Week in review: Bitcoin price slides to $34,000 as Bank of Russia proposes ban on cryptocurrency circulation and mining

Bitcoin briefly traded as low as $34,000. The Bank of Russia proposed banning the circulation and mining of cryptocurrencies in Russia; Bitcoin mining difficulty hit a new record; the Salvadoran fund bought 410 BTC, and other events of the closing week.

Bitcoin price slid to $34,000

On Saturday, January 22, BTC briefly fell to $34,000. At the time of writing, the asset trades around $35,300. Bitcoin’s market capitalisation stands at $670 billion, according to CoinGecko.

On the same day, Ethereum price fell to a six-month low — $2,300. As of writing, the second-largest cryptocurrency by market cap is trading around $2,500. The asset’s market capitalization stands at $299 billion, according to CoinGecko.

Against the backdrop of the market sell-off, all top-10 assets by market capitalization finished the week in the red, with the exception of stablecoins. The biggest losers were Polkadot (-32.6%), Solana (-31.1%) and Ethereum (-24.8%).

The aggregate cryptocurrency market capitalization at the time of writing stood at $1.75 trillion.

Bitcoin mining difficulty hits a new record

On January 21, following another adjustment, Bitcoin mining difficulty rose by 9.32%, reaching a new high of 26.64 trillion hashes (TH).

The previous record was set on May 13, 2021 at 25.05 T.

The same month the Bitcoin hash rate collapsed by 20% due to power outages in the Chinese province of Sichuan which led to a drop in the corresponding mining difficulty.

Bank of Russia proposes to ban cryptocurrency circulation and mining in Russia

On January 20, the Bank of Russia proposed to ban the issuance, circulation and exchange of cryptocurrencies, as well as to prevent such operations on Russian soil.

To reduce crypto-related risks, the central bank proposes:

• to establish liability for violations of the ban on using cryptocurrencies as a means of payment for goods, works and services;
• to ban the issuance, circulation and exchange of crypto assets (including via Bitcoin exchanges, exchangers, and P2P platforms) on the territory of the Russian Federation and to establish liability for violations of this ban;
• to ban investments by financial institutions in cryptocurrencies and related financial instruments, as well as to ban the use of the Russian financial infrastructure for such operations.

“We would like to emphasise that we do not propose a ban on individuals owning cryptocurrencies — that remains possible in foreign jurisdictions,” the central bank said.

The regulator noted the need to develop mechanisms to identify cryptocurrency transactions and those who conduct them, as well as to block purchases or sales of crypto assets. The BoR also intends to monitor P2P payments with banks to track crypto purchases.

To this end, the Bank of Russia plans to:

1. Cooperate with foreign regulators and refine international information-exchange agreements concerning Russian clients’ operations on exchanges;
2. Collect information from foreign payment systems about Russian residents’ purchases of cryptocurrencies, including via payment cards;
3. Establish data exchange between the Federal Tax Service (FNS), the Bank of Russia and Rosfinmonitoring to track crypto holdings and transactions.

Additionally, the central bank called mining ban an “optimal solution” given its energy intensity and the demand for infrastructure to conduct crypto operations.

“Crypto mining farms do not have the option of operating in an opaque manner; they must pay all taxes and use competitive advantages either in energy-rich regions or in regions where climate allows higher efficiency through cooling,” said the head of the State Duma’s industrial committee, Pavel Zaválny.

“Mining farms cannot be powered in an opaque way; they must pay taxes and use competitive advantages, either in energy-surplus regions or in regions where climate conditions enable higher efficiency through cooling,”

Pavel Zaválny, head of the State Duma committee on energy, said that any move to ban mining or to create conditions that deter miners from using cheap electricity should be “taken unequivocally.”

The same official added that there is no single view in the Duma on this issue and that consensus will likely take at least six months. He noted that discussions are needed on using Russia’s infrastructure for digital-asset operations:

“On the one hand, we understand that risks must be minimised, especially for non-qualified investors. On the other hand, the market is developing, and eventually it will acquire a more civilised character,”

Telegram founder Павел Дуров criticised the central bank’s proposal. He argued that a ban would drive IT professionals out of the country and destroy high-tech industries, and would inevitably slow the broader blockchain sector’s development.

Mr. Durov stressed that Russia is among the leaders in highly skilled professionals in this space and could become a major player in the new economy if regulation is approached thoughtfully.

EU urged to ban mining on Proof-of-Work

Eric Teden stated the need to ban Bitcoin and other cryptocurrencies that rely on the energy-intensive Proof-of-Work algorithm.

In his view, absent regulatory intervention, growing shares of green electricity will be diverted to mining digital assets rather than being used to replace carbon-based energy sources.

Crypto.com covers customer losses after $34 million hack

On January 17, after customers reported suspicious activity on their accounts, Crypto.com halted withdrawals. On January 20, the crypto platform unveiled details of the breach.

The attack affected 483 user accounts. Hackers withdrew 4836.26 ETH, 443.93 BTC and about $66,200 in other currencies — totaling around $34 million.

The company stressed that, in the majority of cases, its specialists managed to prevent customer funds from being withdrawn. All affected users received full refunds.

The platform conducted a security audit, implemented a new two-factor authentication model, and introduced an account-protection program. Under the latter, insured coverage for assets of “qualified users” amounts to up to $250,000.

El Salvador government bought 410 BTC

President Nayib Bukele spoke of purchasing an additional 410 BTC for the country’s sovereign wealth fund. He said the purchase cost $15 million at an average price of $36,585.

Government adviser Monica Torres, during an online discussion, said that El Salvador is studying the possibility of providing small and micro businesses with loans collateralised by Bitcoin.

Twitter launches NFT profile-picture verification

Twitter integrated the ability to add non-fungible tokens (NFTs) as profile avatars. The feature is available on iOS to premium Twitter Blue subscribers after linking an Ethereum wallet to their account.

Verified avatars have a distinctive hexagonal shape and are displayed across all platforms. NFTs that were not verified will remain in the traditional circular frame.

A Twitter account with an NFT profile image displays token data — its creator, specific properties and characteristics, blockchain and standard.

Elon Musk criticised the move. He argued the company is wasting engineering resources that could be used to combat scams and spam.

“This is annoying. Twitter spends engineering resources on this nonsense while crypto scammers are throwing spam-bot parties in almost every thread,”

Microsoft to acquire Activision Blizzard. Deal dubbed a step toward the metaverse

Microsoft announced the acquisition of game developer and publisher Activision Blizzard for $68.7 billion. The company said the purchase will provide “building blocks for creating the metaverse”.

“Today, gaming is the most dynamic and exciting category across all platforms. It will define the development of the metaverse. We will invest heavily in world-class content, community and cloud computing to usher in a new era where gamers and game creators come first,”

Microsoft bought Activision Blizzard shares at $95 per share. The deal value exceeded the latter’s market capitalization by almost $20 billion at the time of the announcement. The transaction is expected to close by June 30, 2023.

Fidelity forecasts governments will buy Bitcoin

Countries that challenge the value of the first cryptocurrency will eventually have to consider purchasing it as a form of insurance, according to Fidelity Digital Assets analysts.

They expect that from 2022 the era of state adoption of Bitcoin will begin. In the prior two years, institutions began to embrace the new asset class.

Experts compared China’s ban of the Bitcoin with its endorsement of El Salvador as legal tender.

“Time will, without a doubt, show which path is more successful,” the analysts wrote.

Fidelity stopped short of predicting a broad direct ban on digital gold by the majority of countries, arguing that such a move would deprive them of a large share of wealth and opportunity.

Invesco foresees Bitcoin dropping below $30,000 in 2022

Bitcoin price could fall to $30,000 as the asset’s bubble deflates. Invesco analysts stated this in their list of “unlikely, but possible” scenarios for 2022.

“The mass marketing of Bitcoin reminds us of the activity of stockbrokers ahead of the 1929 crash,” the analysts wrote.

They argue that the slide from January’s highs around $42,000 matches a classic bubble pattern.

The trajectory suggests a 45% loss in value within 12 months of the peak of a typical financial mania. Under this model, the price could fall to $34,000–$37,000 by the end of October 2022.

“The pattern also suggests that bubbles typically deflate within the next two years. So we think it’s not too hard to imagine Bitcoin below $30,000 this year,” the analysts said.

Also on ForkLog:

• Bitmain unveiled a new miner model with a hashrate of 198 TH/s.
• Binance carried out a burn of about $800 million worth of BNB tokens.
• In Cardano launched the SundaeSwap decentralized exchange.
• Opera introduced a Web 3.0–oriented “crypto browser”.

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