CoinDesk Crypto

Cryptocurrency investors have long sought a standardized way of measuring the size and depth of digital asset markets. A new data product from Coin Metrics seeks a way to approximate it.

The cryptocurrency data firm announced its free float supply methodology for digital assets Tuesday to improve and standardize the industry’s liquidity and market capitalization data. 

Cryptocurrency markets have historically lacked consistent, standardized supply data for digital assets, according to the Boston, Mass. company. Borrowing from traditional markets, Coin Metrics’ methodology excludes issued coins and tokens that don’t provide liquidity because they are burned or probably lost, owned by foundations or founding teams, and inactive for over five years. 

Related: First Mover: Bitwise Calls $50K Bitcoin Price When Market Calm Finally Breaks

See also: Bitcoin Facing Greater Price Volatility Than Ether in Q3, Options Market Data Suggests

With this data, investors can “consistently” apply a more precise definition of an asset’s supply to multi-asset indices, market capitalizations and valuation methods, according to Coin Metrics. “The current state of supply data can vary significantly depending on what data source is used, making it very difficult for participants and investors to make informed decisions,” said Ben Celermajer, index manager at Coin Metrics.

Bitcoin’s supply demonstrates the significant difference between free float and issued supply data. According to Coin Metrics, bitcoin’s free float is nearly 25% smaller than the commonly cited 18.4 million bitcoins issued to date.

Forked assets, created by copying the Bitcoin blockchain, demonstrate an even starker difference between free float and issued supply. The Bitcoin Cash market is 36% smaller than its current supply indicates, according to Coin Metrics data. Free float supply of Bitcoin SV, another forked cryptocurrency, is 45% lower than its current supply.

Related: Bitcoin Still Up 27% This Year Despite Dismal June Performance

See also: Why Bitcoin Will Take a Long Time to Dethrone the Dollar

Coin Metrics’ free float supply data can improve the reliability of a variety of cryptocurrency valuation metrics, according to Yan Liberman, former associate at Deutsche Bank and co-founder of Delphi Digital, a digital asset research group. The popular Network Value to Transaction (NVT) ratio, dubbed a “crypto PE ratio,” and Delphi Digital’s UTXO-adjusted Network Value Transactions Signal (NVTS) are two such relative valuation metrics that could benefit.

Free float data improves the quality of these metrics, Liberman told CoinDesk, by “adjusting supply to a more appropriate level for the calculation.”

• Market Wrap: Bitcoin Traders Expect Big Move as Volatility Plummets
• Bitcoin Facing Greater Price Volatility Than Ether in Q3, Options Market Data Suggests

The Bank for International Settlements (BIS) will establish four additional “Innovation Hub” branches – in Toronto, Stockholm, London and a joint location for Paris and Frankfurt – over the next two years in a major expansion of its year-old effort to ponder the future of money.

These new locations, announced Tuesday, “will be well placed to advance work” on digital currency and distributed ledger technology (DLT) alongside other central banking issues including cyber security, artificial intelligence and digital payments, said Innovation Hub chief Benoît Cœuré in a press statement. 

BIS, often referred to as the central bank for central banks, also announced its Innovation Hub will form a strategic partnership with the U.S. Federal Reserve System.

Related: Witnesses Will Vouch for Stablecoins, Digital Dollars in US Senate Hearing Tuesday

Coming exactly a year after the BIS unveiled its vision to build an international tech collaborative for its 62 member central banks, the expansion solidifies the Swiss-based institution’s multifaceted drive to incubate fintech at the highest levels of monetary policymaking. 

Read more: CBDC Issuance Is ‘Not a Reaction’ to Libra, Says Central Bank Body

It also signals that the BIS remains serious about including at least part of the lessons of cryptocurrency in those discussions. BIS had previously tasked its existing Innovation Hubs with investigating stablecoins, DLT and central bank digital currencies (CBDC), among other trends. 

The latest batch of Hub cities may not surprise those who closely follow the rather obscure realm of central banking innovation. The Bank of Canada and Sveriges Riksbank are both considering projects that could fundamentally reshape how their citizenry interacts with money, and the European Central Bank (ECB), represented by Paris and Frankfurt joined the BIS and four other central banks in January, including those of Sweden and Britain, to study CBDC. 

Related: Blockchain Bites: Rethinking Libra, Craig Wright and Something Smells Fishy in Blockchain

Perhaps more surprising is the staggering breadth of central banks the year-old Innovation Hub initiative is now set to unite. 

As per Tuesday’s announcement, the Innovation Hub will have inroads with the entire euro system, Denmark, Sweden, Norway and Iceland, Canada, England, the United States, Hong Kong, Singapore and Switzerland, who already host Innovation Hubs.

“The BIS Innovation Hub is an investment in the future of central banking and the financial system,” BIS chief Agustín Carstens said in the statement. “These new centers will expand our reach significantly and help create a global force for fintech innovation.”

• CBDC Issuance Is ‘Not a Reaction’ to Libra, Says Central Bank Body
• Thai Central Bank Taps Cement Company for First Digital Currency Payments

Bitcoin has traded in an ever-tightening range for two months, and digital-market analysts say a new wave of coronavirus cases and emergency measures could provoke the largest cryptocurrency by market cap out of the doldrums.

The backdrop is an anemic economy, with the International Monetary Fund projecting last week that global output will shrink 4.9% this year: worse than its April forecast for 3% contraction. Confirmed deaths from the coronavirus passed half a million on Sunday, and authorities from China to the U.S. states of Florida and Texas enacted new restrictions to curb rising caseloads. The World Health Organization has also warned the worst is yet to come. 

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Related: Coin Metrics Offers More Rigorous Measure of Crypto Market Supply

Volatility is rising in the U.S. stock market, with the Standard & Poor’s 500 Index still just 10% off the record high reached in February. Yet, bitcoin has been stuck between $8,500 and $10,200 since late April, a remarkably placid stretch given the ongoing tribulations. 

For bitcoin traders, it might not be the best time to sneak away for vacation. 

“With more uncertainty in the stock market again and a monthly close coming up, we may face increased volatility going into July,” analysts with the cryptocurrency-analysis firm Arcane Research wrote Friday in a report.   

Bitcoin’s stretch of calm is evident in price charts focused on a statistical pattern known as Bollinger Bands, which narrow when volatility shrinks. The bandwidth as of Monday had narrowed to 0.09, close to its lowest level in 2020.

Related: Bitcoin Still Up 27% This Year Despite Dismal June Performance

CoinDesk Research Director Noelle Acheson noted on Sunday that bitcoin’s shrinking volatility contrasts with the persistent level of price swings in the S&P 500. 

Stock traders are struggling to reconcile U.S. Treasury Secretary Steven Mnuchin’s predictions of a “spectacular rebound” later this year with Federal Reserve officials’ warnings that the timing and strength of the recovery are uncertain. 

Big cryptocurrency investors including Pantera Capital and Bitwise Asset Management say bitcoin prices could benefit from the next wave of government and central bank stimulus packages, which might be needed to prevent deeper economic fallout.

Due to its capped supply of 21 million, bitcoin is often touted as a hedge against inflation, similar to gold.   

U.S. President Donald Trump, who is fading in the polls as the November elections approach, has reportedly told aides that he favors sending Americans another round of stimulus checks.

And the Federal Reserve saidMonday it would start buying bonds directly from the companies that issue them, effectively becoming the lender of last resort to big corporations; historically, such emergency lending was restricted to financial institutions.

“The Fed is buying everything that isn’t nailed down,” the cryptocurrency investment firm Arca wrote Monday in a weekly newsletter. “Naturally, even the most bullish investors remain somewhat cautious with regard to when all of this unwinds.”

Based on one popular investment model, known as the “stock-to-flow ratio,” bitcoin could rise to $115,000 by August 2021, according to Pantera. On Monday, the cryptocurrency changed hands at $9,151. 

The “tsunami of money will have a large impact,” Pantera wrote last week in a monthly newsletter. “If there are trillions more paper dollars, the law of supply and demand implies much more paper money to buy the same amount of cryptocurrency.” 

Matthew Hougan, global head of research at Bitwise, wrote in a monthly investor letter on June 15 that bitcoin could reach $50,000 if its market capitalization reached just 10% of gold’s roughly $9 trillion.

“It’s a matter of when, not if,” Hougan told First Mover in a follow-up email. 

Analysts with the digital-asset research firm Delphi Digital wrote Friday that “we’re rapidly approaching a key inflection point as policymakers debate if and when to deploy their next wave of relief measures.”

“One could argue the broader macro backdrop has never been more favorable for bitcoin,” according to Delphi. 

Anything to break up the monotony. 

BTC: Price: $9,156 (BPI) | 24-Hr High: $9,224 | 24-Hr Low: $9,032

Trend: Bitcoin’s price bounce from the weekend low of $8,830 could well be short-lived, price-volume analysis indicates.

The leading cryptocurrency by market value is currently trading near $9,150, representing a 3% decline on a month-to-date basis. Prices clocked a high of $9,233 early Tuesday. 

The recovery from sub-$9,000 saved the day for the bulls. After all, acceptance under that level would have marked a downside break of the multi-week long trading range of $9,000 to $10,000 and could have fuelled steeper price declines. 

However, the relief could be temporary as the uptick from $8,830 to $9,233 is accompanied by a drop in trading volumes, as seen on the hourly chart. A low-volume bounce is often short-lived. 

Also, the price rise seen over the past two days has taken the shape of a bear flag, a bearish continuation pattern. A break below the lower end of the flag, currently at $9,100, if confirmed, would create room for a sell-off to $8,150 (target as per the measured move method). 

The bearish pattern would be invalidated if prices rise above the hourly chart resistance at $9,344. That would shift the focus to the highs of $9,800 seen last week. 

• Market Wrap: Bitcoin Traders Expect Big Move as Volatility Plummets
• Bitcoin Facing Greater Price Volatility Than Ether in Q3, Options Market Data Suggests

Bitcoin (BTC) is still outperforming the top traditional financial assets so far in 2020 – even after a dour performance this month. 

At time of writing (10:00 UTC), bitcoin is trading around $9,170, representing a 27.8% gain on a year-to-date (YTD) basis, according to CoinDesk’s Bitcoin Price Index. 

Meanwhile, gold and the U.S. Dollar Index, which tracks the value of the greenback against major currencies, are reporting 16% and 5.4% gains for 2020, respectively. The S&P 500 index and oil prices are in the red YTD at -5.5% and -34.22%, respectively, as per data source Skew.

Related: Coin Metrics Offers More Rigorous Measure of Crypto Market Supply

While bitcoin’s YTD performance looks impressive, on a monthly basis the cryptocurrency is being outshone by most of the other assets included in the chart. 

At press time, bitcoin is down over 3% from the opening price of $9,444 observed on June 1, having rallied by 34% and 9.5% in April and May, respectively. 

“We are in a post-halving price action lull, but investor and on-chain activity has been strong,” said Kyle Davies, co-founder and chairman at Three Arrows Capital.

Bitcoin underwent its third mining reward halving on May 11. The event was expected by some to accelerate price gains; however, strong buying pressure has remained elusive so far, with the cryptocurrency restricted largely to the narrow range of $9,000 to $10,000 since mid May. 

Related: First Mover: Bitwise Calls $50K Bitcoin Price When Market Calm Finally Breaks

Also read: Third Halving Turns Out to Be Non-Event for Bitcoin’s Price

Investors, however, continue to pour money into bitcoin-based exchange-traded instruments like Grayscale’s Bitcoin Trust (GBTC), the largest by assets under management (AUM).

“Grayscale saw record subscriptions of 19,000 bitcoin in the latest 2 week period ending 24-Jun,” said Davies, whose firm is the biggest public shareholder in GBTC. In May, the trust accumulated 1.5 times the total of coins mined since the May 11 halving.

Grayscale is a fully owned subsidiary of Digital Currency Group, CoinDesk’s parent firm.

Onchain metrics are also painting a long-term bullish picture. For instance, the percent of bitcoin’s circulating supply that has not moved in at least 12 months reached a record high of 61.59% on Monday. The figure surpasses the previous lifetime high of 61.13% seen in January 2016, according to data provided by the blockchain intelligence firm Glassnode. 

“The data shows that we are in a period of sustained HODLing. The last time the number of coins last active 1+ years ago exceeded 60% was in early 2016, just before the price started increasing ever-more-rapidly leading up to the bull run to $20K,” analysts at Glassnode said in a weekly analysis. 

Other on-chain activity is also picking up pace due to the recent explosive growth of decentralized finance (DeFi). “Bitcoin tokenized on Ethereum has passed 11,000 (more than $100 million) and fees on Ethereum’s network have reached record highs due to increased tether and Defi transactions,” said Davies. “This will eventually impact market prices.”

While investor flows and on-chain metrics are supportive of stronger gains in bitcoin, seasonal patterns favor a minor correction. 

As can be seen, bitcoin has posted losses in the third quarter in four out of the last six years. On most occasions, the negative third-quarter performance is preceded by stellar gains in the April to June period. 

Disclosure: The author holds no cryptocurrency assets at the time of writing.

• Market Wrap: Bitcoin Traders Expect Big Move as Volatility Plummets
• Bitcoin Facing Greater Price Volatility Than Ether in Q3, Options Market Data Suggests

A former bank exec has said he will help “transform” BitMEX, just a week after the crypto derivatives exchange launched a new corporate service.

Announced Tuesday, BitMEX owner HDR Global Trading said David Wong – a former deputy CEO at Bank of China, the second-largest bank in Hong Kong – will join its board as a non-executive chairman to help grow and turn the Seychelles-based entity into a “world-class financial technology company.”

Wong had previously been the South-East Asian head of Dutch bank ABN AMRO, before heading up the financial markets division at Bank of China. Since leaving the latter bank in 2013, Wong has become a board member for a range of companies, including various real estate trusts and a life insurance company.

Related: To His Own Surprise, Crypto Volume Pumper’s Business Is Still Thriving

According to his Bloomberg profile, he also sits on the board for Singapore’s Energy Market Authority, as well as its Civil Service College, which offers educational programs for government employees.

“Being able to attract someone of David’s calibre is a testament to the distance HDR has traveled,” said Arthur Hayes, HDR’s CEO and co-founder.

See also: BitMEX Sees Biggest Short Squeeze in 8 Months After Bitcoin Surge

In the same statement, Wong said HDR had an “inspiring vision for the future,” but didn’t elaborate on what that was or how he would help transform the company.

Related: Market Wrap: Bitcoin Traders Expect Big Move as Volatility Plummets

Last week, HDR launched a new account service for corporate customers, that comes with enhanced security and full-time relationship managers, liaisons between the exchange and clients, which are commonplace in traditional finance.

BitMEX declined to comment on the hiring when contacted by CoinDesk.

• Chinese Bitcoin Miner Producer Ebang Is Launching an Offshore Exchange
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The Australian Securities Exchange (ASX) has come under pressure to further postpone the launch of a blockchain replacement for its decades-old settlement and clearing system.

One of the main share registry companies in Australia, Computershare, told the Financial Times (FT) on June 25 it was seeking a two-year delay to the implementation of the ASX’s new blockchain-based system because the new project “lacked clarity.”

The Clearing House Electronic Subregister System, or CHESS, is the existing infrastructure responsible for clearing and settlements of trades and transactions on the ASX’s network. The stock exchange is planning to overhaul the current system with distributed ledger technology to enable same-day settlements.

Related: Australia Post Now Lets Customers Pay for Bitcoin at Over 3,500 Outlets

Concerns raised by Computershare relate to a claimed lack of clear information on the technical and operational aspects of CHESS, the fee structure for new services and how regulation would be implemented and governed on the new system.

See also: ASX Accused of Trying to ‘Crush’ Rival Blockchain Trading System

Several ASX clients have also expressed their concerns over the ASX’s ability to increase its dominant market position for clearing and settlement into other markets including share registry services, per the report.

“This [new platform] is owned by ASX and the ASX is a monopoly, it’s not ideal. I don’t believe they should own it,” Tony Cunningham, founder of Perth-based stockbroker CPS Capital, told the FT. “If ASX [has] a distributed ledger, then why do you have a share registry?”

Related: EU-Based Universities Say Blockchain Could Help Meet Paris Agreement Carbon Goals

After a series of studies were conducted in August 2017 relating to the viability of DLT systems for the purpose of settlement and clearing, the ASX finally said yes to settling trades using DLT with a planned launch date previously expected in April 2021.

The DLT CHESS replacement has faced several road bumps including in 2018 when the ASX decided to postpone the proposed date over concerns raised by respondents detailing whether the implementation window of Q4 2020 to Q1 2021 was achievable. This March, it further delayed the launch due to concerns over the coronavirus pandemic.

See also: ASX’s Long-in-the-Works DLT Plan on Ice Amid Coronavirus Concerns

The rollout looks likely to face further setbacks, with the stock exchange having just agreed to another “short delay,” as reported in the FT.

“We know there are stakeholders who want a small change to the go-live date as well as those who are seeking for more time,” the ASX said as per FT reporting. “We will listen carefully to the consultation feedback prior to finalizing the revised implementation timeline.”

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Miner Hut 8 said last week it had raised a total of $8.3 million from selling a 6% equity stake to investors, approximately $800,000 more than the original $7.5 million funding target.

The Toronto-listed mining company says the funding will keep it competitive as smaller entities with older equipment feel the pinch from last month’s halving.

“We’re proud to close the first prospectus offering by a cryptocurrency mining company in Canada and further improve Hut 8’s lead as one of the largest public bitcoin miners,” said Jimmy Vaiopoulos, Hut 8’s interim CEO, in a statement.

Related: Market Wrap: Bitcoin Traders Expect Big Move as Volatility Plummets

Overall, investors purchased a total of 5.7 million “units” in Hut 8, at $1.45 apiece. Each unit contains one common share in Alberta-based Hut 8, as well as the option to purchase another share in the next 18 months at $1.85.

The funding will be invested in new equipment. Ryleigh Ebron, an external spokesperson for Hut 8, said the company be able to increase mining capacity by more than a fifth to 1,150 petahash (PH/s). Once installed, the company could comprise just under 1% of the total hash rate for the bitcoin blockchain, currently around 115,200 PH/s according to Blockchain.com.

“This financing is expected to strengthen Hut 8’s cash flows and balance sheet,” Ebron added.

See also: Chinese Bitcoin Miner Producer Ebang Is Launching an Offshore Exchange

Related: Chinese Bitcoin Miner Producer Ebang Is Launching an Offshore Exchange

Hut 8’s finances have been the subject of much discussion. It saw a $116.6 million loss just in Q4 2019. As a report from CoinDesk Research highlighted earlier this year, the company made a wafer-thin gain of just over $2 million in 2019.

The stock price says it all: In April 2018, Hut 8 traded at CAD $4.50 (~$3.28) but has since spiraled downwards, hitting a low of CAD $0.59 ($0.43) by mid-March this year. At the time of writing, shares were at CAD $0.98 (~$0.72).

Hut 8 has attributed this poor performance to a deleterious agreement that obliged them to only buy mining equipment from manufacturer Bitfury, its single biggest investor. That prevented it from accessing the faster miners coming from Bitfury’s rivals, leaving it with rapidly aging equipment.

Over time, that meant it made up less of the total hashrate and won far fewer blocks, which hit revenue. In January, Hut 8 amended the agreement so it could buy mining equipment elsewhere.

Interestingly, Hut 8 said it will use all the new funding to buy mining equipment from Bitfury’s rival, MicroBT. Most of the new rigs will arrive between July and November.

See also: Argo Buys $500K Worth of Zcash Miners as Bitcoin Revenue Shrivels

Hut 8 hopes the halving will make it harder for some of their competitors, the ones operating with older equipment, to stay in the game, said Ebron.

“The halving is arguably better for miners who can get access to the latest generation of bitcoin mining equipment as they are far more profitable and will benefit from the drop in network difficulty as older equipment continues to be turned offline,” Ebron said.

Ebron also pointed out the miner is in a particularly advantageous position because lower electricity rates in Alberta mean Hut 8 can better weather fluctuations in the volatile bitcoin price.

Hut 8 listed on the Toronto Securities Exchange in October 2019. The exchange has already approved the listing of newly sold shares, subject to the mining company meeting listing conditions, which include having more than CAD $7.5 million (~$5.5 million) in net tangible assets, such as new mining equipment.

• Outflow of Bitcoin From Miners at Lows Not Seen Since 2010
• Miners Are Selling More of Their Bitcoin. That May Actually Be Bullish

The idea of a “digital dollar” will once again rear its head before the U.S. Congress on Tuesday.

The U.S. Senate Committee on Banking, Housing and Urban Affairs will hold a hearing on “The Digitization of Money and Payments,” and while few details have been released, the witnesses – former Commodity Futures Trading Commission (CFTC) Chair J. Christopher Giancarlo, Paxos co-founder and CEO Charles Cascarilla and Duke University Visiting Professor of Law Nakita Cuttino – suggest the focus may center in part around central bank digital currencies and stablecoins.

The hearing may tread similar ground to a recent one hosted by a subcommittee with the House Financial Services Committee, which addressed questions of financial inclusion and how best to send relief funds to U.S. residents quickly and efficiently. Witnesses at the time called for tried-and-proven alternatives to building a novel tokenized system.

Related: Blockchain Bites: Rethinking Libra, Craig Wright and Something Smells Fishy in Blockchain

Cuttino, in pre-written opening remarks, said while some U.S. residents might turn to digital banking and payment systems, “low-income Americans disproportionately prefer to transact with bank tellers.”

Digital systems come with their own drawbacks: nearly 1-in-5 Americans don’t have smartphones, limiting their access to digital banking services, while nearly 10 percent don’t have alternative internet access in their homes. Cuttino also raised questions about the business models for central bank digital currencies and stablecoins.

“If services are ‘free’, what alternative tradeoffs are consumers making (e.g., consumer data)? Is consumer data being used to exploit behavioral weaknesses to their detriment? Additionally, are consumer conditions improved by a shift to the novel solution? Ultimately, fintech solutions should not merely move the most Americans from the fringe financial marketplace to a fringe digital economy,” Cuttino says.

Read more: How the COVID-19 Crisis Revived the Digital Dollar Debate

Related: CBDC Issuance Is ‘Not a Reaction’ to Libra, Says Central Bank Body

Cascarilla addresses concerns around the accessibility of financial services in his opening testimony, noting that banks today have limited hours and accessibility.

“Consumers and institutions alike are held back by the inability to have timely access to their own funds because of settlement delays in bank transfers, international wires and other activities that can take over five days to settle,” he says. “This makes it difficult to manage other payments with any kind of predictability. On an economy-wide scale, this creates a complex daisy chain of loan obligations and unnecessary intermediaries.”

This architecture must be updated for the 21st century, he says, echoing a common refrain from former CFTC Chair Giancarlo, who has similarly advocated for future-proofing the dollar.

For his part, Giancarlo – appearing in his capacity as a director of the Digital Dollar Project – will explain and advocate for a tokenized version of the greenback.

“The Digital Dollar Project believes the opportunity is at hand not just to imagine such an ecosystem, but to actually build it with such services for low-income and underbanked communities as priorities from the start,” he says in his pre-written testimony.

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Sergey Medvedev, a Russian national who operated a digital currency escrow service for the $568 million payment card fraud forum he founded in 2010, pleaded guilty to racketeering charges in what the U.S. government called its largest ever cyber fraud case. 

Medvedev, 33, admitted in his June 26 plea before the U.S. District Court for Nevada that he founded and ran the Infraud Organization, an international cybercrime enterprise that facilitated the sale of credit card and equipment theft, malware and stolen account information during its eight year reign.

He also acknowledged running a “digital currency” exchange and escrow service for Infraud’s 10,901 members. A 2018 indictment stated Infraud members used the now-defunct Liberty Reserve and bitcoin, among other “digital currencies,” to launder their funds. 

Related: Crypto.com to Refund Clients as Wirecard’s Card Issuer Told to Cease Operations

The June plea does not mention the extent to which Medvedev’s exchange service transacted in bitcoin or other cryptocurrencies. It states that Medvedev accrued $1.04 million in Liberty Reserve digital currency through May 2013. 

In total, Infraud facilitated the sale of 4 million compromised payment card numbers and caused an actual loss of $568 million dollars to its victims, American Express, Visa, MasterCard and others, Medvedev admitted. 

The Department of Justice shut down Infraud in February 2018 and subsequently indicted 36 members of the organization as part of Operation Shadow Web.

At the time of his arrest in Thailand in 2018, Medvedev was estimated to be in possession of more than 100,000 bitcoin, according to the Bangkok Post.

Related: How to Spot a Crypto Scam

Medvedev’s sentencing hearing is scheduled for December 9.

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Bitcoin opened the week still stuck in a price range just above $9,000 Monday, moving less than 0.2% from Friday’s close as of 20:00 UTC (4 p.m. ET), according to Bitstamp.

At 00:00 UTC on Monday (8:00 p.m. Sunday ET), bitcoin (BTC) was changing hands around $9,115 on spot exchanges such as Bitstamp. Despite a brief dip below $9,800 on Saturday afternoon, bitcoin did not trade above $9,200 or below $9,000 on Monday.

Ether (ETH), the second-largest cryptocurrency by market capitalization, climbed less than 1% from its daily open Monday and traded around $226 as of 20:00 UTC (4 p.m. ET).

Related: Bitcoin Facing Greater Price Volatility Than Ether in Q3, Options Market Data Suggests

Exchange inflows from bitcoin miners are pouring in as bitcoin continues to trade in the low $9,000s. A seven-day moving average shows inflows from miners to exchanges have reached their highest levels all year. This might be a bearish signal, according to some analysts.

Miners aren’t really speculators with the bitcoins held on their balance as inventory,” said Austin Storms, founder of mining mobile infrastructure company BearBox They’ll readily sell it for cash to reduce risk or expand operations, he added. But to infer that miners sending coins to exchanges is a bearish market signal, according to Storms, is a “big reach.” 

See also: Why Bitcoin Will Take a Long Time to Dethrone the Dollar

Miners make up a small percentage of daily sell pressure, he explained. Using this data to justify a bearish market thesis is “exploratory analysis that wants to be confirmatory,” said Storms. “People are bored with the $9,100-$9,400 range and are looking for any reason we might depart from it soon.” 

Related: Chinese Bitcoin Miner Producer Ebang Is Launching an Offshore Exchange

Bitcoin’s volatility is plummeting as it continues to trade in a tight price range. According to data from Skew, the ether-bitcoin implied volatility dropped to an all-time low over the weekend, and the Bitcoin Volatility Token (BVOL) launched by FTX earlier this year, which tracks market volatility, has fallen for nearly 20 consecutive days.

With volatility at historic lows, CoinGecko research analyst Daryl Lau told CoinDesk he would “definitely not be surprised to see a big move.” Sunday’s brief drop below $9,000 was “bought up on low volumes,” he noted. Cryptocurrency exchange volumes and the continued correlation to the S&P 500, which briefly broke below 3,000 Monday morning, seem to be signalling a “downward move” for bitcoin, Lau said. 

As the market tries to decide which way to exit its current price range, some traders are increasingly frustrated. “Consolidations can be frustrating for short-term traders, particularly those who trade on leverage and attempt to catch breaks,” said Matt Ficke, head of Capital Markets at OKCoin. Bitcoin has closed between $9,050-$9,820 price points for the past seven weeks, according to OKCoin weekly charts. 

See also: Bitcoin Facing Greater Price Volatility Than Ether in Q3, Options Market Data Suggests

To Ficke, the market is “testing or debating whether or not bitcoin can decouple from equity performance in this macro environment.” 

Decentralized finance assets were some of the biggest losers on Monday, according to 24-hour price change data from Messari. Compound (COMP), which was “soaring” several days ago, is down 9.5%. Also down are nexo (NEXO) by 3.7%, basic attention token (BAT) 3.26%, and matic network (MATIC) by 2.6 percent. All price changes were as of 20:00 UTC (4:00 p.m. EDT).

In commodities, gold stayed mostly flat on Monday down less than 0.05% as of 20:00 UTC (4:00 p.m. ET). The yellow metal traded around $1,771. 

See also: Crypto Long & Short: What Trends in Volatility Could Mean for Bitcoin

Meanwhile, major stock indices are mostly green on Monday. 

The FTSE 100 index in Europe gained roughly 1.5% from its daily open at the time of publishing. The S&P 500 also gained nearly 1.5% Monday despite growing fears over an nation-wide increases in coronavirus cases. Only the Nikkei 225 dropped Monday, closing with a loss of more than 1%.

• First Mover: The Return of the Bitcoin Retail Investor (and Why That’s a Good Thing)
• Bitcoin Closes in the Green Sunday to End Longest Daily Losing Run in 6 Months

Bitcoin may seem to be more volatile than traditional assets but in crypto markets it is considered relatively stable compared to alternative cryptocurrencies. 

Bitcoin (BTC) is the biggest cryptocurrency by market value. Not only is it used as the base currency of choice for trading smaller digital assets, it is also less vulnerable to manipulation or sudden price swings compared to altcoins, most of which are based on Ethereum’s blockchain.

However, that pricing situation may change during the third quarter, according to options market data. 

Related: First Mover: The Return of the Bitcoin Retail Investor (and Why That’s a Good Thing)

The spread between the three-month at-the-money implied volatility for Ethereum’s ether (ETH) token and bitcoin pair, a measure of expected volatility between the two, fell to a record low of -2.4% on Sunday, according to data provided by the crypto derivatives research firm Skew. 

“The negative spread shows the options market expects bitcoin to be more volatile than ether over the next three months,” said Skew CEO Emmanuel Goh. 

The spread clocked a record high of 33% in February and has been on a declining trend ever since. 

See also: Bitcoin Closes in the Green Sunday to End Longest Daily Losing Run in 6 Months

Related: Bitcoin Closes in the Green Sunday to End Longest Daily Losing Run in 6 Months

Implied volatility, which is computed using the prices of options and underlying assets and other key metrics, represents investors’ expectations of how volatile or risky an asset would be over a specific period. Implied volatility is a way to quantify uncertainty

“The fact that markets are now factoring in higher bitcoin price volatility compared to ether is surprising given the focus on the Ethereum-based Decentralized Finance (DeFi) sector over the past one month,” said Goh. 

According to data provider DeFiPulse, the number of ether locked into DeFi applications has increased from 2.539 million on June 16 to 3.087 million on June 29. That’s a growth of more than 20% in 13 days. During the same period, the dollar value of various tokens locked has surged from $1 billion to $1.62 billion. Note that out of the 205 DeFi projects listed on DeFiPulse, 192 are built on Ethereum. 

The activity picked up the pace after lending protocol Compound’s COMP token went live for trading on June 18. The governance token rose by 500% in the following three days, triggering a frenzy in the DeFi space. 

The market is divided on whether the DeFi explosion will lead to a sustained rally in ether or lead to a boom-bust cycle. “DeFi will likely help push ETH to $1 trillion market cap,” Joseph Todaro, managing partner at Blocktown Capital, tweeted on June 16. 

Meanwhile, BlockTower’s CIO Ari Paul put out a tweet thread on June 21 explaining the possibility of liquidity mining fueling a bubble in the DeFi space. Liquidity mining refers to giving out governance tokens to put assets into a lending/borrowing protocol. 

See also: Ethereum Developers Consider New Fee Model as Gas Costs Climb

As such, one may expect ether to be more volatile than bitcoin, especially with bitcoin-related news having dried up following the cryptocurrency’s third mining reward halving, which took place on May 12. 

While the options market suggests otherwise, the possibility of bitcoin witnessing greater volatility cannot be ruled out. The top cryptocurrency has spent nearly two months trading in the narrow range of $9,000 to $10,000. A prolonged period of low-volatility consolidation often ends with a big spike in volatility.  

That said, ether and other altcoins are seldom insulated from the pickup in bitcoin market volatility. If bitcoin sees big moves, ether will also likely face heightened volatility, which could shake up things in the DeFi space. That in turn could cause more panic and uncertainty in the ether market. So, while bitcoin could initially see greater volatility, eventually ether’s volatility may catch up and surpass bitcoin. 

• Crypto Long & Short: What Trends in Volatility Could Mean for Bitcoin
• Market Wrap: Bitcoin Still Stuck in a Rut, Trading Below $10K

The Takeaway:

• Demand to transact on the Ethereum blockchain has pushed fees to uncomfortable levels.
• A new technical proposal helps address high fees by implementing a dynamic pricing system.
• Called EIP 1559, Ethereum users would now pay a set “base fee” to the network plus a tip to miners.
• One technical observer calls it “the biggest change to any blockchain post-release.”

The cost to use Ethereum has increased some 500% since April. That’s not very helpful for people running programs on it.

And while average gas fees are not at the all-time highs seen in July 2018, the problem will need fixing if decentralized applications (dapps) can be run reliably on the world’s leading smart-contract blockchain.

Related: ‘Social Money’ Startup Inks Deal With Rapper Ja Rule, Releases Song With Lil B

A potential technical savior is on the horizon, however – and it’s not the Eth 2.0 overhaul or Rollups, the latest en-vogue scaling solution.

Read more: Vitalik Buterin Clarifies Remarks on Expected Launch Date of Eth 2.0

Called Ethereum Improvement Proposal (EIP) 1559, this proposed update aims to reduce transaction costs by overhauling the network’s fee market in what independent analyst Hasu describes as “the biggest change to any blockchain post-release.” 

Some Ethereum clients, the teams that maintain the blockchain’s software in various programming languages, are already working on implementations.

Related: Status Keycard Now Works With Android Mobile Devices

First introduced in April 2019, EIP 1559 has roots going back to an August 2018 paper on Ethereum’s price-auction model penned by Ethereum co-founder Vitalik Buterin. The EIP itself was co-authored by Buterin, in addition to Ethereum developers Eric Conner, Rick Dudley, Matthew Slipper and Ian Norden.

EIP 1559 tries to solve fee pressure by implementing “algorithmic price discovery,” according to Ethereum Foundation researcher Barnabé Monnot in a technical deep dive. 

The EIP solves two problems at once by dynamically changing the size of blocks depending on the number of transactions in the queue between certain thresholds and by pricing out certain users when demand gets too high.

This is accomplished in two parts: a burnt base fee (BASEFEE) for transacting and a tip to miners. 

The base fee will reside at a set level, depending on network conditions, while the tip compensates miners for their work and can be increased to “skip” the transaction line – a nice feature of current blockchain networks that helps alleviate congestion.

Think of it like a regulated highway that can open and close lanes as needed. Plus, there’s a fast-pass lane someone can pay for if they need to scoot in an emergency.

Read more: Plasma Became Optimism and It Might Just Save Ethereum

The configuration also helps during moments of bottleneck where it’s near impossible to settle a transaction. To date, this has happened twice: once with the rise of CryptoKitties in 2017 and more recently, on March 12 (or “Black Thursday”) when the price of ether (ETH) dropped by more than 30% in 24 hours, creating a mad dash to exit various Ethereum-based applications.

Not everyone wants to throw the baby out with the bathwater. Etheruem has a fee problem, but that doesn’t mean you have to dump the current model entirely.

EIP 2593, written by MetaMask developer Dan Finlay, proposes an “escalator algorithm” that allows users to change their fee structure based on their relative needs. In short, the EIP lets a user fine-tune a transaction fee to the lowest amount possible by slowly escalating the transaction fee until a miner decides to incorporate it into the next block. (A more thorough breakdown of EIP 2593’s pros and cons can be found here.)

Ethereum developers liked the idea – so much so, in fact, that the EIP is likely to be used in addition to EIP 1559 as a tweak to the latter’s “tipping” feature. As of June 24, developers have decided to launch a testnet to help model the effects of EIP 1559 and any other tangential work on the network.

As Hasu, the pseudonymous blockchain researcher, states, those effects could be far-reaching.

While miners are currently rewarded in ETH for processing transactions via a block reward and transaction fee, nothing makes the denomination of that fee specific to ETH. For instance, a team could reach out to a mining pool and pay them in fiat to route their orders first.

Notably, EIP 1559 forces Ethereum transactions to be paid in the blockchain’s native token. The base fee is denominated in ETH, paid to the network and then burnt every time a transaction occurs, which also decreases the outstanding supply of ether over the long run. 

(At some point, Ethereum will not pay mining rewards at all, once the network switches to the Proof-of-Stake (PoS) consensus algorithm in the mother-of-all network updates known as Eth 2.0. The current network, Eth 1.x, will run adjacent to Eth 2.0 for a number of years until the PoS chain is fully functional.)

Read more: The Zcash Privacy Tech Underlying Ethereum’s Transition to Eth 2.0

Consequently, the burning also provides a new deflationary pressure into Etheruem’s economic model; a pressure some argue would give the network a higher value proposition in the long term. 

“The burning of BASEFEE, which is the bulk of transaction fee, is a deflationary force of ETH. It promotes its scarcity, and links its scarcity to the growth of the Ethereum economy,” David Hoffman, COO of Ethereum investment firm RealT, told CoinDesk. “The issuance of ETH that pays for security initially leverages the value of ETH. If BASEFEE is burning lots of ETH, the value of ETH should be higher, as it is more scarce.”

Practically speaking, miners may have the most to lose from the proposal. Hefty transaction fees – such as one alleged Ponzi scheme that sent a few multimillion-dollar fees by “accident” – are unlikely to occur under the new system which prioritizes user experience over miner pocketbooks.

“It is better for users since the base fee will become a constant, and that’s something users will no longer have to worry about when sending a TX [transaction],” MyEtherWallet CEO and founder Kosala Hemachandra said in an email. “They don’t have to know how congested the network is, or when their TX will be mined.”

Read more: Ethereum’s ProgPoW Debate Is About Much More Than Mining

Yet intuition may not be a valuable guide. Mining pools operate under the assumption of long-term block rewards, making them less worried about any programmatic changes than initial thought would suppose. 

SparkPool CEO Xin Xu told CoinDesk in an email that both he and the pool believe a “better fee model design is needed” and that the group has been “supportive of EIP 1559 for a long time.” (For reference, SparkPool once operated under the name EthFans.)

“Maximizing every block reward is important to mining pools, including SparkPool. However, I think making the Ethereum network a better network is prioritized [over] maximizing every block reward to SparkPool and I,” Xu said.

• Activists Document Police Misconduct Using Decentralized Protocol
• Money Reimagined: Ethereum’s Renaissance Creates an Opportunity – And a Major Test

A hacker has attempted to disrupt a blockchain voting system currently being used to help decide constitutional changes in the Russian Federation.

According to Russian news agency TASS, head of the Moscow government’s IT technologies department Artem Kostyrko said an observation node on the blockchain had been targeted, but the system was still functioning correctly. It’s not clear from the report what the hacker managed to achieve in the attack, if anything, and how far the intrusion penetrated.

“At present, increased security mode has been introduced. There was no interruption in voting, all votes are in the guaranteed delivery service, that is, they will be recorded on the blockchain,” Kostyrko said.

Related: Hacker Drains $500K From DeFi Liquidity Provider Balancer

The website also went down during the first day of electronic voting due to an overload, the Central Election Commission previously said.

Kostyrko said the node is currently offline while IT experts ensure it is safe to be switched on again.

According to the head of Russia’s election observers’ movement Golos Grigory Melkonyants, the independent observers could not connect to the blockchain, and the issue therefore cannot be about an observer node to monitor the process.

Read more: Ohio Lawmakers Propose Blockchain Voting in Elections Overhaul Bill

Related: Bitcoin News Roundup for June 18, 2020

The vote is running on Moscow City’s Department of the Information Technologies servers, and Kostyrko probably meant the “storefront” website  that is publishing the data on the recorded blocks and transactions with the encrypted votes, Melkonyants told CoinDesk.

“We suggested that the system is at least distributed between the district polling stations, but that was not accepted,” Melkonyants said.

Now, the observers can only watch the website and download the CSV files with encrypted votes every 30 minutes.The Department of the Information Technologies told CoinDesk it needs more time to prepare a response. We will update this story when we have new information.

During the poll, Russians will have their say on constitutional changes, the most important being whether to allow the country’s president – currently Vladimir Putin – to stay in power for more than the current limit of two consecutive six-year terms, the TASS article said.

According to the TASS report, voting began last Thursday and will end Tuesday, June 30. Around 1 million applications to use the blockchain system for the vote were registered in Moscow and up to 140,000 from Nizhny Novgorod.

As reported earlier in June, the voting system appears to be provided by Karpersky Lab based on open-source technology from blockchain services firm Bitfury.

• Russia’s Ministry of Justice Latest to Criticize Proposed Crypto Ban
• Russia’s Supreme Court Makes ‘Landmark’ Vote With Blockchain System From Kaspersky Lab

Balancer fell victim to a “flash loan” exploit, a mining conglomerate sees potential in blockchain and a shareholders association said EY should have caught Wirecard’s multi-billion-dollar blackhole earlier.

Flash loans are one of many novel financial products made possible through decentralized technologies. But with innovation comes risk. Here’s the story:

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Related: First Mover: The Return of the Bitcoin Retail Investor (and Why That’s a Good Thing)

Flash loans & hacks
A hacker exploited a smart contract loophole early Monday to drain $500,000-worth of tokens from DeFi liquidity provider Balancer Pool. CTO Mike McDonald said in a blog the attacker had borrowed $23 million-worth of WETH tokens in a flash loan from dYdX, and used those token to trade against themselves with a variety of investment-grade Stratera tokens. A flash loan was used in February to cripple the bZx exchange. These types of attacks leverage a protocol’s built in capabilities and novel financial instruments, rather than hacking the code base. This hack follows news of 870 bitcoins stored on Blockstream’s Liquid Network being made vulnerable to network moderators’ seizure last week, said Summa founder James Prestwich. 

Blockchain deals
Mining conglomerate BHP completed a $14 million deal with a Chinese metals giant using the blockchain-based MineHub platform to process contract terms, exchange documents online and provide visibility and accountability along the supply chain. Elsewhere, the South Korean government chose blockchain startup Sendsquare to develop a proof-of-concept blockchain registry to help analyze, anonymize and store clinical data for diabetes.

Privacy and pseudo-anonymity 
Bitcoin’s culture is heavily influenced by the rights to pseudonymity and privacy online. Beginning with Satoshi Nakamoto, a long line of crypto developers have taken the route of remaining pseudo-anonymous for personal safety as well as to maintain consistent worldviews. Sometimes seen as needless obfuscation, masked identities allow people to “be who you are,” Engineer Kee Hinckley said. It also informs the projects being built, such as the many privacy-forward experiments on Bitcoin. 

Auditing slip
A German shareholder body has accused “Big Four” auditor Ernst & Young of failing to spot a $2.1 billion black hole in Wirecard’s books soon enough. Shareholders’ association SdK filed criminal damages against EY Friday for not flagging Wirecard’s accounting practices earlier, reports CNBC. The group holds EY, and two current and one former employee in particular, responsible for not alerting the authorities and investors sooner, which ultimately culminated in the precipitous drop in the Wirecard share price.

Related: Crypto Long & Short: What Trends in Volatility Could Mean for Bitcoin

SEC Chair Crypto Mom?
Commissioner Hester “Crypto Mom” Peirce could become SEC chair, if President Donald Trump’s nomination of current Chairman Jay Clayton to U.S. Attorney for the Southern District of New York goes through. If Clayton is confirmed, the president will likely appoint, as is tradition, the senior-most commissioner belonging to his political party; that would be Crypto Mom. 

• The Finance Department of Switzerland thinks existing tax law covers DeFi (Decrypt)
• Compound Finance is a “TVL” unicorn, as of Friday (Decrypt)
• Crypto M&A is led by exchanges, The Block found
• Ross Ulbricht weighs in on MakerDAO
• Will Bitcoin see a return of the retail investor? 
• Matic Network went live with its staking solution

Back in the green
Bitcoin chalked out minor price gains on Sunday, ending its longest run of daily losses for half a year. The leading cryptocurrency by market value jumped 1.2%, having suffered losses in each of the preceding five days, according to CoinDesk’s Bitcoin Price Index. Prices last took a beating for five consecutive days in early December 2019. Both five-day drops saw prices decline by around $900 over the 5-day periods. Sunday’s rise has kept the multi-week long trading range of $9,000 to $10,000 intact.

Volatility trends
Recent market data suggests that bitcoin is becoming less volatile, while stocks are increasingly volatile, CoinDesk Head of Research Noelle Acheson said, in the latest Crypto Long & Short newsletter. If the trend continues, it could have profound effects on bitcoin’s adoption, as Fidelity found the biggest barrier to entry is crypto’s market turbulence. “With the narrowing of the differential, that barrier could disappear, or at least significantly diminish. It’s not just that bitcoin’s volatility seems to be trending down – if volatility overall is more acceptable, bitcoin’s swings could be seen as less of a negative,” Acheson said. Though for some, she remembers, volatility is the whole point. “Where else are you going to get high potential returns?” Subscribe here to get Crypto Long & Short in your inbox.

Valuing bitcoin
Nearly half of investors in a recent survey said a lack of fundamentals keeps them from participating. In a 30-minute webinar July 7, CoinDesk Research will explore one of the first and oldest unique data points to be developed by crypto asset analysts: Bitcoin Days Destroyed. 

We’ll be joined by Lucas Nuzzi, a veteran analyst and a network data expert at Coin Metrics. Lucas and CoinDesk Research will walk you through the structure of this unique financial metric and demonstrate some of its many applications. Sign up for the July 7 webinar “How to Value Bitcoin: Bitcoin Days Destroyed.” 

Is the Travel Rule good or bad for crypto? Both
Professor Malcolm Campbell-Verduyn and blockchain researcher Moritz Hütten break down what is sometimes thought of as an “existential crisis” for crypto: Financial Action Task Force’s “Travel Rule.” They argue the new requirements will lead to a bifurcation in the industry, with one path moving closer to the regulatory schema big banks follow and one diverging towards underground, grey market dealings. 

• Blockchain Bites: Crypto.com Refunds, Sovrin’s Layoffs and AML Bitcoin’s AML Issues
• Blockchain Bites: Rethinking Libra, Craig Wright and Something Smells Fishy in Blockchain

One of the major manufacturers bitcoin mining equipment hopes launching its own exchange could double total revenue by 2022.

In an interview with Bloomberg BNN, CFO Chen Lei confirmed the Hangzhou-based Ebang was planning to launch a regulatory-compliant crypto exchange that would strictly operate outside of China, where the government has cracked down hard on trading platforms.

Little else is known about the proposed exchange other than Ebang hopes to turn its fortunes around by tapping transaction fees as a consistent source of income.

Related: Coinbase Lists Compound’s COMP Token for Retail Crypto Traders

Ebang’s revenue stood at $109 million in 2019, which was roughly a third of what it made in 2018 – the tail end of the initial coin offering boom. Overall, the company has reported net losses in both 2018 and 2019.

The exchange will help diversify revenue so the company isn’t as beholden to bitcoin’s wild volatility, Lei said.

See also: Bitcoin Miner Maker Ebang Estimates $2.5M Loss for Q1 in IPO Prospectus Update

This is the next in a series of branch-outs for Ebang, which has already set up an advisory service for clients, which Lei predicted could see the company’s revenue grow 40% this year.

Related: First Mover: In the Cryptocurrency Markets, No Two Exchanges Are Alike

Ebang’s share price had slid 4% to under $4 after its $100 million public offering on Nasdaq on June 26. The funding would go toward developing new mining equipment as well as help fund expansions overseas.

At press time, Ebang was trading at $4.28.

UPDATE (June 29, 2020, 14:58 UTC): This article has been updated to clarify Ebang is not the second-largest producer of bitcoin miners.

• Australia Post Now Lets Customers Pay for Bitcoin at Over 3,500 Outlets
• Crypto Exchanges Must Stop Acting Like Casinos in Wake of Robinhood Suicide: bitFlyer Exec

Facebook, Accenture, IoTeX, Nvidia and six other companies are joining the Linux Foundation’s Confidential Computing Consortium (CCC), increasing the size of the privacy-focused group by 60 percent.

The addition of members IoTeX, which leverages blockchain to secure the internet of things, and R3, an enterprise blockchain company, nearly doubles the number of blockchain companies involved. 

Created in late October 2019, the CCC aims to bring developers together to accelerate the use of Trusted Execution Environment (TEE) technologies and standards. A TEE sequesters code and data away from applications on the main operating system, so they’re protected from adversaries who may gain access to the main operating system. If the main system is in the White House, for instance, with a variety of protections, a TEE is the bunker underneath it. 

Related: Many Bitcoin Developers Are Choosing to Use Pseudonyms – For Good Reason

Within a TEE, unauthorized actors cannot view the data that is being used within the TEE and cannot alter the data. This enables applications and other systems to run without having direct access to extensive amounts of vulnerable data such as financial or personally identifiable information. 

“Securing data-in-use in hardware-based TEEs, can … strengthen other security- and integrity-related technologies,” like running a blockchain ledger, said Stephen Walli, the chairperson of the CCC’s governing board, in a statement. 

“Confidential computing brings privacy-preserving smart devices to the next level by not only allowing users to own their private data, but also to use it in a privacy-preserving way,” Raullen Chai, CEO of IoTex, told CoinDesk in an email. “This has major implications for consumer-facing industries such as health care and smart homes, as well as enterprise for private multi-party data sharing and interactions.”

See also: Jalak Jobanputra – How Edge Computing Can Make Us More Resilient in a Crisis

Related: Why CoinDesk Respects Pseudonymity: A Stand Against Doxxing

Chai, based in San Francisco, said there are two immediate use cases where confidential computing could make an impact on everyday people’s privacy. 

One is facial recognition in public spaces, an area that is under intense debate and scrutiny, particularly as protests against police brutality continue in the U.S. 

There are traditionally two sides to this debate, said Chai. On one side are privacy-conscious people who don’t want images of their faces scanned and analyzed by governments and other actors. On the other are governments (their supporters) who, broadly, are prepared to sacrifice people’s privacy in the name of public good. Confidential computing has something for each hand. 

“Reactive regulations will never achieve the goal of satisfying both sides, but confidential computing orchestrated by blockchain can,” said Chai. “With confidential computing, facial recognition processes can be executed within a secure TEE-based confidential computing environment, where the raw data (people’s faces) and a cross-referencing database of faces can be analyzed and subsequently forgotten after the desired results are obtained by governments.”

See also: Human Rights Foundation Funds Bitcoin Privacy Tools Despite ‘Coin Mixing’ Legal Stigma

Another area of interest is contact tracing, used to track the spread of COVID-19, and clinical research about the disease. Chai said projects such as Google’s Project Baseline, which leverages user-donated health and location data to combat COVID-19, are important. Google Cloud is a member of the CCC. But the project’s privacy policy includes concerning language, including the baseline terms and conditions, which prevents users from deleting health data once it is contributed. 

Chai said confidential computing can serve as a win-win for initiatives like Project Baseline because it allows the project access sensitive data that’s important for pubic health, while also providing assurances to people sharing their data that they can trace and revoke it at any time. 

Blockchain technology offers a coordination mechanism for computers using TEEs, allowing access to data among parties that might not trust one another, such as a consumer and a large corporation. Smart contracts can set the rules of engagement to be programmable, and make the end-to-end confidential computer process both trusted, and verifiable, according to Chai. 

See also: From Australia to Norway, Contact Tracing Is Struggling to Meet Expectations

The U.S. Senate is considering several bills that would attack end-to-end encryption, according to critics, including the EARN IT Act and the Lawful Access to Encrypted Data Act of 2020. Simultaneously, companies within the U.S. are grappling with how to comply with privacy laws like California’s Consumer Privacy Act (CCPA), which lets California residents limit the amount of data gathered about them and ask that companies delete information they may have.

Notably, the CCPA and its international counterpart the European Union’s General Data Protection Regulation, one of the most prominent privacy laws in the world, don’t prevent companies from abusing people’s data. They just impose fines and other consequences after the fact. 

“Protecting organizational, partner and customers’ private data is table stakes to seeing this model truly achieve its potential,” said Michael Klein, principal director of Blockchain & Multiparty Systems Architecture at Accenture, in a statement. 

“The open standards and tools provided by the Confidential Computing Consortium offer organizations new options to protect private data while ‘in use,’ and Accenture is proud to be a member of this initiative.”

• AI Startup Pilots Digital Masks That Counter Facial Recognition
• Fed Economists Call Fears of Original Libra Stablecoin ‘Overstated’

Kyber Network’s next protocol upgrade, dubbed Katalyst, is expected to go live on July 7.

In an emailed announcement on Monday, Kyber said the upgrade will usher in changes around the role of its native token, the Kyber Network Crystal (KNC), aimed at attracting more participants to the protocol’s development.

The Katalyst upgrade and subsequent KyberDAO platform are planned to support three types of Kyber stakeholder groups: reserve entities providing liquidity to Kyber; decentralized applications (dapps), which connect takers to the Kyber protocol; and general KNC holders.

Related: Hacker Drains $500K From DeFi Liquidity Provider Balancer

KyberDAO, a platform that will allow the different stakeholders to participate in governance through voting, will be hosted on Kyber.org – a mobile dapp that can be accessed on platforms with Web3 connectivity.

See also: Kyber to Offer Delegated Token Staking After Coming Network Upgrade

The protocol upgrade, Kyber said, is aiming to reduce friction in liquidity contributions as well as provide incentive rebates for liquidity providers. The upgrade will also allow for Dapps to be integrated with Kyber to feature a custom spread for flexible rates.

The Katalyst upgrade will also bring in a new mechanism enabling KNC holders to stake the token and be rewarded for voting participation in ether (ETH) collected in the form of network fees resulting from trading activity.

Related: DeFi Platform Opyn Launches Put Options on Compound Token

Users of the network will gain access to the new Katalyst features a week after launch, on July 14, with the first KyberDAO proposal set up in “Epoch 1.” KyberDAO operations are divided into so-called epochs giving users a two week window to vote.

According to Kyber, there is no minimum or maximum amount of KNC that can be staked, no hard lockup period, no loss of tokens due to penalties and no running of nodes required. KNC holders who do not wish to participate in governance are still able to earn rewards by delegating their voting power to KyberDAO pool operators.

See also: New Cross-Chain Network Plans to Bring Bitcoin’s Liquidity to the DeFi Space

To fulfill this role, entities such as StakeCapital, StakeWith.Us, RockX, and Hyperblocks are expected to go live on KyberDAO soon after launch. Existing investors in Kyber Network, such as ParaFi Capital, #Hashed and Signum Capital will also be participating in governance.

So, too, will San Francisco-based blockchain investment firm ParaFi, which invested in the network in mid-June.

• Trio of Bitcoin Tokens Lures DeFi Yield Farmers to New Pastures
• Market Wrap: Bitcoin Tests $9K as Market Struggles With Uncertainty

A German shareholder body has accused “Big Four” auditor Ernst & Young (EY) of failing to spot a $2.1 billion black hole in Wirecard’s books soon enough.

Shareholders’ association SdK filed criminal damages against EY Friday for not flagging Wirecard’s accounting practices earlier, reports CNBC. The group holds EY, and two current and one former employee in particular, responsible for not alerting the authorities and investors sooner, which ultimately culminated in the precipitous drop in the Wirecard share price.

“[T]his was an elaborate and sophisticated fraud, involving multiple parties around the world in different institutions, with a deliberate aim of deception,” said EY in a statement to CNBC. It argued that “even the most robust and extended audit procedures” would have been unable to uncover this scale of “collusive fraud.”

Related: Crypto.com to Refund Clients as Wirecard’s Card Issuer Told to Cease Operations

Earlier this month, before the most recent revelations of accounting malpractice, law firm Wolfgang Schirp had filed a class-action lawsuit against EY for its failure to spot improperly booked payments in Wirecard’s 2018 accounts.

At press time, Wirecard stock traded at €3.50 (roughly $4). Shares had been worth $105 on June 17, before the company admitted employees had purposefully filed false or misleading statements “in order to deceive the auditor and create a wrong perception of the existence of such cash balances.”

For the time being at least, Wirecard remains a constituent member of the DAX 30, Germany’s most prestigious blue-chip stock index. The company filed for insolvency Thursday.

See also: Crypto.com Rolls Out Visa Card to 31 European Nations

Related: Crypto.com’s Card Issuer Wirecard Files for Insolvency

The capitulation of Wirecard has thrown many client businesses up in the air. For example, crypto payment card providers Crypto.com and TenX have used cards provided by a subsidiary, the U.K.-based Wirecard Card Solutions.

Crypto.com told CoinDesk on Friday it was moving to a new provider just hours after the Financial Conduct Authority (FCA) ordered Wirecard Card Solution to cease operations with immediate effect.

TenX told customers they would no longer be able to use their cards. “The TenX team is working to re-enable the affected services as soon as we can,” the company said in a statement.

• Kleiman Bitcoin Case Heads to Trial as Motion for Sanctions Against Craig Wright Is Denied
• Bitcoin News Roundup for June 19, 2020

Since the end of 2017, the conventional thinking was that well-heeled financial institutions would take the reins from retail investors, becoming the driving force and primary investor class in crypto.

But a report out last week from derivatives exchange ZUBR argues retail investors are not just here to stay, they could end up absorbing more than half of bitcoin’s daily fresh supply in as little as four years.  

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Related: Bitcoin Closes in the Green Sunday to End Longest Daily Losing Run in 6 Months

“By the time the next reward [halving] era comes around in 2024, retail could potentially account for eating up over 50% of the physical supply,” the report predicts. 

Using data from analytics firm Chainalysis, ZUBR found the number of wallet accounts holding small whole balances, anywhere between 1 to 10 bitcoins – sizes that suggest retail rather than institutional – had risen rapidly.  

Since bitcoin hit its all-time high at the end of 2017, the number of “retail” wallet holders more than doubled, reaching 215,000 by the start of June 2020. 

In total, these entities hold over 500,000 bitcoin (~$4.6 billion), up over 100,000 since the start of 2019.

Related: Crypto Long & Short: What Trends in Volatility Could Mean for Bitcoin

​​​​​​On average, 144 bitcoin blocks are mined every day. After the next halving in 2024, about 450 bitcoin will enter circulation each day. Assuming demand continues at its present trajectory over the next four years, ZUBR estimates the amount of new bitcoins demanded daily by retail investors could be at around 250 – well over half the daily supply four years from now. 

And that’s only wallet addresses with whole numbers. Adding in wallets with fractional balances and daily demand could be even higher. ZUBR also excluded crypto held in exchange accounts from its study. 

​​​​​​At the start of the year, approximately 1,800 new bitcoins entered into circulation each day. Since the block reward fell from 12.5 to 6.25 in mid-May, the daily bitcoin supply has dropped to just 900.

Assuming the same level of mining activity, daily supply will likely fall down to just 225 bitcoin by the end of the decade.

These supply pressures make a highly bullish case for bitcoin, said Jason Deane, analyst at Quantum Economics.

“Bitcoin has a perfect supply curve, total (maximum) supply is always known, and it can only be lower due to lost coins,” he told CoinDesk. 

Although bitcoin’s total supply stands at around 21 million, the estimated number of coins believed to have been lost or otherwise irrecoverable ranges between 1.5 million, according to CoinMetrics, or even as high as 4 million, according to Unchained Capital. That puts even greater pressure on supply.

But the real variable is demand. Should this continue to increase, there will come a point when it will outpace supply, causing bitcoin’s price to rise. 

A rising price might help burnish bitcoin’s credentials as a store of value asset; possibly creating a virtuous circle where price increases help bolster the store of value narrative which, in turn, leads to further price increases. 

Indeed, going back to ZUBR’s research, this virtuous circle may already be present. 

Since the start of 2020, balances for retail-sized entities have grown continuously month on month. Despite unprecedented market volatility – bitcoin’s price fell nearly 40% in March – there has not yet been a month so far this year where the total amount of bitcoin held in retail-sized wallets has decreased. 

Zooming out, there hasn’t been a month of net decline since April 2019. Going out even further, there have only been five months since the mining of the “genesis block”, more than 11 years ago, where the monthly amount of retail balances of bitcoin have decreased, rather than grown.

This natural “hodling” mentality might suggest that retail investors, as an investor class, see bitcoin as a natural store of value, rather than a medium of exchange, and are, therefore, hoarding as much as they can, anticipating further price increases. 

Indeed, events such as “Black Thursday” on March 12, which temporarily took the bitcoin price down below $5,000, might have been seen more as a unique buying opportunity, rather than an existential threat to the cryptocurrency.

In fact, some institutions and brokerages told CoinDesk at the time they were offloading as much of their bitcoin as possible onto retail investors, some buying for the first time, who were buying up to two to three times as much as they were normally.

According to Deane, this should come as no surprise. If you assume that demand is going to continue rising, just as daily supply continues to fall, it’s reasonable that retail investors may be buying in anticipation of further price hikes. 

The market may soon be at the point where instead of dealing in bitcoins, many small-time traders will instead be buying in “satoshis,” bitcoin’s smallest divisible unit at approximately 0.00000001 BTC (currently around 0.009 of a cent). 

“Obtaining a whole bitcoin will be very difficult in the future and most people will only deal in satoshi, which will almost certainly become the norm, especially for individuals,” Deane said. 

BTC: Price: $9,106 (BPI) | 24-Hr High: $9,190 | 24-Hr Low: $9,025

Trend: Bitcoin’s price bounce from lows below $8,850 seen over the weekend has run out of steam, and the cryptocurrency looks vulnerable to deeper declines. 

At press time, bitcoin is trading near $9,100, having faced rejection around $9,200 during Sunday’s U.S. trading hours. 

On the hourly chart, a bearish trendline connecting the June 22 and June 24 highs is still intact. Meanwhile, the relative strength index (RSI) has fallen back into bearish territory below 50. The MACD, too, has crossed into the negative territory. 

The same indicators are also reporting bearish conditions on the daily and three-day charts.

In addition, the weekly chart shows signs of uptrend exhaustion: Bitcoin has been above a trendline connecting the June 2019 and February 2020 highs (yellow line) for six weeks. Even so, buyers are failing to step in.

As a result, a retest of the weekend low of $8,830 cannot be ruled out. A violation there would expose deeper support levels lined up at $8,630 (May 24 low) and $8,638 (50-week moving average). 

On the higher side, immediate resistance is seen at $9,172, the hourly chart’s bearish trendline. Above that, the focus would shift to $9,344 (a lower high on the hourly chart). The overall bias would turn bullish only after a move above $10,000.

• Market Wrap: Bitcoin Still Stuck in a Rut, Trading Below $10K
• Blockstream’s Liquid Network Sent $8M in BTC Unsafely, Says Bitcoin Developer

Bitcoin chalked out minor price gains on Sunday, ending its longest run of daily losses for half a year.

The leading cryptocurrency by market value jumped 1.2%, having suffered losses in each of the preceding five days, according to CoinDesk’s Bitcoin Price Index. Prices last took a beating for five consecutive days in early December 2019. 

Both five-day drops saw prices decline by around $900 over those periods.

Related: First Mover: The Return of the Bitcoin Retail Investor (and Why That’s a Good Thing)

Sunday’s rise has kept the multi-week-long trading range of $9,000 to $10,000 intact after prices briefly dropped below $8,850 on Saturday. Had the cryptocurrency established a secure foothold below $9,000, the resulting range breakdown could have invited stronger chart-driven selling and further losses. 

However, the cryptocurrency still ended the week (June 22–28) on a negative note. Prices dropped nearly 1.8% despite news that fintech giant PayPal is said to be planning to roll out direct cryptocurrency sales on its platform, as well as its sister money-sharing app Venmo. 

Also read: PayPal, Venmo to Roll Out Crypto Buying and Selling: Sources

The bitcoin market initially responded positively to the news, reported by CoinDesk on June 22, but failed to keep the bullish momentum going.

Related: Crypto Long & Short: What Trends in Volatility Could Mean for Bitcoin

“After the news broke, bitcoin hit a very respectable $9,699, dropping off towards the end of the week as markets got spooked about the spike in coronavirus cases in some parts of the world,” Simon Peters, market analyst at multi-asset brokerage eToro.

Also, some analysts are skeptical PayPal’s plan, if confirmed, would prompt a big rally. “The tech giant’s plan may bring a $1.15 billion boost to bitcoin’s market cap. That figure alone is impressive, but considering bitcoin’s market cap is already $168 billion, the $1.15 billion, maximum, potential increase would only result in only ~$9,300 per coin,” said Messari research analyst Ryan Watkins, according to Forbes. 

The cryptocurrency needs to beat resistance at $10,040 to confirm a major bullish breakout. 

Bitcoin is stuck in a 2.5-year-long descending triangle breakdown on the weekly chart. A move above $10,040, which is the upper end of the triangle, would open the doors to a re-test of the high of $13,880 reached in June 2019. 

On the downside, $8,800 could offer stiff support in the short term. Currently there are 1.27 million addresses holding 837,730 bitcoin that were purchased in the range of $8,805 to $9,076, according to IntoTheBlock’s In/Out of the Money Around Price Addresses indicator. 

“This is expected to act as support as holders in this range will attempt to remain profitable on their positions and push prices above this level,” the blockchain analysis firm IntoTheBlock noted in a weekly analysis. 

Disclosure: The author holds no cryptocurrency assets at the time of writing.

• Market Wrap: Bitcoin Still Stuck in a Rut, Trading Below $10K
• Blockstream’s Liquid Network Sent $8M in BTC Unsafely, Says Bitcoin Developer