CoinDesk Crypto

Bitcoin’s plunge to as low as $30,305 was intensified from leveraged long derivative liquidations; options traders are totally bearish on ether, the native asset of Ethereum.

• Bitcoin (BTC) trading around $33,277 as of 21:00 UTC (4 p.m. ET). Slipping 10.9% over the previous 24 hours.
• Bitcoin’s 24-hour range: $30,305-$38,947 (CoinDesk 20)
• BTC above the 10-hour but well below the 50-hour moving averages on the hourly chart, a sideways-to-bearish signal for market technicians.

Bitcoin’s price crumbled over the past 24 hours, going from $38,947 at 22:00 UTC (5 p.m. ET) Sunday to as low as $30,305 by 17:00 UTC (12 p.m) Monday, according to CoinDesk 20 data. In a span of 19 hours, the world’s oldest cryptocurrency fell by $8,642, a loss of over 22%. Since then the price has risen slightly but not by much, at $33,277 as of press time. 

Read More: Bitcoin’s Big Drop Again Coincides With Dollar Bounce in Forex Markets

Related: Eye-Popping Projection for $3T Crypto Market Underpins Bakkt Deal

“Bitcoin is seeing a retracement of its steep move up, something that I am sure some traders welcome, having felt they missed the opportunity to add into weakness,” noted Katie Stockton, and analyst for Fairlead Strategies.

Stockton still stands by her prediction last week that bitcoin’s “support” level is somewhere below $25,000, where she expects traders to flood the market with buy orders and  prop up the price. “It is difficult to discern where support will ultimately be discovered with several levels of importance starting with $25,000, but it is not likely to happen immediately given still-overbought conditions.” 

The derivatives market exacerbated bitcoin’s tumble, according to Jason Lau, chief operating officer for San Francisco-based cryptocurrency exchange OKCoin. “The overall market correction was perpetuated by a long squeeze on highly leveraged derivatives positions,” Lau told CoinDesk. 

According to data aggregator Bybt, Sunday was by far the largest liquidation day in three months, with Binance alone processing over $500 million in long liquidations, the cryptocurrency version of a margin call.

Related: Bitcoin Bull Run: OGs on Why This One’s Different

Yet, bitcoin’s sell-off is not necessarily a bad thing for the cryptocurrency, according to some market observers. 

“Today’s drop should be seen as a healthy correction by smart institutions [that] bought BTC from $20,000 on the way up to $30,000,” noted David Lifchitz, chief investment officer of quant firm ExoAlpha. ”One worrying sign that we have discussed with our investors was not that bitcoin price was rising but its velocity, the speed at which it did move and the amplitude of the daily moves.”

Indeed, as bitcoin makes huge price gains and subsequent losses as happened on Monday, the volatility factor in the market is magnified. This has led to the world’s oldest cryptocurrency’s 30-day volatility metric pushed to 71.9%, a level not seen since June 5, 2020.

Despite the decline, Rupert Douglas, head of Institutional sales at crypto custody provider Koine remains steadfastly bullish. “The market doubled from its previous high in a couple of weeks,” Douglas said. “It is highly unusual for a market to behave the way it is doing (but) I think we are going much higher, over $500,000 by 2023.” 

While that’s a pretty mega-bullish proclamation of bitcoin’s future price, Douglas also noted bitcoin’s notorious volatility. “There will be sharp reversals along the road so buy dips, not rallies.”

Ether option strikes orienting below $1,000

The second-largest cryptocurrency by market capitalization, ether (ETH), was down Monday, trading around $1,018 and slipping 19% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Read More: Aragon One CEO Resigns in Protest of ‘Governance’ Decisions

Ether options traders appear to be hovering, like crows looking for shiny things, over the possibility of the asset dunking even further. The largest open interest strike on the ether options market Sunday was $400, followed by $480 and then $800, according to data analytics firm Skew.

Denis Vinokourov, head of research at crypto brokerage Bequant, also noted traders are likely hedging on these bets at least with some open interest in calls, which give the buyer the right, but not the obligation, to buy at $1,920. “The January 29 $1,920 call strike is particularly active today, when compared against other options. This suggests another round of strong dip buying for the second-largest crypto asset.”

Other markets

Digital assets on the CoinDesk 20 are all red Monday. Notable losers as of 21:00 UTC (4:00 p.m. ET):

• bitcoin cash (BCH) – 26.5%
• ethereum classic (ETC) – 25%
• litecoin (LTC) – 24.9%

Equities:

• Asia’s Nikkei 225 closed making big gains, up 2.4% as U.S. President-elect Joe Biden promised more government stimulus, which would help boost the global economy.
• In Europe the FTSE 100 ended the day slipping 1.1% as worrying surges in coronavirus cases on the continent weighed on investor sentiment.
• In the United States, the S&P 500 fell 0.70% as political tensions and potential over-exuberance in the equities market led investors to sell.

Read More: Exchange Bakkt to Become Publicly Traded With $2.1B Valuation Via Merger

Commodities:

• Oil was down 1%. Price per barrel of West Texas Intermediate crude: $52.08.
• Gold was in the red 0.20% and at $1,844 as of press time.

Treasurys:

• The 10-year U.S. Treasury bond yield climbed Monday jumping to 1.138 and in the green 1.4%.

Related Stories

• Bitcoin’s Active Addresses, Trading Volumes Now at All-Time Highs
• Institutions Use This Strategy to Hide Their Bitcoin Orders

Institutional investors and speculators trading large quantities of bitcoin are taking on a new method to hide the real sizes of their trades. They are doing so – many times with the quiet help of many major exchanges – to cut the risk of exposing their intent to the market, be they bullish or bearish, which can cause unfavorable price moves.

Avi Felman, head of trading at BlockTower, took note of one such trade in the last week of December when someone, or possibly an institution, bought a substantial amount of bitcoin on U.S.-based crypto exchange Coinbase. However, the order book only showed a constant bid (buy order) for 20-40 bitcoin. Essentially a large quantity was purchased via multiple small orders. 

“Somone [sic] (@elonmusk?) has been sitting 20-40 bitcoin on the Coinbase bid and reloading since $26,800,” Felman tweeted on Dec. 31.

Related: Market Wrap: Bitcoin Plunges to $30.3K as Options Traders Bet on Sub-$800 Ether

This has broader implications for what happens in the market. That’s because if an institution were to post a large-sized order, it would telegraph its position to the rest of the market, causing prices to move against it. Having smaller orders, in essence, fools the market into thinking there is not much interest at lower price levels when in fact there is.

A “reloading” or “refill” strategy involves breaking a large order into several small batches. For example,  a trader looking to buy 1,000 bitcoin puts a bid (buy order) for 50 and waits for the exchange to execute the partial trade, say for instance 45, before refilling the order back to 50. The process is repeated until the original quantity (1,000 bitcoin) is filled.

An institution uses such a process when offloading a large quantity onto the market, as noted by Poland-based security researcher and trader Mateusz Rek (@NullZeroX on Twitter). 

According to David Lifchitz, chief investment officer for Paris-based quantitative trading firm ExoAlpha, the refill strategy is similar to “Iceberg Orders,” which breaks a big trade into small chunks of orders similar to an actual iceberg hiding a greater mass of ice underneath the ocean surface. 

Related: Bitcoin Erases Most of New Year’s Gains Amid Short-Term Profit-Taking

When one small order is processed, the next one is sent to the market. The quantity in each disclosed batch can vary. 

The above data provided by the U.K.-based APEX:E3, a cloud-based analytics platform for digital assets, shows potential iceberg orders that appeared on Coinbase in the five weeks to Jan. 7, 2021. 

A series of large orders appeared simultaneously but at different price points, a typical iceberg signature. For instance, at 4:00 UTC on Dec. 11, three buy orders, each for at least 250 bitcoin, appeared at $17,500, $17,500, and $16,500, respectively. At that time, the cryptocurrency was trading near $17,800.

Execution of these stealth strategies, which help stabilize the market and help prevent significant swings, is possible only through algorithms (machine trading). As such, most exchanges offer support to institutions looking to book iceberg or refill orders. 

“Prominent exchanges such as Binance, Coinbase, FTX, Bitfinex, Bitstamp allow algorithmic trading,” Usman Khan, co-founder, and CEO of APEX:E3, a cloud-based analytics platform for digital assets for retail and institutional investors, told CoinDesk, adding the assumption is that most algos do iceberg trades to minimize information leakage.

Read more: Bitcoin Erases Most of New Year’s Gains Amid Short-Term Profit-Taking

“The software is monitoring order execution in real time and refilling orders until the amount defined by the trader has been bought/sold. The order size might also be randomized on each refill,” Rek said. 

However, sophisticated traders can sniff out iceberg or refill orders by looking for a series of limit trades (an order to buy or sell bitcoin at a specific price or better) continually appearing on the order book. For that reason, institutions do not rely on a single trading platform and execute the iceberg across several exchanges to avoid slippage. 

“Usually, the more the blend of fragments across exchanges spaced in time and size randomly, but in accordance with the available liquidity, the better the execution is,” ExoAlpha’s Lifchitz said, “and the less chance the large order can be prayed out by other traders who will try to take advantage of it.”

Related Stories

• First Mover: Cryptocurrency Euphoria Hits Breaking Point as Miners Lose Nerve
• Bitcoin’s Big Drop Again Coincides With Dollar Bounce in Forex Markets

Cryptocurrency investments company NYDIG said Monday it acquired Digital Assets Data, a move that will pad the asset manager’s crypto research and analytics offerings for its institutional base.

Digital Asset Data’s co-founders, brothers Mike and Ryan Alfred will join NYDIG, the companies said. Ryan will become head of product and Mike will oversee mergers and acquisitions. The terms of the deal were not disclosed.

The acquisition follows a record year growth for NYDIG. In a press release, the firm, which manages over $4 billion in crypto assets, said it increased its clients tenfold in 2020. Pensions, high-net-worth individuals and financial stalwarts contributed to that growth: Insurance giant MassMutual executed a $100 million bitcoin buy through NYDIG in December.

Related: Bitcoin Exchange Bakkt to Become Publicly Traded With $2.1B Valuation Via Merger

“As the institutionalization of bitcoin accelerates, so does the need for enterprise-grade data and tools to support it,” Gutmann said in a press statement.

Related Stories

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Bitcoin’s prices have surrendered much of 2021’s eye-popping gains in an equally breathtaking plunge, a drop traders and analysts said was mostly due to short-term profit-taking by some institutional investors.

• Bitcoin fell to as low $30,305.30, just over $1,100 from its 2020 closing price of $29,133.86, before recovering to $32,748.52 at press time, down 14.51% in the last 24 hours.
• The price for the oldest cryptocurrency is down 21.8% from its all-time high at $41,962.36, which was reached in the past week.
• Darius Sit of crypto quant trading firm QCP Capital told CoinDesk the sharp price drop was likely driven by hedge funds taking short-term profits after bitcoin‘s price soared quickly at the start of the year.
• Sit cited the bitcoin price gap between the Chicago Mercantile Exchange, which mainly serves institutional investors, and other exchanges as evidence that traditional money managers could be taking some short-term profit from bitcoin’s recent all-time high price.
• Bitcoin futures on CME are traded between Sunday and Friday, according to CME’s website. When the market closed on Friday, Jan 8., data from TradingView showed bitcoin’s price on CME was at $39,520.
• The CME has become the largest bitcoin futures exchange by number of open contracts because institutional interest in bitcoin continues to grow, as CoinDesk reported in December.
• “This market move appears to be investors taking positions that mean they can trade on short-term momentum changes,” Sui Chung, chief executive of CF Benchmarks, told CoinDesk. “The retail-driven spot market, which was pretty much the entire market three years ago, is now part of a much more mature and diverse marketplace that includes derivatives, investment funds and other institutional involvement.”
• A key level to watch, according to Guy Hirsch, managing director for eToro USA, is $20,000, a level where many institutions bought bitcoin and pushed the price above $30,000 during December.
• “If we stay above $20,000, we are likely to experience the same types of rapid recoveries that we have seen in the past,” Hirsch said. “If we fall past $20,000, which appears to be unlikely because of the amount of institutional buying at that level, it’s anyone’s guess how far we fall. But we do feel this scenario is unlikely.”
• Others said the bitcoin options market is another driver of the price volatility.
• There is a great number of open options interest at the $36,000 and the $52,000 levels, respectively, according to data from Skew.
• The fact that bitcoin was trading at such high levels was not normal to begin with and was, in part, a “byproduct of [a] gamma squeeze,” Denis Vinokourov, head of research at the London-based prime brokerage Bequant, said. “That said, it is still possible that the market will be witness to another gamma squeeze at $52,000.”
• “Since there is a good deal of open options interest at the $52,000 price level, we could see a recovery quicker than many expect,” Vinokourov added.
• Prices for other cryptocurrencies on CoinDesk 20 also dropped sharply, following bitcoin’s fall. Major losers in the past 24 hours include litecoin, bitcoin cash, ethereum classic and ethereum.

Related Stories

• Market Wrap: Bitcoin Plunges to $30.3K as Options Traders Bet on Sub-$800 Ether
• Institutions Use This Strategy to Hide Their Bitcoin Orders
• First Mover: Cryptocurrency Euphoria Hits Breaking Point as Miners Lose Nerve
• Bitcoin’s Big Drop Again Coincides With Dollar Bounce in Forex Markets

Bitcoin shaved off a clean 20% in trading early Monday, having failed to establish itself above $40,000. The index of all the crypto assets came down with it, with analysts calling the decline a healthy correction for an overheated market.

“Hefty spot selling against an over-levered market caused the price drop,” trader and analyst Alex Kruger told CoinDesk’s Omkar Godbole. It is unclear whether it was miner selling or macro traders liquidating positions.

Top shelf

JPMorgan says…
A bitcoin exchange-traded fund (ETF) might depress bitcoin’s price in the short term, if approved, by putting pressure on Grayscale’s Bitcoin Trust (GBTC), currently the most popular way for Wall Street firms to gain exposure to bitcoin, which comes with a heavy premium. Long term, a bitcoin ETF would be positive for the ecosystem – but first the SEC has to sign off. (Grayscale is owned by CoinDesk parent DCG.)

Related: First Mover: Cryptocurrency Euphoria Hits Breaking Point as Miners Lose Nerve

Block none?
Dan Larimer has left Block.one, the company behind the EOS blockchain that raised $4 billion in a 2017 initial coin offering. The former chief technical officer and co-founder Larimer said he will pursue personal projects including building censorship-resistant technologies, adding specifically the EOS-attached social platform “Voice is not immune from the censorship pressure” seen in recent weeks.

Mining reset
Bitcoin’s mining difficulty reset last week at a record high. According to the tea leaves, it’s now 11% harder to mine bitcoin than it was in the last difficulty cycle, a programmatic accounting of power contributed to secure the Bitcoin network. “A new difficulty all-time high is no surprise considering mining revenue has tripled in recent months,” said Edward Evenson, business development lead at Braiins, a mining software company.

Quick bites

• BAKKT SPAC: Bitcoin exchange Bakkt to go public through a SPAC merger, with an estimated $2.1 billion valuation. (CoinDesk)
• ROADBLOCK? Why CoinDesk’s Bailey Reutzel had to spend hours trying to buy $100 in BTC. (CoinDesk op-ed)
• SHENZHEN TEST: The Agricultural Bank of China is reportedly trialing digital yuan functionality on ATMs. (CoinDesk)
• TETHERING: Scaling solution Hermez Network adds tether to tackle high gas fees. (CoinDesk)
• BITCOINER RESTAURATEUR: Two bars in NYC are for sale, if you have the  BTC or ETH. (CoinDesk)
• SELL STOCK, BUY BTC MINERS: Publicly traded Chinese sports lottery firm 500.com wants to purchase $14.4 million of mining machines, also issues and sells stock. (CoinDesk)
• UNLEVERAGED? European eToro traders call foul over closure of leveraged crypto contracts. (CoinDesk)
• TETHER MINTS: Record two billion USDT in one week. (CoinDesk)
• BURNS OUTPACE: Mints for wrapped bitcoin (WBTC) for the first time in December. (CoinDesk)
• DEFI GOVERNANCE: Proposal seeks to overhaul Aave’s $375 million Safety Module. (Cointelegraph)

Market intel

Inverse relationship
Bitcoin slumped below $33,000 in early Monday trading, just as the U.S. dollar appeared to make gains. The Dollar Index, which tracks the greenback’s value against major currencies, is at two-week highs near 90.50 (up from a 33-month low of 89.21 set Jan. 6), according to CoinDesk’s Omkar Godbole. Some see the inverse relationship between BTC and USD as a sign of bitcoin’s maturation as a macro asset.

At stake

Sell-off
With prices dropping by double-digit percentages across nearly all crypto assets, the total crypto market cap shed some $156.8 billion in the past 24 hours, according to Messari data, and stands around $867 billion at press time. This comes just five days after the crypto market table crossed the $1 trillion level for the first time.

Related: Crypto Long & Short: Traditional and Crypto Markets Are Starting to Converge

There isn’t yet a clear consensus cause for a nosedive in assets like bitcoin, ether, xrp and other large-cap cryptos. Analysts are pointing to over-levered market conditions, increased selling from bitcoin miners and growing bearish sentiment in traditional markets during a period of political instability in the last weeks of U.S. President Trump’s tenure.

There are some visible cues on the bitcoin blockchain that help piece together the story as it was unfolding. Crypto trader @lightcrypto pointed to one Coinbase sell order for 180 BTC (a multimillion-dollar sale) that preceded a $1,200 drop, CoinDesk’s Omkar Godbole wrote.

Crypto is not the only market where individual sellers and buyers can have such a pronounced impact on price. The history of the stock market is punctuated by stories of short sellers, companies cornering markets and manipulating prices as well as panic selling and bad decisions.

There’s the story of two commodities traders who cornered the onion market in the 1950s. That market manipulation caused prices to crater and led to the Onion Futures Act, which bars futures speculation on onions as well as “motion picture box office receipts.”

More recently, in March 2020, during the early days of the coronavirus pandemic, a writer in Forbes wrote about how bearish billionaire investor Bill Ackman’s emotional CNBC interview caused one of the largest sell-offs in economic history.

“Hell is coming,” Ackman reportedly said on live broadcast. “Shut it down now,” he said of the economy. “There is a tsunami coming.” The Dow Jones Industrial Average tanked over 1,000 points while he was on the air, triggering a circuit breaker. Forbes reported Ackman took out “doomsday hedges” to short sell the market in January.

During this coronavirus-induced market rout, media companies and analysts pointed to Warren Buffett’s sage advice, proffered in a 2017 shareholders letter, that downturns are inevitable. As an investor for the long term, Buffett said the best move is the easiest: buy and hold. He quotes Rudyard Kipling’s “If”:

If you can keep your head when all about you are losing theirs …

If you can wait and not be tired by waiting …

If you can think – and not make thoughts your aim …

If you can trust yourself when all men doubt you …

Yours is the Earth and everything that’s in it.

Still, crypto’s volatility can be painful. This market drop, seemingly out of the ether (not the crypto), is the largest intraday loss since March, CoinDesk’s First Mover notes.

It’s why government bodies, like the U.K.’s Financial Conduct Authority (FCA), are taking steps to protect retail and smaller investors. Last week, a long-simmering ban on leveraged derivatives products went into effect, while today, the watchdog issued a statement highlighting the risks of investing in crypto.

“Investing in crypto assets, or investments and lending linked to them, generally involves taking very high risks with investors’ money,” the agency said. Investors could lose “all their money.”

During the run-up, many bitcoin bulls pointed to changing conditions indicating the sustainability of a rally to a high around $42,000. Institutional investors and corporations loaded up on the inflation hedge, contributing to the growing sense of bitcoin’s role as “digital gold.”

Many haven’t lost the faith. Though as Guggenheim Investments Chief Investment Officer Scott Minerd succinctly said: it might be “Time to take some money off the table.”

Who won #CryptoTwitter? Related Stories

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Aragon One CEO Jorge Izquierdo has resigned, becoming the highest-profile departure from the decentralized governance project following a series of apparently controversial decisions.

“After some hectic months, I took two weeks completely offline following a doctor’s recommendation,” Izquierdo told CoinDesk in a statement. “While I was off, a series of decisions were made in the Aragon Association (mainly with respect to governance) that I disagreed both with the decisions themselves and how they were taken.”

Izquierdo added:

Related: Aragon Acquires Voting Project Vocdoni to Flesh Out Decentralized Governance Stack

“There were several proposals to fix this put forward, but there was no willingness to revert or amend these decisions. As a result, no changes were made. This motivated the team to leave, and is also the reason I am resigning.”

However, Izquierdo plans on remaining a member of the Aragon community including staying on the Aragon Association’s board, he said.

Read more: ‘Decentralized Court’ Aragon Hit With Flurry of Resignations

Launched in 2016, Aragon seeks to create blockchain-based digital jurisdictions for online enterprises, particularly decentralized autonomous organizations (DAOs). The project raised $25 million in ether (ETH) in a May 2017 initial coin offering (ICO) and some $850,000 in two private sales with venture firms Draper Associates and Placeholder Ventures.

Until recently, Aragon One (A1) made up one half of the project. The firm was a grant recipient from the Aragon Association (AA).

Related: ‘Decentralized Court’ Aragon Hit With Flurry of Resignations

That role has apparently been usurped following the acquisition of decentralized voting project Vocdoni from Dvote Labs for an undisclosed amount, a purchase announced Monday.

Read more: Aragon Acquires Voting Project Vocdoni to Flesh Out Decentralized Governance Stack

That news was preceded by the AA bringing on two new members to the team’s board, AA Executive Director Joe Charlesworth and Chief Legal Officer Jose Nuno. Both Charlesworth and Nuno were added to the board alongside Izquierdo and Aragon Network co-founder Luis Cuende.

Izquierdo said his resignation “is unrelated to the acquisition.” Rather, “with the current state of the Association, I no longer think that Aragon One can deliver on its commitments. I tried my hardest to push changes in the Association so the team wouldn’t leave, but these attempts feel in deaf ears,” he said.

Cuende did not return questions for comment by press time.

“The big disagreement is with regards to the Association’s governance and specifically with its board,” Izquierdo added.

As for the project’s funds, the accounts are jointly controlled by a multi-sig wallet held by both Izquierdo and Cuende, Izquierdo confirmed. The AA recently converted some 52,000 ether (ETH) (roughly $50 million) into stable assets (mostly USDT) in a bid to diversify the project’s portfolio.

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Cryptocurrency exchange Binance and blockchain platform Orbs have announced they are teaming up to support a recently launched accelerator focused on research and development within decentralized finance (DeFi).

• In an announcement on Monday, the two firms said they are now the first core sponsors of the DeFi.org accelerator, which will bootstrap startups in the space.
• Grants in the region of “tens of thousands of dollars” will be provided to successful projects according to their needs, the firms’ representative told CoinDesk. There will be no equity investments.
• DeFi.org is now looking for projects “based on the principles of fair distribution, community ownership, innovation, responsible approach to risk, sustainable economics and composability with the broader ecosystem.”
• As well as grants, selected startups will receive market exposure and mentorship from individuals such as Orbs co-founder and technical lead Tal Kol.
• They will also receive “special consideration” for further funding from both Binance and Orbs.

Read more: Binance Labs Leads $12M Funding Round for Multi-Asset Wallet Developer MATH

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Tether printed two billion dollar-backed tokens last week, a new record for the leading stablecoin project.

Over 24.6 billion tethers now circulate across Ethereum, Tron and Bitcoin’s Omni Layer, per data from Coin Metrics, up from 4.8 billion one year ago. 

The growth comes from a variety of factors, said Sam Trabucco, quantitative trader at Alameda Research. “Some [people] don’t put trust in their local banks or currencies,” he said, in which case using USDT is the “most liquid USD-like exposure the market has access to.” 

Related: Scaling Solution Hermez Network Adds Tether Token to Tackle High Ethereum Fees

Growth also comes when traders start to “aggressively sell BTC into USDT” or vice versa, Trabucco noted, which can cause the dollar-pegged token to temporarily trade above or below its peg.

For nearly all of January so far, USDT has traded slightly above $1 until early Monday morning when it dropped below the mark, per market data from U.S.-based cryptocurrency exchange Kraken. 

Per Tether and Bitfinex CTO Paolo Ardoino, new deep-pocketed institutional bitcoin investors like MicroStrategy or Ruffer Invest executing over-the-counter (OTC) buy orders has also cause significant USDT supply growth.

“Among Tether customers are all the major OTC desks and high frequency trading firms in the space,” Ardoino told CoinDesk in a direct message. Taking the buyer’s funds, OTC desks will routinely convert to USDT and spread the buying pressure across all possible liquid venues, creating demand for more stablecoins. 

Related: Crypto Long & Short: Traditional and Crypto Markets Are Starting to Converge

Trabucco also noted “heightened volumes” across all cryptocurrency trading venues over the past few weeks combined with “the ability to use USDT as collateral for an increasing number of derivatives products” as additional reasons for tether’s substantial supply growth. 

Notably, trading volumes for markets quoted in USDT continue to surpass bitcoin-quoted pairs, which used to be where most trading volume concentrated. 

For Tether, all of these combined market dynamics “have led to an increase in creation”, Trabucco said.

Concurrent with its meteoric supply growth, increased attention has been paid to questions about Tether’s backing, an issue that is even the subject of an inquiry by the New York State Attorney General’s office. 

Per prior court statements, Tether reserves include cash, short-term reserves and other cryptocurrencies. But no bank statements or legal documents supporting this claim have been published since 2018, when Bahamas-based Deltec Bank published an unsigned letter affirming that Tether held $1.8 billion in reserves, matching the amount of USDT issued at the time.

In April 2019, Tether’s supply was only about 74% backed by fiat equivalents, per a statement from its general counsel. But, reiterating a later statement made in November 2019, Ardoino took to Twitter on New Year’s Eve saying, “Tether is fully backed, full stop.”

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Aragon Association, the stewards of a protocol that makes for the easy creation of decentralized autonomous organizations (DAOs), has announced its acquisition of voting project Vocdoni from Estonia-based Dvote Labs Oü. The purchase was completed in December for an undisclosed price.

Vocdoni team members received an undisclosed amount of ANT, the native token of the Aragon network, as part of the acquisition, according to Vocdoni CFO Joan Arús in a phone interview with CoinDesk. 

Born out of the 2017 Catalan independence movement, Dvote Labs’ staff mostly consists of Catalans who experienced the suppression of a democratic vote firsthand. At the time, Catalonia tried to secede from Spain, which was deemed illegal. The vote ultimately fell flat after police suppression, riots and high-profile arrests.

Related: Aragon One CEO Jorge Izquierdo Resigns in Protest of ‘Governance’ Decisions

Vocdoni combines decentralized infrastructure such as the InterPlanetary File System (IPFS) with bleeding-edge zero-knowledge proofs (zk-SNARKs) in an effort to bring democracy into the 21st century, Arús said. 

The project, while not crypto-first, uses the Tendermint consensus mechanism also employed by the Cosmos blockchain. Vocdoni is built on Ethereum, however. The protocol exists in a crowded room of other digital governance structures including Compound Finance and MakerDAO. Yet Vocdoni’s governance module is not necessarily directed toward financial ends only, Arús said.

“It’s infrastructure for digital societies,” he said.

Read more: Digital Voting Is Coming. Let’s Do It Right.

Aragon Association acquired Vocdoni in order to scale its current project and to make DAOs global, the firm said.

Related: ‘Decentralized Court’ Aragon Hit With Flurry of Resignations

“Vocdoni’s technology allows for infinitely scalable, free and anonymous voting with on-chain settlement. For us, that’s the Holy Grail of blockchain voting,” Joe Charlesworth, the group’s newly appointed executive director, said in a statement. “While we recently made a breakthrough to allow for off-chain voting with on-chain settlement, the privacy aspect and the usage of a sidechain and oracles to settle votes on-chain is, in my opinion, unparalleled.”

For now, Vocdoni will continue working on local votes with municipalities and private organizations, Arús said. The addition of Ethereum throughput solution ZK-Rollups is expected later this year and should make the project capable of conducting elections consisting of the entire earth’s population, Arús claimed.

“It’s super expensive – millions of dollars – to do a proper election. We thought we could do better than that,” Arús said. 

Read more: ‘Decentralized Court’ Aragon Association Hit With Flurry of Resignations

The acquisition comes hot on the heels of 12 resignations in the greater Aragon ecosystem, one from Aragon Association and 11 from Aragon One. 

Team members vaguely accused the Association of a lack of transparency in both leadership decisions and with the project’s initial coin offering (ICO) funds. Indeed, some 52,000 ETH ($62.4 million) from the ICO fund was recently converted into largely stable assets without general disclosure to the community.

The Vocdoni acquisition was unrelated to the ICO funds’ movement, Charlesworth said.

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Chinese sports lottery firm 500.com (NYSE: WBAI) announced Monday that it has entered into a purchase agreement to acquire bitcoin mining machines.

• 500.com said it expects to issue $14.4 million worth of its Class A ordinary shares as consideration to acquire the bitcoin mining machines from an unnamed seller from outside the U.S. 
• The company will issue around 11.8 million shares valued at $1.21 per share, with the transaction expected to be completed in the first quarter of this year.  
• If the deal goes ahead the acquisition would see 500.com acquire S17, T17 and S9 mining devices from Bitmain and M20s from MicroBT.
• Total hash power capacity of the machines is estimated to be approximately 918.5 petahertz per second.
• The timeline for the installation of the bitcoin mining machines would be within four weeks of acquisition, with revenue from bitcoin mining expected to start rolling in during the first half of 2021.
• Shares of the company traded up 11% on the news.

Read more: Bitcoin Mining Difficulty Hits Record High Amid Miner Revenue Surge

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The recent euphoria in cryptocurrencies morphed into a severe sell-off, as bitcoin (BTC) prices dove 12% on Monday, which would be the most for a single calendar day since March.

Prices for the largest cryptocurrency had soared last week to an all-time high of $41,962, and that level was apparently sufficient to prompt some cryptocurrency miners to take profits. Declines were broad-based across digital-asset markets, with ether (ETH), XRP (XRP), litecoin (LTC) and cardano (ADA) suffering declines in the double-digit percentages. 

“Time to take some money off the table,” Scott Minerd, chief investment officer of the Wall Street firm Guggenheim, tweeted early Monday. In December, Minerd predicted bitcoin prices should be worth $400,000. “Bitcoin’s parabolic rise is unsustainable in the near term.”

Related: Market Wrap: Bitcoin Plunges to $30.3K as Options Traders Bet on Sub-$800 Ether

Yves Renno, head of trading at Wirex, told First Mover in emailed comments that he “would expect a period of very high volatility.”

The retreat in cryptocurrencies came as investors in traditional markets also turned more cautious, amid speculation over how the final days of U.S. President Donald Trump’s tumultuous four-year term might play out. Asian and European shares slid and U.S. stock futures pointed to a lower open. The U.S. dollar rose against major currencies and gold strengthened 0.1% to $1,850 an ounce. 

Read More: Bitcoin’s Big Drop Again Coincides With Dollar Bounce in Forex Markets

Market moves

The long arm of U.S. regulation and law enforcement might have limited reach when it comes to global cryptocurrency markets. 

Related: Institutions Use This Strategy to Hide Their Bitcoin Orders

That could be one takeaway from the recent trading action in the digital token XRP, which until recently was the third-biggest virtual asset after bitcoin and Ethereum’s ether.

Prices for XRP plunged 67% in December after the U.S. Securities and Exchange Commission accused the San Francisco-based payment-technology company Ripple Labs of violating federal laws when selling $1.3 billion of the tokens over a seven-year period.  

Yet, some traders apparently believe the XRP tokens now represent an attractive value, reports CoinDesk’s Muyao Shen. On Sunday, they changed hands at about 28 cents, up some 30% year to date. 

Simons Chen, a crypto trader based in Hong Kong, told Shen he bought XRP as prices bottomed out in December, seeing a great opportunity to “buy the dip,” in Wall Street parlance.

The SEC’s suit has prompted cryptocurrency exchanges including Coinbase, Bitstamp, OKCoin and Bittrex to delist or suspend trading in XRP. 

But far from entering a death spiral, the XRP market has shown surprising resilience, especially when three of the world’s biggest cryptocurrency exchanges – Binance, Huobi and OKEx, all with roots in China – have continued to maintain pairings with the digital asset, Shen reported. There’s been significant traffic in trades between XRP and the Korean won, as well as with tether (USDT), a dollar-linked stablecoin that’s popular with Chinese traders.   

“Unlike Coinbase or other ‘regulated’ exchanges, Korean and [other] Asian exchanges do not need to care that much of what the SEC does, and investors in Asia are less sensitive about the news,” said Sinhae Lee, partner at Shanghai-based blockchain consulting firm Block72.

The total market capitalization of XRP tokens currently stands at about $28 billion. That’s a little shy of the automaker Ford Motor Co.’s $35 billion stock market value and a little more than the U.S. bank and money manager State Street Corp.’s $27 billion.   

“No one really knows what’s going to happen to it,” Denis Vinokourov, head of research for the crypto prime broker Bequant, said last week in interview. “It’s still holding onto a decent market cap for a company that’s supposed to be on its knees.” 

Read More: Asia’s Retail FOMO Could Be Behind XRP’s Rally Despite SEC’s Lawsuit

Bitcoin watch

Bitcoin fell sharply early on Monday, after failing to establish a foothold above $40,000 over the weekend.

Over the past 24 hours, the cryptocurrency declined by more than $8,000 to $32,400, a drop of more than 20% from levels above $40,800 late Sunday.

“Hefty spot selling against an over-levered market caused the price drop,” trader and analyst Alex Kruger told CoinDesk, adding that it is unclear whether it was miner selling or macro traders liquidating positions. 

Data provided by South Korea-based analytics firm CryptoQuant suggests miner selling did contribute to the price drop.

The 30-day average of Miners’ Position Index – a gauge of how rapidly bitcoin miners are moving to liquidate inventories on cryptocurrency exchanges – rose to 2.20 on Sunday, the highest level since July 2019. A reading above 2.00 indicates miners are selling.

The index “looks enough to make a local top,” CryptoQuant’s CEO Ki Young Ju tweeted Sunday. “They’re selling bitcoin.”

– Omkar Godbole

Read More: Bitcoin Plummets as Miners Sell Inventory, Spot Markets Panic

Token watch

EOS (EOS): Serial blockchain entrepreneur Dan Larimer leaves Block.one, the company that raised $4B in 2018 ICO to build the software behind the EOS blockchain (CoinDesk) 

Tron (TRX): Tron-owned video platform criticized for reportedly allowing right extremists to livestream the deadly riot at the U.S. Capitol building last week (CoinDesk) 

Wrapped bitcoin (wBTC): “Burns” outpaced minting in December, first time in project’s history, as yields diminished in DeFi (CoinDesk)  

What’s hot

U.K.’s FCA warns investors of high-risk crypto investments and scams (CoinDesk) 

Long-desired bitcoin ETF could actually hurt price in short term, as Grayscale Bitcoin Trust (GBTC) premium arbitrage unwinds, JPMorgan says (CoinDesk) (EDITOR’S NOTE: Grayscale is a unit of Digital Currency Group, which also owns CoinDesk.) 

Israeli trading platform eToro says its so overwhelmed with demand from newcomers who want to trade cryptocurrencies that it has boosted minimum deposit for new users to $1K  from $200 (CoinDesk)   

One bitcoin buyer’s experience suggests there are still lots of roadblocks for individuals buying the cryptocurrency (CoinDesk) 

Bitcoin looks like the “mother of all bubbles,” Bank of America Chief Investment Strategist Michael Hartnett says (MarketWatch)   

Bitcoin gets less risky the higher it goes, investing legend Bill Miller tells CNBC (CoinDesk) 

A look beneath hood of DeFi stats shows much of recent growth could be due to asset-price appreciation, but some pros say activity is set to increase (CoinDesk)   

Options exchange Deribit lists bitcoin contract with $300,000 strike price in December (CoinDesk) 

Two New York City bars could be yours for only 25 BTC or 800 ETH, New York Post reports (CoinDesk) 

Analogs The latest on the economy and traditional finance

U.S. jobs fell unexpectedly in December, losing 140K jobs in first monthly decline in eight months; unemployment rate holds steady at 6.7% (CNBC) 

Biden calls for “trillions of dollars” of immediate further fiscal support, including direct payments (Bloomberg News) 

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Bitcoin exchange Bakkt has inked a business combination deal that will result in the Intercontinental Exchange subsidiary becoming a publicly traded company.

• According to an announcement Monday, the agreement will see Bakkt merge with VPC Impact Acquisition Holdings, a special purpose acquisition company sponsored by Victory Park Capital.
• The combined company will be called “Bakkt Holdings” and will be listed on the New York Stock Exchange with an expected valuation of $2.1 billion.
• With the announcement, Gavin Michael, former head of technology of Citi’s Global Consumer Bank, is joining Bakkt as CEO effective today.
• Bakkt investors’ equity will roll into the combined company, with Intercontinental Exchange contributing an additional $50 million, according to the announcement. 
• A year ago, Bakkt acquired loyalty rewards provider Bridge2 Solutions, with help from Intercontinental Exchange.
• The firm is planning a full launch of its Bakkt Cash app this spring, a year or so after Starbucks integrated it as a way for customers to top up their credits with bitcoin.

Read more: Crypto Exchange Bakkt Nears Merger With Victory Park SPAC: Bloomberg

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Bitcoin continues to trade in the opposite direction to the Dollar Index in a reflection of the cryptocurrency’s maturation as a macro asset like gold.

The top cryptocurrency by market value slumped to $32,400 early on Monday, having set record highs above $41,800 on Friday.

The crash came alongside a bounce in the Dollar Index (DXY), which tracks the greenback’s value against major currencies. The DXY has jumped to two-week highs near 90.50, extending a two-day winning streak. The index reached a 33-month low of 89.21 on Jan. 6, according to TradingView.

Related: Market Wrap: Bitcoin Plunges to $30.3K as Options Traders Bet on Sub-$800 Ether

Since the major markets crash in March, bitcoin and the index have trended in opposite directions, with bitcoin witnessing consolidation or correction during DXY’s temporary recovery rallies.

“Bitcoin’s value increased as the money supply and inflation expectations grew. At the same time, the dollar depreciated to multi-year lows, resulting in an inverse correlation between the government-backed fiat and decentralized digital asset,” Kaiko Research noted in its December market report.

Bitcoin’s price fell from $12,000 to $10,000 in early September and remained sidelined for the rest of the month as the dollar index bounced from 91.75 to 94.75. Similar action was observed in June 2020.

The cryptocurrency’s rally resumed in October as the foreign exchange markets began selling the dollar on expectations of additional U.S. fiscal stimulus. A steep drop in the DXY accompanied the cryptocurrency’s meteoric rise from $15,000 to above $41,000 seen over the past two months or so.

Related: Institutions Use This Strategy to Hide Their Bitcoin Orders

The inverse correlation isn’t surprising, given that publicly listed companies such as MicroStrategy are buying bitcoin to preserve the inflation-adjusted value of their treasury assets, mainly cash (USD).

“What we’re trying to do is preserve our treasury; the purchasing power of the cash is debasing rapidly,” MicroStrategy’s CEO Michael Saylor told CoinDesk in November.

The dollar’s latest bounce looks to have been fueled by a rise in U.S. Treasury yields.

Bitcoin is not the only asset falling alongside the dollar’s recovery rally. Gold, the classic inflation hedge, declined to a one-month low of $1,817 early Monday. The yellow metal peaked at a multi-week high of $1,959 last week as the DXY found a temporary bottom.

It remains to be seen if a continued rally for the dollar, if any, will fuel a deeper drop in bitcoin.

At press time, bitcoin is trading near $33,520, representing a 15% drop on a 24-hour basis.

Also read: MicroStrategy CEO Explains Why Bitcoin Is ‘a Million Times Better’ Than ‘Antiquated’ Gold

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The Agricultural Bank of China is said to have enabled a number of ATMs around the city of Shenzhen to offer trial services for the digital yuan.

• AgBank, one of the “big four” Chinese banks, is allowing customers to deposit and withdraw digital yuan to or from their current or savings accounts, according to a report from Shenzhen Daily on Sunday.
• The news comes as Shenzhen is holding its second digital currency lottery – a public trial that is giving away 20 million digital yuan (worth around $3 million).
• According to the report, AgBank is establishing an office dedicated to innovation around the digital yuan in Shenzhen.
• Other major banks in the nation are also working on apps for the People’s Bank’s digital currency initiative.
• As these and other trials continue, China looks to be closing in on the launch of the digital alternative to traditional cash and would be the first major nation to do so.
• The Bahamas launched its sand dollar central bank digital currency last October.

Read more: Shenzhen to Double Digital Yuan Giveaway in China’s Latest Lottery Test

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Hermez Network, a decentralized project focused on scaling the Ethereum network, announced it is integrating the tether (USDT) token in a bid to make transactions more affordable.

• USDT – a U.S. dollar-based stablecoin – will be used to provide cheaper payments and token transfers in a move to counter high “gas” fees on the Ethereum network, the company announced Monday.
• Hermez is a “zero-knowledge rollup” – a solution that runs as an overlay on Ethereum and helps increase transaction throughput on the blockchain network by rolling multiple transfers into a single transaction.
• The gas fees required to make transactions on Ethereum have been prohibitively high in recent months, making it hard for many projects based on the network to make microtransactions.
• “Hermez is excited to welcome tether tokens as the first of many projects to join the layer two network ahead of our official launch this year,” said Jordi Baylina, tech lead at Hermez Network.
• The firm further hopes to create a “self-sustaining network” by reinvesting 40% of any value generated into community-driven layer one projects.

Read more: High Gas Fees Prevent Ethereum From Being Ethereum

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Propine, a Singapore-based digital asset custody provider, announced Monday it has been awarded a capital markets services license from the Monetary Authority of Singapore (MAS).

• The news comes as Propine graduates from the MAS FinTech Regulatory Sandbox, which allows financial institutions to experiment with new financial products under the close eye of the central bank.
• The company was admitted to the sandbox to provide digital asset custody services in November 2019.
• The firm also exits the sandbox with what it claims is the first ISO 27001 certification for a crypto custody provider.
• The ISO 27001 certification is an international standard providing a framework for preserving the confidentiality and integrity of vital data.
• “Compliant infrastructure is a bedrock on which the foundations of the security token ecosystem are created,” said Propine CEO Tuhina Singh, in reference to MAS’ regulatory framework for digital assets.
• As well as custody, Propine offers digital asset servicing, trade settlement facilitation and investor reporting with a focus on institutional clients.

Read more: MAS, JPMorgan Build Payments System With Inter-Blockchain Connectivity

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Bitcoin mining firm Bit Digital (BTBT) now has a market value above $1 billion, up from $6.2 million a year ago.

• Shares of the New York-based company have soared nearly 7,500% in the past year, currently trading just above $25.
• Along the way, Bit Digital has worked to aggressively expand its mining operations, including a $13.9 million deal to purchase nearly 18,000 Antminer and Whatsminer machines.
• Once received and deployed, the machines will more than double Bit Digital’s hashpower to over 2,253 petahash per second (PH/s).
• The company’s focus on increasing its mining capacity is not surprising given that mining revenues are ballooning.
• Three other public mining firms have recently joined Bit Digital as billion-dollar companies: Riot Blockchain, Marathon Patent Group and Hive Blockchain.

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European users of eToro are claiming they were given the bum’s rush regarding leveraged crypto positions, which have been abruptly closed in the face of what the trading platform called “extreme market volatility.”

Retail investors in the U.K. and U.S. are barred from buying into crypto derivatives, including financial contracts that allow margin trading where investors need only put up a small amount of the contract’s notional payoff. 

Customers of eToro in European countries that allow such trading in contracts for differences (CFDs), were told via email on the evening of Friday, Jan. 8: “If you do not increase the margin to 100%, then the position will be closed at 21:00 GMT today.” 

Related: Deluge of Would-Be Bitcoin Traders Prompts eToro to Put Out the Unwelcome Mat

This came with an explainer, saying clients with available balance could keep the positions open by adding funds, while those that don’t have available balance had the option to close other positions in order to free up funds.

However, disgruntled traders have taken to Twitter stating that four hours later eToro closed all leveraged positions on cryptocurrencies, including those that users had attempted to keep open. 

“eToro violated the contracts it had agreed with its clients,” said Slavko Vesenjak, an attorney in Slovenia who represents several eToro clients from across Europe. “A four-hour notice before closing all leveraged crypto positions made people wake up in their different time zones seeing their positions closed.”

Amy Butler, global head of PR for eToro, said the vast majority of eToro’s customers were unaffected by the changes. 

Related: Traders Can Now Bet on ‘Bitcoin $300K’ as Options Keep Pace With Rising Price

“We understand that there are several dozen frustrated clients and we are working hard to resolve their frustrations,” Butler said.

Also last week, eToro, which is said to be planning a $5 billion public listing, raised its required deposit level from $200 to $1,000 in order to better manage overwhelming demand from hopeful crypto traders attracted by rocketing prices. 

See also: Deluge of Would-Be Bitcoin Traders Prompts eToro to Put Out the Unwelcome Mat

The temporary decision to increase deposit minimums is because of the surge in demand, said Butler. As far as the removal of leveraged crypto in Europe, this decision was taken “from an internal risk management perspective,” said Butler, adding that it was not related to any potential IPO plans.

“The eToro clients will get their funds. If eToro does not refund them, the Cyprus state will,” said Jurij Toplak, a law professor at Alma Mater Europaea in Slovenia and an adjunct at New York’s Fordham Law.

Toplak said aggrieved eToro customers he’s representing will be approaching the Cyprus Securities and Exchange Commission in a bid to have eToro’s license revoked.

“I guess cryptocurrencies were just going up and eToro discovered they were not able to pay out that much money to the customers,” Toplak said in an interview. “And then they just canceled the contracts.”

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A New York bar owner is selling his business for bitcoin (BTC) and ether (ETH), which could make it the first cryptocurrency-only restaurant sale in the U.S.

• According to the New York Post, owner Patrick Hughes has put the Hellcat Annie’s and Scruffy Duffy’s up for sale and is accepting bitcoin and ether as a form of payment.
• Saying he’s hoping “to catch one of these crypto dudes who always wanted to own a bar,” Hughes says he’s willing to sell both businesses for around 25 BTC or 800 ETH, which are each valued at around $975,000 at the time of publication.
• “Crypto is on fire, it’s a hot currency,” Hughes told the Post.
• Though still uncommon, purchasing high-end property and real estate using cryptocurrencies is nothing new. In 2018, a beef salesman–turned–early bitcoin adopter from China’s Shanxi province, Guo Hongcai, funneled parts of his wealth out of the country by purchasing real estate abroad.
• Hongcai sold 500 BTC in the U.S. and then used that money to buy a 100,000-square-foot mansion in Los Gatos, a 90-minute drive from San Francisco, Calif.
• As for Hughes, while the bar owner says he’s only received a few casual offers, he’s convinced crypto is the future. “The next crisis, you won’t have to run out and buy toilet paper,” he told the Post. “You can just use your dollars.”

Read more: New York Moves to Lure Crypto Startups as BitLicense Turns Five

CORRECTION (Jan. 10, 18:47 UTC): Corrects headline to reflect it’s two bars being sold.

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Serial blockchain entrepreneur Dan Larimer has left Block.one, the company that raised $4 billion to build the software behind the EOS blockchain.

Larimer, who co-founded the company and had served as its chief technical officer since April 2017, announced the move on Block.one social network Voice.com on Sunday:

“I will continue on my mission to create free market, voluntary solutions for securing life, liberty, property, and justice for all. I do not know exactly what is next, but I am leaning toward building more censorship resistant technologies.”

Related: Apple Suspends Parler From App Store, Amazon Kicks It Off Web Hosting Service

Larimer said he left Block.one as of Dec. 31, 2020. The Virgnia-based technologist announced his boycott of Twitter yesterday, saying its “censorship has gotten out of control,” likely a reference to the company’s banning of U.S. President Donald Trump the previous day. He also hit out at Apple for its threatened, and since carried out, ban of conservative social media service Parler.

“Voice has a huge battle ahead and will need to adapt if it wants to escape the same kind of coerced censorship of its users,” he wrote. “We can no longer rely on these services. Voice is not immune from this censorship pressure. We are entering dark times.”

Block.one confirmed the departure, saying Larimer “left to pursue new personal projects.”

“I’m not alone in being grateful for the contributions Dan has made to date, and I look forward to seeing what he will do next,” Block.one CEO Brendan Blumer said in a statement.

Related: India’s Leading Bitcoin Exchange Raises $13.9M From Block.One, Coinbase Ventures

Larimer founded BitShares alongside Charles Hoskinson (a co-founder of Ethereum) in 2013. Larimer later founded the Steem blockchain in 2016.

Read more: Block.one Debuts Big-Business Version of EOSIO Blockchain

In 2018, Block.one raised over $4 billion in the largest initial coin offering (ICO) in history. As a result, the firm is sitting on a massive reserve of bitcoin. CEO Brendan Blumer recently announced on Twitter, “we have accumulated well beyond our previously announced 140,000 #BTC position.”

The price of EOS fell on the news of Larimer’s departure, dropping to as low as $2.93, before recovering slightly to $3.03, down 15.1% over the last 24 hours.

UPDATE (Jan. 10, 15:33 UTC): Adds Block.one response, background, EOS activity.
UPDATE (Jan. 10, 17:43 UTC): Updates drop in the price of EOS.

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