Bitcoin in the spotlight. The weekly report from the teams New York Digital Investment Group (NYDIG) often puts Bitcoin in the spotlight in its research and this week’s is no exception to the rule with three specific points which concern the first cryptocurrency on the market. The authors first take stock of the Babylon protocol and its limits, then they will take stock of what they call the “tragedy of the commons” before openly criticizing a study by Goldman Sachs about the profitability of Bitcoin compared to that of gold. Here we go for the main points of the NYDIG report.
NYDIG Urges Caution With Babylon Bitcoin and Here’s Why
The named staking protocol Babylon allows bitcoin holders to generate returns by participating in the consensus of certain networks operating under proof of stake (Proof of Stake) such as Cosmos, Solana or Polkadot. This innovative project was able to convince investors, but also BTC holders, many of whom participated in the first cycle last August while the second will take place these days. To generate yield, those who have deposited their BTC can then engage in various decentralized finance activities and this is precisely where NEEDFUL sound the alarm.
For the authors of the report, this type of lending practices, wrap or liquidity pools are high risks and look like the house of cards that collapsed in 2022 and they are therefore worried to see so much enthusiasm around the protocol Babylon. For them, several reg flags should keep investors away and in particular spelling errors present in the white paper ! Final warning:
“We can understand the desire to generate yield on bitcoin, especially for large holders, but investors should not let this desire blind them to the risks they might be taking. Lending practices were at the heart of the last crash and it would be a shame to see the industry rise from the ashes of 2022 to start experiencing the same thing again. »
A Weekly Digest of Bitcoin News & Insights – Source : NYDIG
Goldman Sachs says gold is more profitable than Bitcoin, NYDIG refutes the arguments
Let us now quickly move on to the second theme addressed by the teams of NEEDFUL which is that of the “tragedy of the commons”. It is a concept which states that “when individuals have unconstrained access to a shared and finite resource, they will tend to overexploit it, damage its value or destroy it entirely”. Most of the time this concept is used to talk about natural resources, the environment or biodiversity, but here it describes the irresponsible monetary policies of our political representatives that are simply destroying the value of our currency.
Finally, third and final point linked to the previous one: the profitability of Bitcoin over time compared to that of l’or. And it all started with an extract from a research note from Goldman Sachs which used the Sharpe ratio to demonstrate that gold performed better than Bitcoin, taking into account its volatility in particular. For NEEDFULthe results are not relevant insofar as gold obtains a ratio of 1.94 against 1.92 for Bitcoin and this very small difference cannot justify such a categorical conclusion.
That’s it for the news of the week which ends with a very politically correct statement less than a month before the American presidential election: “While we agree that a Trump presidency would be better for Bitcoin and cryptocurrencies, both candidates offer an improvement over the Biden administration”. This should make everyone agree!
