Top Stories of Last Week

Regulatory

  • President Joe Biden froze all agency rulemaking, including former Treasury Secretary Steven Mnuchin’s proposal on unhosted wallets, effective until proposed rules undergo further review.
  • Speaking at Senate Finance Committee hearing on her anticipated nomination, Janet Yellen said U.S. should be aware of emerging tools for terrorist financing and that “cryptocurrencies are a particular concern” in response to question by Senator Maggie Hassan. “I think many [cryptocurrencies] are used, at least in transactions sense, mainly for illicit financing and I think we really need to examine ways in which we can curtail their use,” she said.
  • Chris Brummer, a Georgetown University law professor who runs the annual D.C. Fintech Week conference, may be next chair of CFTC, according to Reuters report indicating that Brummer is President Joe Biden’s leading candidate to head federal commodities regulator.
  • Michael S. Barr, former U.S. Treasury Department official and onetime member of Ripple’s board of advisers, likely to become next Comptroller of the Currency, according to Wall Street Journal. Barr will succeed Brian Brooks, former Coinbase executive who served as Acting Comptroller for last half of 2020. Barr was part of Obama administration’s Treasury Department.
  • Banque de France successfully conducted CBDC experiment using blockchain platform for interbank settlement. Pilot involved settlement on private blockchain of around €2 million (US$2.43 mil) using SETL’s fund management platform Iznes, along with Citi, CACEIS, Groupama AM, OFI AM, and DXC, as part of process for first settlement of funds using CBDC.
  • Shenzhen will stage another public trial of central bank’s digital currency, giving away 20 million digital yuan (a little over US$3 million) via lottery. This is third time Shenzhen will hold “red envelope” giveaways. Pilot is aimed to test China’s in-development central bank digital currency in hands of public.

Project Development

  • CoinShares announced launch of exchange-traded Bitcoin product on Swiss stock exchange SIX, which will be listed under ticker BITC. Product’s assets will be custodied by Komainu, a venture involving Nomura Holdings, CoinShares and Ledger. BITC will charge 0.98% expense ratio and will be physically backed by Bitcoin.

Institutional

  • BlackRock appears to have granted at least two of its funds the ability to invest in Bitcoin futures. Prospectus documents filed with SEC indicate BlackRock Global Allocation Fund Inc. and BlackRock Funds V are eyeing Bitcoin, including cryptocurrency on lists of derivative products cleared for use. Asset manager also recently posted job opening for blockchain and crypto executive, seeking vice president of blockchain for its New York office.
  • Goldman Sachs allegedly issued request for information to explore digital asset custody, according to source inside bank, who also said bank’s custody plans would be “evident soon.” Goldman insider also said bank’s digital assets initiative was part of broad digital strategy.
  • Signature Bank revealed deposits from customers in crypto industry now total $10 billion, twice that of California rival Silvergate Bank. Signature also added $2.5 billion in non-interest-bearing deposits in fourth quarter of 2020, which fell half a billion shy of Silvergate’s $2.9 billion in new deposits.
  • “Long Bitcoin” is now most crowded trade in financial markets, according to Bank of America’s January survey of fund managers. Bitcoin dethroned “long tech” as most crowded trade, with “short USD” third most popular trade.

Exchanges

  • BlockFi launched OTC trading desk, which will allow BlockFi’s clients to process large trades directly between themselves instead of relying on exchange order books. OTC desk will operate with traders based in U.S. and Asia to serve institutional and ultra-high net worth clients worldwide. Desk will support spot trading in BTC, ETH, and LTC.
  • Coinbase announced purchase of blockchain infrastructure company Bison Trails, which builds cross-blockchain integration tools that link disparate protocols, and which will become “foundational element” of Coinbase product suite. Terms of deal were not disclosed.
  • Crypto payment services firm BCB Group partnered with Huobi Global to help exchange connect trading desks to banking system in U.K. and Europe. Customers of Huobi’s OTC platform will be able to settle transactions instantly in euros and pounds via BCB’s BLINC network. BLINC real-time settlement system supported by R3’s Corda platform and Digital Asset Shared Ledger. 

Mining

  • Eight Ethereum mining pools amounting to around 30% of network’s hash power have cast support behind mining pool Flexpool’s stance against Ethereum Improvement Proposal 1559, which is calling on Ethereum miners to jump ship from mining pools that support update. EIP 1559 flips traditional mining payment scheme by burning most of transaction fees typically given to miners in bid to address transaction fee volatility and improve blockchain’s user interface.
  • Authorities in Iran seized 45,000 Bitcoin mining machines claimed to be using illegally subsidized electricity from state-run energy provider Tavanir. Earlier this month, Iranian authorities shut down 1,620 illegal cryptocurrency mining farms said to have collectively used 250 megawatts of electricity over past 18 months. Country’s recent blackouts across major cities have been in part blamed on cryptocurrency mining.
  • Hive Blockchain announced purchase of 6,400 Bitcoin mining machines from Canaan, giving Hive an estimated operating hashrate of 1,229 PH/s after delivery. Delivery and deployment of machines is set to start in May and June with initial shipment of 500 machines.

Fundraising

  • Wintermute, an algorithmic liquidity provider for digital assets, closed $20 million Series B led by Lightspeed Venture Partners with participation from Pantera Capital, Sino Global Capital, Kenetic Capital, Rockaway Blockchain Fund, Hack VC, DeFi Alliance and Avon Ventures. Wintermute plans to use funding to open first international office in Singapore in first quarter of this year, spearheading a general push into Asia. Company also plans to launch derivatives business and offer request-for-quote services for counterparties. 
  • Offline mobile map platform Maps.me raised $50 million in funding round led by Alameda Research. Genesis Capital and institutional cryptocurrency firm CMS Holdings also participated in the round. Funds will go toward launch of multi-currency wallet and enable DeFi ecosystem on platform.
  • Saddle raised $4.3 million in seed funding from Framework Ventures, Polychain Capital and Electric Capital. Automated market maker is focused on preventing slippage in value between different types of pegged-value assets like stablecoins and tokenized Bitcoin. 
  • Bahrain-based cryptocurrency exchange Rain Financial raised $6 million in Series A funding from Coinbase and other investors, including MEVP Capital, Vision Ventures, CMT Digital, Abdul Latif Jameel Fintech Ventures and DIFC.

Defi

  • Yearn.finance core contributors and community members submitted proposal to increase supply of YFI by 6666 tokens, worth roughly $225 million at current prices. Proposal, called “Funding Yearn’s Future,” calls for one-time mint of 6666 tokens, increasing YFI’s current 30,000 supply by 22%, and is culmination of discussion about developer incentives for vault project. Yearn currently has a $500,000 treasury, and 0% of YFI token supply was reserved to incentivize team during project’s fair launch liquidity mining event.

Things to Watch This Week

  • Bitcoin CME Futures Expiry
    • Over $3.5 billion worth of Bitcoin options are set to expire on January 29, as speculation ramps up following one of Bitcoin’s sharpest corrections last week along with the continued growth in interest in cryptocurrency derivatives. The estimated notional value of all open Bitcoin options positions is roughly 250,000 Bitcoin, or nearly $8.3 billion in current prices. As interest in cryptocurrency derivatives rises, expiry periods are increasing in significance as they tend to coincide with greater market volatility. An expiry of this size needs to be monitored as we get closer to the date. 
  • GBTC Inflow and Premium
    • Grayscale Bitcoin Trust’s premium has fallen below 3% from about 40% a month ago, and the sharp fall suggests that some investors might be cashing out gains or arbitraging premiums away. Accredited investors who invest in GBTC shares at NAV can sell shares only after a six-month lockup period, and it is possible that some investors who bought GBTC’s shares six months ago may have sold. Nevertheless, Grayscale’s inflows remain robust. GBTC’s AUM jumped to over $24 billion at one point last week before settling around $20 billion currently, with investors committing an average of $217.1 million on a weekly basis into the trust. With the premium of and inflows into Grayscale’s products serving as significant signals of market sentiment, we will be keeping an eye on the progress of both throughout the week. 
    • Alex Krüger@krugermacro
      #Ethereum will soon pass to the next level. These are the levels to watch beyond all time highs: 1500, 1600, 1920, 2000, 2240, 2500, 2750.
      ₿itDealer@Bitdealer_
      Average Return per Time of Day (UTC) for $BTC $ETH and #DeFi
      Charles Edwards@caprioleio
      Grayscale already owns 3% of all circulating Bitcoin. Their holdings are growing around 10% a month. At this rate they could hold 10% of ALL Bitcoin in 2021. The centralization of Bitcoin has moved from exchanges to wall st. The difference is, this is a one-way model.

      Mira Christanto @asiahodl
      Asia is the most active #crypto market. We have a history of dictators, currency depreciation, capital controls — all ripe for disruption. Behold Messari’s Asia Crypto Landscape: Everything you want to know about the major players
      messari.io/asia-crypto-la…

      Asia-based companies account for 98% of $ETH and 94% of $BTC futures volumes. Basically, the entire globe. Why is that? messari.io/asia-crypto-la… We wrote this with @_blockdaemon — with end-to-end middleware platform to connect to any protocol with enterprise grade security.

      Rafael Schultze-Kraft@n3ocortex
      #Bitcoin liquidity on exchanges still getting crushed 

      Sam Trabucco @AlamedaTrabucco
      The most popular narrative surrounding the crypto rally for the past few months has been clear and consistent: U.S. institutional buying is fueling everything. And I agree that this narrative has basically been right! But … I also think there’s nuance here which can be lost.

      It’s easy to make the leap from “U.S. institutions fueling the rally” to “U.S. is buying crypto and fueling the rally.” And THEN it’s easy to make the leap to “when crypto sells off, Asia is selling.” I see people make these leaps all the time!
      READ MORE

      Documenting Bitcoin @DocumentBitcoin
      Supply shortage incoming. 270,000 #bitcoin off the market this month.
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      Thomas Lee@fundstrat
      Our firm raises #ethereum $ETH price objective to $10,500. 

      Image

      Pomp @APompliano
      Blackrock is now jumping into Bitcoin. This has gone from a contrarian idea to a consensus idea on Wall Street.

      Andreas M. Antonopoulos@aantonop
      A more detailed explanation of the whole “A double-spend broke Bitcoin” FUD that was circulated by an irresponsible publication. 1/

      There was a chain re-organization in the Bitcoin blockchain. This is a common occurrence that is part of Bitcoin’s normal operation. It is a result of decentralized consensus under Proof-of-Work. All PoW chains do this. 2/

      Two blocks were mined almost simultaneously, competing for the same height, meaning that they had the same parent block and were trying to extend the chain of the same block 3/

      Only one can ever succeed in the long run. It is possible that different nodes and miners see one or the other block first and assume it is the winner. This is also normal in a decentralized consensus algorithm
      READ MORE

      Yassine Elmandjra@yassineARK
      1/ Interesting that treasury secretary @JanetYellen has stated concerns that cryptocurrencies are being used mainly for illicit financing on the same day that Chainalysis reported a dramatic fall in cryptocurrency transactions associated with criminal activity.
      Image
      2/ As ARK has noted in the past, cash transactions account for a larger share of illicit activity than do cryptocurrency transactions, on both absolute and relative terms.

      Image

      3/ I’d be more concerned if Yellen denounced Bitcoin as a threat to monetary sovereignty. To criticize Bitcoin for facilitating criminal activity is to criticize one of its fundamental value propositions: censorship-resistance.

      4/ As a neutral technology, Bitcoin cannot identify “criminals”. This does not make it an inherently criminal tool. Phones, cars, and the Internet are no less bannable for facilitating criminal activity than Bitcoin is.

      Cathie Wood@CathieDWood
      As Chair of the Fed from February 2014 to February 2018, Yellen was on policy watch as bitcoin soared from ~$1,000 to ~$20,000 in 2017. The fact that this week she focused on the risk of potential nefarious actors instead of the risk to US monetary sovereignty is reassuring.

      CNBC@CNBC
      How might cryptocurrencies like Bitcoin fare during President Joe Biden’s administration? Tom Jessop of Fidelity says a “generally constructive attitude or picture” can be expected going forward.
      Watchhttps://cnb.cx/3c0nyRW