Bitcoin on the Brink: What Could Trigger a Capitulation?

Bitcoin has been on a roller coaster ride over the past few weeks, with prices swinging wildly from highs of around $80k by June 2021 to lows below $15k in the past few weeks. This volatility is nothing new for Bitcoin, but it seems to ramp up as we approach what could be a critical juncture for the digital currency.

So, what exactly is a capitulation? The Cooperate Finance Institute has a concise definition.

In the financial world, it generally refers to a situation where investors give
up on an asset and sell it en masse, leading to a sharp decline in prices. This can often be seen as a final stage before prices bottom out and begin to rebound.

In the case of Bitcoin, a capitulation could be triggered by several factors, including the following:

When miners receive rewards in Bitcoin for verifying transactions, they are motivated to keep the network secure. However, if the price of Bitcoin falls below the cost of mining (i.e., electricity and other expenses), miners will be operating at a loss. As a result, they will be less likely to continue verifying transactions, and the Bitcoin network will become less secure. This is known as a miner capitulation. 

In a severe case, it can lead to a Bitcoin death spiral, in which the price of Bitcoin falls so low that no miners are willing to continue verifying transactions. This would make Bitcoin unusable as a currency, as there would be no way to verify transactions. Therefore, it is important for the price of Bitcoin to remain high enough to incentivize miners to keep the network secure.

Brain Drain

When people are anxious about the future, they tend to sell their assets and move their money into assets they see as safer. In the case of Bitcoin, when people become anxious about its future, they sell their Bitcoins and move their money into assets like the US dollar. 

This mass exodus of money from Bitcoin to other assets causes the price of Bitcoin to drop, which leads to even more people selling their Bitcoins, causing a downward spiral.

Closed/Overprotective Community

There have been a few times in Bitcoin’s history when the community has become too closed off and overprotective, leading to a capitulation. One such example was when Introducing NFTs to Bitcoin forums and discussion groups led to a massive flame war that ended in many members leaving the community. Another example was when the Bitcoin Lightning Network was first proposed, there was a lot of infighting, and eventually, some members left to start their own projects. While it’s understandable that people want to protect their investments, Ultimately, these capitulations happen because the community becomes too insular and fails to listen to new ideas. To avoid this in the future, it’s important for the community to remain open-minded and willing to discuss new proposals. 

Increased Regulation from Governments 

When a government begins to tighten its regulation of a particular industry – in this case, Bitcoin – it can significantly impact the market. In the case of Bitcoin, when it was announced that the governments of South Korea and China were planning to introduce new regulations around cryptocurrency, the price began to drop significantly. 

This is because investors felt that the increased regulation would make it more difficult to trade or use Bitcoin, so they began selling off their holdings. As more investors sold off their holdings, the price continued to drop until it reached a point where many people decided to sell their coins at a loss. This caused an overall panic in the market and led to a massive capitulation event.

Bitcoin Verdict

The jury is still out on whether or not Bitcoin will survive in the long term. However, it is clear that several factors could trigger a capitulation event.

If the price of Bitcoin falls too low, miners will be incentivized to leave the network, which could lead to a death spiral. Additionally, if investors start to panic, they may sell their holdings en masse, which could also lead to a capitulation.

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Watch your Emission! Time for Individual Carbon Credit Allowance

Governments across the world are trying to tackle climate change. One way to do this is through the reduction of greenhouse gas emissions such as CO2. As a result, they have been actively seeking ways to achieve net zero carbon Emissions as envisaged in the UN climate change goal 2050- an initiative kickstarted in 1998 in the now defunct Kyoto protocol. Unfortunately, Kyoto agreement achieved little success and was restructured into the 2015 Paris Climate agreement. Basically, the idea behind these agreements was to get governments to commit to setting caps on the carbon emissions and set up markets for carbon trading. While this may have started as a corporate/government endeavor to limit carbon emissions, it is slowly spilling over to basic consumers, morphing into an attempt to track individual carbon footprints and encourage the trade of carbon credits at a household or individual level.

  Carbon Credits

Carbon Credits are defined as 1 ton of CO2 Emissions traded in the market to allow buyers emit CO2 into the atmosphere. To get a better understanding of Carbon Credits, let’s briefly look at the Carbon Market Mechanism concept: First, a country identifies its limit of total greenhouse gas emissions. It then creates permits and assigns them to different companies within its jurisdiction with allocated carbon emission limits. The companies that can emit green house gases below those limits will have a surplus of Carbon credits. Those that exceed the allocated limits will need to buy Carbon credits from the companies that ‘saved’ on carbon emissions so as to make up for their shortfall. This buying and selling of carbon credits works in the same way as stock exchanges work. Subsequently, the caps get stricter and the permits get even more expensive. This is meant to drive up the cost of emitting greenhouse gas into the atmosphere while at the same time make it expensive to buy Carbon credits from the markets. This whole scheme is also known as Cap and Trade. Europe, the US and China are some of the regions that are currently actively trading in Carbon. It is market that is estimated to be worth over $ 250 Billion annually.

Individual Carbon Credits

Recently, while speaking at the World Economic Forum in Davos, the president of Alibaba, J. Michael Evans, said that they are in the process of creating an app that will track Individual Carbon footprints. 

   ” We are developing a technology that will allow consumers to monitor their carbon footprint. What will this mean? It will monitor individuals on where they are travelling, how they are travelling and what they are eating,” he said, much to the angst of the internet population.

Individual Carbon Credits will work in the same way as Cap and trade schemes. While all this  conversation may be purely speculative at this stage, it is not far-fetched to think that this is the path the global elite may want us to take

With individual carbon credits, people will be assigned a limit on CO2 they can emit every year based on their consumption levels, wealth, age and even nationality. When this cap is achieved, you will need to purchase more credit from individuals who may have saved on their carbon emissions. Failure to do this may mean that you are grounded or may even face jail term or fines. So for example, if you are assigned a  specific quota of carbon emission in a year and you exuberantly squander it in travel and  partying, then you will need to cut back just as you would when it comes to spending money, so as not to exhaust your limit. On the other hand, if you haven’t been active for the most part of the year, say you travelled less and ate ‘green’ products, then you may have an abundance of carbon that you can sell to other consumers. All this can be done via government regulated or private apps that have been licensed to track individuals.

In Europe, companies that are currently helping corporates and governments track carbon footprints are Plan A and Planetly. There is also an app , called Klima, that is used for individual voluntary carbon offsets- basically buying and selling of carbon credits on a voluntary basis. While these companies are currently focusing on corporate entities ( and the app works on voluntary submission), it is only a matter of time before governments legislate and insist they should also start monitoring individual carbon emissions.

Is this the right way to go?

Individual carbon trading will create a whole new market for trading carbon and may ultimately help in reducing carbon emissions. It will also attract investors into this industry just as they are flooding the regulated Carbon trading markets- pushing up the prices of carbon credits and making  it harder for people to engage in emissions unless necessary. For example, if the price of credits is pushed higher, one will have to reconsider unnecessary travels and consumptions that may exhaust their carbon allowances. Cap and trade at an individual level will also encourage households to be cognizant of their carbon footprints and therefore put effort into saving energy.

While this may look rosy and ideal, it may also lead to a dystopian society where all activities are monitored and closely tracked. Discussions are rife on what this really means and what tangent it can take. Some worry that it may mimic a social system that may strive to reward good behavior and punish bad practices. Individuals may also stop engaging in economically productive activities so as to cut their carbon footprint. Done at scale, this will have adverse effects in the growth of an economy  at a macro level and may easily cascade into civil unrest. We may also experience widespread arrests as most people may find it hard to work or move within their specified limits. Just as is the case with the corporate Cap and trade systems, individuals cap and trade schemes may also cause carbon leakages- a situation where  people migrate to  countries that are more flexible and offer better terms on carbon offsetting. This will lead to talent erosion and may adversely affect economic production.

Hedge Yourself

Carbon Credits have been designed in such a way that they get harder to access and their permits also get more expensive. So in the long-term, it is safe to assume that this is a market that will grow as the price of the  carbon credits is envisaged to keep growing- with the exception of a global  catastrophe such as  the 2008 economic crisis or the Covid pandemic that hindered movement thus causing a glut in carbon credits, thereby, bringing down their prices. Savvy investors can invest in projects that track carbon credit, stock up on carbon credit or even buy CBDCs from governments that are actively legislating on carbon emissions.

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A Functional Metaverse and the Future of Work

“Meta-optimists” are convinced that as we move into 2023, it will be a time when the Metaverse will gain acceptance and wide adoption. The Metaverse itself is composed of a cocktail of technologies that included blockchain, gaming, crypto, and VR. Indeed, Covid pandemic has confirmed that remote working is not just a possibility, but it is the future.. In this article, we state what working in the metaverse entails and the benefits of doing that.

Accessing the Metaverse

Getting into the Metaverse will require some headsets such as VR headsets and access to the internet. One can also access it using their desktop or mobile devices. Companies are working to develop solutions that can give one access to the metaverse without the need for a VR headset. Some innovations around this include the use of holograms to project images and avatars into real space. Meta is also working on special gloves that enable its users to have a sense of touch while in the metaverse

The Metaverse seeks to bring a paradigm shift in the way we interact. Avatars will be used to teleport from one location to another, with enhanced experiences giving you a feel of your surroundings. Employees can also pop into each other’s workstations for a quick chat and catch-up. You can navigate the metaverse, in the same manner, you do in the physical world. If you would like to have a chat or live call with a colleague, then your webcam is activated automatically. Once done with the call, the webcam turns off and you can proceed with your stroll. Companies have already started working on avatars that can move from one virtual company to another- mimicking the physical world.

An employee can choose an avatar that they can use to navigate the metaverse. One that will act as their digital twin. This digital twin will act as their representative in the metaverse, with emotions and a sense of touch. These digital twins can be assigned to perform mundane and recurring tasks. In the event that you are busy and would not have time to attend to certain obligations such as meetings and conference calls, you can send your digital twin to go and represent you in these meetings. This frees you up for other tasks.

Organizations can also set up areas where employees can go hang out and relax with experiences such as music and scenic views such as hills and forests. This is meant to boost employee productivity while in the metaverse.

There is also the option of making orders while in the metaverse. Employees can either order for virtual goods/food and get them delivered to their houses. You can be working on the metaverse, make an order on McDonalds and get the physical food delivered straight to your door without leaving the metaverse.

Employees also have the chance to create and customize their virtual environments in a way that is unique and suits their personality- spurring creativity. Virtual work spaces will not be similar to conventional office spaces. Each employee can have their unique work environment that can be changed intermittently with minimal cost. Companies can also offer trainings with ease from the metaverse and then deploy their staff into different virtual locations. Imagine a situation where you have 10 employees that need to be inducted into the company. Instead of hosting meetups and sending them writeups, a company can organize for a virtual tour while in the metaverse to take them through their work places, with the employees moving around in their avatars- ensuring have a detailed and first-hand experience of their workplace . We shouldn’t be shocked when we see companies created and operating purely on metaverses such Sandbox and have employees that report and work on different shifts just like in physical work environments. Such a scenario will cascade and affect different industries such as ecommerce and fashion as avatars will need different clothing to attend various occasions and office spaces will need to be spruced up.


Benefits of working in the Metaverse

Promotes equity

Being in the metaverse provides an equal playing field for all employees. You can work from anywhere and interact with ease. Additionally, having virtual work spaces ensures that staff have access to the same digital resources regardless of their physical location.

Working as an avatar may also help prevent workplace prejudices such as discrimination on skin color, gender or even accent. Imagine going to work as an avatar and choosing the skin color or gender you may want to identify as. It can also help during interview sessions as you may not be anxious because of your physical attributes.

An upgrade from conventional video conferencing

The metaverse will be an upgrade from the normal video conferencing calls such as zoom, skype and Google meet. It offers a richer, enhanced and more immersive experience. For example, if a company wants to test a new product or even open a new location, the CEO can take the employees on a virtual tour to this new location.

Enhances productivity

With the metaverse, company staff have the chance to work from anywhere- something that may have been hard to achieve with physical workspaces. For example, an employee may be working while immersed underwater in a submarine or even in space shuttle. This helps boost productivity as you can choose to work in an environment where you feel most at ease.

Better demarcation between work and Home

Working remotely is stressful. In most instances, employees cannot switch between being at work and at home. While working in the metaverse, it is easier for employees to demarcate between their home and work environments and can easily switch from one environment to another. You log in to your workspace in the metaverse environment and when you are done you can switch off and get back to the physical world.

Granted, we are still in the nascent stages of this technological development. However, companies, especially mega tech companies, are convinced that pivoting into the metaverse is worthwhile as the physical world is due for a digital twin. Companies like Facebook( Meta) and Microsoft have already started experimenting with the metaverse, spending billions on product development. It isn’t far-fetched to envisage that in the next few years, working in the metaverse will be the norm.

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