CoinDesk Crypto

Based on earnings estimates announced Tuesday, nothing else in the financial services industry really compares to Coinbase right now.

Wedded to the rising fortunes of cryptocurrencies themselves, soon-to-list Coinbase expects to make more money in the first quarter of this year than in all of 2020, and has seen an exponential rise in engaged customers.

Coinbase’s revenue for the first three months of 2021 is expected to be $1.8 billion with earnings of about $800 million, compared with $1.3 billion in revenue and earnings of $322 million for all of 2020. Crypto is booming right now, with bitcoin holding its own not far below $60,000.

Related: Chart of the Day: Coinbase Q1 Revenue Compared to Other Exchanges

Ahead of next week’s listing of COIN stock, the obvious question is whether the current quarter is an outlier or, as some stolid crypto believers may be thinking, the new normal.

In this respect, seasoned crypto watchers will recall that Coinbase reported bumper revenue of close to $1 billion in 2017, and close to half of that was booked in December of that year when the price of bitcoin rose to then-all-time highs near $20,000.

Still, when Coinbase does list on April 14, Wall Street will have to sit up and take notice, and also begin comparing the stock to other listed brokerage and investment firms. 

It’s hard to predict how long the crypto industry’s current upswing will last, but it’s fun to compare large listed trading firms with Coinbase, especially because it has been an unusual year for everyone. 

Related: Taproot Activation Debate Settled with a Blockchain ‘Coin Toss’

In fact, 2020 was a huge year for the retail investing industry, thanks to the COVID-19 lockdown, the explosion of interest around WallStreetBets and also large plays like brokerage giant Charles Schwab’s acquisition of rival TD Ameritrade.

Schwab added 15.77 million new clients in the fourth quarter, which includes 14.5 million new brokerage accounts from the TD Ameritrade merger. The merged company now has about 29 million brokerage accounts and handled some $6.69 trillion in client assets at the end of 2020.

Coinbase saw its monthly active users jump from 2.8 million in the fourth quarter of 2020 to 6.1 million in the first quarter of 2021. The overall number of people with Coinbase accounts increased from 43 million last year to 56 million. Total assets on Coinbase’s platform increased from $90 billion to $223 billion, nearly a 150% increase quarter over quarter.

Meanwhile, Robinhood, which added crypto as an asset class to its commission-free trading platform back in 2018, saw its transaction volume double in 2020 (boosted in no small part by WSB-type trading in GameStop and AMC Theatres), and its daily average revenue trades outperformed publicly traded, incumbent brokerage firms like Schwab.

Robinhood, which has over 13 million customers, also offers an interesting comparison with Coinbase in that the brokerage platform has announced its intention to list later this year. An increase in the price of Robinhood shares in secondary market trading could see the app reach a $40 billion valuation, about twice the figure predicted back in December.

When Coinbase debuts on Nasdaq later this month, it’s expected to command a value of about $100 billion. Even based on a conservative value of $300 a share, Coinbase is now worth more than InterContinental Exchange (ICE) Group, the owner of the New York Stock Exchange (NYSE). ICE reported earnings of $2.1 billion in 2020.

The crypto space is understandably in a state of excitement. 

But this could also turn out costly. There’s a good chance Coinbase stock will be driven up in price by Wall Street investors who don’t fully understand crypto cyclicality, and who are probably not considering a possible 50% pullback in bitcoin’s price down the line.

• Coinbase’s First Quarter Report Sends Shockwaves Through Wall Street
• Here’s How the Archegos Debacle May Have Spilled Over to Bitcoin

Tendermint, the team behind the interoperable blockchain ecosystem Cosmos, is building out a decentralized exchange (DEX) with a new acquisition.

The development studio has acquired B-Harvest, a decentralized finance project that has developed on Cosmos since the early days and which runs one of Cosmos’ validator nodes. Tendermint would not disclose all the details and dollar amount behind the acquisition, but it includes a four-year vesting of ATOM tokens.

Tendermint will integrate B-Harvest’s Gravity DEX into Cosmos to facilitate “trustless and permissionless” trades, Tendermint’s CEO Peng Zhong told CoinDesk.

Related: Coinme Launches 300 Bitcoin-Enabled Kiosks in Florida After Securing Financial License

“We started working with B-Harvest in October because we were looking for a team with experience in finance and DeFi to create a decentralized exchange. With the Gravity DEX, it’s designed not just to be a native exchange for ATOM, but an exchange for tokens that use other blockchains, as well,” Peng said.

One of the more ambitious crypto projects, Cosmos is a network hub that connects other blockchains using “bridges.” The network supports both public and private blockchains with the ultimate goal of creating a nexus where all these different blockchains and coins can interact.

Peng said the Ethereum bridge is in testnet and could be live as soon as the DEX launches, while bridges for Bitcoin and other chains would come later. As with Uniswap and other decentralized markets, anyone with the technical savvy will be able to write a contract for the Cosmos blockchain to integrate a coin or trading pair, Feng said.

Tendermint estimates Gravity DEX will be live next month.

• Bitcoin News Roundup for April 7, 2021
• How Coinbase’s Wild Earnings Stack Up Against Normie Financial Firms
• South African Cryptocurrency Exchange iCE3 Goes Into Liquidation

South African cryptocurrency exchange iCE3 has gone into liquidation after it claims to have found “discrepancies” in its balances in March.

In a company announcement posted Tuesday, the exchange said, “We regret to inform you that the platform will not return to operation and that we have been advised to initiate liquidation proceedings.”

iCE3 told customers that withdrawals from the platform have been disabled, and they will be provided with further details on Wednesday. CoinDesk has reached out to iCE3 seeking more information but did not receive a response by press time.

Related: Coinme Launches 300 Bitcoin-Enabled Kiosks in Florida After Securing Financial License

In March, iCE3 shared a blog post urging users to withdraw cryptocurrency holdings from its platform after finding discrepancies in its balances. The exchange said it is still waiting on confirmation of results by the auditing team, and based on the advice of its legal and auditing team, it had suspended deposits and trading in bitcoin and litecoin.

One exchange user emailed CoinDesk complaining his or her cryptocurrency holdings remain locked, and about the lack of communication from the exchange.

“No communication has come from [iCE3], except for blog statements, which tell us nothing about what has happened,” said the exchange user.

• Bitcoin News Roundup for April 7, 2021
• How Coinbase’s Wild Earnings Stack Up Against Normie Financial Firms
• Tendermint Acquisition Takes Aim at New Interoperable DEX for Cosmos

Jamie Dimon, the CEO of JPMorgan, has listed the legal and regulatory status of cryptocurrencies among a list of “serious emerging issues that need to be dealt with.”

• In a letter to shareholders released Wednesday, Dimon describes his view on how aspects of the business are “bogged down in the past” and need to “focus on the future.”
• “There are serious emerging issues that need to be dealt with – and rather quickly,” Dimon wrote, listing the legal and regulatory status of cryptocurrencies alongside the growth of shadow banking, cybersecurity risks and ethics around artificial intelligence (AI).
• As have several of its Wall Street peers, JPMorgan has warmed to cryptocurrencies in recent months.
• In November, Dimon acknowledged that “very smart people” are buying into bitcoin, although it’s still not his “cup of tea,” reiterating his longstanding belief that governments will ultimately regulate it more heavily.
• A report released by JPMorgan last week set a long-term price target for bitcoin of $130,000.

See also: Wall Street Embrace of Crypto Grows Closer as Employees Argue on Its Behalf: CNBC

• Coinme Launches 300 Bitcoin-Enabled Kiosks in Florida After Securing Financial License
• Bitcoin News Roundup for April 7, 2021
• How Coinbase’s Wild Earnings Stack Up Against Normie Financial Firms
• Tendermint Acquisition Takes Aim at New Interoperable DEX for Cosmos

Sellers remained active during Asia hours as bitcoin (BTC) trades below its 50-period volume-weighted moving average on the four-hour chart. Resistance around $60,000 has set the tone for profit taking, with lower support seen around $54,000.

• BTC has traded in a range between $50,000 and $60,000 over the past month and has since retraced about 20% of the rally from the March 25 price low.
• Volume has significantly slowed over the past two weeks, which is typical of a consolidation phase and could lead to sharp price moves.
• On the daily chart, trading volume peaked on January 11 and has since declined despite the continued price rise. This indicates slowing upside momentum and is consistent with lower highs on the 14-day relative strength index (RSI) explained in previous posts.
• Selling pressure should continue to cap upside moves on intraday charts as buyers await stronger support around $54,000 and $50,000.

• Crypto Whale Watching Could Become a Thing at Ukrainian Town Council Meetings
• Bitcoin Drops 6% in Korea, Shrinking the ‘Kimchi Premium’
• Ripple Granted Access to SEC Documents on Bitcoin, Ether in Ongoing XRP Fight
• Final Taproot Activation Specifics Chosen With a Bitcoin Blockchain ‘Coin Toss’

Ukrainian public officials reported owning 46,351 bitcoin, or US$2.67 billion at Wednesday’s price, according to the report by a local data analytics service Opendatabot.

Civil servants in Ukraine must declare all the property they own or use, and some chose to include crypto in their declarations, although the country currently is not regulating digital assets. A draft bill establishing the legal status of cryptocurrencies is still awaiting passage by the Ukrainian national parliament.

Still, out of 791,872 public officials who submitted their 2020 declarations in March, 652 reported owning bitcoin, Opendatabot said. Most crypto holders are members of city councils, followed by the staff of the national police, ministry of defense and the general prosecutor’s office, the service reported. Members of the national parliament, Verkhovna Rada, accounted for only 3.7% of high-ranking crypto holders.

Related: Coinme Launches 300 Bitcoin-Enabled Kiosks in Florida After Securing Financial License

The most crypto-rich civil servant in Ukraine, at least officially, is Vyacheslav Mishalov, a member of the Dnipro city council. Mishalov reported owning 18,000 bitcoin (BTC), worth more than US$1 billion, for the second year in a row. Mishalov was followed by Petro Lensky, first secretary of Ukraine’s embassy in Vietnam, with 6,528 BTC in his vault. After him came Alexander Urbansky, deputy chairman of the Odessa regional council, who’s got a trove of 5,328 BTC.

The number of Ukrainian public officials investing in crypto is growing, Opendatabot said. While in 2018 only 71 officials owned cryptocurrency, in 2019, that number had grown to 424, and in 2020 653 officials reported owning crypto. Most people reported owning bitcoin (61%), while other reported holding ether (24%) and smaller altcoins including litecoin, cardano, stellar and bitcoin cash.

Watching the “whales,” or large crypto holders, may become a new sport for Ukraine. CoinDesk previously wrote about a 19-year-old city council member in a Ukrainian town of Kramatorsk who is not only the youngest lawmaker in his city but is also a monero whale who owns millions of dollars worth of XMR.

Ukraine is the world’s leader in cryptocurrency adoption by its population, using crypto for their various needs, according to Chainalysis.

Related: Bitcoin News Roundup for April 7, 2021

Read also: Why Ukraine Is Ripe for Cryptocurrency Adoption

• How Coinbase’s Wild Earnings Stack Up Against Normie Financial Firms
• Tendermint Acquisition Takes Aim at New Interoperable DEX for Cosmos

Ukrainian public officials reported owning 46,351 bitcoin, or US$2.67 billion at Wednesday’s price, according to the report by a local data analytics service Opendatabot.

Civil servants in Ukraine must declare all the property they own or use, and some chose to include crypto in their declarations, although the country currently is not regulating digital assets. A draft bill establishing the legal status of cryptocurrencies is still awaiting passage by the Ukrainian national parliament.

Still, out of 791,872 public officials who submitted their 2020 declarations in March, 652 reported owning bitcoin, Opendatabot said. Most crypto holders are the members of city councils, followed by the staff of the national police, ministry of defense and the general prosecutor’s office, the service reported. Members of the national parliament, Verkhovna Rada, accounted for only 3.7% of high-ranking crypto holders.

Related: Bitcoin Weakens Amid Slower Volume; Support Around $54K

The most crypto-rich civil servant in Ukraine, at least officially, is Vyacheslav Mishalov, a member of the Dnipro city council. Mishalov reported owning 18,000 bitcoin (BTC), worth more than US$1 billion, for the second year in a row. Mishalov was followed by Petro Lensky, first secretary of Ukraine’s embassy in Vietnam, with 6,528 BTC in his vault. After him came Alexander Urbansky, deputy chairman of the Odessa regional council, who’s got a trove of 5,328 BTC.

The number of Ukrainian public officials investing in crypto is growing, Opendatabot said. While in 2018, only 71 officials owned cryptocurrency, in 2019, that number had grown to 424, and in 2020 653 officials reported owning crypto. Most people reported owning bitcoin (61%), while other reported holding ether (24%) and smaller altcoin, like litecoin, cardano, stellar lumens, bitcoin cash.

CoinDesk earlier wrote about a 19-year old city council member in a Ukrainian town of Kramatorsk, which is not only the youngest lawmaker in his city but also a monero whale owning millions of dollars of XMR, monero’s native token.

Ukraine was named as the world’s leader in cryptocurrency adoption on the ground level, by Chainalysis meaning that more people than anywhere are using crypto for their various needs.

Related: Bitcoin Drops 6% in Korea, Shrinking the ‘Kimchi Premium’

Read also: Why Ukraine Is Ripe for Cryptocurrency Adoption

• Ripple Granted Access to SEC Documents on Bitcoin, Ether in Ongoing XRP Fight
• Final Taproot Activation Specifics Chosen With a Bitcoin Blockchain ‘Coin Toss’

Bitcoin’s Kimchi premium, or the difference between prices on South Korean exchanges and other global avenues, declined on Wednesday as the cryptocurrency lost ground against the Korean won (KRW).

• The price gap narrowed to 16% during the European hours, as bitcoin fell by over 6% to KRW 70,412,000 on Upbit exchange – the largest in South Korea as per trading volumes, according to data source CoinGecko.
• The price pullback happened after the exchange suspended KRW withdrawal and deposit service at 14:47 local time (5:47 AM UTC).

• “Bitcoin dropped after Upbit announced withdrawal suspension,” Ki-Young Ju, CEO of the Korea-based blockchain analytics firm CryptoQuant told CoinDesk in a Telegram chat.
• “But there’s also the possibility that someone figured out how to arbitrage the Kimchi premium opportunity,” Ju added.
• The Kimchi premium had swelled to a three-year high of 22% early today in a sign of retail frenzy.
• However, executing a classic arbitrage strategy by purchasing bitcoin on western exchanges and dumping on Korean platforms is quite challenging because local exchanges only allow trading in KRW pairs, as discussed on Tuesday.
• Some whales have been depositing coins on Korean exchanges, as tweeted by Ju. Investors typically move coins to exchanges when they want to liquidate their holdings.
• Analysts say a potential dump in South Korea may not significantly impact bitcoin’s global average, as the Asian giant now contributes less than 2% of the worldwide trading volume versus 8% in 2017.
• Bitcoin is currently trading near KRW 73,000,000 on Upbit and changing hands at $57,500 on major western exchanges – down 1% on the day, as per CoinDesk 20 data.

Also read: Market Wrap: Bitcoin Futures Premium Rises Again Despite Bitcoin’s Relatively Flat Performance

• Bitcoin Weakens Amid Slower Volume; Support Around $54K
• Crypto Whale Watching Could Become a Thing at Ukrainian Town Council Meetings
• Ripple Granted Access to SEC Documents on Bitcoin, Ether in Ongoing XRP Fight
• Final Taproot Activation Specifics Chosen With a Bitcoin Blockchain ‘Coin Toss’

Ripple won the right on Tuesday to peek into the Securities and Exchange Commission’s (SEC) internal communications on how it determines whether a cryptocurrency is a security.

The San Francisco-based cryptocurrency firm is hoping to find evidence the regulator defined XRP, at some point, as being similar to bitcoin and ether, two cryptocurrencies largely accepted as non-security instruments, according to a report by Law360.

The distinction is important as the SEC is alleging that Ripple and two of its executives violated U.S. securities laws in selling XRP to retail consumers. The case may lead to a court ruling on how and when a cryptocurrency is considered a security that other startups in the U.S. could use as informal guidance in the future.

Related: Final Taproot Activation Specifics Chosen With a Bitcoin Blockchain ‘Coin Toss’

The eight years taken by the regulator to file suit against Ripple is also another angle being pushed by the cryptocurrency firm as it attempts to strengthen its argument in the five-month-old case.

Granted by U.S. Judge Sarah Netburn in the Southern District Court of New York, the motion affords Ripple access to the SEC’s minutes and memos “expressing the agency’s interpretation or views” on cryptocurrency, which Netburn said are likely discoverable. Netburn also said Ripple’s discovery was a “high-stakes” win, according to the report.

One of Ripple’s lawyers, Mathew Solomon, argued it could be “game over” for the entire case should Ripple catch the SEC as having privately stated XRP is more like a currency than a security because that would place XRP outside the regulator’s jurisdiction.

“I’m going to grant in large part the defendants’ motion,” said Netburn. As part of the ruling, staff-to-staff email communications will not have to be produced.In December, the SEC sued Ripple, its CEO Brad Garlinghouse and Executive Chairman Chris Larsen alleging they violated federal securities laws in selling $1.38 billion worth of XRP to the general public. The defendants are arguing they haven’t done anything wrong.

• Goldman’s Ex-Head of Digital Assets Joins Talos: Report
• Q1 2021: Institutional Growth Slows Down, Retail Ramps Up
• Japan’s BitFlyer Has a New President – Again

Bitcoin developers couldn’t settle on the specifics of Taproot’s activation, so they used a “coin toss” on the Bitcoin blockchain this Tuesday to wrap up activation discussions that began a year ago.

According to blockchain data pulled from this journalist’s Bitcoin node, the result of the coin toss has determined that Taproot’s activation timeline will be measured using median time passed (MTP) instead of block height.

Taproot – an upgrade that will enrich Bitcoin’s smart contracts – is all set to go using the “Speedy Trial” activation method outlined a month ago. Today’s coin toss settled a dispute, though, over how the Bitcoin blockchain will measure the time that has passed between when the upgrade is released and when it will “time-out.” 

Related: Ripple Granted Access to SEC Documents on Bitcoin, Ether in Ongoing XRP Fight

There were two options up for debate: one using “block height,” which chooses a timeout that triggers once a specific block is mined and the other using MTP, which chooses the timeout based on real-world time derived from block data.

The coin toss occurred on block 678079 and the result landed on MTP. Following the result, Bitcoin Core contributor Andrew Chow removed his pull request for a block height-based scheme.

MTP means that, when Taproot’s code is shipped, miners and node operators will have a time period of exactly three months to upgrade to Taproot before a timeout period is reached. 

If miners representing 90% of Bitcoin’s hashrate upgrade in this timeframe, then Taproot is “locked in” and it will activate three months after this lock-in. Assuming Taproot is shipped by May, this means the upgrade would be fully functional on Bitcoin’s blockchain no later than November.

Related: Goldman’s Ex-Head of Digital Assets Joins Talos: Report

“We have two good options, and coinflip is people agreeing to put aside minute preferences on two acceptable options for the big picture,” Bitcoin Core contributor Jeremy Rubin wrote in a Bitcoin devlist email. “As such, I think that a coinflip is appropriately used in this circumstance, although I recognize the sentiment that some may feel it’s treating development a little too *flippantly*.”

• Q1 2021: Institutional Growth Slows Down, Retail Ramps Up
• Japan’s BitFlyer Has a New President – Again

Goldman Sachs’ former Head of Digital Asset Markets is now head of strategy at Talos, a crypto-trading engineering firm, according to a published report.

• Justin Schmidt left Goldman late last year as the financial giant was preparing to offer investment vehicles for digital assets to clients, Bloomberg said, noting that Goldman took a stake in BitGo during Schmidt’s time there. 
• Talos, which is based in New York, provides technology to the financial world that supports digital assets trading from price discovery through settlement. It was founded a year and a half ago.
• Part of Schmidt’s remit will be to help the company expand internationally, the report said.
• With the move, Schmidt has become the latest Wall Streeter to leave a traditional finance firm to join one fully on the crypto side of things.

• Q1 2021: Institutional Growth Slows Down, Retail Ramps Up
• Japan’s BitFlyer Has a New President – Again
• Crypto Won’t Be Money Until IRS Accepts It for Taxes, Top Forex Strategist Says
• Former BitMEX CEO Hayes Surrenders to Face US Charges: Report

Tokyo-headquartered global cryptocurrency firm bitFlyer has a new president – for the third time in two years. 

According to an announcement made by bitFlyer, the new president, Goldman Sachs alum Kuniyoshi Hayashi, replaced outgoing president Kimihiro Mine on March 30, 2021. 

bitFlyer is the leading digital assets exchange in Japan, with over 2.5 million users worldwide, and is licensed in Japan, the U.S. and the E.U.  

Related: Goldman’s Ex-Head of Digital Assets Joins Talos: Report

The firm first replaced its co-founder and president Yuzo Kano with Yoshio Hirako in January 2019. Five months later, president Hirako was replaced by Mine.

In addition to the appointment of Hayashi as the new president last week, bitFlyer also introduced two new members to the board of directors: Masaaki Seki was promoted to director, while Joel Edgerton, chief operating officer at bitFlyer USA, became the first non-Japanese director of the global firm. 

This latest change in management signaled instability within the firm, prompting Asian business publication Nikkei to observe that bitFlyer was wandering off course. 

But Edgerton told CoinDesk that the latest company reshuffle was part of bitFlyer’s larger strategy to go global, and that the timing for the changes was not random. 

Related: Q1 2021: Institutional Growth Slows Down, Retail Ramps Up

“In Japan, the fiscal year ends at the end of March. Whenever we make changes, it tends to be at this time… So the timing’s actually normal for us and discussions have been going on for quite a while internally,” Edgerton said. 

According to Edgerton, bitFlyer founder Kano stepped away in 2019 so that the firm could quickly respond to the regulatory changes taking place in Japan’s crypto space. 

The country’s financial authority FSA doubled down on regulations for crypto exchanges in 2018 after Japanese digital assets exchange Coincheck suffered the largest cryptocurrency hack in history, confirming that around $533 million was stolen from the exchange. Soon after the incident, the FSA temporarily suspended two crypto exchanges (including Coincheck) and expanded the team that handled exchange licensing.  

“The Japanese government started going to different cryptocurrency companies basically telling them, ‘okay, you guys need to be more like traditional finance companies, and you need to have this type of structure and regulations and controls in place.’ So we had to make a change to do that,” Edgerton said referring to the management shuffle in 2019. 

But now that the firm is licensed and fully compliant with local regulations, bitFlyer is looking to focus on expanding its global influence, Edgerton says. He added that bitFlyer’s hyperfocus on the Japanese market has created a strong crypto payments system in the country that can be used as a model elsewhere.  

“You can go into a bookstore in Japan, and get loyalty points linked to your bitFlyer account and crypto. You can also go into electronic stores and buy electronics using crypto in Japan. So these types of real-world use cases that are not really tied to trading, per se, are things we also want to roll out to the rest of the world,” Edgerton said.

The new president, Hayashi, a University of Tokyo graduate who worked at Goldman Sachs Japan has “international experience” according to Edgerton, which he says is a key point, adding that his own addition to the board of directors (as the first non-Japanese executive) signals how serious bitFlyer is about establishing itself as a global entity. 

Although Kano – also a University of Tokyo and Goldman Sachs alum – is no longer president of the firm, he remains chief executive officer of bitFlyer USA and chairman of the European branch of the company. 

• Crypto Won’t Be Money Until IRS Accepts It for Taxes, Top Forex Strategist Says
• Former BitMEX CEO Hayes Surrenders to Face US Charges: Report

Just because bitcoin has quintupled in value over the past few months, that doesn’t mean the U.S. dollar is about to get knocked off its perch as the world’s leading currency, according to a top foreign exchange analyst.

For one thing, central banks around the globe own roughly $3.1 trillion worth of U.S. Treasury debt that is denominated in greenbacks, and so have little incentive to let the dollar lose power to a cryptocurrency, said Marc Chandler, chief market strategist at Bannockburn Global Forex.

“What stands behind [the U.S. dollar] is something that the crypto space has not yet innovated and that is that central banks hold their dollars in Treasury bonds — not just in dollars but they have these Treasury bonds behind them,” Chandler said on CoinDesk TV’s “First Mover” show Tuesday.

Related: Japan’s BitFlyer Has a New President – Again

Chandler, whose storied career included stints as the top FX strategist at such leading financial institutions as Mellon Bank, HSBC and Brown Brothers Harriman, said his view is in line with those of regulators. He noted that Federal Reserve Chair Jerome Powell recently remarked that he sees cryptocurrencies as a potential substitute for gold.

But as a replacement for the dollar? Not so much.

“It doesn’t look like it’s really money,” said Chandler, “meaning a means of exchange, a store of value, and a unit of account.”

However, he said there’s one way he could change his mind.

Related: Former BitMEX CEO Hayes Surrenders to Face US Charges: Report

“For me, the smell test of all this will be when tax officials, when the IRS says, ‘Yes, you can pay your taxes in crypto.’ Taxes seem to be the origin of money in many ways,” said Chandler. “When the IRS or some other major tax authorities say you can pay your taxes in crypto, then I’ll believe it’s money.”

While Chandler doesn’t classify himself as a dollar bull, he doesn’t see it losing its top spot, notwithstanding a recent weakening in exchange rates against foreign currencies.

“We’re having a correction,” he said. “The third big dollar rally since the Bretton Woods [Agreement of 1944] is over, but I think you can have a cyclical decline of the dollar without it changing its fundamental position in the world economy.”

Although central banks in countries such as China may be looking at digitizing their currencies, not much would threaten the greenback’s position, according to Chandler.

On the one hand, “a digital central bank currency increases what we call ‘the C3’: command, control and communication,” he said. “It allows the Chinese government to better monitor the flows of money…. It will help curb tax evasion, for example. It will help curb the underground economy, which in some countries is very substantial. At the same time, it will help bank people who are not banked yet.”

However, “I’m still not convinced that because you can have a digital chip on your cell phone that really only works in the Chinese system, that can take your digital RMB and buy something, like in the United States, or buy or settle or even trade with” a digital yuan, he said. “It’s possible at some point in the future, but it doesn’t seem likely anytime soon.”

Thus Chandler said he’s “not sure how much of a race this is or how urgent it is. It doesn’t look like Fed officials, while they are studying it, I don’t see them wanting to necessarily be the first mover.”

Nonetheless, “I think also there’ll be a two-pronged system, at least the way the U.S. and Western Europe are conceiving it, where you’d have the digital currency not really disintermediating banks; they’ll strengthen banks.”

• Blockchain Association Says It Will Join Fidelity, Coinbase and Square in Efforts to Shape Crypto Regulation
• Chart of the Day: Altcoins in Charge as Bitcoin Dominance Nears 2-Year Low

Former BitMEX CEO Arthur Hayes surrendered to U.S. authorities in Hawaii to face charges he failed to take proper steps to safeguard the cryptocurrency exchange he co-founded from being used for money laundering, according to a published report.

• Hayes surrendered six months after prosecutors in New York accused him and his BitMEX co-founders of conspiring to get past U.S. laws requiring the implementation of money-laundering controls, Bloomberg said in its report.
• Hayes was released on $10 million bond pending court proceedings in New York, the report said.
• According to court documents released last month, the surrender was planned for April 6.
• Last October, BitMEX and co-founders Hayes, Samuel Reed and Ben Delo were charged by the U.S. Department of Justice with violating the Bank Secrecy Act and conspiracy to violate the act.
• Each charge faces a maximum sentence of five years in prison.

• Japan’s BitFlyer Has a New President – Again
• Crypto Won’t Be Money Until IRS Accepts It for Taxes, Top Forex Strategist Says
• Blockchain Association Says It Will Join Fidelity, Coinbase and Square in Efforts to Shape Crypto Regulation
• Chart of the Day: Altcoins in Charge as Bitcoin Dominance Nears 2-Year Low

• Bitcoin (BTC) was trading around $58,246.41 as of 20:00 UTC (4 p.m. ET). Slipping 1.31% over the previous 24 hours.
• Bitcoin’s 24-hour range: $57,421.85-$59,484.20 (CoinDesk 20)
• BTC trades below its 10-hour and 50-hour averages on the hourly chart, a bearish signal for market technicians.

Recently, bitcoin’s price movements have been, well, less exciting than the triple- and sometimes quadruple-digit-percentage gains witnessed in alternative cryptocurrencies, or “altcoins.” 

The No. 1 cryptocurrency has traded in a narrow range between $56,552 and $60,102 over the past week, while ether, the native token of the Ethereum blockchain, has climbed more than 20% to a new all-time high over $2,100.

But in the past couple weeks, traders in bitcoin derivative markets have been ratcheting up their bets on future gains. 

Related: Japan’s BitFlyer Has a New President – Again

The annualized futures premium rate – a gauge of bullish bets – has averaged 22% to 25% on retail-focused derivatives exchanges like FTX, BitMEX, Deribit and Binance. That compares with about 13% on the Chicago-based CME exchange, which tends to be more focused on institutional investors.  

An increased futures premium – the spread between futures prices and spot-market prices – indicates that more retail traders are looking at upside exposure of the market despite bitcoin’s relatively flat performance lately.

“Traders are expecting higher prices and taking on long positions,” Bendik Norheim Schei, head of research at Arcane Research, told CoinDesk.

But with the increasing bullishness comes a higher risk of a snap-back: the bitcoin market experienced a total $27.5 billion worth of long position liquidation during the first quarter of 2021, reflecting the huge amount of leverage in the markets built up as the largest cryptocurrency rallied into the new year, as noted by Arcane Research in its weekly newsletter on April 6.

Related: Crypto Won’t Be Money Until IRS Accepts It for Taxes, Top Forex Strategist Says

“It is always concerning when these futures premiums climb too high, indicating an overly confident and leveraged market,” according to Arcane. “This usually leads to rounds of liquidations and sharp pullbacks, so traders should consider de-risking in this current environment.”

• Ether (ETH) trading around $2,114.60 as of 20:00 UTC (4 p.m. ET). Climbing 0.44% over the previous 24 hours.
• Ether’s 24-hour range: $2,045.40-$2,151.25 (CoinDesk 20)
• Ether trades above its 10-hour and 50-hour averages on the hourly chart, a bullish signal for market technicians.

Ether and other altcoins continue to outperform bitcoin. The No. 2 cryptocurrency by market capitalization has traded above $2,000 since it claimed a new all-time high a day ago.

Ether’s latest rally “follows Visa’s announcement that transactions can be settled using USD Coin (USDC), a stablecoin powered by the Ethereum blockchain,” Simon Peters, crypto analyst at eToro, wrote in an email.

“Meanwhile, large volumes of Ether are increasingly being locked into DeFi projects and the ETH 2.0 deposit contract,” Peters added. “This reduces the supply in circulation while announcements like Visa’s increase demand, thereby pushing prices higher.”

As of April 6, more than 10 million ether are locked in decentralized finance, up from about 7 million 90 days ago, according to DeFi Pulse:

At the same time, blockchain data site Glassnode shows that nearly 4 million ether has staked on Eth 2.0:

Other digital assets on the CoinDesk 20 are mostly in green Tuesday. Notable winners as of 20:00 UTC (4:00 p.m. ET):

• xrp (XRP) + 27.95%
• ethereum classic (ETC) + 17.19%
• omg network (OMG) + 15.23%
• litecoin (LTC) + 9.45%
• chainlink (LINK) + 8.2%

Read More: XRP Rises Above $1 for First Time Since March 2018, Despite SEC Shadow

Notable losers:

• orchid (OXT) – 8.05%
• eos (EOS) – 2%

Equities:

• Asia’s Nikkei 225 closed in the red 1.3%.
• The FTSE 100 in Europe was up by 1.28%.
• The S&P 500 in the United States closed nearly flat, down 0.097%.

Commodities:

• Oil was up 1.19%. Price per barrel of West Texas Intermediate crude: $59.35.
• Gold was in the green 0.81% and at $1742.24 as of press time.

Treasurys:

• The 10-year U.S. Treasury bond yield fell Tuesday, dipping to 1.654%.

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Cryptocurrency exchange Coinbase saw a whopping 117% quarter-over-quarter increase in monthly transacting users, the firm revealed Tuesday in its voluntary earnings report.

All those users helped Coinbase rake in $1.8 billion over the quarter, driving a net income of approximately $730 million to $800 million, according to a new filing that comes ahead of the company’s Nasdaq listing next week.

All the numbers point to a business riding high as interest in cryptocurrency tracks upward with the price of bitcoin, ether and other leading assets.

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For example:

• Active users on Coinbase jumped from 2.8 million in the fourth quarter of 2020 to 6.1 million in the first quarter of 2021.
• Verified users – or the total number of people with Coinbase accounts – increased from 43 million at the end of 2020 to 56 million at the end of Q1 2021.
• Trading volumes topped $335 billion.
• Total assets on Coinbase’s platform increased from $90 billion to $223 billion, nearly a 150% increase quarter-over-quarter.

Showing how solidly Coinbase has cemented itself at the center of the current bull run, some $122 billion of those assets were from institutions.

On the retail side, the company will be adding more assets and giving people more access to decentralized finance (DeFi) applications, Coinbase CEO Brian Armstrong said during Tuesday’s earnings call.

On the institutional side, the company will continue to build out its prime brokerage offering and use its Bison Trails acquisition to create what Armstrong called the “Amazon Web Services for crypto.”

Related: Crypto Won’t Be Money Until IRS Accepts It for Taxes, Top Forex Strategist Says

The exchange also gave three financial scenarios for the rest of 2021.

In a “high” performance scenario, Coinbase would average 7 million monthly users if the crypto market capitalization grows throughout the rest of the year. In a “mid” scenario, the exchange would average 5.5 million monthly users if the market capitalization is flat. In a “low” scenario, the exchange would average 4 million if the market turns into something like the 2018 bear market.

“For the last two years we’ve seen average net revenue per [monthly transacting user] range between $34 and $45 per month,” Coinbase CFO Alesia Haas said on the call. Haas said she expects the average net revenue per user to reach new records in 2021.

Coinbase’s new cohort of stock analysts were particularly keen on user metrics, as CoinDesk reported earlier today.

“The first quarter more than doubled monthly users sequentially and revenue followed three times higher than the previous quarter,” James Friedman, senior fintech research analyst at Susquehanna International Group, told CoinDesk after Coinbase’s earnings call, adding:

“How do you have users doubling and growth three times that? It happens because volume per user also increased. That’s the increase in the price of bitcoin.”

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Shares of Chinese Bitcoin mining machine manufacturer Ebang fell sharply on Tuesday following a report from Hindenburg Capital that claims the firm misled investors about investment allocations.

A lengthy report from Hindenburg Capital alleges that, of the roughly $375 million the mining machine manufacturer raised from investors since going public in June 2020, some $103 million went toward “bond purchases linked to its U.S. underwriter.”

Shares of Ebang were down over 15% on the news.

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The report also claims that the company “directed $21 million to repay related-party loans to Ebang Chairman/CEO Dong Hu’s relative.” Additionally, the report says that its mining machine business is faltering, only producing 6,000 machines in the first half of 2020.

To shore up its mining business (or, as Hindenburg put it, to “pivot the story”), Ebang launched a cryptocurrency exchange called Ebonex yesterday.

Ebang did not respond to CoinDesk’s request for comment by press time.

Hindenburg took out a short position following its research, the report discloses, and the firm attempts to use Ebang as an example of caveat emptor for Western investors jumping at publicly traded crypto stocks before doing their due diligence.

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Trading card company Topps is poised to take non-fungible tokens (NFT) to Wall Street as a publicly traded firm via a special purpose acquisition company (SPAC) merger with Mudrick Capital.

The 80-year-old company, in which Mudrick led a $250 million investment at a $1.3 billion valuation, has long sold baseball cards and other physical collectibles, but on Tuesday its new investor, Jason Mudrick said he’s betting on the digital front: through the buzzy market for NFTs.

Topps plans on chasing that upside aggressively. Closing its deal during a booming market for crypto collectibles, it told investors in a Tuesday presentation the company will reinvest in blockchain and NFTs as a “growth accelerator.”

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The card company anticipates pushing more content through the blockchain pipeline, expanding NFT distribution across marketplace partners like Wax and OpenSea and integrating NFTs into more collector experiences through 2021. 

“Digital currently represents 6% of Topps’ revenue,” said Joel Belfer, a financial analyst at Guggenheim who writes about sports card markets for industry newsletter Mint Condition. “It’s not a big part of their business, but I think Mudrick is going to try to accelerate their digital offering.”

Topps reported $567 million in total sales during 2020. For context, Dapper Labs’ NBA Top Shot steamrolled through over $500 million in NFT sales in its first 10 months.

Topps began carving a niche in the early innings of the NFT craze through a Garbage Pail Kids partnership with the Wax platform. That tie-up continues: Last week it dropped a Godzilla-themed NFT card pack on Wax that generated at least $500,000 in revenue within hours.

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Mudrick told Institutional Investor he wants Topps to monetize the secondary market for NFTs. Because NFTs have no physical form they can theoretically be restricted to private blockchain platforms where their movement is restricted, and their secondary sales essentially taxed. 

Dapper Labs follows this model – it takes a 5% cut of each moment sale – though other leading marketplaces exist on the fee-heavy wilds of the Ethereum blockchain, competing for block space with major lending markets.

Back in meatspace, collectors, some perhaps angry at their mothers for ditching the card-stuffed shoebox they claim was worth millions, have poured six-figure sums into throwback cards during the pandemic. 

Bringing a blockchain-sanctioned secondary market to digital collectibles could position Topps to take on a major new revenue stream. After all, Dapper Labs recently raised $305 million from splashy investors to seize the moment.

Read more: Michael Jordan Joins $305M Investment in Firm Behind NBA Top Shot

Topps’ top brass told investors the company has been investing in digital for more than a decade, in part through pre-NFT digital collectible platforms like MLB-licensed Topps BUNT. It is unclear how popular that walled-garden project is among baseball fans. (Blockchain data sites like Evaluate.market lay bare the value of NBA Top Shot moments in real-time.)

Topps’ foray into blockchain and NFTs is barely a year old, however.

“Ending up as a leader in this area will still require quite a bit of vigilance and investment but we like our head start,” Topps Executive Chairman Andy Redman said during the presentation. He said the blockchain initiatives pair well with the company’s efforts in e-commerce, “further cementing our position in the sports ecosystem of the future.”

But Belfer, the card analyst, said Topps won’t be able to simply carry its existing physical collectible licenses with major leagues like MLB or NFL into the digital world. The company will likely have to broker new digital-specific business deals, as Dapper Labs did with the NBA.

That could be an expensive proposition, he said.

Topps declined to answer CoinDesk’s questions.

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Investment flows into cryptocurrency funds jumped fivefold last week to $106 million, rebounding from a five-month low, according to a new report from the digital-asset manager CoinShares.

The prior week had seen the fund flows dry up to about $21 million, the lowest since October, as sideways trading action in bitcoin (BTC) and other digital-asset markets failed to inspire buyers.

The latest week’s tally wrapped up a record quarter for crypto fund flows, at $4.5 billion, some 11% higher than in the final quarter of 2020, according to CoinShares.

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That pace represented a slowdown from the prior quarter’s growth of 240%, potentially indicating waning interest or indecision among digital asset investors – or maybe just the difficulty of increasing off a bigger base. CoinShares cautioned against drawing conclusions.

• “It is not indicative of a slowing trend, as quarterly growth rates tend to be highly varied,” wrote CoinShares.
• Bitcoin products garnered the majority of last week’s inflows, around $83 million, versus about $20 million for Ethereum (ETH) products.
• “Assets under management (AUM) for both active and passive digital asset investment products are now at an all-time high of $59 billion.”
• Active investment managers (strategies that adjust portfolio weightings based on market conditions rather than following an index) make up a decreasing amount of total AUM, to 1.5% of total AUM during the first quarter versus 3.6% in Q4 2020.
• That shift might reflect increasing demand for “passive” investment vehicles like trusts and exchange-traded funds, which aren’t yet approved for trading in the U.S. but have garnered substantial interest in other countries, including Canada.

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Chinese online lottery company 500.com (NYSE: WBAI) has acquired Bee Computing, a Hong Kong-registered maker of Bitcoin mining machines, for $100 million, according to an filing Monday with the U.S. Securities and Exchange Commission. 

500.com, which changed its name to BIT Mining Limited in March, has been quietly shifting its focus from its struggling online lottery business to bitcoin mining over the last four years. The company accelerated that transition late last year amid bitcoin’s historic bull run, making it one of many publicly traded companies trying to profit for bitcoin’s rising price. 

It is now one of the few large-scale companies in the crypto-mining business after acquiring the third-largest mining pool, BTC.com, and three mining farms under its Loto Interactive unit. The company is venturing into the business of making mining machines with the latest deal, which comes at a time when mining companies are in short supply of those machines.

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BIT Mining said Bee Computing has worked with MTK, which is the largest chip designer in Asia, to make a seven-nanometer chip for bitcoin mining. Taiwan Semiconductor Manufacturing Co. (TSMC) will supply the chips, according to Yufei Jiang, CEO of Bee Computing. 

Jiang said Bee Computing has received backing from some of the most influential companies in the semiconductor industry. MTK invested $9.5 million in a Series B round, and Taiwan-based ASE Group, which is the leading semiconductor assembly and test company, invested $3 million in the same round.   

Bee Computing’s current miner model’s performance is similar to Bitmain’s T17, which tends to have higher energy consumption than Bitmain’s S17 but is less powerful than Bitmain’s latest model S19. 

Jiang said Bee Computing’s research and development slowed down during the bear market a few years ago but the company can pick up the pace with new capital from BIT Mining. 

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BIT Mining is set to invest $30 million in Bee Computing’s research to develop better 7-nm chips for bitcoin mining and higher quality miners for ether and litecoin. Jiang said the company would be able to test new chips by October. 

Crypto miners use the application-specific integrated circuit (ASIC), which is an integrated circuit chip, to mine cryptocurrencies such as bitcoin. The 7-nm figure refers to the size of the transistor. The smaller the component is, the more you can fit into a piece of silicon and the more powerful the mining machine becomes, making the chip one of the most sought-after components for any major bitcoin miner maker. 

To put that into context, leading crypto mining machine maker Bitmain’s latest model uses 7-nm chips. Designing stable and high-performance chips for mining machines is very costly and challenging even for some big players in the semiconductor industry, according to Jiang. 

While Bitmain is studying new models that use 5-nm chips, it may prove to be difficult to manufacture these because TSMC would make most of the chips for car makers or cellphone companies such as Apple. 

Bee Computing produces much less annually than Bitmain does, because of the fixed number of 7-nm chips TSMC allocates to each maker of mining equipement. In the near future, Bee Computing plans to provide all the new mining machines to BIT Mining until it has a surplus to sell. 

BIT Mining had disclosed that it purchased $8.5 million worth of mining machines in February from Bee Computing. 

According to the purchase agreement, BIT Mining will pay Bee Computing $35 million in stock by the end of the second quarter this year and send the other $65 million worth of stock after the acquired company manages to produce a certain number of 7nm ASIC bitcoin mining machines as well as make higher performance bitcoin, ethereum and litecoin mining machines. 

BIT Mining officially announced its strategic shift to bitcoin mining in December. In February, the company bought the crypto mining mining pool business, BTC.com, from Bitdeer Technologies, which was majority owned by Bitmain’s former chief executive Jihan Wu. It has purchased at least $14 million in mining machines in an all-equity deal. 

Combined with the existing mining pool services provided by BIT Mining’s subsidiary Loto Interactive, the company would be one of the largest mining pools in the world, according to data from BTC.com. 

Loto Interactive has three big data centers in the crypto mining hub Sichuan province in central China because of Sichuan’s rich hydropower in the summer. Loto Interactive previously only provided venues and maintenance services, rather than buying mining machines and profiting from mining cryptocurrencies. The company has started running its own miners early this year. 

If a company only operates a mining site for miners to make a profit, it does not have much exposure to crypto’s prices, It would face more price-related risks and could stand to profit more if it starts to buy mining machines and run them in its own mining sites. 

Tsinghua Unigroup is BIT Mining’s holding shareholder, but it remains unclear how the Chinese semiconductor conglomerate is involved in the company’s businesses.

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