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Bitcoin Retakes $50K as Powell Eases Market Jitters, Bond Yields Drop

5 years 7 months ago

Bitcoin gained ground, while U.S. bond yields dropped, during Wednesday’s Asian session as remarks by U.S. Federal Reserve Chairman Jerome Powell squashed fears of an early unwinding of monetary stimulus.

The leading cryptocurrency clocked a high of $51,413 at 04:15 UTC, having defended the psychological support of $45,000 on Tuesday, according to CoinDesk 20 data. At press time, bitcoin traded near $50,500, representing a 3% gain on the day.

The U.S. 10-year bond yield slipped to 1.33%, extending Tuesday’s drop from 1.39% to 1.34%, according to data source TradingView.

Related: US House Subpanel to Look at Crypto as Part of Examination of How Domestic Terrorism Is Funded

The yields came under pressure, possibly helping bitcoin scale the $50,000 mark, as Powell underscored the U.S. economy’s ongoing weakness in written testimony to Congress on Tuesday. Bond yields are reflective of investors’ expectations of growth/inflation and interest rates.

“The economic recovery remains uneven and far from complete, and the path ahead is highly uncertain,” Powell said, noting that millions of Americans are still out of work.

Powell’s comments contradicted the bond markets’ previous optimism that the U.S. economy would grow rapidly this year, putting pressure on the Fed to unwind stimulus (hike rates or scale back bond purchases) earlier than expected. The 10-year rose to a 12-month high of 1.39% earlier this week, diluting bitcoin’s appeal as an inflation hedge, and sending the cryptocurrency lower to $45,000 from record highs above $58,000. The sell-off was accentuated by U.S. Treasury Secretary Janet Yellen’s anti-bitcoin comments.

Moving forward, a continued decline in bond yields could propel bitcoin toward record highs. “The focus remains on bond yields and stock markets,” Denis Vinokourov, head of research at the London-based prime brokerage Bequant, told CoinDesk in a Telegram chat.

Related: Abra CEO Bill Barhydt: The Tether and Bitfinex Legal Case was a ‘Distraction’

Vinokourov added that “buying the dip” remains the best strategy, as institutional demand for the cryptocurrency continues to grow. Payments giant Square disclosed its additional bitcoin investment worth $170 million on Tuesday. Elsewhere, the recently launched Canadian bitcoin exchange-traded fund (ETF) is witnessing strong inflows, as noted by the data provider Glassnode.

Further, the settlement of a long-running legal dispute between Tether Ltd, the company behind the stablecoin tether, and the New York Attorney General’s office has supposedly removed a potential systemic threat to cryptocurrency markets.

Analysts at JPMorgan warned last week that a sudden loss of confidence in tether posed risk to crypto markets, given the stablecoin is widely used to fund cryptocurrency purchases.

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US House Subpanel to Look at Crypto as Part of Examination of How Domestic Terrorism Is Funded

5 years 7 months ago

A subcommittee of the U.S. House Financial Services Committee is expected to discuss how to thwart current and future avenues relating to the financing of domestic terrorism, including cryptocurrency.

According to a memo on Monday, the Subcommittee on National Security, International Development and Monetary Policy will hold its hearing on Thursday, Feb. 25.

Specifically, it will assess various means of terrorist financing including crowdfunding, charities, content subscriptions, cryptocurrencies and other funding mechanisms amid the backdrop of what occurred on Jan. 6.

Related: Voyager CEO: Bitfinex, Tether’s $18.5M Settlement With NYAG ‘Extremely Positive Sign’ for Crypto Ecosystem

As it relates to cryptocurrency, the hearing will assess “the overall increase” in its popularity as banks begin to tighten their measures against terror financing, the committee said.

Additionally, U.S. Treasury Secretary Janet Yellen has mentioned cryptocurrency use in terrorism as a key concern at least three times over the past five weeks.

A number of “high-profile, high-value” transfers to known “alt-right” cryptocurrency wallets have occurred including a post-death transfer of over $500,000 in bitcoin from a suicidal French extremist to a number of U.S.-based, extremist-owned wallets, the memo reads.

It is unclear whether those individuals were present at the Jan. 6 Capitol Hill insurrection in Washington, D.C. “Nonetheless, since it is increasingly common to find cryptocurrency wallet addresses listed on extremist websites, this is a potential and growing source of funds for domestic extremists.”

Related: Abra CEO Bill Barhydt: The Tether and Bitfinex Legal Case was a ‘Distraction’

The hearing will feature a panel of five witnesses from various organizations including Iman Boukadoum, senior manager at the Leadership Conference on Civil and Human Rights and Lecia Brooks, executive director at the Southern Poverty Law Center.

Daniel Glaser, former assistant secretary for Terrorist Financing and Financial Crimes, Daniel Rogers co-founder and CTO at the Global Disinformation Index and Daveed Gartenstein-Ross, CEO at Valens Global will also be joining.

See also: State of Crypto: The US Government Keeps Mentioning Terrorism

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Square Cash App Bitcoin Revenues Swell 785% in 2020

5 years 7 months ago

Square raked in $4.57 billion in bitcoin revenue in 2020 with $97 million of that going to the company in gross profit, according to the company’s earnings report filed with the SEC.

Year-over-year that’s a 785% increase in bitcoin revenue.

The San Francisco payments giant reported on Tuesday that the revenue it made from selling bitcoin on Cash App contributed to “48% of total consolidated revenue in 2020, and 85% of the total increase in consolidated net revenues in 2020.”

Related: Paxos Plans to File for a Clearing Firm License

In the fourth quarter of last year, the company reported $1.76 billion in bitcoin revenue and $41 million in gross profit. Bitcoin costs in the same period were $1.71 billion. 

“The increase was due to the market price of bitcoin, growth in the number of active bitcoin customers, as well as volume per customer,” the company wrote in its earnings release. “The  amount of bitcoin revenue recognized will fluctuate depending on customer demand as well as changes in the market price of bitcoin.”

Additionally, Square announced Tuesday it had added 3,318 BTC to its bitcoin treasury.

This is a developing story and will be updated.

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Paxos Plans to File for a Clearing Firm License

5 years 7 months ago

Stablecoin issuer and crypto exchange Paxos is applying to become a clearing firm with the U.S. Securities and Exchange Commission (SEC).

Clearing firms act as intermediaries in the U.S. securities markets, facilitating payments and the transfers of securities for exchanges. If approved, Paxos would become one of just a handful of clearing firms in the U.S., joining the Depository Trust Company (DTC), Options Clearing Corporation and others. 

Charles Cascarilla, the CEO and founder of Paxos, told CoinDesk TV Tuesday that the company, which already settles U.S. equities trades, was hoping to become a full clearing firm.

Related: Square Cash App Bitcoin Revenues Swell 785% in 2020

“We’re going to be submitting our clearing agency application hopefully in very short order,” he said. “We are really committed to being infrastructure in a similar way” to the Depository Trust & Clearing Corporation.

There’s no firm timeline for when Paxos might submit the application, and after it does the SEC will likely publish it for a public comment period. 

Cascarilla also raised the idea that a blockchain-based clearing system might be more efficient than the current market infrastructure.

“The GameStop issue really highlighted how blockchain infrastructure can help solve a lot of the problems in our markets,” he said, referring to last month’s community-driven pump of GameStop’s stock price. Several brokerages offering GameStop trading had to suspend the stock due to market volatility caused by rising clearing firm costs, which some are attributing to the current two-day lag in settlement time, called T+2.

Related: Market Wrap: Bitcoin Settles Around $47K After Biggest 2-Day Rout in 11 Months

Under the current system, trades are settled by the DTCC (the parent company of the DTC) two days after they’re conducted,

A blockchain network lets companies know exactly “who owns what, when,” Cascarilla said, referring to T+0, or same-day settlement. Still, a blockchain might not be the right tool for the job, at least just yet.

Read more: What Really Happened When Robinhood Suspended GameStop Trading

“I don’t know if a public blockchain can handle the level of infrastructure that is needed in the public U.S. equity markets today,” he said. “I think that will be the case in the future but for instance to be able to handle 500 million transactions … that is something that you can’t put through, for instance, the Ethereum blockchain.”

Paxos has also applied to become a nationally chartered bank through the Office of the Comptroller of the Currency. This application is still being reviewed by the bank regulator.

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Market Wrap: Bitcoin Settles Around $47K After Biggest 2-Day Rout in 11 Months

5 years 7 months ago

Bitcoin’s punishing sell-off appeared to decelerate as prices settled around $47,000, after the largest cryptocurrency by market capitalization logged its steepest two-day loss since March 2020 early Tuesday.

  • Bitcoin (BTC) trading around $47,851.27 as of 21:00 UTC (4 p.m. ET). Slipping 11.72% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $44,964.49-$55,053.91 (CoinDesk 20)
  • BTC trades below its 10-hour and 50-hour averages on the hourly chart, a bearish signal for market technicians.

Bitcoin’s price tumbled along with U.S. stocks after markets opened in the U.S. Tuesday, bringing the cryptocurrency’s decline since Sunday to 20%, the most for a two-day period since the coronavirus-fueled crash in March 2020. The decline has wiped out more than $100 billion of bitcoin’s market value, which last week climbed past $1 trillion for the first time. 

And while many traders are still bullish on bitcoin in the long term, analysts said the largest cryptocurrency may have further to fall in the coming days, traders and analysts said.

Related: Square Cash App Bitcoin Revenues Swell 785% in 2020

As is often the case in digital asset markets, this week’s decline didn’t appear tied to any specific negative news or fundamental data, but to technical factors such as worrisome signals from price charts and a general sense that the market had run too far, too fast: Bitcoin’s price had doubled this year to an all-time high price of more than $58,000 as of Sunday.

This week’s price retreat trimmed the 2021 gains by as much as 59%, versus 3.6% for the Standard & Poor’s 500 Index of U.S. stocks. 

“The current market is extremely overheated,” Flex Yang, founder and chief executive officer of Hong Kong-based crypto lender Babel Finance, told CoinDesk. Prices could fall as low as $40,000, he said. 

The price move came on strong volume, though, indicating high activity on the part of sellers and buyers alike. Trading volume on eight major exchanges tracked by CoinDesk topped $10 billion for the second straight day. 

Related: Paxos Plans to File for a Clearing Firm License

Signals from the market for bitcoin derivatives showed traders turning slightly less bullish, with futures contract premiums over spot prices shrinking on major exchanges including Deribit, Binance, OKEx and Huobi.

The premiums are still high compared with January levels, indicating the bulls still dominate the market.

Arcane Research, a Norwegian cryptocurrency analysis firm, noted in its weekly newsletter Tuesday that the funding rates – fees that traders pay for leverage – have come down dramatically since Monday, a sign that some of this week’s market rout may have shaken out some of the euphoria.

Funding rates on perpetual futures contracts are set by the market and vary over time as traders put on and take off positions. When the market is bullish, funding rates turn positive and traders taking long positions pay short sellers. When the market is bearish, funding turns negative, and short sellers pay.

Arcane Research also warned that with perpetuals trading again at a “significant” premium to spot prices on Tuesday, the funding rates are poised to rise soon.

“Trying to catch a falling knife is a dangerous exercise, which could ignite a new cascade of liquidations in the near term,” Arcane Research wrote.

There appeared to be little change this week in the outlook for loose monetary policy, which has driven many institutional investors to buy bitcoin as a hedge against eventual inflation. Federal Reserve Chair Jerome Powell, in testimony Tuesday before the U.S. Senate Banking Committee, stuck to his prior message that easy monetary policy wouldn’t budge anytime soon, given the need to keep borrowing rates low as long as it takes for the economy to heal. 

“We view the current pullback as nothing more than a necessary correction to allow for a very strong market to take time to consolidate and reset before eventually looking to continue on its upward trajectory,” Joel Kruger, cryptocurrency strategist at institutional crypto exchange LMAX Digital, said.

And it appears that some have been buying the latest dip, as CoinDesk reported earlier today.

Ether lower; high fees force more liquidations on DeFi lending platforms

Ether (ETH), the second-largest cryptocurrency by market capitalization, was down Tuesday, trading around $1,524.42 and sliding 14.08% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Similar to bitcoin, ether’s trading volume on major exchanges exploded again on Tuesday.

As ether’s price continued to correct, another record-high $115 million in lending positions in decentralized finance (DeFi) based on the Ethereum blockchain were wiped out Tuesday, as reported by CoinDesk. 

Read More: DeFi Lending Platforms Liquidate Record $115M in Loans as ETH Price Drops

Other markets

Digital assets on the CoinDesk 20 are mostly in red Tuesday. There were no notable winners as of 21:00 UTC (4:00 p.m. ET).

Notable losers:

Equities:

Commodities:

  • Oil was up 0.45%. Price per barrel of West Texas Intermediate crude: $61.98.
  • Gold was in the red 0.21% and at $1805.15 as of press time.

Treasurys:

  • The 10-year U.S. Treasury bond yield fell Tuesday, dipping to 1.359%.

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Square Buys Another $170M in Bitcoin

5 years 7 months ago

Payments giant Square said Tuesday it had purchased an additional $170 million of bitcoin, adding to the stash it purchased in October.

Someone should have looked at the recent price before that went to press.

According to the payment processor’s press release, the company added 3,318 BTC to its treasury for $170 million. Doing the math, that results in a per bitcoin purchase price of $51,235.70.

Related: Voyager CEO: Bitfinex, Tether’s $18.5M Settlement With NYAG ‘Extremely Positive Sign’ for Crypto Ecosystem

Unfortunately for Square, after setting a record high above $58,000 over this past weekend, bitcoin hit a recent low of $44,964.49 before rebounding to about $48,408.31 at price time.

When Square’s announcement was released, just after 4 p.m. New York time, the price of bitcoin was below $48,000, which means those 3,318 BTC are now worth less than $160 million.

The company made the announcement just before the release of its fourth-quarter earnings call that it had added to the 4,709 BTC it purchased in October 2020, which were worth $50 million at the time. Currently, that investment is worth $224 million and the company’s total value of BTC on Square’s balance sheet is $394 million.

Square has $4.4 billion in total cash and securities, so the $220 million it spent on bitcoin is only 5% of its total liquid assets at the end of the fourth quarter.

Related: Abra CEO Bill Barhydt: The Tether and Bitfinex Legal Case was a ‘Distraction’

UPDATE (Feb. 23, 22:41 UTC): Rewrites throughout to reflect the change in value of Square’s investment.

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CoinDesk

Square Announces Additional $170M Bitcoin Buy

5 years 7 months ago

Payments giant Square has added 3,318 bitcoins to its treasury.

The company announced in advance of its fourth-quarter earnings call that it had added to the 4,709 bitcoins it purchased in October 2020, which were worth $50 million at the time. Currently, that investment is worth $224 million and the company’s total value of BTC on Square’s balance sheet is $394 million.

This is a developing story and will be updated.

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In Nigeria, One Bitcoin Can Cost $68,000. Here’s Why.

5 years 7 months ago

Bitcoin has already passed the $68,000 mark in Nigeria, but that’s if you use the official exchange rate.

Awosika Ayodeji, a Nigerian blockchain project designer, isn’t complaining. He is happy to wake up and see bitcoin prices quoted using unofficial U.S. dollar exchange rates because it means he’d be getting more naira per dollar when he converts his crypto earnings to his local currency. 

At the same time, however, “buying [bitcoin] becomes more expensive, too,” Ayodeji noted.

Related: Square Cash App Bitcoin Revenues Swell 785% in 2020

On Friday, Nigeria’s official exchange rate for the U.S. dollar was around 380 naira per dollar. Using this rate, a bitcoin listing on peer-to-peer platform LocalBitcoins in Nigeria of around 26,000,000 naira converted to $68,246. On the surface, this looks like a hefty 24% premium, which in this context refers to bitcoin’s price being much higher in specific locations than it is on average worldwide.

In Nigeria, these premiums aren’t consistent. On peer-to-peer platform Paxful, the listed bitcoin prices were based on $1 trading for around 475 naira. This rate converted to $54,736, a price much closer to the average bitcoin trading price of the day. In fact, the informal market dollar exchange rate in Nigeria on Friday was around 478 naira, reflecting the rate seen on Paxful and the bitcoin prices listed on LocalBitcoins. 

In emerging markets that are facing a currency crisis, bitcoin prices can actually shed light on the informal market for U.S. dollars. In Argentina, Latin American crypto exchange Bitso listed the bitcoin price at 8,700,993 Argentinian pesos on Friday, which converted to a whopping $98,000 using the official exchange rate, which was around 89 Argentine pesos per dollar. But bitcoin listings on exchanges like Bitso indicated the dollar was worth around 150 pesos, reflecting the informal going rate for the dollar.

Yele Bademosi, chief executive officer at social payments app Bundle Africa said exchanges are most likely using informal dollar rates, thus inflating bitcoin’s price in local currency. According to Andrés Ondarra, country manager for Argentina at Bitso, the market exchange rate for the dollar is usually higher than the official exchange rate in Argentina as well. 

Related: Paxos Plans to File for a Clearing Firm License

“This is mainly reflecting the difference between the informal U.S. dollar rate and the official one. The gap between the official and the informal dollar in Argentina is around 70%,” Emiliano Limia, press officer at Argentine crypto exchange Buenbit told CoinDesk via an email.

Exchanges using informal rates instead of official ones indicate the local bitcoin markets exist outside of government rules, and that bitcoin trading might reveal the real value of the local currency against the dollar. 

According to Gina Pieters, a professor of economics and the University of Chicago who published a paper on how bitcoin can detect exchange rate manipulation and capital controls, bitcoin premiums can occur for a number of reasons. 

“It seems unlikely that the price should be that much higher unless there is the manipulation of the nominal exchange rate channel,” Pieters said in an email to CoinDesk, referring to the price of one currency in terms of another.

In fact, the thesis of Pieters’ 2016 paper was that bitcoin trading can be used to approximate unofficial exchange rates, “which, in turn, can be used to detect both the existence and the magnitude of the distortion caused by capital controls and exchange rate manipulations.”

Informal exchange rates

Due to the falling purchasing power of the naira, on any given day, Nigeria has multiple exchange rates for the dollar. The informal exchange rates are typically much weaker, with Nigerians having to dish out more naira per dollar, indicating the local currency may be worth less than what the government says. 

According to a chapter in economist Koji Kubo’s book about Myanmar’s foreign exchange market, multiple exchange rates emerge within the unofficial market when governments implement “exhaustive exchange restrictions” or limitations on the amount of foreign currency that could be bought or sold. 

In 2020, Argentina’s government imposed strict controls on the purchase of U.S. dollars, restricting the amount of dollars citizens could buy and hold to $200, in an attempt to stop capital from flowing out of the country. The dollar black market flourished as a result, with people scrambling to buy more dollars to protect their wealth, and even paying more pesos per dollar. This quickly spilled over to crypto as Argentines tried to ditch the peso for stronger currencies: demand for bitcoin soared in 2020.

Meanwhile, Nigeria’s facing a U.S. dollar shortage: in 2020, local media reported Nigerian banks were limiting the amount of dollars Nigerians can spend abroad to as low as $500. Thanks to the scarcity of dollars that could not meet local demand, the value of the naira fell in local informal markets as people showed willingness to pay more naira per dollar. 

“The general market is now setting the price to $480 as that seems to be the present value generally accepted between buyers and sellers,” Ayodeji said. 

The lower informal exchange rate can mean sending money to family in Nigeria or Argentina in bitcoin can be beneficial as one bitcoin can get you more of the local currency, but this also means that the purchasing power of the local currency is weakening. Sending money out of the country can be problematic, as your wealth converts to less dollars.

It’s typically difficult to estimate local informal dollar rates: Ayodeji said black market currency merchants might ask for even more naira per dollar. But bitcoin conversions can calculate a decent estimate, Ayodeji said. 

Inflation

Still, premiums can exist even after you factor in the difference in exchange rates. One possible reason is, in countries with high inflation, people may be willing to pay more for bitcoin. 

“In the euro area the prices are pretty much the same as spot prices in big centralized exchanges,” Jukka Blomberg, chief marketing officer at LocalBitcoins, said in an email. But “in countries such as Venezuela, there can even be quite big premiums.” 

Blomberg explained this is because Venezuelans who are willing to sell their bitcoin in exchange for their local currency typically want a higher premium due to the risk they have to take by accepting a highly inflationary currency such as the bolivar. In Venezuela, where the inflation rate hit a staggering 10 million% in 2019, and the value of the bolivar was dropping almost daily against the U.S. dollar, people began turning to bitcoin. In fact, the local demand for bitcoin drove crypto adoption in Venezuela ahead of other hyperinflationary countries like Argentina.

Nigeria is also an inflationary country, and citizens have been turning to bitcoin to weather value drops in naira. Demand for bitcoin was so high that the central bank of Nigeria first ordered banks to shut down all accounts associated with crypto trading, and released a five-page explainer that said the measure was taken to protect the country’s financial system. 

According to Ayodeji, the naira exchange rate on crypto platforms changed drastically the days after the ban was announced, perhaps driven by the panic that followed, and the demand for bitcoin dropping slightly: the unofficial exchange hit between 410 and 420 naira per dollar, Ayodeji said. 

“But the market circled back,” he said. 

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SEC’s Hester Peirce Says ‘Alluring’ DeFi Space Needs Legal Clarity

5 years 7 months ago

U.S. Securities and Exchange Commission Commissioner Hester Peirce said regulators need to provide “legal clarity and freedom to experiment” to allow decentralized finance (DeFi) to compete with the traditional financial system.

  • In a speech Monday for the George Washington University Law School “Regulating the Digital Economy” conference, Peirce described DeFi as “a very good test” for regulators to regulate in such a way that it empowers investors and markets.
  • Peirce made reference to “anti-Wall Street sentiment” evidenced in events such as the GameStop trading frenzy, which, she said, have “inspired some to call for throwing the legacy financial system out entirely” and replace it with DeFi.
  • Amid suspicions that financial markets are not working for everyone, DeFi is “building an alternative to the legacy centralized financial system (CeFi)” with smart contracts replacing intermediaries, according to Peirce.
  • Peirce concluded that DeFi would be a challenge for regulators but would also provide new tools to meet that challenge, saying, “The regulator’s job is unchanged even though the stage is set with more modern scenery.”

See also: SEC Commissioner Peirce Says Market Is Ready for a Bitcoin ETP

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What a Transparent Tether Means for Bitcoin

5 years 7 months ago
At stake

This article is excerpted from Blockchain Bites, a daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here. 

Clarity and uncertainty
The New York Attorney General’s (NYAG) multi-year investigation into the twinned exchange and stablecoin issuer Bitfinex and Tether’s internal finances has wrapped, with the regulator bringing no formal charges. The firms will pay $18.5 million to settle an inquiry centered on claims that the U.S. dollar stablecoin was not fully backed, but have admitted no wrongdoing.

Tether (USDT) is the largest stablecoin in the crypto economy. In the past year it has grown from $2 billion to $34 billion, and serves a systemically important role for traders, exchanges and virtually all aspects of this emerging financial sector. Since tether’s inception, there have been unanswered questions as to whether this synthetic asset was fully backed by reserves held in a bank account, which Tether claimed.

Related: SEC’s Hester Peirce Says ‘Alluring’ DeFi Space Needs Legal Clarity

“Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie,” Attorney General Letitia James said. According to court documents, Bitfinex and Tether “recklessly and unlawfully covered-up massive financial losses,” “obscured the true risk investors faced,” “were operated by unlicensed and unregulated individuals” and, at one point, lacked a bank account.

Tether looks to have gotten off fairly easy. In addition to the aforementioned fine, the firm will provide regular reports on Tether’s reserves for the next two years. The firm is also barred from operating in New York State.

This increased level of transparency is viewed positively by industry commentators. Castle Island Ventures partner and CoinDesk columnist Nic Carter said this was a historic “derisking event” for the industry. According to Carter, one of the largest hurdles for institutions to enter the market was the lack of certainty around USDT, despite its outsized role.

For instance, JPMorgan analysts said just last week a loss of faith in tether could cause a liquidity crisis in crypto. In addition to questions about USDT’s backing, there have been persistent conspiracies that tether is used to inflate the price of bitcoin.

Related: Bitfinex, Tether Settle With NY AG for $18.5M: Cloud Lifted?

“I think we can put that to bed now,” Charles Cascarilla, CEO and co-founder of Paxos, said on CoinDesk TV Tuesday morning.

There are still questions about the form these quarterly reports will take, and the level of insight they may provide. “[T]he mandatory reporting and transparency requirements are better, although it will depend on the quality and nature of those reports and disclosures, including whether they are independently audited, etc,” Elizabeth Renieris, founder of HACKYLAWYER and affiliate at the Berkman Klein Center, said in an email.

“Obviously the parties cannot be trusted to tell the truth,” she continued. Though the issue is larger than just Tether: “Until some of the other measures around mandatory reporting and transparency requirements become institutionalized and standardized for stablecoins in general, it won’t mean much,” Renieris said.

One of the most vocal and consistent Tether critics, who goes by the pseudonym Cas Piancey, notes these developments are a “positive thing for Tether, and likely the space as well.”

“I’ll continue [researching and writing on Tether] because there’s still loose ends to tie up in regard to the ongoing CFTC/DOJ actions, but if they start getting regular attestations and being properly regulated then no need to push for that,” he added in a direct message regarding the Commodity Futures Trading Commission and the U.S. Department of Justice.

Indeed, as Cascarilla said, “In the case of Tether, it’s still unregulated, unaudited and … that will always create concerns. That doesn’t mean tether is a source of systemic risk.”

Quick bites Regulatory update
  • ‘India’s Warren Buffett,’ Rakesh Jhunjhunwala, Backs Bitcoin Ban (CoinDesk)
  • The European Central Bank (ECB) wants veto power over stablecoins like libra. (CoinDesk)
  • Nigeria’s Crypto Ban Fuels Mistrust in Government (CoinDesk Opinion)
  • What Janet Yellen Gets Wrong About Bitcoin (Decrypt)
Capital flows
  • State Bank of India (SBI) is joining JPMorgan’s blockchain payments network. (CoinDesk)
  • Bitcoin payments platform for social networks Bottlepay raised £11 million. (CoinDesk)
  • Nasdaq-listed bitcoin mining company Bit Digital partnered with Compute North, Core Scientific and others for a North American expansion. (CoinDesk)
  • Uncovering Coinbase’s $100 billion pre-market valuation. (CoinDesk Opinion)
  • Galaxy Digital Leads $4.3 Million SAFT Into Blockchain Platform Centrifuge (Decrypt)
  • “Rich Getting Richer in PoS Chains:” by Chainflow’s Chris Remus (The Defiant)
  • What Happens When Cryptocurrencies Earn Interest? (HBR)
Who won Crypto Twitter?

UPDATE (2/23/2021 18:41): Corrects context around the nature of the investigation.

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Bitcoin Poised for Further Losses After Two-Day Plunge Wipes Out More Than $100B

5 years 7 months ago

Bitcoin’s (BTC) price tumbled along with U.S. stocks, bringing the cryptocurrency’s decline since Sunday to 17%, the most for a two-day period since the coronavirus-fueled crash in March 2020. The decline has wiped out more than $100 billion of bitcoin’s market value, which last week climbed past $1 trillion for the first time.  

And while many traders are still bullish on bitcoin in the long term, analysts said the largest cryptocurrency, now changing hands around $47,000, may have further to fall in the coming days, traders and analysts said.

“The current market is extremely overheated,” Flex Yang, founder and chief executive officer of Hong Kong-based crypto lender Babel Finance, told CoinDesk. Prices could fall as low as $40,000, he said. 

Related: SEC’s Hester Peirce Says ‘Alluring’ DeFi Space Needs Legal Clarity

Bitcoin staged a mini-rebound Tuesday after the New York state attorney general’s office announced a settlement of a dispute involving the stablecoin tether (USDT). But the rally proved short-lived and appeared to peter out as prices approached $50,000. 

Buying the dip

Market sentiment remains largely bullish, and there are signs some investors are buying the dip.

In China, demand for tether has gone up, as evidenced by the stablecoin’s premium over the Chinese yuan on over-the-counter trading desks, when prevailing foreign-exchange rates are taken into account. 

For example, earlier on Tuesday, a screenshot of Huobi OTC, the similarly named exchange’s fiat-to-crypto trading platform, showed a 2% premium between USDT’s price, expressed in yuan, and the going exchange rate for the Chinese currency in U.S. dollar terms, per Bloomberg data.

Related: Bitfinex, Tether Settle With NY AG for $18.5M: Cloud Lifted?

Guy Hirsch, managing director for U.S. at eToro, told CoinDesk he saw 26% more new bitcoin positions opened than closed on the trading platform, which would “help drive markets higher in the longer-term.”

“We don’t believe any of the weakness should be construed as being symptomatic of structural weakness or a lack of confidence in crypto assets,” Joel Kruger, cryptocurrency strategist at institutional crypto exchange LMAX Digital, said. “There will once again be tremendous opportunity for existing players to increase exposure and new participants to take on fresh exposure into the dip.”

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Central Banks of China, UAE Join Blockchain-Based CBDC Payments Project

5 years 7 months ago

The Hong Kong Monetary Authority and the Bank of Thailand have announced the central banks of China and the United Arab Emirates are joining a project looking to use blockchain tech for regional payments.

  • The “Multiple Central Bank Digital Currency Bridge” (m-CBDC) project will explore the capabilities of distributed ledger technology (DLT) through the development of a proof-of-concept (PoC) prototype, according to a joint statement Tuesday.
  • Specifically, the central banks will explore the possibilities of DLT and CBDCs in facilitating cross-border, multi-currency, real-time payments.
  • Hong Kong and Thailand previously collaborated on Project-Inthanon-Lionrock in Q4 2019 which developed a DLT-based prototype allowed participating banks to conduct payments on a peer-to-peer basis, removing clearing and settlement pain points.
  • Under its new name, the m-CBDC Bridge will expand across more central banks, which will evaluate its feasibility on a pan-Asian and eventually wider basis.

See also: Thailand Already Using Central Bank’s Digital Currency

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CoinDesk

Central Banks of China, UAE Join Hong Kong-Thailand CBDC Payments Project

5 years 7 months ago

The Hong Kong Monetary Authority and the Bank of Thailand have announced the central banks of China and the United Arab Emirates are joining a project looking to use blockchain tech for regional payments.

  • The “Multiple Central Bank Digital Currency Bridge” (m-CBDC) project will explore the capabilities of distributed ledger technology (DLT) through the development of a proof-of-concept (PoC) prototype, according to a joint statement Tuesday.
  • Specifically, the central banks will explore the possibilities of DLT and CBDCs in facilitating cross-border, multi-currency, real-time payments.
  • Hong Kong and Thailand previously collaborated on Project-Inthanon-Lionrock in Q4 2019 which developed a DLT-based prototype allowed participating banks to conduct payments on a peer-to-peer basis, removing clearing and settlement pain points.
  • Under its new name, the m-CBDC Bridge will expand across more central banks, which will evaluate its feasibility on a pan-Asian and eventually wider basis.

See also: Thailand Already Using Central Bank’s Digital Currency

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DeFi Lending Platforms Liquidate Record $115M in Loans as ETH Price Drops

5 years 7 months ago

A record-high $115 million in decentralized finance (DeFi) lending positions were wiped out Tuesday after the price of ether continued to correct to as low as $1,406 on Tuesday. The cryptocurrency has shed 9% in the past 24 hours, according to the CoinDesk 20.

Compound Finance saw the largest number of liquidated positions with some $86 million, or 75% of the total liquidations coming from that platform, according to data provider DeBank.

MakerDAO followed in a distant second with some $10 million in liquidations, or 8% of the total. Aave v1 and v2 combined for a total of $13 million, or 11% in liquidations.

Related: The State of Crypto in Germany

A sharp 15% correction in the price of ether Monday caused some $25 million in loan liquidations, a three-month high. Nov. 25 saw the previously highest liquidation volume for the emerging financial tech stack with $93 million liquidated.

Historically high gas fees may be one reason mass liquidations are taking place on the lending platforms. The cost of an average transaction set records yet again Tuesday with new highs of $39 for a basic ether transaction, according to data provider Blockchair. For many loans, forcing a liquidation by not closing or topping off the position may end up being cheaper due to high transaction costs.

Read more: Kraken CEO Says Ether Flash Crash Down to Trading, Not System Glitch

The DeFi asset class in general has experienced a sharp selloff as well, down some 13% according to Messari. However, indexes of the asset class remain in the green over the past 30 days with nearly 50% gains, as can be seen on the DeFi Pulse Index (DPI).

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Kraken CEO Says Ether Flash Crash Down to Trading, Not System Glitch

5 years 7 months ago

The CEO of the Kraken cryptocurrency exchange has said a sudden 50% drop in ether’s price on the exchange Monday was caused by an extreme sell-off and not any system glitch.

  • “There doesn’t seem to be any evidence of a trading-engine malfunction,” Jesse Powell, told Bloomberg Television on Tuesday. “It seems like trades processed accurately.”
  • Powell added that the crash could have been caused by a single big investor who “decided to dump his life savings.”
  • Ether crashed to $700 at 14:20 UTC (9:20 a.m. ET) Monday, having been north of $1,600 only minutes earlier.
  • The drop occurred amid a broader sell-off of crypto assets that saw ether drop as low as $1,546, according to the CoinDesk 20, but nothing as dramatic as was witnessed on Kraken’s platform.
  • When contacted by CoinDesk soon after, Kraken noted ether prices had dropped on multiple venues, but did not comment on its far lower price.
  • Kraken is unlikely to roll back trades, Powell advised Tuesday, but hinted at offering some kind of compensation for clients affected.

See also: New Kraken Venture Fund to Target Early-Stage Crypto, Tech Startups

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Galaxy Digital, IOSG Lead $4.3M Funding Round for ‘DeFi Bridge’ Centrifuge

5 years 7 months ago

Centrifuge, a blockchain startup focused on bringing real-world assets to decentralized finance (DeFi), has raised millions from big-name investors.

According to a press release provided to CoinDesk Tuesday, Centrifuge has secured $4.3 million to further grow its business through a “safe agreement for future tokens” (SAFT) round that kicked off late last year. Now leading the round are asset manager Galaxy Digital and IOSG Ventures, with Rockaway Capital, Fintech Collective, Moonwhale Ventures, Fenbushi Capital, TRGC and HashCIB also newly participating.

In a SAFT round, a company sells rights to future tokens that won’t be issued until a key target is reached, such as the issuing platform going live.

Related: The State of Crypto in Germany

The startup has set out to construct a bridge between real-world assets and DeFi via its asset tokenization process known as Tinlake – a business the company says can attract “trillions of value” from traditional finance.

See also: How to Bring Off-Chain Assets to DeFi – Ajit Tripathi

Nonfungible tokens (NFTs) representing a value on-chain of something tangible in the real world, such as an invoice, can be bundled and sold to investors, the firm believes. The process occurs through the use of smart contracts based on the ERC-/EIP-721 Ethereum NFT standard.

“Centrifuge is the on-ramp for the real economy to tap into DeFi liquidity,” said Will Nuelle at Galaxy Digital. “Securitization and warehousing of debt happens in a single block, lowering the cost of capital for borrowers.”

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Convergence Protocol Raises $2M in Funding Round Led by Hashed

5 years 7 months ago

Convergence Protocol, a decentralized project focused on bringing liquidity to real-world assets in decentralized finance (DeFi), has secured $2 million in its latest funding round.

According to a press release Tuesday, the round was led by blockchain firm Hashed, with strategic investors NGC Ventures, Genesis Block Ventures, Alameda Research, CMS Group, Kenetic Capital, Pantera’s Paul Veradittakit and more also participating.

The funding will be used to advance Convergence’s testnet and mainnet, according to release. The company also said it has plans to hold a public sale of its native token at the end of March.

Related: The State of Crypto in Germany

Convergence aims to bring real-world assets to decentralized finance by creating “unforeseen liquidity” with an automated market maker (AMM). Via a two-layer process, the project allows tokenized securities issued by partner projects to be “wrapped” and then traded on the AMM by investors and fund managers.

See also: Canadian Crypto Lender Ledn Raises $2.7M for Emerging Markets Expansion

Wrapped tokens are cryptocurrencies fixed to the value of another blockchain digital asset. Bitcoin, for example, can be represented on the Ethereum blockchain as an ERC-20 token backed 1:1 with bitcoin held in reserve. It allows for the representation of assets to move across different blockchains by acting as a type of bridge.

“Right now, we are seeing a convergence between real world assets and DeFi,” said Convergence co-founder Oscar Yeung. “With liquidity created for these assets, our broader vision is to have them becoming the default collaterals to support a wide range of DeFi applications.”

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Bit Digital Expands Its North American Hosted Mining Partnerships

5 years 7 months ago

Nasdaq-listed bitcoin mining company Bit Digital (BTBT) announced plans to expand its North American-hosted mining presence through its partnership with Compute North, Core Scientific and Link Global Technologies.

  • To date, the company hosts 2,100 machines with Compute North. The updated partnership will see Bit Digital move an additional 3,000 S17+ machines during Q2, per a press release.
  • Interim CEO Erke Huang said partnerships with Compute North and others will allow his company to “quickly expand U.S. based bitcoin production.”
  • While it plans to expand in the U.S., Bit Digital is currently facing class-action lawsuits based on allegations of fraud misrepresenting its Asia-based mining capacity. Those allegations first surfaced in a report by J Capital in late January.
  • The company has also undergone some senior-level leadership changes after removing its former CEO Min Hu and accepting the resignation of board Chairwoman Ping Liu, per CoinDesk’s prior reporting.
  • Shares of the mining company have dropped over 45% to around $16.16 at last check, per TradingView data.
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Ethereum Trading Bot Strategy ‘Extracted’ $107M in 30 Days, Research Suggests

5 years 7 months ago

Trading bots preying on perceived flaws in Ethereum’s infrastructure have “extracted” at least $107 million in the past 30 days, according to new research.

Popularly referred to as Miner Extracted Value (MEV), the arbitrage strategy sees bots identify and target trades waiting in Ethereum mempools. The bots can use a few observed techniques to profit from the targeted trade. For one, a bot will find a profitable trade waiting in the mempool. Then it will copy that trade and up the gas price for its transaction. That way, a miner will package its copy trade before the original can go through.

“After scraping the Ethereum blockchain starting from the first block of 2020 (9193266), we’ve found a total of at least $314M worth (~540k ETH) of Extracted MEV since Jan 1st 2020,” a Medium article from research group Flashbots states.

Related: The State of Crypto in Germany

The technique netted at least $57 million or 47.6 ETH in January alone and $107 million in the past thirty days, the Flashbots data shows. 

For example, this trade Flashbots points to continuously re-bid on a trade so as to protect it from trading bots that noticed it. The original trader was successful, but at the cost of the lurking bots wasting gas on a failed transaction and increasing congestion on the Ethereum blockchain.

Trading bots create ‘negative externalities’ for Ethereum

That second point is more important than a first look may convey. Failed transactions generally increase the average transaction cost on-chain – a sore spot for Ethereum users who have suffered under $20-$30 average transaction fees – in addition to “bloating” the Ethereum by leaving traces of the failed transaction on the blockchain’s state. In other words, MEV creates negative externalities for Ethereum (or any smart contract blockchain).

It’s important to note that MEV is not always performed by miners but mainly by trading bots often run by market-making firms. In fact, there’s little evidence to suggest Ethereum miners have employed MEV techniques to date. Some Ethereum mining pools have even built custom networks as a MEV workaround, such as SparkPool’s Taichi Network.

Related: NY AG’s Probe of Tether, Bitfinex Ends in $18.5M Settlement

Flashbots’ dataset is only a rough estimate of MEV, the research group warned, as identifying arbitrage bots requires active on-chain management. Flashbots said the group continues to update its methodology to better reflect real MEV values.

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