Top Stories of Last Week

Regulatory

  • SEC hinted Bitcoin market’s volatility may mean it’s not yet ready to support ETF, though it’s monitoring digital asset sector in staff statement published by Division of Investment Management. Note warned that investors in mutual funds that trade Bitcoin futures may be taking on more risk than they’re aware of. SEC staffers will “closely monitor”’ mutual funds’ Bitcoin positions with eye toward ensuring investor protection, analyzing market liquidity, how funds are valuing their holdings, what impacts their positions have on Bitcoin futures and the market itself and assessing whether fraud and manipulation might be influencing price.
  • Tether revealed breakdown of reserves for first time, casting light on backing of USDT. Pie charts provided by Tether states reserves as of March 31, 2021 were composed of 75.85% cash and equivalents, 12.55% secured loans, 9.96% in corporate bonds and precious metals and 1.64% in other investments, including digital currencies. Cash section was further broken out into different components: 65.39% commercial paper, 24.2% fiduciary deposits, 3.87% cash, 3.6% reverse repo notes and 2.94% Treasury bills.
  • Federal Reserve Associate Director Michael Hsu appointed by U.S. Treasury Secretary Janet Yellen as first deputy comptroller and acting comptroller of Office of the Comptroller of the Currency. Hsu was part of supervision and regulation division at Fed. Unclear yet whether he is U.S. President Joe Biden’s pick for full-term comptroller.
  • Indonesia reportedly plans to tax profits on cryptocurrency trades. Plan is still at discussion stage, according to Neilmaldrin Noor, a spokesman at Indonesia’s tax office. Indonesia treats crypto as a commodity for trading but has banned use as payment instrument in country. Proposed income tax on crypto profits is 0.05%, smaller than income tax imposed on stock trades, which is currently 0.1%.

Project Development

  • Block.one launched subsidiary, Bullish Global, with $10 billion in funding. Bullish Global will operate as independent subsidiary under Block.one, and new venture will be focused on launch of crypto exchange called Bullish later this year. Funding includes initial investment from Block.One of $100 million in cash, $9 billion in Bitcoin, $200 million in EOS, and supplemented by $300 million funding round backed by Thiel Capital, Galaxy Digital, Alan Howard and Nomura.
  • Crypto payments startup Simplex being acquired by Canadian payments processor Nuvei. Deal, which is subject to regulatory approval, will be worth $250 million to be paid in cash. Simplex provides users with on-ramp/off-ramp capabilities using debit and credit cards. 
  • Industrial and Commercial Bank of China appears to have quietly allowed public users to activate China’s CBDC wallet inside its mobile app. ICBC users from at least Chengdu can now activate wallets after signing in bank’s mobile app in feature called “Internal Test Wallet,” which has become available for activation by public users without invitation. Additionally, Chinese business media reported that digital yuan module has also become available for some AliPay users, who can now activate digital yuan wallet from Ant Group’s mobile payment app.
  • Diem Association is partnering with Silvergate Bank to launch U.S. dollar-pegged stablecoin. Diem Networks US, a subsidiary of association, will run Diem Payments Network and register as money services business with FinCEN, while Silvergate will be formal issuer of Diem USD stablecoin. Silvergate will also manage reserve backing token. DPN will be permissioned network, allowing only approved participants to transact.

Institutional

  • Citigroup reportedly weighing launching cryptocurrency services amid surge in interest from clients. Trading, custody and financing are all under consideration, according to report by Financial Times citing Itay Tuchman, Citi’s global head of foreign exchange.
  • UBS Group reportedly in early stages of planning to offer digital currency investments to affluent clients, according to Bloomberg report. Bank is exploring several alternatives for offering asset class, and investment offerings would be “small portion” of clients’ total wealth due to volatility, with options include investing through third-party investment vehicles.
  • Investment bank Cowen Inc. said it will offer crypto custody services to hedge funds and asset managers in partnership with Standard Custody & Trust, a unit of digital asset infrastructure firm PolySign. As part of agreement, Cowen took $25 million stake in PolySign as part of PolySign’s $53 million Series B funding round. Cowen was joined in funding round by Blockchain.com and others.
  • DBS Private Bank launched Asia’s first cryptocurrency trust service backed by a bank. DBS is offering clients ability to invest and manage up to four assets through bank’s wholly owned, licensed trust company DBS Trustee. Assets are BTC, ETH, BCH and XRP. Fiat trading pairs on exchange are Singapore dollar, Hong Kong dollar, U.S. dollar and Japanese yen. Bank also offers tokenization of securities and other assets as well as providing bank-grade custody for digital assets.
  • Millennium ManagementPoint72 Asset Management and Matrix Capital Management reportedly all at varying stages of building cryptocurrency-focused trading funds, including using DeFi platforms. “Point72 is standing up a crypto fund. They are probably six months away from launch with a product,” said source in cryptocurrency custody world, adding Millennium and Matrix were also currently hiring operations people.
  • Renaissance Technologies increased exposure to cryptocurrency ecosystem last quarter, amassing largest-ever positions in mining stocks, worth over $140 million in total at end of March, with 1.16 million Riot Blockchain shares ($61.8 million), 1.56 million Marathon shares ($75 million) and 203,672 Canaan shares ($4.2 million).
  • VanEck filed for ether-based ETF that would allow retail and institutional traders to gain exposure to second-largest cryptocurrency by market cap without requiring them to directly invest in it. VanEck intends to work with Cboe BZX Exchange on offering.
  • NYDIG announced CFO of Bridgewater Associates, John Dalby, joined firm as new CFO. Prior to Bridgewater, Dalby was CFO and chief operating officer of D.E. Shaw Renewables Investments.
  • Cboe BZX Exchange filed 19b-4 form, acknowledging support of Wise Origin’s Bitcoin ETF application. Wise Origin, a fund affiliated with Fidelity, first filed for ETF with SEC in March. With Cboe’s filing, SEC has initial 45 days to make decision on ETF application.
  • Tesla CEO Elon Musk said company is discontinuing Bitcoin payments, stating cryptocurrency “cannot come at great cost to the environment.” Statement also included praise for crypto’s “promising future” and promise to investigate less energy-hungry networks than Bitcoin’s.
  • Palantir Technologies announced they are “open for business” when it comes to Bitcoin, according to CFO Dave Glazer. Company has begun accepting crypto as form of payment, and is considering investing in Bitcoin as treasury reserve asset. Glazer did not elaborate on timeline for reserve assets in BTC other than to say Palantir is “thinking about it internally,” and noted Palantir has $151 million in adjusted free cash flow.
  • Bitwise has come to market with ETF that offers investors exposure to companies in cryptocurrency sector, the Bitwise Crypto Industry Innovators ETF, on New York Stock Exchange under ticker “BITQ”. Product aims to track Bitwise’s Crypto Industry Innovators 30 Index, the firm’s list of “pure-play” crypto companies. Companies must have either 75% of income derived from cryptocurrency or 75% of net assets in crypto. Firms with $100 million or more of liquid crypto assets on balance sheet are also included.

Exchanges

  • Huobi Group deploying $100 million into DeFi projects as well as mergers and acquisitions through new consolidated investment arm, Huobi Ventures, a wholly owned subsidiary focused on boosting firm’s investment portfolio. Huobi Ventures also setting up $10 million NFT fund.
  • Binance Holdings Ltd. allegedly facing federal investigation by U.S. Department of Justice and Internal Revenue Service, according to Bloomberg report, with officials specializing in tax and money-laundering investigations probing exchange for unspecified reasons.

Fundraising

  • Crypto exchange Bitso wrapped up $250 million Series C fundraising round led by Tiger Global and Coatue Management. Valuation stands at $2.2 billion and exchange is considered among largest crypto and financial technology firms in Latin America.
  • Crypto-lending startup Babel Finance raised $40 million in Series A funding round led by Zoo Capital, Sequoia Capital China, Tiger Global Management and other investors. Investment will be used to acquire relevant licenses in markets worldwide, including North America and Europe, to offer crypto financial products to investors.
  • Pantera Capital looking to raise $600 million for new fund to invest in early stage tokens, venture equity and liquid tokens. Pantera Blockchain Fund will have a minimum investment of $1 million.  
  • Sienna Network, a privacy-focused, cross-chain DeFi platform, raised $11.2 million in private and public token sale. $10 million came from NGC, Inclusion Capital, Lotus Capital, FBG, SkyVision Capital and others. Sienna is built on Secret Network, a Tendermint-based chain within Cosmos ecosystem that uses privacy-preserving smart contracts.

Defi / NFT

  • DeFi protocol xToken said it suffered exploit by attacker who used flash loans to take $24.5 million. Attacker got away with more than $8 million in xToken’s SNX tokens and more than $6 million in protocol’s BNT tokens.

Other

  • Vitalik Buterin regifted tokens sent to his wallet by creators of Shiba Inu coin (SHIB), dogelon (ELON), Akita Inu (AKITA), mwDOGE (mwDOGE) and OURSHIB (OSHIB), donating coins to India Covid Relief Fund and Gitcoin.

Things to Watch This Week

  • Elon Musk Watch
    • Bitcoin’s bout of weakness brought about by Elon Musk’s tweets last week is continuing even further as we begin this week, with Bitcoin falling to an important support zone found around $42,000. Ironically, this was the resistance level that was broken by Elon’s tweet regarding Tesla’s Bitcoin purchase in February. Elon’s tweets are now must-see events, as they’ve been catalysts for not only the price of Bitcoin, but also Doge and other tokens that are benefiting short-term from the narrative focus on environmentally-friendly methods of consensus. This situation is garnering attention from newcomers in the market, causing volatility in crypto markets that were already on edge along with traditional markets due to inflation fears and geopolitical events. During these unsteady times, it will be important to keep an eye on the news this week, as negative reports could stoke further fear in the market.
  • Binance/Tether Updates
    • Lost somewhat in the commotion of Elon’s actions were reports of an investigation into Binance by the Dept. of Justice and IRS as well as Tether’s release of the breakdowns of reserves backing USDT. Although CZ has downplayed the severity of the situation, the uncertainty of a tax and money-laundering investigation dealing with an exchange the size of Binance is not something that will calm markets until more clarity is given. Additionally, the backlash from Tether’s report is growing, with many pointing to the sparse details that were given in the announcement that consisted of two pie charts. In particular, the concern rests with the majority of Tether’s reserves sitting in “commercial paper,” of which no details were given. It will be important to monitor the developments of both situations throughout the week, as speculation could grow wild unless further information is given. 
  • SBF@SBF_Alameda
    1) How fickle we all can be
    2) For years, we were entertained by @elonmusk. “Here is a meme”, he said, “in which I like bitcoin”. “Yes”, we replied, “this one sparks joy”.

    3) He did not pretend to have loyalty or deference to BTC. Or for that matter, to anything, really. That is fine, we all thought. Deference to the system as it happens to exist is the innovation killer.

    4) Tweets about BTC became tweets about DOGE, and we didn’t bat an eye. The world’s most prominent businessman was tweeting about our industry. If DOGE is what brings him joy, then fuck it, it brings us joy too.
    READ MORE

    Arthur Hayes@CryptoHayes
    Fear Is The Mind-Killer. Which crypto boogiemen conjure red doji’s in your mind?

    READ: bit.ly/3tLVPcX

    Yano@JasonYanowitz
    In 1999, Forbes claimed that the internet “burns up an awful lot of fossil fuels” and sets the world on a dangerous trajectory of energy usage. Imagine if entrepreneurs, investors, and developers had listened to Forbes and stopped building the internet. Source: @veradittakit
    David Gerard @davidgerard
    Tether publishes … two pie charts of its reserves
    davidgerard.co.uk/blockchain/202…
    Does nine lines of text on two pie charts satisfy Tether’s agreement with the New York Attorney General to publish a breakdown of its reserves?
    SpartanBlack@SpartanBlack_1
    Institutions are coming into DeFi If Aave is piloting this, others will follow very quickly. I repeat DeFi Summer 2.0 is here
    cryptobriefing.com/aave-has-priva…

    Ryan Watkins@RyanWatkins_
    Not sure there’s ever been a stronger setup for ETH flipping BTC. In the coming months:
    1) EIP 1559
    2) PoS + ETH 2 Merger
    3) DeFi + NFTs
    4) Institutions announce ETH positions
    5) ESG tailwinds
    Meanwhile unclear catalyst path for BTC. Only a 100% move away.

    I don’t think a flippening is necessarily bearish for BTC btw. BTC and ETH will always have trade-offs that may allow them to co-exist peacefully. But would really go to show that maybe digital store of value market may not be a winner take all market.

    Autism Capital @AutismCapital
    Let’s think this through. Bitcoin has positioned itself to be completely sovereign. What does this mean? It exists independent of whatever is going on around it in the globe. So this means it coexists with the current financial system or whatever comes next. Enter Ethereum…

    Ethereum is attempting to build a brand new financial system. To quote them, “the current system on better rails.” What does this mean? It means all the games we love to play, and more, but this time “decentralized”, meaning, anybody can play worldwide in the same money game.

    Why is this important? Because Ethereum is the separation of BANKING and state, while Bitcoin is the separation of MONEY and state. Meaning, for those who want to play money games (the majority of people), they now have a new global game board to play on with min. gov oversight

    But some people don’t want money games. Those people will use BTC. MONEY outside the system. Note: Bitcoin really *did* want to be a global payment rail, but it couldn’t be done on chain. So it pivoted to preserve the core VALUE of protected money.

    So what does all this mean? It’s likely we’ll have Bitcoin doing its own thing, it will probably have it’s own ecosystem, but as we see now, rely mostly on Ethereum, other blockchains, and third party payment processors to be used, if people even desire to use it for that at all.

    And we’ll have Ethereum. A globally coordinated “trustless” money game that people can use to play all the games of greed that man has invented since Eve first bit into the proverbial Apple. All will exist, with their own communities, own uses, and own cultures. Your choice.

    ₿itcoin Gandalf @BTCGandalf
    1/ @Excellion: “The #bitcoin is bad for the environment narrative has been lurking around for some time. More recently it has come to prominence because of bitcoin’s rise in prominence. This brings along all FUD; Tether, Mining etc.

    2/ the reason why #bitcoin mining is a target for this FUD is because it’s so easy to calculate the energy consumption of the network because it’s transparent. You can see how many THs it is, you can calculate how many machines there are, and how much electricity it would consume

    3/ whereas with the traditional financial system you have a very opaque layer over everything. You just don’t know how much it costs to produce and transport cash from production to bank vaults, atms etc. And how much energy the banking system consumes with data centres,

    4/ offices and bank branches, physical security. It’s a tonne of things that are involved in the operational of the legacy financial system that are not easy to calculate so #bitcoin’s transparency makes it a much easier target.” – @Excellion paraphrased

    Michael Saylor@michael_saylor
    The finance industry is taking crypto mainstream by building #Bitcoin into their insurance, banking, & investment products. @Newsweek says 46 million Americans now own Bitcoin.
    newsweek.com/46-million-ame…

    Santiago Palladino@smpalladino
    There is talk about The Merge, The Flippening, PoW, PoS, ETH2, and a lot of new concepts that can be hard to follow for those outside the crypto space. Let’s go with a thread to explain what these mean and how they are related, and why they are important for crypto 

    Let’s start with PoW, or Proof of Work. PoW is an integral part of Bitcoin, Ethereum, and many other chains. As a consensus algorithm, it’s what allows everyone to agree on what data is on the blockchain.
    ethereum.org/en/developers/…

    For those of you who want to dig deeper, you can read about PoW directly on Satoshi’s original Bitcoin paper. It’s clearly explained, and does not require much of a background to understand!
    READ MORE

    Jeremy Allaire@jerallaire
    1/5 More reality checks re: CBDC. No one wants them. In China, DCEP was built as a response to private sector innovation (Alipay & WeChat Pay), and large SOE banks fighting back with government backing.
    bloomberg.com/news/articles/…

    2/5 It seems that those closest to power (editorial boards, top think tanks and academics) are most enamoured by CBDC, but the actual market is actually like ¯\_(ツ)_/¯

    3/5 Private sector and open source, open network innovation is hurtling the world forward, rebuilding the global economic system in the image of the internet.

    4/5 This reminds me of the mid-1990s when skepticism about the Web and internet as a platform for content, communications and commerce was extraordinarily high, and “thought leaders” were focused on giant private walled gardens (MSN, Time Warner Roadrunner, etc.)

    5/5 Prediction – by the end of this year, the world will have figured out that CBDC is a mirage, that crypto and public chains and private sector innovation is the future, and policy will shift towards public/private cooperation around global stablecoins.

    Alex Krüger@krugermacro
    Bitcoin current macro drivers:
    1. loss of faith in governments
    2. lower rates push speculators out the risk curve
    3. negative real interest rates
    4. inflation
    These are all interconnected, the faces of a four-sided dice.

    1. Loss of faith is self-explanatory and applies to a small fraction of the population who feel governments failed them. This pocket of demand received a boost in 2020. After all Bitcoin is a tail-risk hedge against fiat systems collapsing, a put on central banks without expiry.

    2. The risk curve. Central banks increased liquidity and drove rates lower, pushing speculators further “out the risk curve” (into riskier assets) to achieve higher returns. Bitcoin is such a riskier asset. Higher BTC-risk correlations speak of some of that liquidity finding BTC.

    Image

    3. The economic crisis and central banks actions pushed real yields into negative territory. This makes it costly to hold interest bearing assets and makes assets such as gold more attractive, and likely bitcoin as well, at least for those who see it as digital gold.

    Image

    4. There is no inflation yet, yet higher inflation is likely to materialize. This is not yet priced in by rates markets, but is the talk among many. Inflation pushes real yields lower AND debases the value of cash not held in interest bearing accounts.

    Image

    On a related note: “The best profit-maximizing strategy is to own the fastest horse” Jones, the founder of Tudor Investment Corp, said in a note he entitled ‘The Great Monetary Inflation.’ “If I am forced to forecast, my bet is it will be Bitcoin.”

     

    Edward Snowden@Snowden
    The worst part of cryptocurrency transforming into dragon-level wealth is witnessing good people emotionally devolve into dragons themselves: so intellectually paralyzed by the fear that everyone they see threatens their hoard that they lose sight of the world beyond their cave.

    1) This is such a profoundly misleading TL;DR of a privacy-focused talk that it’s hard to call it anything but intentionally deceptive. 2) To the extent I own crypto (unless and until it has been lost in boating accidents), I own more bitcoin than anything else—but

    …despite the theoretical risk of harming the value of that ownership, I continue to criticize Bitcoin’s (and other cryptocurrencies I hold) failings because the public cost of doing otherwise would be orders of magnitude greater than that individual private gain. Moral compass.

    3) Bitcoin’s disastrous privacy is the “missing stair” of cryptocurrency. Every expert understands it’s a problem, but—as experts—they themselves know how to compensate for the risk in their own personal interactions with Bitcoin, and therefore feel no urgency to actually fix it.

    4) Privacy coins are great, but they’re too small and too easy to smother via regulatory actions like de-listing from exchanges. Only Bitcoin has immunity-via-dominance to delisting. It adopting privacy-by-design instantly normalizes financial privacy. Ultima Ratio Cryptum.

    The central property of cash is fungibility—meaning a dollar spent by a plumber is honored equally to one spent by a sex worker: they are indiscriminable. Adversarial chain analysis of Bitcoin’s public ledger reduces its fungibility over time. Only privacy guarantees fungibility.
    READ MORE

    Ser Jeff Garzik@jgarzik
    1/ Snowden notices part of what’s wrong with #Bitcoin governance and development.

    2/ As I’ve observed over a decade of #Linux development and another decade in #blockchain, crypto and infosec folks often hyper focus on security to the point where people are turned off from the product, or simply stop waiting for a promised future and move on.

    3/ #Bitcoin‘s lodestone is that it’s difficult to build on, and it’s developers are focusing on features unlikely to have a visible impact on most existing or future holders. Fancy, well engineered plumbing which does not really change user outcomes.

    4/ The #Bitcoin crowd is gearing up to celebrate a feature which will be activated in November 2021, yet not fully integrated or absorbed into developer libraries or user-facing software for months or years after that.

    5/ “Never let the MENSA people run the world.” For all the BTC wizards in the room, they miss basics that every community college MBA knows by heart: – Time to market matters. – Build things that people use. – Look at what people do and don’t use in what you built.

    6/ #Bitcoin development expends an enormous amount of energy on tiny, incremental, esoteric technical features that are often entirely speculative as to whether they will actually reach production in end user-facing wallet deployment.

    7/ Most of the practical world has moved on. Stablecoins, new crypto projects, new permissionless financial products happen elsewhere. Even bitcoiners turn to #Ethereum #DeFi, to create interest bearing #Bitcoin products.

    8/ Like HTTPS everywhere, economic #privacy should be a fundamental default in Bitcoin. Devs are pro-privacy, sure, but that’s not translating into consumer facing privacy. See also: well meaning anti-nuke environmentalists prolonged fossil fuel use and pollution for decades.