July has been a challenging month, with many Australians stuck at home. However, there’s been plenty happening in the world of Bitcoin.
Banks preparing for negative interest rates
Australian banks have been asked by the regulator (Australian Prudential Regulation Authority) to prepare for zero or negative interest rates by 30th April 2022. Quite reasonably, their software systems have been designed to only work with positive interest rates. While the Reserve Bank of Australia (RBA) states that negative interest rates are “highly unlikely” the fact that banks are being asked to commit resources to preparing for this scenario should ring alarm bells. Negative interest rates would imply that bank customers with dollars in a savings account would have to pay interest. It’s not hard to imagine that Australians with savings will exit the banking system in favour of sounder alternatives like bitcoin, gold and silver if negative interest rates occur. But it’s not all bad, residential mortgages are included in the list of products that must be ready for the negative interest rate scenario.
Bitcoin Meet Ups
Most Australians have endured some form of lock-down or cancelled holiday plans this winter. Although the Olympics have presented a welcome source of entertainment while we are all cooped up inside, we are all looking forward to being able to socialise again, without a screen. Those new to Bitcoin may not realise that there are Meet Up groups in different states where people can gather together over a drink and share ideas about Bitcoin. Here are the details of the major Bitcoin focused meet up groups that are currently active. Hopefully they will be able to hold events again soon:
Lightning Network Increases Capacity by 20% in one month
The Lightning network is a secondary layer built upon the Bitcoin protocol that enables instant, nearly-free transactions. This is the technology that is being adopted in El Salvador to power their day-to-day commercial transactions. Unlike a transaction on the Bitcoin base chain, which can sometimes take an hour to be included in a block, Lightning transactions travel at the speed of light. According to CoinDesk, over 1,800 bitcoin have been locked-up in Lightning payment channels, helping provide liquidity to the network. Most impressively, the last 100 Bitcoin were added in just five days, with the number of Lightning nodes doubling in the last 3 months. All of this is happening before Bitcoin becomes legal tender in El Salvador on 7th September.
The past month has seen diverging signals between on-chain metrics and the bitcoin price. Will Clemente provides free updates on Bitcoin fundamentals, and one chart that stands out is the level of miner accumulation. As you can see in the chart above, miners were selling their newly acquired bitcoin in June (red bars), but more recently have started accumulating again (green bars), which will slowly put pressure on the available supply and should theoretically result in a higher price. This week, the price has shown some very positive intent, breaking out of a downwards trend that has been in place for most of July and at the time of writing looks to be holding above the support line at AUD$53,000.
See the ATO’s latest guidance on tax implications for Bitcoin here.