op Stories of Last Week

Regulatory

  • U.S. Justice Department published report titled “Cryptocurrency: An Enforcement Framework,” which details strategies DOJ plans to take related to digital assets. U.S. Attorney General William Barr said report would delineate priorities and strategies for DOJ’s crypto enforcements. Report also indicates interest in how enforcement will work in world of decentralized finance, plus makes note of where DOJ will exert authority over foreign actors, namely when “virtual asset transactions touch financial, data storage or other computer systems” with the U.S., if they use crypto to import illegal goods into country and if they provide illegal services” to defraud or steal from U.S. residents.
  • Initial principles for how national digital currencies can help implement monetary policies was published in report titled “Central bank digital currencies: foundational principles and core features,” which was prepared by central banks of Canada, U.K., Japan, Sweden and Switzerland, as well as Federal Reserve, European Central Bank and Bank for International Settlements. It set out several core principals for CBDCs to work alongside cash and other payment types in flexible and innovative payment system, support wider policy objectives while doing no harm to monetary and financial stability, and promote innovation and efficiency.
  • Bank of Korea to run trials of possible CBDC through next year following progress of research in technical phase over the summer and will see testing of distribution and circulation of the digital coin. BoK indicated they will test blockchain-based CBDC in virtual environment initially, simulating transactions on blockchain platform that would be similar to those for cash or traditional means of payment.
  • Financial Conduct Authority published rules banning sale of derivatives and exchange-traded notes that reference certain types of crypto assets to retail consumers, saying it considers these products to be ill-suited due to harm they pose, inherent nature of underlying assets that have no reliable basis for valuation, prevalence of market abuse and financial crime in secondary markets, extreme volatility, and lack of legitimate investment need. Ban will affect sale, marketing and distribution to retail investors of derivatives contract or ETNs linked to unregulated transferable crypto assets issued by entities in or outside U.K. Ban will come into effect Jan. 6, 2021.
  • China’s central bank unveiled usage statistics of DCEP trials conducted, as People’s Bank of China said bank opened 113,300 consumer digital wallets and 8,859 corporate digital wallets for residents of Shenzhen, Suzhou and Xiong’an to pilot digital yuan. Digital wallets processed RMB 1.1 billion ($162 mil) across 3.1 mil digital yuan transactions between Apr – Aug.
  • Bank of Thailand launched blockchain-based government savings bond issuance platform using IBM’s blockchain technology and has reportedly sold more than $1.6 billion worth of savings bonds, as per IBM’s official announcement.
  • Office of Foreign Assets Control warned that paying out to recover from ransomware attacks can be breach of its rules. OFAC, a wing of U.S. Department of Treasury, said in an advisory that there’s sanctions risk with complying with such demands, and specifically pointed to companies that facilitate negotiations with cyber attackers regarding ransomware payouts.

Project Development

  • Ethereum 2.0 second testnet, named Zinken, will launch Oct. 12 at 12:00 UTC after first testnet, Spadina, failed due to “critical peering issues” according to Ethereum Foundation researcher Danny Ryan. Testnet aims to give Ethereum stakers another practice run at moving ETH into Eth 2.0 deposit contract, and Ryan said he is “primarily looking for a clean client release process and minimal headaches for users” with Zinken.
  • Revolut enlisted crypto security firm Fireblocks to lay foundation for new crypto products. Fireblocks said it will provide Revolut with infrastructure needed “for securing payment railways for digital asset transfers” and to introduce new product lines and retail-facing capabilities.
  • DBS and Standard Chartered completed proof-of-concept of blockchain trade finance platform called Trade Finance Registry. Two entities developed PoC with 12 other banks and intend to launch platform for commercial use by central banks. Platform is expected to help banks fight fraud in lending and commodity trade using company’s blockchain-based TradeDoc Validation Registry, which reduces chance of duplicate financing from different lenders for same inventory.

Exchanges

  • BitMEX announced leadership changes, stating Arthur Hayes is no longer BitMEX CEO and Samuel Reed is no longer exchange’s CTO. Additionally, Greg Dwyer will take leave of absence from role as head of business development. Vivien Khoo, chief operating officer of 100x Group, has become interim CEO. Ben Radclyffe, in his role as commercial director, will have additional responsibility for client relationship handling and oversight of financial products.
  • SBI Holdings announced SBI’s foreign exchange and derivatives arm SBI Liquidity Market acquired all shares of TaoTao exchange, making it a wholly-owned subsidiary. With acquisition, SBI now has two crypto trading platforms as company is already offering crypto trading services through SBI VC Trade. SBI’s acquisition of TaoTao comes shortly after exchange officially ended negotiations with Binance. 

Mining

  • Galaxy Digital outlined ambitions to build one-stop financial services shop for bitcoin miners. Galaxy will offer services ranging from financing to capital markets advisory and liquidity services. Ian Taylor, a Galaxy executive, will play role in development of new unit and then will hand over reins to Amanda Fabiano, who joined Galaxy from Fidelity as head of mining.
  • Riot Blockchain bought another 2,500 S19 Pro Antminer rigs from BitmainTech as firm aims to increase mining power by mid-2021, paying $6.1 million for rigs with delivery slated for December. New purchase will increase Riot’s hashrate from current levels around 500 PH/s to estimated 2.3 EH/s by June.

Fundraising

  • Bitcoin derivatives marketplace Bitnomial raised $11.6 million from 13 different investors in Series B funding. In April, Bitnomial gained approval from CFTC to manage designated contracts market.
  • Gauntlet Network raised $4.3 million in funding round led by Paradigm. First Round, IA and Polychain also took part in round. Firm developed system for modeling blockchain governance decisions in DeFi, allowing startups and project teams to game out and stress test protocol decisions in real world.
  • Tim Draper backing a planned $5 million Series A funding round for Bangalore-based cryptocurrency exchange Unocoin. Exchange said Draper Associates is currently lead investor, with XBTO Ventures and 2020 Ventures also joining.
  • Covalent, a data analytics startup, raised $3.1 million in new funding round co-led by Woodstock Fund, 1kx Capital, and Mechanism Capital. Other participating investors included CoinGecko and Alameda Research, among others. Covalent currently provides on-chain data and analytics for Ethereum network.

Other

  • Square purchased 4,709 bitcoin at aggregate purchase price of $50 million, or an average price of approx. $10,600 per bitcoin. Announcement from Square included statement that “cryptocurrency is an instrument of economic empowerment and provides a way to participate in a global monetary system, which aligns with the company’s purpose.” Investment represents approximately 1% of Square’s total assets as of Q2 2020.
  • Christie’s auction house announced sale of digital portrait “Block 21,” comprised of physical piece of art and NFT representing Satoshi’s original Bitcoin code, by unknown buyer for $131,250, marking first time NFT was auctioned at major auction house.

Things to Watch This Week

  • Ethereum Testnet Zinken
    • Today’s launch of the second testnet for Ethereum 2.0 will capture news flow this week, as we hear over the next few days if the latest practice run for Ethereum stakers interacting with Eth 2.0 deposit contracts goes smoothly or not. A clean client release process will be a positive sign for the progress of Eth 2.0 and could have major implications for the prospective November launch period of Phase Zero that many in the Ethereum community are eagerly hoping for.  
  • November Elections / Brexit
    • Traditional markets should be watched closely this week as well, as we’re three weeks away from U.S. elections and cryptocurrencies have been showing an increasing correlation with current events as of late. This week, an October 15th deadline placed by UK Prime Minister Boris Johnson for a Brexit agreement to come into place could have a potential effect on markets, as a deal will need to be struck earlier than the transition period expiration at the end of December in order for all parties involved to prepare. We’ll be monitoring this situation as well as election updates throughout the week. 
    • Willy Woo @woonomic
      Around $25b of capital needs to flow into Bitcoin to push it to $1T market cap, which will bring it into visibility as a major asset bucket. Today $18.3b sits in USDT and USDC alone, that’s even if we ignore new participants preparing for their entry.

      Willy Woo @woonomic
      I’m retracting this statement. It was originally based on estimates by @fundstrat for every dollar going into “crypto” in 2018. It doesn’t look like the right number for BTC from a quick glance at the data. BTC is very liquid. Here I’ll lay a method to estimate it.

      Realised cap approximates the total capital current investors paid for their coins by peering into the blockchain and using the time (and therefore price) at which the coins moved into their wallets. Right now Bitcoin’s cap is $202b for $116b of capital invested.

      So all-time impact is $1.70 per dollar invested. For the impact of the latest dollar, we need to take the current slope of the market cap (change in cap) and divide by the latest slope of the realised cap (change in money invested). Depending on market phases it changes a lot.

      I’ll set aside time to create this chart, I think it’s important as we see more companies like Square and MicroStrategy hedge their USD stockpiles into BTC.

      Krüger @krugermacro
      A few corporations adding bitcoin to their balance sheets is both bullish and overrated. The function of a corporate treasury is not to *invest*. Corporate demand for gold as inflation hedge is minimal. Thus the likelyhood of a bitcoin domino effect among corporates is very low.

      That said, if this were to become a trend, something interesting would happen: major banks would be forced to have a crypto team on payroll to service corporate clients’ hedging needs.

      Christie’s@ChristiesInc
      #AuctionUpdate Robert Alice’s ‘Block 21 (42.36433° N, -71.26189° E) (from Portraits of a Mind)’ — a work based on Blockchain technology — sold for $131,250 and achieved more than 7x its high estimate.
      bit.ly/2I8gLsH
      Camila Russo@CamiRusso
      The DeFi Projects Map handy, updated, and ultra complete, so you don’t lose your way in this wild west
      thedefiant.io/defi-projects-…

      Krüger@krugermacro
      In 2018 many ICO tokens experienced a 95% crash in the span of a year. In 2020 some DeFi tokens expeienced a 95% crash in the span of a month.

      Most 2018 ICOs were scams. Many of these 2020 DeFi tokens are actually good projects that unfortunately were bought up too fast in a rabid frenzy. Market is likely close to its bottom and should experience a bull run in 2021, along with bitcoin.

      Su Zhu@zhusu
      my thoughts
      1) you cannot will yields into existence. the real world is 0 yield
      2) just bc its a bull mkt doesnt mean its a bull mkt for your narrative
      3) btcusd going up does not mean defi/usd will go up, or even stay flat. real btc buyers are rebal-ing v fiat, gold, assets
      //Bitcoin 𝕵ack @BTC_JackSparrow
      1/ Let’s talk stimulus (or lack thereof) During the market crash of 1929-’32 (-89.49% $DJI) monetary policy was the opposite of today’s day and age: tight Quantative tightening vs easening Every cycle had its own “experimental” approach to “fix” that what couldn’t be fixed

      2/ In the 1930’s banks didn’t inflate the monetary base, nor did they buy assets, and the effects of the tightening policy is very visible on this chart Pretty much a straight rocket down on quarterly basis for 3 years
      READ MORE
      Mohit Sorout @singhsoro
      next $btc breakout prob decides the trend for coming weeks
      Cole Garner@ColeGarnerBTC
      1/ New #bitcoin addresses were absolutely off the charts last week. The backstory is bullish and intriguing — a unique view on a new bull market catalyst. I’m about to break this down 

      2/ First: volume precedes price. And #bitcoin active address counts are an OG on-chain leading indicator of volume.
      READ MORE
      The Crypto Dog@TheCryptoDog
      Q4 is where $BTC typically makes most if its gains during bull markets. I don’t think this year will be an exception.

      Michel Rauchs@mrauchs
      I published a short blog post about #CBDC. It’s the first as part of a short series following the @ecb release of the ‘digital euro’ report.
      mrauchs.com/blog/what-cbdc…

      tl;dr: CBDC is not about technology, digital payments, or programmable money. It’s about a prospective power shift from the private to the public sector which, …

      … if implemented, has the potential to fundamentally reshape our current monetary and financial systems, with implications not yet fully understood. This idea will be further developed over the days in follow-up posts.

      vitalik.eth@VitalikButerin
      A quick recap of the short and medium term of Ethereum scaling. TLDR: 1. Ultra-high scaling with sharding + rollups will be possible *in phase 1* 2. Sharding is NOT “cancelled” 3. Get on a rollup asap; you get 100x scaling even without eth2
      Image
      The original ETH2 roadmap was created with 3 phases: 0. PoS (this is the one that’s coming very soon) 1. Sharding of data, but not of computation (that is, the sharded chain will *include* ~2 MB/sec of data, but it will just be dumb data blobs, not txs) 2. Sharded tx processing

      Currently, we have ~15-45 TPS. Rollups offer a ~100x increase in throughput. Sharding offers a ~64x increase. These two stack multiplicatively; rollups *on top of* sharding offer a ~6400x (!!) increase in throughput.

      But the roadmap has an interesting unintended artefact: sharded applications by themselves need phase 2. But sharded rollups only need phase 1, because rollups use the chain only for data, not for computation. So we will have all the tools we need for 6400x throughput quite soon!

      So it’s not “rollups instead of sharding”, it’s “rollups on top of sharding”. That said, rollups are already here or coming soon even before sharding, and rollups without sharding still offer that 100x increase in throughput. So get on a rollup today!

      Meltem Demirors@Melt_Dem
      are #Bitcoin markets getting boring? in our latest @CoinSharesCo perspectives, our trading desk covers declining volatility, what’s happening with derivatives, and where bitcoin might go in the short term…
      check it out: coinshares.com/insights/coins…