Scalping Crypto: Best Strategies, Indicators And Trading Tips

Scalping Crypto: Best Strategies, Indicators And Trading Tips

Dive into the thrilling world of crypto scalping and learn the top strategies and trading tips for mastering the art of quick profits. 

Are you a beginner ready to tackle the fast-paced world of crypto trading? Or an experienced trader aiming to polish your scalping skills? This guide has all you need to successfully navigate the volatile cryptocurrency markets.

What is scalping?

Scalping is a trading strategy used in the financial markets, especially popular among day traders. Imagine you’re at a marketplace, but instead of buying fruits to eat over the week, you’re buying and selling stocks, currencies, or even cryptocurrencies, all within a very short time—sometimes in minutes or even seconds! 

The goal here is to make small profits quickly by taking advantage of tiny price changes throughout the day. Now, to do this effectively, traders use special tools.

Scalping tools

These scalping tools are like the gadgets and apps that help you snag the best deals online but are designed for trading. 

They include:

  • Charting software

This is like a high-tech map that helps traders see where the prices of stocks or currencies have been and predict where they might go next. It’s filled with graphs and indicators that give clues on the right moment to buy or sell.

  • Trading platforms

These are the apps or websites where the actual buying and selling happen. They need to be fast because, in scalping, even a few seconds of delays can make a difference between profit and loss.

  • Market news feeds

Just like checking the weather before heading out, traders use news feeds to stay updated on financial news that might affect the prices of what they’re trading.

  • Order execution tools

These tools help execute trades (buy or sell orders) quickly. Imagine telling a robot to buy or sell the moment conditions are just right; that’s what these tools do, making sure traders can jump on opportunities instantly.

In simple terms, the most basic definition of scalping is all about making quick, small profits in a fast-moving market. This trading technique also involves using a set of specialized tools to help make smart, speedy decisions.

Scalping strategies

Scalping trading strategies are favoured by many traders for their potential to secure quick profits with minimal exposure to market risk. While the concept might remind some of scalping tickets, where individuals buy tickets to sell at a higher price, scalping in financial markets is legal and widely practiced. 

These strategies are particularly prevalent in forex scalping, where traders capitalize on minor currency fluctuations. The essence of scalping meaning lies in the rapid buying and selling of securities, aiming for small gains in short periods.

A successful scalping trader employs a variety of tactics to navigate the markets efficiently. When it comes to scalping stocks or scalping options, the approach involves meticulous analysis and swift execution to benefit from the brief periods when prices align favourably. 

The strategy demands an in-depth understanding of market movements and the ability to act quickly to exploit small price changes.

The best scalping indicator can vary depending on personal preference and the specific market. 

However, the following tools are commonly regarded as the most effective for identifying potential entry and exit points: 

  • Relative Strength Index (RSI), 
  • Moving Average Convergence Divergence (MACD)
  • Bollinger Bands 

These indicators help traders discern short-term price movements, guiding them to make swift, informed decisions.

Trading and especially scalping requires a keen sense of market trends and the ability to remain focused under pressure, as the success of scalping strategies hinges on executing a large volume of trades to accumulate significant profits over time.

Scalping crypto

Scalping in the context of cryptocurrency trading is a fast-paced strategy that involves making multiple trades over the course of a day to profit from small price movements. This approach is similar to scalping in traditional financial markets but is applied to the highly volatile crypto markets. 

What is scalping crypto?

Scalping crypto involves buying and selling cryptocurrencies within a very short time frame, often minutes or even seconds, aiming to capture small, quick profits from slight price changes. 

Given the cryptocurrency market’s volatility, it presents numerous opportunities for scalpers to profit from these small fluctuations.

How to perform crypto scalping

  1. Choose the right platform. Select a trading platform that offers low transaction fees and fast execution times, as the cost and speed of trades can significantly impact the profitability of scalping strategies.
  2. Utilise technical analysis. Scalpers rely heavily on technical analysis and indicators to make informed decisions. Tools like the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Bollinger Bands can help identify potential entry and exit points.
  3. Set up a trading plan. Before starting, establish strict entry, exit, and risk management rules. Decide on the profit targets and stop-loss orders to minimize potential losses.
  4. Monitor the market. Scalping requires constant monitoring of the market as conditions can change rapidly. Be prepared to make quick decisions based on real-time data.

Who is crypto scalping for?

Scalping crypto is best suited for traders who can dedicate the time and attention required to monitor the markets closely and make quick decisions. 

It requires a good understanding of the cryptocurrency market, patience, discipline, and the ability to remain calm under pressure. 

It’s not recommended for those who prefer a more laid-back approach to investing or cannot commit to the intense focus and time-scaling demands.

Is crypto scalping profitable?

Scalping can be a profitable endeavour in the crypto markets due to their inherent volatility and the frequent opportunities for making small, quick profits. 

However, it’s also risky, and the high volume of trades can lead to significant transaction fees, which can eat into profits. 

The profitability of scalping crypto also depends on the trader’s skill, strategy, and ability to react quickly to market movements.

If you’re interested in earning crypto, you should also check out some of the easiest ways to earn free crypto (still available today).

What is the best crypto for scalping?

The best cryptocurrencies for scalping are those that combine high liquidity, volatility, and strong market activity. 

These characteristics ensure that there are enough price movements throughout the day to make small, quick profits, and enough trading volume to enter and exit positions easily without significantly affecting the price. 

Bitcoin (BTC) and Ethereum (ETH) are often cited as some of the best options for scalping. That’s due to their high liquidity, volatility, and active trading communities. However, other cryptocurrencies like Ripple (XRP), Binance Coin (BNB), and Litecoin (LTC) can also be suitable for scalping. However, traders should always check if they meet the criteria of high liquidity and volatility.

Most crypto trading platforms have a page dedicated to the top trading digital assets on the platform. Look on that page to choose the crypto with the highest liquidity and market activity. 

Factors to consider when choosing the best crypto for scalping

Here are a few factors to consider when choosing the best crypto for scalping:

  • High liquidity. Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. High liquidity is crucial for scalpers, as it allows for quick trades at predictable prices. Cryptocurrencies with high trading volumes, like BTC and ETH, are often preferred for scalping because they can be traded easily at any time of the day.
  • Volatility. Volatility is a measure of how much the price of an asset varies over a short period. While high volatility increases risk, it also creates more opportunities for scalpers to profit from price fluctuations. Cryptocurrencies that show consistent volatility can be good candidates for scalping.
  • Market activity. Cryptos that have strong and active trading communities and are frequently included in news or market updates can provide scalpers with more opportunities to capitalize on price movements driven by news or events.
  • Technical analysis support. Cryptocurrencies that respond well to technical analysis and show clear trends or patterns can be easier to scalp. This is because scalpers rely heavily on technical indicators and charts to make quick trading decisions.

Should you engage in scalping crypto?

Scalping in the crypto markets is a dynamic and intensive trading strategy that targets minor price movements for profit. While it can be profitable, it requires a significant time commitment, a thorough understanding of the market, and a disciplined approach to risk management. 

It’s most suitable for experienced traders who thrive in fast-paced environments and are comfortable with high-risk, high-reward trading activities.

Whether one is engaged in scalping forex, scalping stocks, or scalping options, the key to success lies in a deep understanding of the market, a well-crafted strategy, and the use of reliable indicators. 

Scalping trading demands discipline, quick reflexes, and the ability to make decisions based on real-time information, making it an exciting, though challenging, trading style.

FAQ:

Is scalping illegal?

Scalping, in the context of trading (stocks, forex, or crypto), is a legal and legitimate strategy used by many traders. However, ticket scalping (buying and reselling event tickets for a profit) can be illegal or restricted in some jurisdictions.

What are the best scalping forex indicators?

The best scalping forex indicators include the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Bollinger Bands. They help identify entry and exit points by highlighting market trends and volatility.

What is scalping in crypto? 

Scalping in crypto involves making numerous small trades on minor price fluctuations. These trades happen within a day to accumulate profit from short-term market movements. Scaping is leveraging the high volatility of the cryptocurrency market.

Is scalping profitable?

Scalping can be profitable for traders who are disciplined, quick to make decisions, and able to closely monitor the markets. However, scalping carries a high risk and requires a significant time commitment to manage effectively.

$64k Bitcoin Transaction For A 9MB Data Inscription

$64k Bitcoin Transaction For A 9MB Data Inscription

In a puzzling move, an unidentified individual has spent approximately $64,000 to record nearly 9 megabytes of encrypted data on the Bitcoin blockchain. Spanning over 332 transactions, with fees varying from $14 to $2,500 in Bitcoin’s smallest unit, satoshis, the purpose behind this enigmatic activity remains shrouded in mystery.

Recently, someone spent around $64,000 (about 1.5 BTC) to add almost 9 megabytes of complex computer data to the Bitcoin network. 

The mystery of the 2024 Bitcoin data inscription

A report from Ord.io, a digital data tracker, revealed that over 1 Bitcoin was used to make 332 separate entries on January 6th. 

These entries contain complex data. But right now, no one knows what this data means. 

Someone even tried to figure it out using ChatGPT, a smart computer program, but they couldn’t solve the mystery.

As you can imagine, there is a lot of curiosity about who actually added this data. 

The Bitcoin address linked to these mysterious additions is listed as “Unnamed” on Ord.io. The data itself is a mix of English, Greek, and mathematical symbols. 

Interestingly, among the 332 entries, two feature a digital image of a pepperoni pizza. 

According to Ord.io, this signifies that the entries include some of the 10,000 Bitcoins once used by early Bitcoin enthusiast Laszlo Hanyecz to buy two Papa John’s pepperoni pizzas on May 22, 2010. 

This puzzling event of inscribing data occurred just a day after a massive 26.9 Bitcoins, valued at $1.17 million, were transferred to the very first Bitcoin wallet, known as the Genesis wallet, on January 5. 

What is Bitcoin blockchain inscription?

Imagine the Bitcoin blockchain as a digital ledger or a record book.

Normally, this ledger keeps track of Bitcoin transactions – who sends and who receives Bitcoins.

An inscription on the Bitcoin blockchain is like writing a note in the margins of this ledger. Instead of recording a transaction, you’re adding extra information.

How is it different from typical transactions?

A standard Bitcoin transaction is like saying, “I give 5 Bitcoins to Alice.”

An inscription adds more: “I give 5 Bitcoins to Alice. P.S. Here’s a recipe for apple pie.” This ‘recipe’ is the extra data you’re inscribing.

This extra data doesn’t affect the transaction’s main purpose (sending Bitcoins), but it permanently records additional information.

Why inscribe data on the blockchain?

  • Permanence. Once something is written on the Bitcoin blockchain, it can’t be changed or deleted. It’s like carving into stone.
  • Visibility. Everyone who can see the ledger can see your inscription. It’s a public display.
  • Proof of existence. Inscribing data can prove that a certain piece of information existed at a certain time. For instance, if you inscribe a unique digital artwork, you’re showing that it existed at the time of the inscription.
  • Security. The blockchain’s secure nature makes it a trustworthy place to store important data.

The process of a Bitcoin blockchain inscription

  • You create a Bitcoin transaction.
  • Along with the transaction details (like sender, receiver, and amount), you include your extra piece of information – your ‘note.’
  • You send this transaction to the blockchain.
  • Miners on the Bitcoin network confirm the transaction and add it to a block.
  • Once added to a block, your inscription is permanent and visible to anyone who looks at the blockchain.

26.917 BTC transaction to Genesis Wallet

On January 5, at 1:52 am Eastern Time, an anonymous Bitcoin user made a notable transaction, sending 26.917 Bitcoins, valued at $1.17 million, to Bitcoin’s first-ever wallet, the genesis wallet (1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa). 

$64k Bitcoin Transaction For A 9MB Data Inscription. 26.917 BTC transaction to Genesis Wallet

Source: Blockchain.com

This wallet is historically significant, as it was set up by Satoshi Nakamoto, the elusive creator of Bitcoin.

The transaction was unique for several reasons. 

Firstly, the amount was transferred from a wallet that had been emptied specifically for this purpose. The transaction fee was $100, which is considerably higher than the average fee. 

Secondly, the funds were moved in a complex manner, involving three wallets initially and then dispersing to 12 others. 

Notably, a large portion of these funds was traced back to a wallet associated with Binance, a major cryptocurrency exchange, as identified by Arkham Intelligence, a blockchain analytics platform.

Coinbase director Conor Grogan commented on the transaction, speculating on two possibilities: either this was an action taken by Nakamoto himself, moving Bitcoins from Binance, or it was someone else making a dramatic gesture by effectively ‘burning’ over $1 million. Grogan also raised the possibility of this being part of an unusual Bitcoin exchange-traded fund marketing campaign.

It’s important to note that there has been no movement of funds from wallets associated with Nakamoto, including the genesis wallet, since Nakamoto’s disappearance in December 2010. 

However, it’s speculated that Nakamoto could still possess the private keys to these wallets and control the funds within.

The genesis wallet initially contained 50 Bitcoins mined by Nakamoto. 

By the end of 2023, on the occasion of Bitcoin’s 14th birthday, the global Bitcoin community had added to this wallet’s balance, bringing it up to 72 Bitcoins through various celebratory contributions. 

26.917 BTC transaction to Genesis Wallet

Source: Blockchain.com

With this latest transaction, the wallet’s balance has now reached 99.68 Bitcoins, which are estimated to be worth about $4.69 million.

Bitcoin ETFs: A Beginner’s Guide to Crypto Exchange-Traded Funds

Bitcoin ETFs: A Beginner’s Guide to Crypto Exchange-Traded Funds

Bitcoin ETFs are the intersection where cryptocurrencies meet the structured universe of traditional investing. 

Bitcoin ETFs, or ‘exchange-traded funds’ that focus on Bitcoin, offer a unique way to participate in the exciting growth potential of cryptocurrencies without diving headfirst into the often complex crypto markets. 

These ‘crypto ETFs’ blend the familiarity of conventional stock trading with the adventurous spirit of digital currencies, providing a gateway for both seasoned investors and curious newcomers. 

As we explore this innovative investment vehicle, you’ll discover how it simplifies the process of adding digital assets to your portfolio, all while maintaining the ease and accessibility of traditional stock market trading. Let’s dive in and unravel the essentials of Bitcoin ETFs.

What are exchange-traded funds (ETFs)?

Imagine you want to invest in the stock market, but instead of picking individual stocks (like shares of Apple or Google), you decide to buy a little bit of lots of different stocks all at once. That’s essentially what an Exchange-Traded Fund (ETF) is.

An ETF is like a basket that contains a mix of various stocks, bonds, or other assets. When you buy a share of an ETF, you’re buying a small piece of all the things inside that basket. This mix can include all sorts of investments – from tech companies to government bonds. The beauty of ETFs is that with just one purchase, you can invest in a whole range of assets, which can reduce the risk compared to buying just one company’s stock.

What makes ETFs special is that they are traded on the stock exchange, just like regular stocks. This means you can buy and sell shares of an ETF throughout the day at different prices, just like you would with stocks of individual companies.

So, in a nutshell, ETFs offer a simple way to diversify your investments, spreading out your risk while still allowing you the flexibility to buy and sell as you would with traditional stocks.

Why is everyone talking about a spot Bitcoin ETFs?

The sudden importance of spot Bitcoin ETFs in the crypto world stems from their potential regulatory approval, a significant step forward in legitimizing Bitcoin as a mainstream investment. 

Unlike previous ETFs tied to Bitcoin futures, spot Bitcoin ETFs would be directly linked to the current price of Bitcoin, offering a more direct and potentially more accurate reflection of Bitcoin’s market value. This direct connection attracts investors looking for a more straightforward way to invest in Bitcoin through traditional financial structures.

The anticipation of these ETFs has been heightened by the involvement of major asset management firms like BlackRock, Fidelity, and VanEck, signalling strong institutional interest. 

The approval of spot Bitcoin ETFs by the SEC would not only increase Bitcoin’s accessibility to a broader range of investors but also potentially provide more stability and liquidity in the crypto market. 

This move is seen as a critical milestone for the cryptocurrency industry, as it represents a significant endorsement from regulatory authorities and could lead to increased adoption and integration of Bitcoin into the traditional financial system.

The benefits of Bitcoin ETFs

Bitcoin ETFs are an exciting option for those interested in the buzz of the cryptocurrency world but looking for something a bit more familiar and potentially less risky. Let’s break down why someone might lean towards a Bitcoin ETF instead of buying Bitcoin directly.

Familiarity and Ease of Trading

Investing in a Bitcoin ETF feels much like investing in any other stock. You don’t need to learn the ins and outs of cryptocurrency exchanges or how to securely store digital coins. It’s as straightforward as trading regular stocks, making it a comfortable option for many traditional investors.

Diversification

Bitcoin ETFs often track not just the price of Bitcoin but can include other cryptocurrencies or related assets. This means you’re not putting all your eggs in one basket (Bitcoin) but spreading your risk across a range of assets. It’s like choosing a mixed fruit basket over just apples. This diversification can be a safer bet, especially in the volatile world of cryptocurrencies.

Regulatory oversight

ETFs are subject to regulatory oversight, which means there’s an added layer of security and transparency. When you buy Bitcoin directly, you’re stepping into a largely unregulated space, which can be riskier. With a Bitcoin ETF, you have the peace of mind that comes with regulated financial products.

Lower entry point

Investing in Bitcoin directly can be expensive, as you often have to buy whole units of the cryptocurrency. But with a Bitcoin ETF, you can invest with much smaller amounts, making it more accessible for the average investor.

No digital wallets are needed

Holding Bitcoin directly means dealing with digital wallets and the security concerns that come with them. 

With a Bitcoin ETF, you don’t have to worry about digital wallet security or remembering complex passwords. Your investment is as safe as any other stock in your portfolio.

Top Bitcoin ETFs to invest in

When it comes to dipping your toes into the world of Bitcoin through ETFs, there are several key players you might want to consider. Here’s a list of some of the top Bitcoin ETFs, each offering a unique crypto-investing approach.

ProShares Bitcoin ETF

ProShares is a big name in the ETF world, and their Bitcoin ETF is a popular choice. It’s known for its reliability and is a go-to option for many investors looking to get involved in Bitcoin through a more traditional investment vehicle.

Grayscale Bitcoin Trust

While not a traditional ETF, Grayscale’s Bitcoin Trust is another major player. It offers exposure to Bitcoin’s price movements without the need to directly buy and store the cryptocurrency.

Valkyrie Bitcoin Strategy ETF

This ETF is relatively new but has quickly gained attention. It focuses on Bitcoin futures contracts, offering a different angle on Bitcoin investment.

VanEck Bitcoin Trust

VanEck is known for its innovative investment products, and its Bitcoin Trust is no exception. It aims to reflect the performance of Bitcoin, offering investors direct exposure to the cryptocurrency’s price changes.

Bitwise 10 Crypto Index Fund

For those who want broader exposure, the Bitwise 10 Crypto Index Fund covers the top 10 cryptocurrencies by market cap, not just Bitcoin. It’s a good option if you’re looking to diversify within the crypto space.

Each of these options has its unique features and approaches to Bitcoin investment. Whether you’re looking for something straightforward like the ProShares Bitcoin ETF or something more diverse like the Bitwise 10 Crypto Index Fund, there’s likely an ETF that fits your investment style and risk tolerance.

Remember, investing in Bitcoin, whether directly or through ETFs, carries risk. It’s always wise to do your own research and consider seeking advice from a financial advisor to find the best fit for your investment goals.

How to trade Bitcoin ETFs

Trading Bitcoin ETFs is like playing a video game where you need to know a few key moves. Let’s make sense of terms like ‘bitcoin tracking’ and ‘bitcoin exchange-traded note,’ and also explain how different platforms work for trading these crypto ETFs.

Bitcoin Tracking

 Imagine Bitcoin’s price is like a rollercoaster at an amusement park. ‘Bitcoin tracking’ is like having a model of that rollercoaster in your backyard. The ETF follows the ups and downs of Bitcoin’s price, just like your model coaster follows the same path as the real one.

Understanding Bitcoin Exchange Traded Notes (ETNs)

Think of ETNs as a promise note from your school friend. They promise to pay you back your lunch money with a little extra. In the financial world, an ETN is a promise by a company to pay you based on Bitcoin’s price performance. 

But remember, if your friend moves away, you might not get your money back. Similarly, if the company behind the ETN has problems, your investment could be at risk.

Trading platforms for Bitcoin ETFs

Now, let’s talk about where you can trade these ETFs. You’ve got two main options: brokerage platforms and crypto exchange platforms.

  • Brokerage platforms: These are like your regular supermarkets where you can buy all sorts of things (stocks, bonds, ETFs). Trading Bitcoin ETFs here is like buying cereal from a supermarket. You use the same cart (platform) you use for other shopping. These platforms are user-friendly and regulated, offering a familiar environment for regular stock traders.
  • Crypto Exchange. These are specialized stores, like a shop that only sells video games. They mainly deal with cryptocurrencies. While you can’t directly buy Bitcoin ETFs here, these platforms are where the action happens for Bitcoin and other cryptocurrencies. They offer more crypto-specific features and can be a bit more complex to use.

The main difference between these platforms is what you can buy on them. Brokerage platforms offer a variety of investment products, including Bitcoin ETFs, while crypto exchanges focus on cryptocurrencies. 

Also, brokerages are often seen as more beginner-friendly and regulated, while crypto exchanges offer more in-depth features for crypto trading.

Crypto vs crypto ETFs: comparing investment options

Let’s talk about the difference between buying cryptocurrencies directly and investing in crypto ETFs, and how these stack up against other investment options like mutual funds.

1. Direct crypto investment

Imagine buying cryptocurrencies like Bitcoin or Ethereum directly is like owning a specific type of exotic fruit. You have full control over it; you can eat it, save it, or sell it. However, you need to know where to buy it, how to store it safely and be ready for its price to jump up and down wildly.

2. Crypto ETFs

Now, investing in a crypto ETF is like buying a fruit basket that includes a bit of this exotic fruit along with other types. You don’t own the fruit directly, but you own a share of the basket. It’s simpler and safer in some ways because you’re not responsible for taking care of the individual fruits, and you also get a variety, which can balance out the risk.

3. Crypto ETFs vs traditional mutual funds

Traditional mutual funds are like a pre-packed lunch – you know what you’re getting, and it’s usually a well-balanced meal.

Mutual funds pool money from many investors to invest in stocks, bonds, or other assets and are managed by professionals. They’re not as volatile as cryptocurrencies but may offer lower returns.

4. Platforms for trading

The difference in platforms is like shopping at different types of stores. 

Crypto exchanges are like speciality stores where you buy and manage individual types of fruit (cryptocurrencies). Some of the most popular centralized exchanges (CEXs) are Binance, KuCoin, WhiteBit, Kraken and Coinbase.

In contrast, brokerage platforms where you trade ETFs are like big supermarkets where you can buy fruit baskets (ETFs), along with other groceries (stocks, bonds).

As you see, there is more than one way to invest in crypto. Investing directly in cryptocurrencies is for those who want full control and are comfortable with high risk and volatility. 

Crypto ETFs, on the other hand, offer a simpler, more diversified way to get into the crypto market, much like traditional mutual funds, but with a focus on digital assets. 

And where you shop (trade) depends on whether you want to manage individual assets or prefer a more diverse, managed portfolio.

Ethereum’s Centralization Dilemma: A Double-Edged Sword of Staking and Node Operations

Ethereum’s Centralization Dilemma: A Double-Edged Sword of Staking and Node Operations

While Ethereum staking is on the rise, it brings with it the challenge of increased centralization. Even Ethereum co-founder Vitalik Buterin acknowledges this as a core issue, suggesting that a comprehensive solution may be decades away.

The growth in Ethereum staking has surged since the Merge update. 

But this has led to two issues: the network becoming more centralized and people earning less from staking. 

The team at JPMorgan, headed by top executive Nikolaos Panigirtzoglou, cautioned investors about these rising concerns related to Ethereum’s increasing centralization.

The leading five easy-staying services—Lido, Coinbase, Figment, Binance, and Kraken—hold more than half of all staked Ethereum.

According to Dune Analytics, over 31% of all ETH staked belong to the Lido pool. 

While people in the crypto world have viewed Lido as a better option than centralized services like Coinbase or Binance, the reality is different. 

Ethereum's Centralization Dilemma
Source: Dune analytics 

Even decentralized platforms like Lido still have a lot of control concentrated in a few hands. For example, one Lido node operator alone manages over 7,000 sets of validators, holding 230,000 Ether.

This concentration of power occurs because Lido’s decision-making is controlled by a small number of wallet addresses in their decentralized organization, known as a DAO. 

While there was a general market proposal to limit each staking service to no more than 22%, Lido’s DAO voted against it in June 2023. In general, a DAO is a self-governing platform, but in this case, its decision to not limit its Ether staking is making the entire Ethereum ecosystem more centralized and, thus, more vulnerable. 

Having too much control in one place poses a risk to the Ethereum network. A small group of major stakeholders or node operators could become a weak point in the system, or even collaborate to gain unfair advantages.

In addition to concerns about centralization, the Ethereum network has also seen staking yields go down since the big updates like the Merge and Shanghai.

The average block rewards have dropped from 4.3% to 3.5%, and overall staking yields have gone from 7.3% to around 5.5%.

It’s not just JPMorgan ringing the alarm bells about Ethereum’s growing centralization after the Merge, which was launched on September 15, 2022. This update is viewed as a stumbling block to Ethereum’s goal of being fully decentralized, and it has also led to reduced earnings from staking.

Even Ethereum’s co-founder, Vitalik Buterin, acknowledges the issue. In September 2023, he admitted that tackling the problem of node centralization in Ethereum is a big challenge, and finding an ideal solution could take up to two more decades.

Simplify node operations on Ethereum

Ethereum co-founder Vitalik Buterin says that making it simpler and less expensive to operate nodes is crucial for addressing the Ethereum network’s centralization issue. 

Right now, most of the nearly 6,000 active Ethereum nodes are hosted by centralized services. The top service used it Amazon Web Services, posing a vulnerability for the network.

While speaking at Korea Blockchain Week, Buterin identified six critical challenges to overcome to ensure Ethereum stays decentralized over time. 

One major aspect is making it technically easier for people to operate nodes. “Statelessness is a key technology to make this possible,” he added.

As of now, running a node requires hundreds of gigabytes of data storage. 

With stateless clients, however, you could operate a node without needing almost any storage space at all. This statelessness means eliminating the need for centralized services to verify network activities. 

According to the Ethereum Foundation, true decentralization can only happen when running an Ethereum node becomes accessible and affordable.

Buterin emphasized that statelessness is a significant part of Ethereum’s future plans. Major progress towards this goal is expected in upcoming phases called “The Verge” and “The Purge.”

He mentioned that the long-term vision is to have fully verified Ethereum nodes that are so streamlined you could literally run one on your phone.

Lido Defies 22% Self-Limit Rule Amidst Mixed Reactions

Lido Defies 22% Self-Limit Rule Amidst Mixed Reactions

While multiple Ethereum staking services are pledging to limit their market share to 22%, Lido Finance takes a different path, sparking debates on centralisation and community values.

The top five companies that offer ether staking pools for individuals have stated that they won’t control more than 22% of all ETH currently staked. 

This is a way to make sure that no single company has too much power over the Ethereum network, keeping it open and fair for everyone. 

Companies like Rocket Pool, StakeWise, Stader Labs, and Diva Staking are either already following this rule or planning to do so, says Superphiz, a key Ethereum developer. 

Puffer Finance, another such company, has also said they’ll stick to this limit.

Lido doesn’t obey the 22% of ether staked limit

Why 22%? 

Superphiz explains that to make any big changes to the Ethereum network, 66% of the participants have to agree. 

By setting a limit of 22%, it ensures that at least four big companies would have to work together to push through any major updates. This makes the network safer and more secure.

When talking about blockchain transactions,  the finality of a transaction is the moment when transactions are locked in place and can’t be changed. 

Superphiz, a leading Ethereum developer, brought up an important question last May: 

Would a company that helps people stake Ethereum be willing to put the network’s well-being over its own profits?

Interestingly, Lido Finance, the biggest company of this kind, decided not to follow the 22% self-limit rule. Almost all of their members (99.81%, to be exact) voted against it back in June. 

Superphiz mentioned in a post at the end of August that Lido aims to control most of the deciding power in the Ethereum network.

To give you an idea of how big Lido is, they control 32.4% of all Ethereum that’s currently being staked. 

That’s a big deal, especially when you consider that the next largest, Coinbase, only has an 8.7% share, according to data from Dune Analytics.

Source: Dune Analytics

What’s the right thing to do?

Well, the Ethereum community has different opinions on that. 

One expert named Mippo commented at the end of August that the 22% self-limit rule isn’t really about staying true to Ethereum’s ideals, which are about open access and innovation for everyone. 

Mippo thinks that those advocating for the self-limit would probably not stick to it if they were in the dominant position like Lido Finance. In his view, everyone is just acting in their own best interest.

Another person argued that user-friendly services shouldn’t be criticised as greedy. 

On the flip side, some people are really concerned that a few big companies could end up controlling too much of the Ethereum network. They see Lido’s large market share as a problem, even calling it “selfish and disgusting.”

Why is Lido Finance the top staker on Ethereum?

Lido ticks all the boxes when it comes to staking services. 

They support multiple types of digital money and make it super easy for anyone to use their platform. 

Their fees are fair, and they even offer nice rewards if you refer people to their service. On top of that, they make a lot of different cryptocurrencies more available for trading and are backed by some big names in the decentralised finance world. 

What’s cool is that when you stake your digital tokens with Lido, you get back tokens that are tied to the value of what you staked. You can then use these for more ways to earn money in the DeFi world.

Lido has become a top pick for people looking to stake their digital assets thanks to some standout features. 

First off, staking is a breeze; you can earn daily rewards by simply staking your tokens, and there’s no minimum amount you need to start.

Want to make even more from your tokens? 

Lido allows you to use them for things like loans, yield farming, and other money-making activities. This can give your earnings a nice boost.

They also have their own digital token, called LDO, that you can trade on popular exchanges like SushiSwap, Uniswap, and many more.

When it comes to security, you can rest assured. Lido’s smart contracts have been thoroughly checked by reputable firms like Quantstamp and Sigma Prime.

Although Lido doesn’t offer its own wallet, you can still use popular ones like TrustWallet and MetaMask to manage your assets.

The Perilous Intersection of CBDCs and Government Oversight

The Perilous Intersection of CBDCs and Government Oversight

NYU law professors Richard Epstein and Max Raskin published a paper to explain the potential hazards of central bank digital currencies, highlighting the risk of overstepping governmental boundaries and the importance of maintaining the ‘separation of money and state’.


Central banks worldwide are swiftly progressing with their explorations in creating digital currencies. 

Numerous examples, such as the recent announcement of a successful prototype by the New York Federal Reserve or the Bank of England’s achievement in the subsequent phase of its digital pound trial, indicate that over 130 nations globally are considering the idea of central bank digital currencies (CBDCs).

The reasoning behind this is twofold. 

Firstly, central banks can position themselves as protectors of consumers and innovators in cost-saving technologies by eliminating the role of private banking intermediaries

Secondly, they can acquire an additional mechanism for policymaking.

However, the proposition of excluding these intermediaries raises an important question of who would be responsible for the other end of the financial transactions. 

The inevitable answer is a far-reaching and intrusive government capable of monitoring every single expenditure.

Digital cash? 

Max Raskin, an adjunct professor of law at New York University and a fellow at the school’s Institute for Judicial Administration, and Richard Epstein, a law professor at New York University, a senior fellow at the Hoover Institution, and a senior lecturer at the University of Chicago, are exploring this topic in a paper called “A Wall of Separation Between Money and State: Policy and Philosophy for the Era of Cryptocurrency,“ published in The Brown Journal of World Affairs.

Their argument suggests that a central bank, for instance, the Bank of England, would issue a “digital pound,” which would be a direct claim on the central bank, much like current cash is. 

This process would involve creating the necessary infrastructure for individuals to store digital pounds in digital wallets and facilitate interactions with retailers and other users.

Contrasting current practices where central banks such as the Federal Reserve and the Bank of England do not offer accounts to direct depositors, the proposed model would eliminate the costly private banking system that presently stands between the central bank and the accounts held by businesses and individuals.

At a glance, it seems that CBDCs might cut unnecessary costs

However, these apparent efficiency benefits can be deceptive and hazardous. 

Intermediaries function in thousands of markets, with representatives, aggregators, and monitors in almost every significant business line. These participants can’t be easily deemed obsolete.

Intermediaries often provide value as they are motivated to offer more than the bare minimum to stand out – such as new banking products and services. 

The variety of services banks can offer due to competitive pressures that ultimately benefit consumers. Restricting these forces can hamper the market economy.

CBDC implementation can be risky

The implementation of CBDCs is not without risks. 

The idea of providing extensive power and confidential information to a faceless government entity can be alarming. The system can use that data against you in numerous ways. 

By removing the private banking intermediaries, CBDCs would eliminate a crucial barrier that currently safeguards individuals and firms from government intrusion and overstepping.

The use of cash and bearer instruments is currently untraceable by the central government. 

However, the use of digital cash would be. 

It’s clear that even those who decide to stick with private bankers will still be scrutinised by the state, which holds control over all transactions.

Moreover, these digital funds would empower central banks to direct personal loans and mortgages to specific private parties with minor competition, raising concerns around state industrial policies. It’s not hard to imagine potential nightmare scenarios, yet they are difficult to avert.

The question remains: can we trust thousands of new banker-bureaucrats to perform any better?

Can we trust banks?

The Bank of England, in its digital pound argument, emphasised the British government’s commitment to fighting climate change, stating that the digital pound would be designed with this objective in mind.

Why should a topic as intricate and contentious as climate change be regulated through the financial system?

Similarly, U.S. financial regulators have started to wade into political issues like climate change.

If such explicit political objectives are considered, it is not a stretch to imagine a government-run bank using its powers to favour certain energy producers and punish others through their bank accounts. 

The power to impact credits and debits must be a feature of the central banks’ proposed code, which introduces a covert system of industrial policy.

If CBDCs become a reality, officially favoured energy sources like solar and wind power could witness their bank accounts receiving subsidies without the need to attract private investors or undergo the scrutiny of the private banking system. 

Bank accounts could become vulnerable to political manipulations, bureaucracies, or even disenfranchisement overnight with limited recourse.

Furthermore, these CBDC initiatives in the U.S. were originally proposed in the context of directly providing pandemic stimulus to the economy. However, the evidence is overwhelming that this hasty system of government payments was incredibly wasteful.

Moreover, central banks could implement countercyclical monetary policies, such as providing cash boosts to individuals in specific regions or sectors, which again becomes a political football.

Money and new technologies

We should undoubtedly strive to leverage new technologies, but only when implemented correctly. According to the paper in the Brown Journal of World Affairs, “Money should be a neutral unit of measurement, like inches or kilograms.”

This concept, referred to as the “separation of money and state,” aims to stabilise all currencies over time, minimising the need for private parties to design complex and costly mechanisms like adjustable-rate mortgages to handle financial instability.

For instance, Bitcoin has a predetermined supply of no more than 21 million units, not governed by any individual institution but rather by the network’s consensus mechanism. 

This feature provides a robust defence against value dilution that no government-centric system could hope to match.

This fixed system could offer additional institutional support for developing countries seeking modernisation. 

Countries with a history of mismanaging their monetary systems could benefit from the discipline that comes with certain forms of digital currency. 

For instance, a central bank like Zimbabwe‘s or Argentina’s, plagued with mismanagement, could adopt an innovative form of dollarisation using Bitcoin or another form of programmed cryptocurrency.