Top Stories of Last Week

Regulatory

  • Police crackdown on PlusToken Ponzi scheme in China resulted in cryptocurrencies worth billions of dollars being seized by law enforcement, with court documents accounting for 194,775 bitcoin, 833,083 ether, 487 million XRP, 79,581 bitcoin cash, 1.4 million litecoin, 27.6 million EOS, 74,167 dash, 6 billion dogecoin, and 213,724 tether. Digital assets worth almost $4.2 billion. As part of ruling, court said “seized digital currencies will be processed pursuant to laws and the proceeds and gains will be forfeited to the national treasury.” 
  • Coinbase CEO Brian Armstrong took to Twitter to announce U.S. Treasury Department’s rumored plans to attempt to track owners of self-hosted crypto wallets with data-collection requirements, alleging outgoing Treasury Secretary Steven Mnuchin is preparing to tamp down on ability of individual to hold crypto themselves. Proposed regulation would require financial institutions like Coinbase to verify recipient/owner of self-hosted wallet, collecting identifying information on party, before a withdrawal could be sent to self-hosted wallet.
  • U.S. Director of National Intelligence John Ratcliffe wrote letter to SEC Chairman Jay Clayton over fears that China’s dominance in area of digital currencies could put U.S. at a disadvantage in effort to push agency to bring in rules that would allow U.S. businesses to be more competitive. Ratcliffe is said to have raised fact that over half of global cryptocurrency mining power is based in China, and that People’s Bank of China is already developing national digital currency.
  • South Korean National Assembly’s planning and finance committee reportedly proposing to delay commencement of crypto income tax rule by three months to January 2022. South Korea’s Ministry of Economy and Finance amended tax code in July, finalizing plan for charging local residents 20% tax on gains from crypto trading starting from October 2021. Reported reason why National Assembly is delaying rule’s effective date is due to concerns raised by local crypto exchanges for not having enough time to build proper tax reporting infrastructure. 
  • Suzhou will hold second lottery of China’s CBDC on Dec. 12, during shopping festival known as Double 12. Giveaway designed to gauge usability of digital yuan and trial will be similar to one held in Shenzhen in October. Report also indicates another city, Chengdu, is holding closed beta trial of CBDC, allowing invited participants to use digital wallet for transactions via major bank.
  • Brian Brooks, who currently serves as acting Comptroller of the Currency, nominated to full five-year term. Brooks took over office in May after departure of Joseph Otting. Brooks, former chief legal officer for Coinbase, has pursued number of policy initiatives on digital asset front since assuming office. Most notably, his office published guidance for national banks that allows them to custody cryprocurrencies as well as funds for fiat-backed stablecoin issuers.
  • BlackRock CIO of Fixed Income Rick Rieder responded to question during CNBC’s Squawk Box asking if governments might try to regulate bitcoin. “I think cryptocurrency’s here to stay, I think it is … durable,” he said. Alongside central banks developing digital currencies, millennials’ “receptivity” to technology and cryptocurrency “is real, digital payments systems is real,” Rieder included. “Do I think it’s a durable mechanism that … could take the place of gold to a large extent? Yeah, I do,” Rieder concluded.

Project Development

  • Ethereum 2.0 deposit contract required for triggering first phase accrued enough funds to begin activation of Ethereum upgrade, having received more than 540,000 ETH and ensuring beacon chain for Ethereum 2.0 will launch Dec. 1. Target was hit with hours to spare after more than 150,000 ETH were deposited in 24-hour period before the Nov. 24 soft deadline.
  • VanEck announced launch of Bitcoin exchange-traded note product for European market to allow investors to gain exposure to Bitcoin without having to deal with security, regulatory, and storage issues. ETN is based on MVIS CryptoCompare Bitcoin VWAP Close Index and will be traded on Deutsche Börse Xetra.
  • Libra announced it could launch as series of stablecoins, each pegged to a fiat currency, rather than one multi-currency basket as early as January 2021. Launch of single coin backed 1:1 by U.S. dollar is pending approval from Swiss financial regulator FINMA. Other currencies within basket and composite may still be rolled out at later time.
  • Pendal Group, an Australian Securities Exchange-listed investment manager with over A$100 billion (US$73.6 billion) in assets under management, announced they are now investing in bitcoin futures on Chicago Mercantile Exchange.
  • China Construction Bank suspended upcoming listing of $3 billion bond issuance that was intended to be tradable for bitcoin and U.S. dollars via Fusang digital asset exchange. CCB Labuan said the “proposed issuance will not proceed and the overall bond-issuance [program] is being re-evaluated.” Fusang Exchange was not able to provide any information as to why CCB had backed out of issuance.

Exchanges

  • Coinbase announced it is discontinuing margin trading product due to regulatory concerns, stating product will be fully offline in December when all existing margin positions have expired. As of November 25 at 2 p.m. PT, customers will be unable to place new margin trades and any open limit orders will be cancelled.
  • Binance sent email to users who have identified themselves as U.S. persons with notice to withdraw funds in 14 days in move to impose stricter measures on U.S.-based users and blocking them from accessing its platform.
  • Sygnum, a digital asset finance firm with Swiss banking license, launched blockchain-based alternative to listing shares on stock exchange comprised of primary market issuance platform called Desygnate, and SygnEx, a secondary market trading venue. Solution will provide issuers way to raise capital, grow liquidity and transfer ownership and manage corporate actions.

Mining

  • Bulk preorders for bitcoin mining hardware from Bitmain’s AntMiner S19 Pro, S19 and T19 products are already queued until May 2021 for delivery. Similarly, MicroBT is showing ”sold out” for WhatsMiner M30 series on its website, and is already selling April to May future preorders. Overall supply shortage follows bitcoin’s price jump since Q3 this year, and is due to both increase in institutionalized demand for bitcoin mining equipment and limited wafer capacity from Bitmain’s and MicroBT’s silicon provider, Taiwan Semiconductor Manufacturing Company.

Fundraising

  • Chainalysis reportedly on cusp of raising $100 million at $1 billion valuation in Series C funding round. Venture firm Addition is said to be leading round, with participation from existing investors such as Accel, Ribbit Capital and Benchmark Capital. Forbes reports that deal “has been signed by all counterparties and is awaiting final paperwork.”
  • Globe, a crypto derivatives exchange that is launching in coming weeks, raised $3 million in seed funding round backed by Y Combinator, Pantera Capital, Tim Draper’s Draper Dragon Fund, and Wavemaker Partners, among others.
  • Pantera Capital raised another $5 million for its bitcoin fund, bringing total to $134 million, according to form D filing with SEC.

Defi

  • Around $89 million was liquidated on Compound due to DAI price on Coinbase driven up to a premium of around 30%, which caused liquidations as value of loans exceeded collateralization-ratio thresholds. Affected include third largest COMP farmer, who was liquidated for $46 million. Malicious actor may have manipulated price of DAI on Coinbase Pro, the only source of Compound’s price oracle.
  • Yearn.Finance and Pickle Finance set to merge in first M&A agreement of DeFi space. Both teams behind protocols said they would work together to leverage shared expertise, and actual merger will occur when second version of Yearn launches, which is currently under development. Yearn Finance also published details of another upcoming integration with Cream, which outlines how two protocols will cooperate for launch of Cream V2. Teams will merge development resources and introduce several symbiotic interactions between two protocols.
  • Andre Cronje, founder of Yearn.Finance, introduced new project called Deriswap, a protocol that combines different segments of DeFi like swaps, options, and loans into one platform. Deriswap is currently under audit, and other details, including specific launch date, remain unknown.

Things to Watch This Week

  • ETH 2.0 Beacon Chain Launch
    • This week, Eth2 genesis will go into motion with the launch of Ethereum 2.0’s Beacon Chain that should happen at approximately December 1, 12:00:23pm UTC. The backbone of Ethereum 2.0, the Beacon chain is an interim blockchain that will operate alongside the current network as it begins the first of four migration phases to the new network. These phases will take years, with estimates calling for a completion sometime in 2022-2023. Nevertheless, the significance of the Beacon Chain launch should not be ignored, as it is the foundation of Ethereum’s future and will bring with it the existence of both the current Eth1 PoW main chain and a new POS Eth2 chain. Thus, developments surrounding the launch and thereafter should be monitored closely. 
  • Bitmex Accelerated User Verification Programme Deadline
    • The December 4th, 00:00 UTC deadline for Bitmex’s accelerated User Verification Programme will most likely serve as a formality, as the majority of unverified users have already left the exchange and its position as a catalyst in the cryptocurrency trading markets has already been diminished. However, it does serve as an important footnote in a trend of regulatory action that has been developing over the past few weeks. The recent spate of crackdowns on cryptocurrency exchanges throughout the world has not gone unnoticed, with last week bringing us Binance also making efforts towards removing unverified users from their platform and Coinbase discontinuing margin trading from their exchange. In addition to the continuing developments around OKex and Huobi in China, the PlusToken scheme seizure by Chinese police, and Brian Armstrong’s tweet regarding tracking of self-hosted cryptocurrency wallets, it is needless to say that the emphasis around regulation in crypto has been elevated. We’ll be keeping a close eye on the aforementioned events and how they unfold as well as other developments that are sure to happen throughout the foreseeable future.    
    • Jason Choi@mrjasonchoi
      In 2016 – 2018 when $BTC ran from ~$200 to ~$19K, there were multiple violent 20%-40% drawdowns that seemed like blow off macro tops, especially during the $1000+ leg, that ended up being corrections from local tops

      Brian Armstrong@brian_armstrong
      Last week we heard rumors that the U.S. Treasury and Secretary Mnuchin were planning to rush out some new regulation regarding self-hosted crypto wallets before the end of his term. I’m concerned that this would have unintended side effects, and wanted to share those concerns.

      For those who don’t know – self-hosted crypto wallets (also known as non-custodial wallets or self-custody wallets) are a type of software that lets individuals store and use their own cryptocurrency, instead of needing to rely on a third party financial institution.

      Self-hosted crypto wallets are important, because they allow anyone to use this new technology to access basic financial services – just like anyone can use a computer or smartphone to access the open internet.

      The open nature of cryptocurrency is what makes it a powerful tool for innovation, and it is what levels the playing field globally. It is what is fueling innovation, such as in Defi. It has the potential to bring down the cost of financial services, and improve accessibility.

      This proposed regulation would, we think, require financial institutions like Coinbase to verify the recipient/owner of the self-hosted wallet, collecting identifying information on that party, before a withdrawal could be sent to that self-hosted wallet.

      This sounds like a reasonable idea on the surface, but it is a bad idea in practice because it is often impractical to collect identifying information on a recipient in the cryptoeconomy. Let me explain why.
      READ MORE

      Jeremy Allaire@jerallaire
      1/4 Market reaction to regulatory engagement around open blockchain access is overblown — there are smart, engaged people in Treasury who want to work with the industry to address risks while preserving open networks and innovation.

      2/4 If anything, recent engagement demonstrates a huge desire to learn from regulators, and its incumbent on industry to educate and innovate — its possible to have open networks and public chain protocols, and better handle identity and crime risk.

      3/4 We need faster innovation in on-chain identity networks, attestation models, and use of ZK to provide both privacy and accountability. Industry needs time to develop this, but this needs to accelerate.

      4/4 Current industry solutions are non-crypto, off-chain databases that map to legacy rules; we need solutions on Layer 1s that can scale now and support hundreds of millions of users. Lots more thoughts on this and will try to write up and share.

      Nunya Bizniz@Pladizow
      BTC weekly: This week could be the 7th time BTC has been positive for 8 or more consecutive weeks. 5 of the past 6 times this has ended in a substantial correction. Four times they have also been Tom Demark TD9 sell signals. How strong is this bull and when will it rest?
      Sino Global Capital@sinoglobalcap
      Sino Global Capital presentation – e-CNY and Exorbitant Privilege: Implications for Dollar Hegemony

      READ MORE

      Wu Blockchain(Chinese Crypto Reporter)@WuBlockchain
      Exclusive: Whatsminer’s next-generation BTC mining machine M50S is in trial production, miners have already obtained prototypes. The energy efficiency is best to reach 28J/T, power is rarely as high as 200TH/s, three sources told Wu.

      M50 is expected to start pre-sale early next year, and strive to ship before the arrival of the China rainy season. The pre-calculation power of M50S will even exceed 200T, but it has not yet been trial-produced.
      READ MORE

      Blockfolio@blockfolio
      So it begins.
      Image
      Luke Martin@VentureCoinist
      The weekend trading hours are highlighted on the $BTC chart in red. •Past 4 weekends have been almost perfectly flat •Price rises taking place when US traditional markets open No guarantee the pattern continues but it’s something you should consider for your weekend trades.
      Image

      The pattern did continue this weekend. $BTC basically flat from where we entered the weekend… If you’re trading Bitcoin on weekends you have to pay attention to this until it changes.

      Image

      Ari Paul @AriDavidPaul
      Some anecdotes on where the new money has come from to bid BTC from $10k-$18k. Retail inflows have been relatively muted. The crypto industry is at relatively low leverage. So where’s the buying coming from? /1

      2/ for most of this rally, we’ve seen a clear pattern of algorithmic style buying during US hours and flat activity during asia hours. Those are largely HNWs (high net worth individuals) buying large amounts facilitated by algos (or via an OTC desk that uses algos)

      3/ while it took a bit longer than many of us expected, the trend of hedge fund managers like Paul Tudor Jones accumulating BTC both personally and for their hedge funds has been accelerating.

      4/ I’ve been on a number of calls in the last few weeks with billionaire hedge fund managers discussing making their first $5m-$100m buy, as well as others upsizing their allocations from say 1% of their net worth to 5-10%.

      5/ these buyers are only interested in BTC and they’re buying on a monetary narrative. A blend of, “this hedge’s inflation and fiat depreciation” and “it’s an underowned SoV likely to appreciate by multiples even if only because other portfolios add a small %.

      6/ things like Paypal support and recent sell-side research from the likes of JPM and Citi convinced them that BTC is here to stay. At this point it’s just a matter of “touches.” Maybe the third time a billionaire buddy recommends it, they buy.

      7/ the most common questions: “will governments ban it if it gets big enough?” “we hear mining is concentrated in china, is that a risk?” “ok, so how can I actually buy $100m worth and how can I store it?”