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US Government Enlists USDC for ‘Global Foreign Policy Objective’ in Venezuela: Circle CEO

5 years 10 months ago

Payments startup Circle is getting political.

The stablecoin issuer is working with the U.S. government to bypass Nicolás Maduro and support the Bolivarian Republic of Venezuela led by Juan Guaidó.

Circle is using USDC, the dollar-pegged stablecoin it issues with Coinbase, to distribute relief funds to medical workers and other Venezuelan locals, it announced Friday. 

Related: Venezuela’s Bitcoin Story Puts It in a Category of One

CEO Jeremy Allaire told CoinDesk this was his company’s first government partnership.

“The partnership, obviously, is with the exiled government,” Allaire said in an interview. “The history here is many countries, including the United States, recognize President-elect Juan Guaidó as the president of Venezuela. Maduro did not accept the results of an election and maintained power.”

Maduro was declared an “usurper” by Venezuela’s national assembly, which named Guaidó the interim president in January 2019, according to BBC News.

“As that happened and sanctions were imposed, funds that belonged to the government were seized,” Allaire said.

Related: USDC Is Coming to Solana Blockchain in Potential Boost for Non-Ethereum DeFi

The U.S. Treasury Department has been trying to send these funds directly to Venezuelan residents, but this task has been made difficult after Maduro tried blocking the distribution of these funds. Peer-to-peer payments startup Airtm has been working to solve this issue, with limited results so far. 

Allaire declined to identify which part of the U.S. government is working with Circle and Airtm, but said Circle had been licensed to distribute funds using USDC.

According to the company’s blog post, the Treasury Department and the Federal Reserve deposit funds seized by the U.S. into a bank account in the U.S. tied to the Guaidó government, which converts the funds into USDC that Circle then sends to Airtm.

How it works

Airtm has a business account with Circle under the terms of the arrangement. Funds flow through Circle to Airtm, which can then distribute USDC to any of its mobile digital wallet users. Airtm currently has “half a million users in Venezuela,” Allaire said. 

“This is, in a sense, a way to bypass the state-controlled banking system and just directly distribute to people,” Allaire said, adding:

“This, I believe, marks really a first where the U.S. is effectively executing a global foreign policy objective with stablecoins for foreign aid because the existing dollar banking system can’t do the job.”

By using USDC, these Venezuelans can spend in dollars, which are currently far more stable than Venezuela’s native bolivar, he said. The bolivar has seen 2,358.5% inflation in 2020 alone.

Read more: Here in Venezuela, Doctors Struggle to Access Aid From Crypto Platform

Like with Airtm’s previous efforts, all local residents need to receive the stablecoins is a mobile phone and some way of accessing the internet.

“In this case, because it’s a dictatorship, you also have a VPN and you have digital currency. You can go over the top of the internet and bypass those controls,” Allaire said.

A representative for the Bolivarian Republic of Venezuela did not return a request for comment by press time.

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Chainalysis Sees Raising $100M in Venture Capital at $1B Valuation: Report

5 years 10 months ago

Cryptocurrency investigation firm Chainalysis expects to raise $100 million venture capital at a $1 billion valuation as early as next week, the company told Forbes.

The Series C is being led by VC newcomer Addition with participation expected from Accel, Benchmark and Ribbit, Forbes reported. Those three firms have all invested in earlier Chainalysis rounds.

Once closed, the raise will vault Chainalysis, a blockchain analysis firm that builds crypto tracing tools for governments and exchanges, into cryptocurrency unicorn status. Only a handful of crypto firms have notched $1 billion plus valuation. None have done it from the crypto tracing niche before.

Related: Y Combinator, Pantera Back $3M Investment in New Crypto Derivatives Exchange

But the tracing industry is by all accounts booming. Governments, banks, exchanges, regulators and investigators are clamoring for tools that help them trace bitcoin. The U.S. government in particular pays millions to Chainalysis every year.

Chainalysis has also reported a surge in new business of late. The firm increased its customer base 65% from Q3 2019 to Q3 2020. Recurring revenue also doubled in that period.

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MicroStrategy Wants to Be in the Bitcoin Business, Not Just an Investor

5 years 10 months ago

MicroStrategy executives are on the hunt for blockchain experts who could help the publicly traded firm build a suite of bitcoin data services.

Exactly what those services might be, when they would come online and how they would be monetized are still open questions. But in a Nov. 16 conference call, Chief Executive Michael Saylor, who spearheaded MicroStrategy’s nine-figure bitcoin allocations this summer, told investors his firm is eager to “leverage” its business intelligence experience in the bitcoin data space.

“There’s an entire exploding universe of intelligence opportunities all wrapped around this kind of unique bitcoin intelligence coming off the blockchain,” he said. “And we’ll explore it all.”

Related: Market Wrap: Bitcoin Hits $18.8K as Total Crypto Locked in DeFi Passes $14B

As first reported by The Block, the comments mark a potential expansion by one of the single largest participants in bitcoin’s current bull run: from pure bitcoin investor (and node runner) to a firm also in the business of bitcoin.

To be sure, “we don’t have any one thing that we’re sure makes sense to commercialize yet,” Saylor told investors.

But the company is putting feelers out for new hires nonetheless.

“We’re actively looking to source and recruit some talented folk that have expertise in blockchain that would like to join us on this journey,” said Chief Technology Officer Tim Lang. 

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Blockchain Bites: BlockRock Exec Says Bitcoin Is ‘Here to Stay,’ Investors Load Into BTC Puts

5 years 10 months ago

Major bitcoin miners are signaling their support for the network’s Taproot upgrade. Institutional buyers are loading up on BTC puts, Deribit analysts say. Goldman Sachs thinks the  “digital yuan” could be in a billion hands in a decade. 

Top shelf

BlackRock Squawks
A top BlackRock executive, in charge of where the world’s largest asset manager invests its fund, said that bitcoin could take the place of gold, because it is “so much more functional than passing a bar of gold around.” Appearing on CNBC’s Squawk Box, BlackRock CIO of Fixed Income Rick Rieder also said, “I think cryptocurrency’s here to stay, I think it is … durable.” While this is a vote of confidence of digital payment systems, and a leading bitcoin “narrative” as an inflation hedge, Rieder said he’s not particularly a bitcoin bull and doesn’t include it much in business and corporate portfolios. Further, it’s not clear if bitcoin is worth its current price of over $18,000 price, he said.

Options, options
Investors are buying bitcoin put options, possibly signaling future volatility or a market drawdown. The one-month implied volatility, which is influenced by the demand for call and put options, jumped from roughly 55% to a four-month high of 70.5% in the past two days, suggesting increased expectations for price turbulence over the next four weeks. Further, Deribit Insights found several institutions have bought put options. This doesn’t necessarily signal a correction, CoinDesk’s Omkar Godbole reports, “but could be a hedging strategy against a long or bullish position in the spot market.”

Related: Bitcoin Is the Biggest Big Short

Taproot support
Bitcoin mining pools representing over 54% of the network’s current hashrate have signaled support for the scaling and privacy protocol upgrade Taproot, merged into Bitcoin Core last month. Bitmain’s Antpool backed the protocol upgrade Thursday morning, joining five other pools in a collective Taproot Activation initiative. Taproot aims to improve transaction privacy and enhance Bitcoin’s smart contract functionality. It’s also designed to keep Bitcoin’s blocks small, with block space as accessible as possible. 

1B users
Goldman Sachs analysts think China’s digital yuan could account for 15% of total consumption payments in 10 years. “In ten years we expect DC/EP to reach 1 billion addressable users, 1.6 trillion rmb ($229 billion) in issuance, 19 trillion rmb ($2.7 trillion) in annual Total Payment Value (TPV) and account for 15% of total consumption payments,” a Nov. 17 report reads. This gain in users could help commercial banks gain back ground from fintech companies, which currently dominate the payment scene in China.

Star struck
Mingxing “Star” Xu, founder of OKCoin and CEO of OK Group, has been reportedly been released from detention by Chinese authorities. According to a report by Bloomberg Thursday, Xu appeared on a private social media platform to post that he had been cooperating with an investigation relating to an equity merger that OK Group had finalized years prior. “The authorities have clarified the matter and proved me innocent,” Xu wrote Friday on his WeChat feed. OKEx previously suspended all account withdrawals, claiming the absence of a key holder. The exchange plans to enable “unrestricted withdrawals” by Nov. 27.

Quick bites
  • BTC RETIREES? Crypto investment adviser Digital Asset Investment Management (DAiM) has integrated retirement plans supporting bitcoin. (CoinDesk)
  • COMPLETE CASE: Bitcoin will go to $100,000, according to OKCoin CEO Hong Fang. (CoinDesk)
  • BLOCKCHAIN BANK: One of Japan’s largest banking institutions, Mitsubishi UFJ Financial Group, will launch a high-speed blockchain payment network in 2021. (CoinDesk)
  • HEAVY BAGS: SoftBank CEO Masayoshi Son reportedly sold bitcoin in 2018, eating a $50–130 million loss. (Decrypt)
  • PLUG & PLAY: “Running an ETH Validator for the Barely Motivated.” (Bankless)
Market intel

Ether gains
Amid a larger market bull run, ether (ETH) is notching serious gains. Ethereum’s native cryptocurrency has jumped to 28-month highs, taking year-to-date gains to nearly 290%, CoinDesk’s Omkar Godbole reports. The second-largest cryptocurrency by market value crossed above $500 this morning around 9:00 UTC, pushing it to the highest price level since July 18, 2018, according to the CoinDesk 20. Ether is now 185% short of its record high of $1,433. 

At stake

Related: First Mover: Bitcoin ‘Rich List’ Grows as Whales HODL and Price Retakes $18K

Data costs
Filecoin, the decentralized storage network incubated by Protocol Labs, has seen explosive growth a month following its mainnet. Since going live in mid-October, the network has surpassed one exabyte of storage capacity.

An exabyte is equal to 1,000 petabytes, or about 15 Library of Congresses (at last count). Filecoin’s blockchain-based network creates a market for data storage by enabling users to rent out unused storage space to those looking to backup their data.

When first pitching the idea, Protocol Lab CEO Juan Benet said, “They laughed at me directly, saying, ‘You’ll never get a decentralized network to exceed a few petabytes, maybe 10 petabytes,’” at Decrypt’s Around the Campfire virtual conference Thursday. So, to achieve an exabyte is a real achievement. 

To be sure, not all of this information came online in just the past month. The Filecoin team has been seeding the network with various experiments over the past year, including sending out physical hard drives of data to likely miners and launching an incentivized testnet called Space Race, which was ported over into the live version of Filecoin. 

Like other blockchains, Filecoin creates immutable versions of select types of data. For some, this may raise environmental concerns – especially considering how much of the internet appears to be dark and redundant, obsolete and trivial (ROT).

Addressing these concerns during the conference, Benet said Filecoin’s environmental concerns are “not very deep relative to other computing systems.” He mentioned Bitcoin, which is often criticized for consuming a vast amount of energy to power its consensus model, and said Filecoin’s consumption is a “tiny fraction.” 

And, considering it does “something useful” in storing data, it might be a price worth paying.

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First Mover: Bitcoin ‘Rich List’ Grows as Whales HODL and Price Retakes $18K

5 years 10 months ago

Bitcoin reached fresh 35-month highs above $18,400 during the European trading hours. The cryptocurrency has failed to keep gains above $18,000 in the previous two trading days. It will be interesting to see if prices establish a foothold above that level on Friday. 

“The market showed a lot of resilience and dip buying interest to shake off any immediate questions about the sustainability of the recent upside. So much so, that bitcoin has moved back above the $18,000 level and remains on track to retest the highs from earlier on in the week,” Denis Vinokourov, head of research at the London-based prime brokerage Bequant said. 

Other cryptocurrencies also rallied, with ether penetrating the psychological hurdle of $500 for the first time since July 2018.

Related: MicroStrategy Wants to Be in the Bitcoin Business, Not Just an Investor

In traditional markets, European stocks advanced, ignoring the fading prospect of additional U.S. fiscal stimulus and rising coronavirus crises.  U.S. stock futures, however, dropped and gold eked out gains as the Treasury secretary announced plans to let several of Federal Reserve’s emergency lending programs expire on Dec. 31. 

Market moves

Bitcoin has climbed for seven straight weeks, the longest streak since early 2017, when prices began their push toward the all-time-high near $20,000 in December of that year. And crypto traders are wondering how long this latest rally can last. 

The move higher started in early October when prices were around $10,700, and bitcoin is now changing hands around $18,000. On a year-to-date basis, the cryptocurrency has gained an astounding 150%, the most since the 14-fold gains witnessed in 2017. 

The ascent has been so rapid and powerful that analysts are starting to use terms like “parabolic,” where increases turn exponential.

Related: Blockchain Bites: BlockRock Exec Says Bitcoin Is ‘Here to Stay,’ Investors Load Into BTC Puts

“Bitcoin’s recent continuous uptrend displays stark similarities to the 2017 bull run, where a parabolic trend took it up to $20,000,” Lennard Neo, head of research for the cryptocurrency-focused structured-products firm Stack Funds, wrote Thursday in a weekly report.

For clues on what comes next, some cryptocurrency analysts are looking to data extracted from the blockchain, making inferences about what types of buyers are coming into the market, and who’s selling, if anyone. 

Those indicators appear to show just how few investors are willing to part with their bitcoin, even with signs mounting that a growing number of big institutional fund managers from traditional markets are seduced by the outsize gains, during a year when few other trades appear to be producing big wins. The Standard & Poor’s 500 Index of large U.S. stocks is up 11% this year, and fixed-income returns are hard to come by, with 10-year Treasury notes yielding less than 1%.

“Bitcoin’s price is rising because demand for [b]itcoin is increasing at a time when there’s relatively few bitcoin available to buy,” the blockchain data firm Chainalysis wrote Thursday in a report. 

The firm produced a chart tracking what appear to be “investor-held” wallets – those whose coins rarely if ever move – versus “trader-held” wallets, where sales take place more frequently. The number of bitcoin in trader-held wallets, or those theoretically more likely to take profits as prices rise, has declined this year. The amount of investor-held bitcoin, meanwhile, has risen steadily. 

Another blockchain data firm, CryptoQuant, is tracking bitcoin “whales” – those accounts big enough to send a giant sell order to an exchange, typically swamping buy orders from smaller traders. 

The “exchange whale ratio,” calculated by dividing the value of the largest 10 deposits on exchanges by the total amount of deposits, is currently below the 90% level, which would signal an extreme likelihood that a big price drop is looming. The gauge currently sits around 85%, where “the chance of prices continuing to rise is high,” CryptoQuant wrote Thursday in an email. 

“Looking at the movement of whales, it appears that the rise in prices will continue,” according to the report. 

Hong Fang, CEO of the San Francisco-based crypto exchange OKCoin, wrote Thursday in an op-ed for CoinDesk Opinion that “the burning question is whether bitcoin is becoming overpriced.”  

She argued that it’s not unreasonable to expect a price around $100,000 next year, assuming 1%-2% of total U.S. household wealth of $112 trillion gets allocated to bitcoin.  

“This is a timing risk,” she wrote. “It is quite possible that it may take much longer than expected for bitcoin to go mainstream.” 

The whales represent a shorter-term threat. If bitcoin continues its parabolic rise, they might come splashing around. 

– Bradley Keoun

Bitcoin watch

Bitcoin’s rich list, or the number of addresses holding at least 1,000 BTC, continues to rise along with the price, suggesting increased interest from institutions and high-net-worth investors. 

The metric recently reached a record high of 2,237, marking a 5.6% increase on a year-to-date basis, according to data source Glassnode. The rich list has grown by over 2.5% alongside bitcoin’s rice from $10,000 to $18,000 seen in the past six weeks.

A single person can hold multiple addresses. Crypto exchanges also store coins belonging to traders in multiple addresses. As such, the rich list is not an accurate metric of increased institutional participation or user adoption. 

That said, there is strong reason to believe the recent rise in the number of large addresses is the result of influx of high-net-worth individuals. Several public companies such as MicroStrategy and Square have made a foray into the bitcoin market in the past eight weeks or so. 

With strong hands backing the price rally, the cryptocurrency looks set to challenge record highs before the year-end, as anticipated by some analysts. 

What’s hot
  • OK Group CEO Mingxing “Star” Xu resurfaces from police detention as OKEx’s mystery key holder also returns, and crypto exchange signals it will soon end the suspension of customer withdrawals; exchange token OKB jumps 23% in price (CoinDesk) 
  • Ether trades above $500 for first time since July 2018 (CoinDesk) 
  • Financial Times editorial board says bitcoin’s recently rally has “happened alongside other risk assets,” and the “main factor” in the cryptocurrency’s rise is “its potential for more mainstream adoption beyond hobbyists and speculators” (Financial Times) 
  • Goldman Sachs expects 1B users of digital yuan within Chinese CBDC’s first decade (CoinDesk) 
  • Bitcoin options investors are starting to hedge against potential price pullback (CoinDesk)
  • Majority of bitcoin hashrate signals support for Taproot scaling, privacy upgrade (CoinDesk)
Analogs The latest on the economy and traditional finance
  • China borrows $4.7B in European debt sale, paying negative interest rates for first time (WSJ) 
  • More Americans filing for unemployment assistance, at 742K last week, first increase since October (WSJ) 
  • U.S. Treasury Secretary Mnuchin asks Federal Reserve to return all unused coronavirus relief funds, and Fed issues statement saying it “would prefer” that the emergency programs “continue to serve their important role as a backstop” (Politico via Yahoo Finance) 
  • Venezuelan opposition fights creditors for control of billions of dollars in global assets (WSJ) 
  • $6 billion in bond sales have been canceled across mainland China as fear of mass corporate bond defaults have forced many to cancel new issuances (Nikkei Asian Review)
  • U.S. President Donald Trump, in midst of ongoing battle to dispute election results, is set to meet Chinese President Xi Jinping Friday at a virtual summit of Asia Pacific leaders to discuss economic recovery (Reuters)
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German Finance Minister Says He Does Not Support Private Cryptos: Report

5 years 10 months ago

German Finance Minister Olaf Scholz, speaking at a banking congress Friday, showed no love for privately issued cryptocurrencies.

  • “I do not support private-sector digital currencies,”  Scholz said, according to Reuters.
  • Coming from the finance minister of the euro region’s largest economy, Scholz’s comments potentially strike a blow at two private crypto projects: Libra, the Facebook-backed retail payments network, and JPMorgan Coin, the wholesale payments chain.
  • Nevertheless, Scholz told congressional delegates that European banks must adapt for the digital future.

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BlackRock’s Chief Investment Officer Says Bitcoin Could Replace Gold to a Large Extent

5 years 10 months ago

The chief decision maker for where BlackRock, the world’s largest asset manager, invests its funds said bitcoin could take the place of gold to a large extent because crypto is “so much more functional than passing a bar of gold around.”

  • Speaking during CNBC’s Squawk Box on Friday, BlackRock CIO of Fixed Income Rick Rieder responded to a question asking if governments might try to regulate bitcoin if its price keeps rallying.
  • “I think cryptocurrency’s here to stay, I think it is … durable,” he said.
  • Alongside central banks developing digital currencies, millennials’ “receptivity” to technology and cryptocurrency “is real, digital payments systems is real,” Rieder said.
  • “Do I think it’s a durable mechanism that … could take the place of gold to a large extent? Yeah, I do, because it’s so much more functional than passing a bar of gold around,” Rieder said.
  • The CIO balanced that by saying he’s not particularly a bitcoin bull and doesn’t include it much in business and corporate portfolios. Further, it’s not clear if bitcoin is worth its current price of over $18,000 price, he said.
  • At press time, bitcoin was at $18,550.01, up 2.75%.

UPDATED 11/20/20 at 14:43 UTC: adds that BlackRock is the world’s largest asset manager.

See also: Morgan Creek CEO Says Bitcoin Doing ‘Extremely Well’ Due to Fed Reserve’s Dollar Devaluation

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Y Combinator, Pantera Back $3M Investment in New Crypto Derivatives Exchange

5 years 10 months ago

A new crypto derivatives exchange, Globe, is looking to step up to the plate following crackdowns on BitMEX, the growth of decentralized finance (DeFi) and a surge in the price of bitcoin.

The platform announced Friday a $3 million funding round from the likes of Pantera Capital, Y Combinator, Tim Draper and others.

“We’re seeing a wave of interest in crypto assets from major banks, fintech companies and portfolio managers,” said Pantera partner Paul Veradittakit. “Globe has built the platform and products that these sophisticated market players need and expect.”

Related: Star Xu Surfaces From Detention as OKEx’s Mystery Key Holder Also Returns

The bells and whistles 100x leverage on DeFi perpetuals, a product built around a prominent crypto volatility index and other features.

“Globe is on a mission to unlock frictionless access to global alpha for everyone,” said CEO James West, adding:

“We’re building solid infrastructure, solving the overload problems that have wrecked the fortunes of so many traders, pushing up the standards of integrity in the space and building out new products – like VIX – that traders like ourselves want to see.”

Following the regulatory problems seen on existing exchanges, Globe hopes to deliver a safe and fair platform for fresh institutional capital to enter the space, he added.

Related: DEX Aggregator Rebrands to Slingshot After Raising $3.1M From Coinbase Ventures, Others

“The Globe team has been building quietly and we think now’s the perfect time for them, with incumbents like BitMEX facing new challenges and DeFi catching the attention of sophisticated market players,” Pantera’s Franklin Bi said via email.

Silicon Valley accelerator Y Combinator saw success in picking Coinbase as an early bet (among a number of other crypto-sector investments). West is hoping some of that luck rubs off on him.

“I guess you could call us Coinbase for derivatives,” he said in a press statement.

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US Firm Launches Company-Sponsored Bitcoin Retirement Plans

5 years 10 months ago

After running a year-long test, Digital Asset Investment Management (DAiM), a U.S.-based crypto investment advisor, has launched what it says are the first company-sponsored retirement plans supporting bitcoin.

DAiM will serve as an advisor and fiduciary while helping companies create a 401(k) plan that allows a maximum allocation of up to 10% in bitcoin alongside varying degrees of exposure to traditional assets, according to an announcement Thursday.

Cryptocurrency associated with the Employee Retirement Income Security Act (ERISA)-compliant plans will be held in New York-regulated Gemini Trust’s cold storage custody.

Related: Players Prefer Cashing Out in Bitcoin Amid Rally, Says Online Poker Giant

“From the moment we were approved by the State of California in June 2018, we’ve seen incredible inbound demand from individuals eager to invest bitcoin in 401(k)s,” DAiM said in the announcement, adding that conventional plans’ inability to keep up with inflation is a bad deal for savers.

Individuals can choose to take a bigger exposure to bitcoin following a consultation with DAiM and will be able to transfer pension bitcoins in the event of a job switch. Companies can switch to the bitcoin plans from their current provider if desired. 

Firms interested in offering the new product to employees in 2021 need to put the plan in place by mid-December 2020, DAiM said.

“We believe Bitcoin has demonstrated it has a place in the modern portfolio and individuals should have an opportunity to “Get Off Zero” and invest directly through their retirement account,” the company said.

Related: Morgan Creek CEO Says Bitcoin Doing ‘Extremely Well’ Due to Fed Reserve’s Dollar Devaluation

Bitcoin has received validation as an inflation-hedge and reserve asset from several public companies and prominent investors this year.

Also read: Morgan Creek CEO Says Bitcoin Doing ‘Extremely Well’ Due to Fed Reserve’s Dollar Devaluation

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Players Prefer Cashing Out in Bitcoin Amid Rally, Says Online Poker Giant

5 years 10 months ago

One of the world’s largest poker networks has said its players currently prefer bitcoin to fiat money for payouts.

Winning Poker Network, which operates a number of online poker sites, said has been forced to buy millions in bitcoin a day to meet the demands of exiting players.

As reported by Bloomberg on Thursday, 90–95% of Winning Poker’s payouts are in bitcoin because of the recent price rises, said the company’s CEO, Phil Nagy. “We are constantly having to go out and buy bitcoin, lots. Lots. More than we’ve even had to before.” 

Related: US Firm Launches Company-Sponsored Bitcoin Retirement Plans

According to Nagy, the business is clocking over 60% of its transaction volume in bitcoin, roughly $100 million a month. Geographically, the majority of the bitcoin demand derives from the U.S., despite online poker being illegal in most states.

So far this year, bitcoin has risen 155%, buoyed by bullish cryptocurrency fundamentals, inflation of fiat currencies and the global coronavirus pandemic.

Nagy noted that his company doesn’t hold bitcoin instead preferring to convert to fiat without delay due to the digital asset’s volatility. However, he also said that when bitcoin is down, players will pay with the cryptocurrency as a way to liquidate quickly, meaning his company has been “kind of stuck with it.”

See also: Bitcoin Options Investors Are Starting to Hedge Against Potential Price Pullback

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Morgan Creek CEO Says Bitcoin Doing ‘Extremely Well’ Due to Fed Reserve’s Dollar Devaluation

5 years 10 months ago

The U.S. Federal Reserve and the rise of “zombie companies” is prompting investors scramble to hedge against inflation using bitcoin and gold.

That’s according to Mark Yusko, founder and CEO of investment firm Morgan Creek Capital Management, who spoke with CNBC’s Fast Money host Melissa Lee on Thursday.

Yusko took aim at zombie companies (those that need bailouts at times of financial stress to stay in operation), calling them a “ponzi finance scheme” and saying their inability to repay debt, default or restructure meant the “only choice” left for the Fed and other authorities is to devalue the currency.

Related: US Firm Launches Company-Sponsored Bitcoin Retirement Plans

That it is “exactly” what the U.S. central bank has been doing, alongside the central banks of Europe and Japan. “They’re going to continue to do that,” he said.

As a result, bitcoin and gold have been doing “extremely well,” according to Yusko. “Before people’s eyes, you’re having your wealth stolen through inflation.”

“Money is being devalued. Over the last three years, stocks are up about 6% a year – not really that great,” he said. “But if you denominate in gold instead of dollars they’re down 44%; if you denominate in bitcoin it’s way worse.”

See also: ConsenSys, Polychain, Tron, CipherTrace: Blockchain Startups Got $30M+ in US ‘PPP’ Bailout Loans

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Star Xu Surfaces From Detention as OKEx’s Mystery Key Holder Also Returns

5 years 10 months ago

Mingxing “Star” Xu, founder of OKCoin and CEO of OK Group has resurfaced after being detained by Chinese police.

According to a report by Bloomberg Thursday, Xu appeared on a private social media platform to post that he had been cooperating with an investigation relating to an equity merger that OK Group had finalized years prior.

The equity investee was the target of a “complicated” legal case, Xu said, choosing not to go into further detail. It remains unclear as to precisely which deal he was referring to.

Related: Gemini Exchange Is Using ClearBank for UK Banking Services

“The authorities have clarified the matter and proved me innocent,” Xu wrote Friday on his WeChat feed, per Bloomberg’s reporting. “In coming days, I’ll call on everyone who supported OK Group to express my gratitude.”

As CoinDesk reported, the related Malta-based exchange, OKEx, was forced to suspend all account withdrawals on Oct. 16, it said because an unnamed holder of the keys to the crypto assets had been detained. A report in Chinese newspaper Ciaxin said the key holder was Xu, based on sources “close to” the company.

Xu’s temporary detention and subsequent release closely coincides with the period that the mystery key holder also became unavailable. The exchange said Thursday that it would restart withdrawals by next Friday because the key holder had been released from “assisting the authorities,” and “has now returned to his normal business functions.”

OKEx has previously told CoinDesk that Xu has no direct relationship with the exchange. We reached out to OKEx again on Friday to try and gain clarity on Xu’s relationship and why he may be holding the keys if, as the facts suggest, that is the case.

Related: OKEx Exchange Says Crypto Withdrawals to Restart by Next Friday

“OKEx has been a separate entity from OK Group from 2017, Star therefore has not been in any kind of operation in OKEx. In the interests of user security, OKEx maintains all details about private key holders confidential, as such, we are unable to comment on this neither can we provide any comment on Star Xu,” a representative reiterated.

The exchange said in its announcement that it is preparing to allow “unrestricted withdrawals” by Nov. 27.

The withdrawals news has helped the exchange’s OKB token recover from a slump over the last month. OKB is now trading at $5.88, up around 23% since Wednesday.

See also: OKEx Token Rallies on Rumors Founder Xu Released From Custody

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Ether Trades Above $500 for the First Time Since July 2018

5 years 10 months ago

Ethereum’s native cryptocurrency ether has jumped to 28-month highs, taking year-to-date gains to nearly 290%.

  • The second-largest cryptocurrency by market value crossed above $500 soon before press time to reach the highest level since July 18, 2018, according to the CoinDesk 20.
  • The move has happened alongside bitcoin’s rise to 35-month highs above $18,400.
  • Apart from the broader market uptrend, Ethereum’s impending transition to proof-of-stake looks to be powering gains in ether, according to Nischal Shetty, CEO of Mumbai-based cryptocurrency exchange WazirX. “The belief is that it’ll lead to a supply shortage of ether,” Shetty said.
  • While ether is still 185% short of its record high of $1,433, bitcoin needs to rally just 10% from the current price of $18,260 to challenge its lifetime high of $20,000 reached in December 2017.
  • Ether has gained 6% in the past 24 hours, while bitcoin has increased by over 4%. Other alternative cryptocurrencies like litecoin and bitcoin cash have scored double-digit gains.

Also read: How to Value Ethereum: Accounts

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Japan’s Banking Giant MUFG Plans to Launch Blockchain Payment Network in 2021

5 years 10 months ago

Mitsubishi UFJ Financial Group (MUFG), one of the largest banking institutions in Japan, is set to launch its high-speed blockchain payment network with the U.S.-based tech firm Akamai in 2021. 

MUFG and Akamai aim to provide cheaper and more efficient payment services via their joint venture Global Open Network (GO-NET). The network will integrate payment terminals from electronic device manufacturer Seiko Holdings with the bank’s credit card company MUFG NICOS in February, CoinDesk Japan reported. GO-NET initially announced the launch of the payment services in the first half of 2020. 

The network also plans in July of next year to start a service allowing customers to buy canned and bottled beverages at some vending machines in Japan by placing a credit card on a machine reader. GO-NET said its payment platform can process 100,000 transactions per second, which exceeds VISA’s processing capacity of about 70,000 per second. According to GO-NET, the platform can be expanded to reach as high as 10 million transactions per second for small payments.

Related: 30 Japan Firms to Collaborate on Private Digital Yen: Reuters

Founded in May 2018, GO-NET is a joint venture between MUFG and Akamai, with the bank owning 80% of the firm’s stake. The collaboration between the two companies in developing the payment platform started as early as 2016, according to CoinDesk Japan. 

While MUFG can leverage its existing financial services to increase the adoption of the network, Akamai helps GO-NET build its infrastructure with around 280,000 servers in 136 countries and the blockchain technology that comes with a native wallet.

MUFG has been working on its own digital currency MUFG Coin for several years. It is unclear if the blockchain payment network is related to the bank’s coin initiative. 

GO-NET expects the payment services to be fully functional across Japan by the summer of 2022. 

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Goldman Sachs Expects Digital Yuan to Reach 1B Users Within 10 Years

5 years 10 months ago

The digital yuan, China’s planned national virtual currency, would account for 15% of total consumption payments in ten years, helping commercial banks gain more ground from fintech companies, according to a Nov. 17 Goldman Sachs report shared with CoinDesk.

The Digital Currency Electronic Payment (DC/EP) could be a more attractive alternative to existing digital payment services provided by fintech companies in a cashless environment, said the 81-page report. It cited anonymity enabled by the separation of a bank account and the digital yuan wallet, offline payment and interconnectivity with various payment options as contributing to the digital yuan’s success. 

“In ten years we expect DC/EP to reach 1 billion addressable users, 1.6 trillion rmb ($229 billion) in issuance, 19 trillion rmb ($2.7 trillion) in annual Total Payment Value (TPV) and account for 15% of total consumption payments,” the report said. 

Related: First Mover: What China Crackdown Means for $18K Bitcoin as Dimon Passes on ‘Tea’

 Goldman Sachs said consumption payments – meaning the transactions in which users make purchases via a digital payment platform – will be where banks and fintech providers compete most aggressively.

“Consumption is the major source of income for Third Party Payment (3PP) providers given the higher take rate than transfers and finance; thus consumption payments are regarded as ‘commercial payments’ by payment institutions,” the report said. 

Leveling the playing field

The report came after China’s top financial regulators halted Ant Group’s record-setting initial public offering. The company, which is the fintech affiliate of China’s IT giant Alibaba, has one of the most popular digital payment mobile apps Alipay. Beijing’s authorities also proposed a set of new anti-monopolistic practices to rein in fintech companies in the country.

The adoption of the digital yuan will likely slow the rate that banks have been ceding ground to fintech, and even reverse market share losses over the long-term if DC/EP gains in popularity, the report said. 

Related: Bitcoin News Roundup for Nov. 17, 2020

The report noted China Merchant Bank (CMB) and Ping An Bank (PAB) may be among the beneficiaries from the new digital payment ecosystem, as third-party payment platforms would have to face more competition in the long term. 

“A 10% increase in the bank app users would lift revenues by 2%-5%,” the report said. “PAB and CMB are best placed to commercialize returning app users given their leading retail franchises, premium client bases, superior fintech capability and strategic focus on retail finance.”   

Currently, Alipay and Tencent’s digital payment arm WeChat Pay still dominate China’s digital payment industry. The two companies account for over 90% of mobile banking transactions in the last three months of 2019. 

“Commercial banks will be the only institutions permitted to operate in DC/EP exchange as it is the digitalization of legal tender,” the bank noted. “This will effectively level the playing field with fintech platforms, enabling banks to once again compete head-to-head with them in consumption payments.”   

Fintech growth

However, fintech companies will still be focused on retail banking services, taking large shares of growth in the retail financial services market in the next five years as the central bank gradually increases the adoption for the digital yuan. 

“Over the next five years, we expect Fintech to grow revenues at almost double the rate of banks as they continue to capture incremental market share across the retail finance ecosystem,” the bank said. 

The report also notes DC/EP would not disintermediate the commercial banks since the virtual currency is replacing cash rather than savings. In addition, the digital yuan wallet will not pay interest to depositors and most of the transactions will be in small amounts, the report said. 

According to the report, China has 900 million mobile internet users as of 2019, making up over 64% of its population. The country’s M0/M2 ratio is only 4%, which is one of the lowest cash usage among major economies and it is still declining. Ninety-six percent of Chinese banking services are processed on electronic devices. 

The bank forecasts a 3 trillion rmb ($428.6 billion) revenue pool for retail finance by 2025 (excluding mortgages) as growth in payments and retail lending slows but wealth management and insurance agencies remain brisk.

Read the full report below:

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Texas Financial Regulators Crack Down on 15 Alleged Crypto Scams

5 years 10 months ago

Texas regulators are going after a host of crypto firms they allege to be investment scams, 10 of which they say are are controlled by a single Texas man.

The Texas State Securities Board on Thursday ordered 15 firms to cease and desist operations with a series of emergency orders against crypto, forex and binary options hubs that purport to be based in Texas.

Ten firms are named in the first order: Proactive Expert Trading, Reliable Miners, BitcoinFX Options, Sure Trade Earnings, CryptoTradeFXWay, Proactive ExpertTrade, ReliableFX Internal Trade, MaxFX Internal Trade, AntPoolTop Mining and ExpertTrades247. Regulators say one man, James Blundell, pumped all 10 on social media.

Related: Hackers, Scammers Have Stolen $7.6B in Crypto Since 2011

Three are named in the second: Binary Trade Forex, FX Trades and IQTrade. Regulators say the trio are not registered to sell securities in Texas. They’re peddling highly lucrative, low risk investing options – at least according to the customer testimonials, which TSSB alleges are fake.

One firm, a crypto binary option and forex investment platform called GenuisPlanFxPro, is named in the third. Regulators say GenuisPlanFxPro falsely claims to hold a handful of international financial licenses.

TSSB officials alleged a common thread across all 15 firms is their savvy use of social media to draw investors in and drain them dry.

“Bad actors know how to use social media and internet websites to create the pretense of legitimate operations. They can also use this technology to quickly reach large numbers of potential victims,” said Enforcement Director Joe Rotunda in a statement.

Related: Court Enters $900K Judgment Against Crypto Ponzi Scammer on Behalf of CFTC

“Their websites often go dark, social media often goes dormant and fraudsters often disappear. In many cases, the money is gone.”

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Travel Tech Firm Monaker Group Eyes Regulated Thai ICO Market

5 years 10 months ago

Monaker Group, which builds booking platforms for the travel industry, is venturing into tokenized assets with the indirect acquisition of Thailand’s Longroot initial coin offering (ICO) portal.

The Nasdaq traded company took an “indirect controlling stake” in the entity that owns Longroot on Thursday, one day after buying up a third of Longroot minority shareholder Axion Ventures, a video game company.

It is now at the helm of one of the few ICO portals regulated by Thailand’s relatively crypto friendly Securities and Exchange Commission.

Related: Thai SEC Revises Net Capital Rules in Bid to Open Liquidity, Support Digital Asset Businesses: Report

Longroot could begin hosting ICOs for the travel and video game industries in 2021, according to Richard Marshall, Monaker’s corporate communications director. He said the move gives Monaker exposure to the growing digital assets ecosystem by providing opportunities in gaming and tech.

That’s especially important in a travel-crunching pandemic. Marshall said that with travel down, gaming is up. Both, he said, are now core to Monaker’s business. And both could benefit from tokenized offerings ahead.

“The broader business is really focused on delivering to the consumer, bringing technology, whether it’s vacation rental, gaming, in-game advertising,” he said. “And with the cryptocurrencies in the ICO portal there’s an opportunity for that crossover.”

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Market Wrap: Bitcoin Hangs Around $18K While Ether Locked in DeFi Declines

5 years 10 months ago

Bitcoin steadied around $18,000 after record volumes on Wednesday while Ethereum 2.0 may be causing some investors to move ether out of decentralized finance (DeFi).

  • Bitcoin (BTC) trading around $18,026 as of 21:00 UTC (4 p.m. ET). Gaining 2.1% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $17,364-$18,170
  • BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin’s price rise stalled somewhat Thursday, with the world’s oldest cryptocurrency hitting as high as $18,170 before dipping below the $18,000 level, but back to $18,026 as of press time. 

Volume contributed to the weakening price action. At $1.79 billion, Wednesday was the highest volume day for major USD/BTC spot exchanges since way back on March 13, when volumes hit $1.98 billion the day after the “Black Thursday” crash. Today, daily volume on these exchanges were at a comparably tepid $867 million. 

Related: The Complete Case for $100K Bitcoin

A volume pullback from the second-largest day on the USD/BTC spot market in 2020 isn’t deterring analysts on their bullish prognostications. 

“The current upward move seems more sustainable than the 2017 bull run as institutional investors are now positioning in bitcoin whereas it was only retail speculation back in 2017,” said Elie Le Rest, partner at quant firm ExoAlpha. “Bitcoin confirms by its recent price move that it has a place in a diversified portfolio.”

Read More: Deutsche Bank Says Investors Increasingly Prefer Bitcoin Over Gold

“The market’s infrastructure, regulatory regime and overall maturity is much more robust than previously,” said John Willock, CEO of crypto asset manager Tritium. “I fully expect a couple of pullbacks from these nominal mile markers such as $18,000, $19,000 and $20,000, but I do expect we should see the overall momentum continue through the rest of the year.”

Related: Lightning Network’s New Liquidity Marketplace Attracts a ‘Surprising’ Mix of Individuals, Enterprises

Since Oct. 20, bitcoin’s 30-day volatility has been steadily rising, indicating that some price gyrations may still be on the horizon.

“No assets go parabolic forever,” noted Michael Gord, chief executive officer for trading firm Global Digital Assets. “Bitcoin has gone up over 50% in the past month and is due for a correction.”

“Long term I’m still very bullish and still seeing increasing interest from more traditional investors in bitcoin and other digital assets,” Gord added. 

Read More: OKEx Exchange Says Crypto Withdrawals to Restart by Next Friday

Investors are certainly looking at the derivatives market, with bitcoin futures (over $6 billion) and options (over $4 billion) open interest hitting new highs. CME, a professional investor venue, has flirted with $1 billion in bitcoin open interest this week, a sign institutions are increasingly hedging crypto positions.

Even permabulls like Henrik Kugelberg, a Sweden-based over-the-counter crypto trader, are prepared for some bumps in the road should bitcoin work its way to an all-time high. 

“I expect a much larger drop pretty soon,” Kugelberg told CoinDesk. “But in all I can see BTC going to $23,000-$24,000 in the next month or two.”

Ether moving out of DeFi

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Thursday, trading around $475 and climbing 0.55% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

The amount of ether “locked” in decentralized finance, or DeFi, is declining. The fall began Nov. 14, going from 8.9 million to 7.7 million ETH as of press time, according to aggregator DeFi Pulse.

Jean-Marc Bonnefous, managing partner for investment firm Tellurian Capital, suspects some of the ether movement out of DeFi might have to do with Ethereum’s ambitious “2.0” project. This requires some capital allocation to a smart contract set aside for staking something known as the “beacon chain” to launch the new network. 

“There is the need to find another 400,000 ETH to fill the first phase of staking into ETH 2.0 by the end of November,” said Bonnefous. “So this might explain some of the leakage out of DeFi.”

Other markets

Digital assets on the CoinDesk 20 are mixed Thursday, mostly green. Notable winners as of 21:00 UTC (4:00 p.m. ET):

Notable losers:

Read More: Solidus Believes Its Crypto Surveillance Tool Can Help Launch a Bitcoin ETF

Equities:

Commodities:

  • Oil was up 0.71%. Price per barrel of West Texas Intermediate crude: $41.88.
  • Gold was in the red 0.30% and at $1,866 as of press time.

Treasurys:

  • The 10-year U.S. Treasury bond yield fell Tuesday, dipping to 0.855 and in the red 2.7%.
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US Is Debating Risk vs. Liability for New Crypto Tax Rules

5 years 10 months ago

U.S. Treasury Department officials are weighing the pros and cons of a risk-based approach to cryptocurrency tax reporting versus a model more focused on tax liabilities.

Top considerations are the trade-offs each model would bring to a still-developing set of crypto tax rules, said Erika Nijenhuis, senior counsel at Treasury’s office of tax policy. Bloomberg Law first reported the comments.

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Lightning Network’s New Liquidity Marketplace Attracts a ‘Surprising’ Mix of Individuals, Enterprises

5 years 10 months ago

Lightning Labs’ new liquidity marketplace, Lightning Pool, has seen more early-stage growth than its creators expected. And what’s more, a fair share of its volume is coming from individual Lightning users – not businesses.

“It’s a big surprise! Very exciting,” Lightning Labs Business Development head Ryan Gentry told CoinDesk. “The primary users thus far have been a mix of power users and startups/businesses who are already running Lightning nodes.”

Since launch, Lightning Pool has facilitated over 11.5 BTC in orders (worth just over $208,000). According to data from a community-built Lightning Pool tweet bot, the service has several dozen active users (Lightning Labs declined to give an exact figure).

Related: Market Wrap: Bitcoin Hangs Around $18K While Ether Locked in DeFi Declines

Lightning Pool provides a market where Lightning Network users can lease liquidity for payment channels, the transaction avenues Lightning uses to send faster and cheaper payments than Bitcoin’s main network. 

Read more: What Is Bitcoin’s Lightning Network?

Complex cryptography makes this possible, in addition to financial requirements that mandate payment channels must have enough bitcoin in reserve to “route” payments between network participants. 

No more ‘begging’ for liquidity

If a Lightning user’s payment channel doesn’t have enough “inbound capacity” (the minimum bitcoin needed to receive a routed transaction), then he or she won’t be able to receive payments. Likewise, if a payment channel lacks enough “outbound capacity,” then it cannot send payments.

Related: The Complete Case for $100K Bitcoin

Lightning Pool was built to address such obstacles in Lightning’s financial plumbing. Through the service, Lightning Network users can lease liquidity from other Lightning users to access the liquidity necessary to route payments through the network.

Innovations like Bitrefill’s Thor channels, which allow customers to instant-purchase payment channels, have also taken aim at this problem. Before solutions like these, Lightning Network node operators had to do grassroots networking across messaging platforms and social media if they needed bitcoin in a pinch.

As one pseudonymous Lightning Network user, Openoms, expressed to CoinDesk, Pool is a breakthrough for the very purpose it serves in speeding up the liquidity-matching process.

“My relief is that begging on social media for incoming channels is over,” Openoms told CoinDesk over direct message.

Openoms has been testing Pool since before its public launch and is“very impressed,” adding the service is “an efficiency gain for allocating capital.” Lightning Labs also batches the transactions to fund the payment channels that are being leased, meaning Pool users can save money on fees by splitting them among multiple participants.

On the other side of the trade, the liquidity providers are earning passive yield on their bitcoin without having to relinquish their private keys. Gentry said the service has engendered a lot of excitement among community members as a new way to earn yield on their holdings (this adds to other non-custodial yielding options like earning fees from coin mixers).

Read more: Putting Pressure on Bitcoin’s Lightning Network Vulnerabilities Will Strengthen It

Lightning Lab’s financial stack

Pool has been crowded mainly with individual users since shortly after launch, but Gentry thinks businesses will correct this balance over time as the service matures.

“We anticipate increased demand from businesses and enterprise users as Pool matures because they will likely have more consistent liquidity needs when using Lightning, or may want to enable their end users to earn returns on their funds,” he told CoinDesk.

Lightning Labs also uses the service because it does more than just generate fees for the company. Gentry said the service was “partly built … in order to solve an internal business problem,” namely, providing inbound channel liquidity for its Lightning Loop service. Loop allows its users to top off or withdraw from their Lightning balances without closing their payment channels. 

As if illustrated by the fact that the two are anagrams, Pool and Loop are complementary services that address the same problem: Lightning’s need for constant, fresh liquidity.

Read more: Lightning Operators Are Bracing for a Bitcoin Bull Run

“The idea of Pool evolved, in part, to solve an internal business need – sourcing good inbound liquidity for Loop,” Gentry said. “But after speaking with customers and other Lightning services, we heard they were looking for a solution to the same problem, which was an encouraging sign in terms of the need for Pool.”

A Lightning optimist, Openoms is “bullish” on Pool and said it’s effective at “incentivizing people to place more capital on LN” and allocating it “strategically where it is needed.” 

Right now, everything is run from the computer’s command line, so Openoms said that a GUI (or the visual interface that you use to interact with computer/web applications) will improve the user experience.

Gentry told CoinDesk a GUI for Pool is “in the works.” 

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