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CoinDesk Crypto

Reflation-Trade Rethink Keeps Bitcoin Under Pressure

CoinDesk Crypto
5 years 3 months ago

While bitcoin‘s blockchain data shows signs of green shoots, the macro environment does not appear conducive to a bullish revival.

In particular, the unwinding of the reflation trade – or bets that benefit from a pick up in growth and inflation – might be keeping bitcoin under pressure, analysts say. Evidence for the unwinding comes from a recent slide in bond yields and weak commodity-linked currencies.

“The unwinding of the reflation trade is impacting bitcoin,” Noelle Acheson, head of markets insights at Genesis Trading, told CoinDesk, adding that many investors allocated the cryptocurrency to their portfolio as an “inflation hedge”.

Related: Bitcoin Struggles Within Choppy Range; Could Stabilize at $30K

Reflation refers to an increase in economic activity and inflation after depression or recession. When anticipating reflation, investors typically buy industrial commodities, currencies linked to commodities such as the Australian dollar, shares of economically sensitive companies and perceived inflation hedges like bitcoin, gold. They tend to sell bonds, driving yields higher.

The so-called reflation trade became popular after March 2020, when policymakers worldwide pledged unprecedented monetary and fiscal stimulus and raised hopes for a V-shaped recovery in economic activity and inflation.

The trade picked up steam in November after the U.S. election, as evident from AUD/JPY currency pair’s rally from 72 to 84 in the five months to March 2021 and the uptick in bond yields (bond prices and yields move in opposite directions).

Bitcoin also charted a six-fold rally to near $60,000 during that period, moving in lockstep with AUD/JPY. The currency pair might be a better indicator of reflation sentiment than most traditional assets, as the Australian dollar is sensitive to commodity prices and the yen is seen as a haven. Australia is one of the top exporters of copper, iron ore.

Related: Bitcoin Price Seesaws in Tight Range Awaiting Bullish Catalyst

The positive correlation suggests that the reflation theme played a big role in bringing money into the bitcoin market.

Both bitcoin and AUD/JPY peaked in March-April. Bitcoin tanked in May on renewed concerns of tighter regulation and Tesla’s decision to delist the cryptocurrency as a payments alternative, and AUD/JPY has begun losing altitude in recent days, hinting at an unwinding of the reflation trade and flight to safety.

The bond market is signaling the same thing, with longer duration yields falling sharply in recent days. The 10-year U.S. Treasury yield fell to a 4 1/2-month low of 1.25% on Thursday. “The bond market is telling us that inflation could be transitory,” Acheson said.

For now, there is less incentive for investors to pour money into inflation hedges, including bitcoin. The cryptocurrency may face selling pressure if markets continue to unwind reflation trades, leading to a full-blown risk-off sentiment.

“The reflation rethink is beginning to take a toll on equities, and if risk aversion worsens, bitcoin may see a deeper decline,” said Pankaj Balani, CEO of Delta Exchange.

U.S. stock benchmarks dropped on Thursday, with the Dow Jones Industrial Average losing more than 250 points and futures down almost 500 points at one point earlier in the day. Bitcoin also fell by nearly 5% to $32,100.

“Bitcoin is still considered to be an emerging market and is thereby somewhat exposed in periods of intense risk-off, at least for now, despite the longer-term store of value proposition,” Joel Kruger, a currency strategist at LMAX Digital said.

Sentiment appears to have stabilized at press time. Dow futures are currently trading 0.55%, or 180 points, higher, and bitcoin is unchanged on the day near $32,900, according to CoinDesk 20 data.

Also read: Circle CEO Says USDC to Take High Road, But It’s a Long Road 

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Bitcoin Struggles Within Choppy Range, Could Stabilize at $30K

CoinDesk Crypto
5 years 3 months ago

Bitcoin (BTC) remains in a tight range after buyers took profits at the $34,000 resistance level. The cryptocurrency registered a series of lower price highs over the past few days, which suggests sellers are in control. The price decline could stabilize heading into the weekend at around $30,000 support.

Bitcoin was trading at about $32,000 at press time and is down about 2% over the past week.

  • Resistance is seen at the 50-day moving average, which signaled an intermediate-term downtrend since the May sell-off.
  • The relative strength index (RSI) is neutral after rising from oversold levels over the past month. That suggests the price could stabilize within the current range with support at $30,000.
  • Momentum is slowing, however, and the weekly RSI is not yet oversold. There is risk that a break below $30,000 could resume the downtrend since April.
  • For now, buyers could remain active at short-term support, albeit with limited upside given the strong overhead resistance.
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Bitcoin Struggles Within Choppy Range; Could Stabilize at $30K

CoinDesk Crypto
5 years 3 months ago

Bitcoin (BTC) remains in a tight range after buyers took profits near $34,000 resistance. The cryptocurrency registered a series of lower price highs over the past few days, which suggests sellers are in control. The price decline could stabilize into the weekend around $30,000 support.

Bitcoin was trading around $32,000 at press time and is down about 2% over the past week.

  • Resistance is seen at the 50-day moving average which signaled an intermediate-term downtrend since the May sell-off.
  • The relative strength index (RSI) is neutral after rising from oversold levels over the past month. This suggests price could stabilize within the current range with support at $30,000.
  • However, momentum is slowing, and the weekly RSI is not yet oversold. There is risk that a break below $30,000 could resume the downtrend since April.
  • For now, buyers could remain active at short-term support, albeit with limited upside given strong overhead resistance.
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BIS, IMF, World Bank Say Central Banks Must Consider Cross-Border Implications of CBDCs

CoinDesk Crypto
5 years 3 months ago

Central banks should pay more attention to the cross-border use of central bank digital currencies (CBDCs) rather than concentrating mainly on domestic applications, according to the Bank for International Settlements (BIS), the organization that represents most of the world’s central banks.

  • In a paper published Friday alongside the World Bank and International Monetary Fund, the BIS said central banks are focusing on domestic needs, even though the implications of CBDCs go beyond borders.
  • If different jurisdictions’ CBDC projects are coordinated effectively, the “clean slate presented by CBDCs might be leveraged to enhance cross-border payments,” the paper concluded.
  • Cooperation could take various forms, the report said. It could include common standards between CBDCs to allow for interoperability, or the establishment of international payment infrastructures.
  • Additionally, given that CBDCs will roll out at different paces in different jurisdictions, there needs to be interoperability between CBDCs and existing payment systems.
  • Some central banks are already exploring international transfers. The “Multiple Central Bank Digital Currency Bridge” (m-CBDC) project between the central banks of Hong Kong, Thailand, China and the United Arab Emirates, is designed to evaluate the feasibility of a pan-Asian payments network.
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UK Ad Watchdog to Clamp Down on Crypto Marketing: Report

CoinDesk Crypto
5 years 3 months ago

The U.K. Advertising Standards Authority (ASA) plans to tighten its monitoring of crypto marketing.

  • The advertising regulator said it will ramp up steps to identify and remove misleading or irresponsible ads for crypto products, the Financial Times reported Friday.
  • Efforts will particularly focus on online and social media platforms, with companies being warned or required to add disclaimers to their ads.
  • The authority has identified crypto as a “red alert,” said Miles Lockwood, the ASA’s director of complaints and investigations.
  • While the ASA has generally been reactive in this area – responding to complaints from consumers – it will now actively look for potentially misleading online ads using artificial intelligence and web scraping, the FT said.
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UK Ad Watchdog to Clamp Down on Crypto: Report

CoinDesk Crypto
5 years 3 months ago

The U.K. Advertising Standards Authority (ASA) is to tighten its monitoring of crypto marketing.

  • The advertising regulator said it will ramp up steps to identify and remove misleading or irresponsible ads for crypto products, the Financial Times reported Friday.
  • Efforts will particularly focused on online and social media platforms, with companies being warned or required to add disclaimers to their ads.
  • The authority has identified crypto as a “red alert,” said Miles Lockwood, the ASA’s director of complaints and investigations.
  • While the ASA has generally been reactive in this area – responding to complaints from consumers – it will now actively look for potentially misleading online ads using artificial intelligence and web scraping, the FT said.
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Crypto Exchange Aggregator OpenOcean Adds Polygon

CoinDesk Crypto
5 years 3 months ago

Cryptocurrency exchange aggregator OpenOcean has connected to the Polygon blockchain after canvassing users over which network to add.

  • Polygon topped the list with almost half of the more than 44,000 votes cast.
  • OpenOcean connects decentralized and centralized exchanges on its supported networks and automatically seeks the best trades.
  • Connection to Polygon means traders will be able to make trades on the network at the best prices with low slippage, an announcement Friday said. OpenOcean will offer as many as 100,000 of its native OOE tokens in the coming weeks to encourage trading on Polygon.
  • OpenOcean expanded to Solana in March this year. Ethereum, Binance Smart Chain, Tron and Ontology were already available on the platform.
  • The aggregator plans to release cross-chain aggregations in the coming weeks to enable trades across different chains.
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Bitcoin Price Seesaws in Tight Range Awaiting Bullish Catalyst

CoinDesk Crypto
5 years 3 months ago

Experts say bitcoin is extending the same old uneventful humdrum of recent weeks, trapped in a narrowing price range while awaiting the next bullish catalyst.

Over the last 24-hours, bitcoin’s price slumped to as low as $32,000 before buyers drove prices to an Asia intraday high of around $33,319. It is currently changing hands for $32,900, CoinDesk data show.

On Thursday, bitcoin broke below initial support at $34,000 as regulatory concerns resurfaced with China’s central bank having issued a warning about stablecoin risk.

Related: Reflation-Trade Rethink Keeps Bitcoin Under Pressure

Prices, though, are still well within a holding pattern that has kept them locked between tightening support and resistance levels.

“I’m watching Coin Days Destroyed (CDD) continue to plummet, and whale wallets slowly accumulate while bitcoin trades in a bound range,” BCB Group CEO Oliver von Landsberg-Sadie told CoinDesk via Telegram.

CDD is Glassnode’s metric measuring economic activity that affords more weight to coins that have not been spent in a long time. The metric is calculated by taking the total number of coins in a given transaction and then multiplying that number by the total number of days developed since those coins were last spent.

“CDD weakens resistance, whale wallet accumulation strengthens support,” Landsberg-Sadie said. “Any real good news will be the tipping point for a breakout that returns to the long-term upward trend.”

Related: Bitcoin Struggles Within Choppy Range; Could Stabilize at $30K

Indeed, the daily chart for bitcoin shows prices have been caught between $36,000 and $31,000 since at least June 21. Meantime, volume among most exchanges, including in regions where large transactions take place, has slumped.

“We have a long way to go to catch up with the Stock to Flow projections,” said Landsberg-Sadie, referring to a model that suggests bitcoin’s price should presently be sitting around $77,900.

How long that will take is anyone’s guess.

“Volumes are still quite thin across most major exchanges,” Blockstream CSO Samson Mow told CoinDesk. “We’ve seen it bounce back quickly each time so I’d expect more of the same until we see some major news pushing us higher.”

Most of the other notable cryptos in the top 20 by market value are also down slightly, with ether classic and internet computer the hardest hit over a 24-hour period.

Equity markets in Asia are mixed with a 50-50 split up or down of about 1% or less.

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Indian Exchanges Unfazed by Current Crypto Bear Market: Report

CoinDesk Crypto
5 years 3 months ago

A drop in trading volumes among cryptocurrency exchanges is not a cause for concern during the current market downturn, digital asset platforms in India are saying.

Business Insider India reported on Friday that exchanges are looking to build up their infrastructure for when the next big boom in crypto rolls around.

A “bear market brings in an opportunity for us to further strengthen security and work on building educational initiatives to bring more awareness around crypto as an asset class,” the report cited Ashish Singhal, CEO of CoinSwitch Kuber, as saying.

Related: Bear Markets Don’t Scare Protocol Developers: CoinDesk 2021 Q2 Review

Other Indian exchanges echoed CoinSwitch’s sentiment, including CoinDCX and WazirX.

The comments come as India’s embattled domestic crypto industry has tussled with the country’s regulators flip-flopping on their stance with the nascent asset class.

To top it off, global flows into the crypto markets in recent months have tapered following a stream of unfavorable news, including China’s crackdown on the industry and renewed skepticism surrounding its energy use.

“Of course, with a strong and clear regulatory framework in place, the entire crypto industry would benefit from the measures and help propel the next growth phase of crypto adoption in our country,” said Sumit Gupta, CEO of CoinDCX.

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Survey Suggests Most Salvadorans Wary of Bitcoin as Legal Tender

CoinDesk Crypto
5 years 3 months ago

A recent survey suggests the majority of El Salvador’s citizens are wary of their president’s push to implement the country’s newly crafted and legislated Bitcoin Law.

Peering into the minds of the country’s people, the survey, conducted by pollster Disruptiva, showed around 54% of respondents viewed the law as “not at all correct,” Reuters reported Thursday.

Around 24% thought President Nayib Bukele’s law was “only a little correct” while only around 20% were in approval of it.

Related: Osprey’s Bitcoin Trust Ups the Ante in Race to Displace GBTC

The poll, which queried 1,233 people July 1-4, also showed 46% knew “nothing” about bitcoin. Almost 65% of respondents said they would not be keen on being paid in the crypto.

Bitcoin will function as legal tender in the country’s economy alongside the U.S. dollar, which has long been used to exchange for goods and services following the replacement of the Salvadoran colón in 2001.

El Salvador’s Bitcoin Law passed through the country’s legislature on June 8 by way of a supermajority. It has drawn the ire from political opponents and critics who say it violates constitutional rights.

The law is set to come into effect on Sept. 7, Bukele announced late last month. Its rollout will be accompanied by $30 in bitcoin for all users, provided they downloaded a compliant and supported e-wallet.

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Miami’s Institute of Contemporary Art Gifted CryptoPunk NFT

CoinDesk Crypto
5 years 3 months ago

Miami’s Institute of Contemporary Art (ICAM) has got its hands on a CryptoPunk non-fungible token (NFT) thanks to a generous donor.

According to a press release on Tuesday, the institute has scooped up CryptoPunk #5293, one of 10,000 unique 24-by-24-pixel icons created in 2017 by Larva Labs.

The donation came by the way of ICAM Trustee Eduardo Burillo. ICAM says the digital collectible is the first NFT to enter a major art museum collection.

Related: ‘Walking Dead’ NFTs to Roam the Metaverse

“CryptoPunk 5293 joins the ICA Miami collection as a work that is truly representative of the cultural zeitgeist and will have historic significance for generations to come.”

As one of the earlier creations in the series of NFTs minted on the Ethereum blockchain by Larva Labs, offers have ranged from $34,000 to $123,000, according to its price history.

Launched in 2014, ICAM opened its new permanent home in Miami’s Design District on Dec. 1, 2017, right around the time when the first CryptoPunks were being crafted.

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Square to Build Bitcoin Hardware Wallet

CoinDesk Crypto
5 years 3 months ago

Square is moving forward with plans to build a bitcoin hardware wallet, executives at the payments company said Thursday.

The company has begun assembling a team to handle the project, said Hardware Lead Jesse Dorogusker in a tweet, emphasizing the product is very much in the drawing-board stage. Nevertheless, he said Square will seek to bring a mobile-friendly, “assisted-self-custody” wallet to a global audience.

“We have decided to build a hardware wallet and service to make bitcoin custody more mainstream,” he said in the tweet. Square CEO Jack Dorsey followed up: “We’re doing it.”

Related: Bitcoin Privacy Wallet Wasabi Lays Out Roadmap for Version 2.0

Square’s status as a mainstream fintech would likely inject new attention into bitcoin custody. It has much wider name recognition than even the best-known hardware builders in the crypto industry. It has carved out a niche in making bitcoin accessible through its Cash App. And Dorsey is himself aligned with the cryptocurrency on philosophical grounds.

Dorogusker did not immediately respond to CoinDesk queries.

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Osprey’s Bitcoin Trust Ups the Ante in Race to Displace GBTC

CoinDesk Crypto
5 years 3 months ago

Osprey Funds is filing to register its Osprey Bitcoin Trust (OBTC) as a Securities and Exchange Commission (SEC) reporting company.

If the U.S. regulator deems the Form 10 filing effective, Osprey would become the second cryptocurrency investment vehicle to become an SEC reporting company, following the Grayscale Bitcoin Trust (GBTC). 

Osprey is part of a crop of new bitcoin funds aimed squarely at the market-leading GBTC before a bitcoin exchange-traded fund (ETF) is approved by the SEC. This includes offerings from Bitwise Asset Management, BlockFi and CrossTower that look to give traditional investors exposure to bitcoin without having to touch the asset itself. 

Related: Market Wrap: Bitcoin Sells Off as Regulatory Concerns Resurface

The Osprey registration would increase transparency and liquidity for the trust, requiring it to file audited financial statements with the SEC. It would also reduce the holding period for OBTC shares from 12 months to six months, putting it on par with GBTC. (Grayscale is owned by Digital Currency Group, CoinDesk’s parent company.)

Also similar to GBTC, Osprey can be accessed directly by accredited investors and indirectly by retail investors via over-the-counter (OTC) trading desks.

OBTC boasts a 0.49% management fee compared to GBTC’s 2% annual fee, but the Osprey fund also has 0.3% in other expenses from services like crypto custody.

Danny Nelson contributed reporting.

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Swedish National Sentenced to 15 Years in Crypto Fraud Case

CoinDesk Crypto
5 years 3 months ago

A Swedish man who swindled more than 3,500 victims out of more than $16 million worth of bitcoin and other payment platforms from 2011-2019 received a 15-year prison sentence for securities fraud, wire fraud, and money laundering charges, according to a release from the United States Department of Justice.

Roger Nils-Jonas Karlsson, 47, was also ordered to forfeit a Thai resort he purchased with the stolen funds and $16,263,820 in restitution.

From 2011 to 2019, when he was arrested in Thailand, Karlsson ran an investment fraud scheme using the name Eastern Metal Securities. Karlsson promised his victims “astronomical returns” on their investments, paid in bitcoin and other online payment methods, tied to the price of gold. Instead, Karlsson kept the money and used it to fund a string of expensive properties and a racehorse.

Related: Korean Authorities Investigate 33 People for $1.48B in Illicit Crypto Transactions

Karlsson pleaded guilty to the scheme in March.

Karlsson’s sentencing is one in a recent series of fraud charges brought by different U.S. agencies against individuals, as regulators attempt to clamp down on illegal activities in the crypto space.

The case against Karlsson was an international joint effort between the Internal Revenue Service (IRS)’s criminal investigations (CI) division, the FBI Legal Attache Office in Thailand, the IRS-CI Attache Office in Hong Kong and the Royal Thai Police Crime Suppression Division.

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Market Wrap: Bitcoin Sells Off as Regulatory Concerns Resurface

CoinDesk Crypto
5 years 3 months ago

Cryptocurrencies traded lower on Thursday as regulatory concerns resurfaced. Bitcoin broke below initial support at $34,000 and is down about 5% over the past 24 hours. The cryptocurrency could stabilize around $30,000, which is the bottom of the month-long trading range. 

There is a lack of a “real catalyst or market-moving events right now,” wrote QCP Capital in a Telegram chat. “We expect volatility to remain under pressure until mid [to] late August.”

“With BTC, we have seen some funds speculate that the lack of narrative combined with lower levels of liquidity on exchanges may lead to a pop in prices if a positive headline is to occur,” wrote Chris Dick, quant trader at crypto trading firm B2C2. 

Latest prices

Related: Osprey’s Bitcoin Trust Ups the Ante in Race to Displace GBTC

Cryptocurrencies:

  • Bitcoin (BTC) $32962.45, -4.68%
  • Ether (ETH) $2157.6, -8.93%

Traditional markets:

  • S&P 500: 4321.07, -0.85%
  • Gold: $1801.8, -0.11%
  • 10-year Treasury yield closed at 1.3%, compared with 1.318% on Wednesday
Regulatory headwinds

Growing concerns from regulators have been weighing on cryptocurrency prices over the past few months. This week, China’s crackdown intensified when the nation’s central bank issued a warning about the risks of stablecoins. 

“Global stablecoins may bring risks and challenges to the international monetary system,” said Fan Yifei, deputy governor of the People’s Bank of China (PBOC) on Thursday. The banker also said the central bank was already taking measures against cryptos.

Related: First Midwest Bank Trust Division Holding 29.5K Shares of Grayscale Bitcoin Trust

In Europe, several countries are proposing forming a new agency to crack down on cryptocurrencies that could potentially be used for money laundering. Concerns also include terrorist financing and organized crime, which should be addressed at the European Union level, according to documents reviewed by Reuters on Thursday. 

Cryptocurrency risks were also reviewed by 15 West African nations during parliamentary meetings on Thursday. 

And in the U.S., Sen. Elizabeth Warren (D-Mass.) gave the Securities and Exchange Commission (SEC) until the end of this month to figure out its role in regulating cryptocurrencies.

Grayscale discount

Some analysts are not convinced that bitcoin could receive a boost from the expiration of investor restrictions on the sale of shares in the Grayscale Bitcoin Trust (GBTC), the world’s largest cryptocurrency fund. (Grayscale is a unit of Digital Currency Group, of which CoinDesk is an independent subsidiary).

“We don’t expect these unlocks on [their] own to have significant impact on the overall market outside of GBTC itself,” QCP Capital wrote in a Telegram chat.  

“Most of the large institutional positions who had subscribed in-kind before have already been unlocked earlier, and they have held off selling at the current discounted price.”

Flows shifting from stablecoin cash to crypto

The stablecoin supply ratio (SSR), which measures the relationship between bitcoin supply and stablecoin supply, is stabilizing after a sharp decline from the January peak.

“A low SSR implies high quantities of stablecoins on the sidelines – or more buying power to purchase risk-on digital assets,” wrote David Grider, strategist at Fundstrat, in a Thursday newsletter.

SSR shows that flows have shifted from bitcoin to stablecoins for most of the year, but recently bottomed out. This could point to investor confidence in bitcoin’s price direction as stablecoin cash is put to use.

Circle to go public

​​Circle, operator of USD coin, the world’s second-biggest stablecoin, announced it is listing on the New York Stock Exchange via an acquisition by Concord, a special purpose acquisition company, or SPAC, led in part by former Barclays CEO Bob Diamond. The deal values the crypto financial services firm at $4.5 billion. 

The Boston-based firm generates income in three ways, according to its investor presentation: from transaction fees on USDC and interest earned on its reserves; transaction and treasury services (TTS); and SeedInvest, the equity crowdfunding platform it purchased in 2019.

Jeremy Allaire, CEO of Circle, wrote in a tweet that the transformation from a private to a public company “creates an opportunity for Circle to also provide significantly more transparency about the business we are building around USDC, and about the reserves that back USDC.”

USDC has grown to about $25 billion outstanding from less than $1 billion a year ago, while an increasing number of investors have demanded more insight into assets backing the stablecoins. 

Altcoin roundup
  • Circle losses from email fraud: Circle lost over $156 million on its blockbuster buyout and subsequent jettisoning of the crypto exchange Poloniex, the payments company revealed Thursday. The company also lost another $2 million to email fraudsters in an “incident” that occurred last month.
  • Terrorists hold crypto: Israeli officials have moved to seize potentially millions of dollars in cryptocurrency from addresses it says are controlled by Hamas. The wallets, 84 in all, hold a mix of cryptocurrencies including BTC, DOGE , ADA , XLM , XRP, ETH and others.
Relevant news Other markets

All digital assets on the CoinDesk 20 ended lower on Thursday.

Notable losers as of 21:00 UTC (4:00 p.m. ET):

polkadot (DOT) -11.25% 

the graph (GRT) -9.9%

uniswap (UNI) -9.01%

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First Midwest Bank Trust Division Holding 29.5K Shares of Grayscale Bitcoin Trust

CoinDesk Crypto
5 years 3 months ago

First Midwest Bank Trust Division has reported holding 29,498 shares of Grayscale Bitcoin Trust as of June 30, according to a Securities and Exchange Commission (SEC) filing.

  • According to the 13F SEC filing, the Joliet, Ill.-based bank purchased one lot of 20,655 shares and another lot of 8,843 shares of the Grayscale Bitcoin Trust.
  • First Midwest Bank Trust Division has $14 billion of assets under management and provides fiduciary, investment and private banking services to individual, corporate and governmental clients. It is the third largest independent, Illinois-headquartered bank.
  • Grayscale is a unit of Digital Currency Group, of which CoinDesk is an independent subsidiary.

Read more: Grayscale ‘Unlockings’ Poses Downside Risk to Bitcoin Price, JPMorgan Says 

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Gryphon Digital Mining to Buy 7.2K S19J Pro Antminers From Bitmain for $48M

CoinDesk Crypto
5 years 3 months ago

Bitcoin mining company Gryphon Digital Mining has signed an agreement to purchase 7,200 Antminer S19J Pro mining machines from Bitmain Technologies for $48 million.

  • Gryphon Mining said Bitmain is scheduled to deliver 600 miners monthly with the first delivery starting next month.
  • The S19J Pro Antminer has a maximum hashrate of 100 TH/s combined, with an energy efficiency ratio of 29.5 J/TH, and an expected life cycle of over five years.
  • Most recently, Gryphon Mining entered into a merger agreement with Nasdaq-listed Sphere 3D (NASDAQ: ANY), a data management company.
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USDC Is Only Circle’s Second-Biggest Business, SPAC Filing Shows

CoinDesk Crypto
5 years 3 months ago

Most of the conversation about Circle revolves around USD coin (USDC), the stablecoin it created in collaboration with Coinbase.

But according to an investor presentation released with Thursday’s announcement that Circle would go public using a special purpose acquisition company (SPAC), the company has three lines of business, all generating growing revenue. Of those, USDC is only the second-biggest contributor to the top line. 

Circle has been a mainstay of the more corporate and institutionally focused side of the cryptocurrency industry. Started by Jeremy Allaire and Sean Neville as a peer-to-peer payments company that once had a strong bitcoin orientation, it has evolved into an infrastructure company supporting much of the blockchain industry, and that infrastructure work appears to be its strongest area for revenue growth.

Related: Market Wrap: Bitcoin Sells Off as Regulatory Concerns Resurface

The Boston-based firm generates income in three ways: from transaction fees on USDC and interest earned on its reserves; transaction and treasury services (TTS); and SeedInvest, the equity crowdfunding platform it purchased in 2019.

Its transaction and treasury services are probably the least understood and least detailed part of its offerings. “Circle Accounts and API services provide companies with a comprehensive suite of payments and treasury services,” the investor presentation says.

The presentation lists Dapper Labs, Compound Labs and FTX among the TTS business’ clients. 

The slide deck does not give prior-year results, but it estimates that Circle will generate $115 million in revenue in 2021, but end the year with a $76 million loss.

Related: Circle CEO Says USDC to Take High Road, But It’s a Long Road

Of those revenues, it expects $40 million to come from USDC, $65 million to come from TTS and $10 million from SeedInvest.

The company also projects $76 million in earnings before interest, taxes, depreciation and amortization (EBITDA) on $886 million in total revenue across the three business segments by 2023. Of that, it expects TTS to be by far the largest line of business.

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Circle CEO Says USDC to Take High Road, But It’s a Long Road

CoinDesk Crypto
5 years 3 months ago

With his company on the cusp of going public, Jeremy Allaire – CEO of Circle, operator of USDC (USDC), the world’s second-biggest stablecoin – has vowed to make his company “the most public and transparent operator of full-reserve stablecoins in the market.”

He has a ways to go.

​​Circle announced Thursday that it is listing on the New York Stock Exchange via an acquisition by Concord, a special-purpose acquisition company, or SPAC, led in part by former Barclays CEO Bob Diamond. The deal values the crypto financial services firm at $4.5 billion. 

Related: Market Wrap: Bitcoin Sells Off as Regulatory Concerns Resurface

After the announcement, Allaire wrote in a tweet that the transformation from a private to a public company “creates an opportunity for Circle to also provide significantly more transparency about the business we are building around USDC, and about the reserves that back USDC.”

Allaire made the promise at a time when a growing number of commentators have called for greater insight into the assets backing stablecoins like tether (USDT), the largest in the cryptocurrency category with about $63 billion of assets. No. 2 USDC has grown to about $25 billion outstanding from less than $1 billion a year ago.

Regulators and industry analysts have warned that a loss of confidence in stablecoins could destabilize cryptocurrency markets and potentially even spread to Wall Street.

The issue could take on even more significance if Circle’s projections for its own growth prove accurate: In a presentation Thursday, Circle executives estimated that USDC in circulation could more than double to $83 billion next year and reach almost $200 billion by 2023.

Related: USDC Is Only Circle’s Second-Biggest Business, SPAC Filing Shows

The presentation mentions the word “reserves” only once – to point out that USDC earns “interest income on reserves.”

Circle did include the following line in fine print in a list of “risk factors” on page 45 of the 46-page presentation: “We have obligations to safeguard the assets of our customers, and any failure to do so could negatively impact our business and result in liabilities, regulatory enforcement and reputational harm.”

The company has been issuing monthly “attestation” reports on its assets since 2018. According to those reports, it had been holding all of its customer funds in federally insured U.S. banks until the end of February 2020. In its subsequent attestation report for the month ended March 31, 2020, Circle added the category “approved investments,” without specifying what those were.

Despite mounting inquiries from investors and the media, Circle has not disclosed breakdowns of the “approved investments” or the amount held in them.

During an interview with CoinDesk TV on June 30, Allaire didn’t directly answer questions on what the investments were, though he said there’s a “very narrow set of permissible financial instruments that are able to be held” according to the law. 

“If you look at it, it’s obviously cash. It’s, you know, government treasuries, those types of short-term instruments,” Allaire said. “We don’t break out the actual individual line items in USDC reserves, but what we do is actually publish exactly what we are required to do and we make it very clear that we are holding ourselves to an even higher standard.”

The pseudonymous blogger known as Bitfinex’d, a long-standing critic of tether and stablecoins generally, published a post on Medium on Wednesday chronicling the changes in how Circle has characterized its reserve assets.

“You can’t claim to be transparent if you’re unwilling to be transparent about your reserves,” the post read. “It’s not illegal to show people what you’re holding. You’re holding other people’s money, and other people’s livelihoods and families are dependent on you, and they deserve to know what the hell they’re holding.”

As CoinDesk columnist JP Koning pointed out, Circle is licensed as a money transmitter with 44 state-issued licenses, and regulations on the investment scope for such entities vary from state to state. 

Texas imposed tighter restrictions for those entities to invest only in safe assets, while states such as New York and Connecticut allowed money transmitters to invest in commercial paper and preferred shares of publicly listed companies.

As the stablecoin market grows, it has drawn increasing concerns from regulators and experts for the potential impact on digital assets as well as on traditional markets like stocks and bonds. Stablecoins play a key role in the plumbing of the $1.4 trillion global cryptocurrency market. Traders use them to quickly move dollar value between exchanges in order to take advantage of arbitrage opportunities.

Some traders, analysts and economists have speculated that financial losses at Tether or other stablecoin issuers, or even a crisis of confidence, might trigger a sell-off that could put downward pressure on prices for other cryptocurrencies, including bitcoin.

“Stablecoins will never be as stable as dollars, physical or digital – and may even require a bailout when panic over broken promises spreads,” wrote Marcelo M. Prates, a CoinDesk columnist, central bank lawyer and researcher. 

Raft of warnings

Fan Yifei, a deputy governor of China’s central bank, has voiced concern that stablecoins could pose a risk to the stability of the global financial system.

Eric Rosengren, president of the Federal Reserve Bank of Boston, made similar remarks last month. 

“I do worry that the stablecoin market that is currently, pretty much unregulated as it grows and becomes a more important sector of our economy, that we need to take seriously what happens when people run from these type of instruments very quickly,” Rosengren said. 

Fitch, the bond-ratings firm, warned last week that the rapid growth of stablecoins could have implications for the functioning of short-term credit markets. 

In May, the Federal Reserve published a survey of market contacts finding that brokerage firms, investors, political advisers and academics increasingly see cryptocurrencies and stablecoins as a threat to the stability of the financial system. Global regulators have been studying the potential risks from stablecoins since at least 2019. European Central Bank President Christine Lagarde echoed the concerns last year.  

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Circle Says It Lost $2M to Email Fraudsters in June

CoinDesk Crypto
5 years 3 months ago

Circle Internet Financial lost $2 million to email fraudsters in an “incident” that occurred last month, the payments company said in Thursday regulatory filings.

The “email fraud incident” did not impact customer funds and accounts, and Circle’s “information systems” remained secure, Circle said. It said the unnamed fraudsters stole $2 million in “company-owned funds” in June 2021. 

Circle made the disclosure as part of its preparation to go public through a merger with a special purpose acquisition company. The $4.5 billion payments company is positioning itself to be Wall Street’s highest-profile stablecoin specialty firm.

Related: Market Wrap: Bitcoin Sells Off as Regulatory Concerns Resurface

Circle did not elaborate on the incident in its SEC filings. A spokesperson declined to comment.

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