just as volatile as oil.

However, Bitcoin continues to register violent price oscillations. On Wednesday, the cryptocurrency fell USD 2,041 from a daily maximum (and annual peak) of USD 13,880 to USD 11,200, the biggest daily price movement since January 2018.

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