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The latest face-saving communique from Seychelles-domiciled crypto exchange KuCoin – hacked almost two months ago for over $280 million – is that 84% of the affected assets have been recovered. Some victims will be glad the situation seems to be moving towards resolution. Others, not so much.

Leaving aside the conspiracy theories, death threats and alleged lack of communication on the part of the exchange, the KuCoin debacle raises troubling issues around blockchain decentralization and how token projects often rely on fallible intermediaries.

Following the hack, many projects whose tokens were stolen from the exchange were urged to react quickly and change their smart contracts – effectively replacing stolen tokens with new versions, known as a token swap. (A list of projects that speedily updated their tokens following the Sept. 26 hack can be found here.)

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

The majority of ERC-20 projects affected by the KuCoin hack (around 60%) have bowed to pressure and upgraded their tokens. While it goes against the principles of those projects to essentially cover KuCoin’s back by updating their smart contracts or replacing their tokens, they chose the easiest solution available to them. But in some cases, it’s not a straightforward process and would lead to a very messy fix.

Read more: KuCoin CEO Says Suspects in $281M Hack Identified; Authorities on the Case

“We consciously built our smart contract in a way that’s truly decentralized and we, as a team, can’t just halt transactions, blacklist, whitelist people and so on,” said Paul Claudius, co-founder of DIA, a crowd-driven Wikipedia for financial data and information. “As a team, we obviously trust ourselves, but we don’t think the world should have to trust us. And that’s the reason we build our smart contracts that way.”

KuCoin calls all remediating efforts “token swaps,” said Claudius, but the exchange is confusing two different things. 

Related: Audius Has Big Numbers by Crypto Standards but Can It Take On SoundCloud?

In some cases, it’s possible to upgrade the contract, reissue the token and create a blockchain state similar to that prior to the hack. That’s very different from a situation where reissuing the token would create two tokens.

“Then it’s like a fork,” said Claudius. “Which is the real token at the end? People would be trading the old token, not knowing this. It’s just not an option.”

In the case of DIA, some 3 million tokens were taken by the hacker, at a value of around $4 million; while this amount was not “life-threatening,” the team members had to watch powerless as the hacker sold their tokens. 

“I can see why projects who had, say, 50% of their tokens affected by the hack, would choose the option to basically just pull the plug,” Claudius said. “Their backs were against the wall.”

Read more: Decentralized Governance in the Wild – Lessons From the KuCoin Hack

The DMM Foundation, the organization behind Decentralized Money Market, said KuCoin’s strategy has been to switch the onus onto the decentralized governance communities behind these projects, pressuring them to swap tokens, effectively crediting KuCoin’s balance.

“This leaves the community in an uproar, asking why we are not upgrading our token, when in fact it shouldn’t be our responsibility; it’s actually KuCoin’s problem,” a member of DMM, who wanted to remain nameless, told CoinDesk, adding:

“We are a DeFi protocol. We can’t do that so easily without completely disrupting our user base and potentially exposing areas of weakness for our community.” 

Token quandary 

It’s one of the paradoxes at the heart of crypto, that decentralized projects list on centralized exchanges and must rely on centralized custody as a potential point of failure. 

Of course, that’s why decentralized exchanges (DEXs) are becoming increasingly popular as technological advances bring speed (and, in turn, attract liquidity for prominent tokens). For some smaller projects, though, listing on KuCoin is a big deal. Perhaps it is their only trading venue with significant liquidity. So what are they going to do?

Read more: Ocean Protocol Forks to Retrieve Tokens Stolen From KuCoin Exchange

There are a number of projects that are holding out from doing a token swap, and KuCoin’s strategy seems to be to wait until they all eventually fold. During this waiting game, the exchange has employed some egregious tactics, said Jag Singh, CEO of Vid, a project that delisted from KuCoin before the hack took place. 

“We delisted from KuCoin because we noticed a lot of suspicious stuff going on with our token price – pumps and dumps – that we concluded could only be [caused by] the exchange itself,” said Singh. “This [delisting] meant they had less leverage over us.”

Like many others affected by the hack, Singh claims KuCoin is selling phantom tokens. If the entire balance of a token was stolen by the hacker and that project has not done a token swap, KuCoin is “trading on thin air,” Singh said. He claims this is a deliberate tactic to induce token swaps and reduce the amount the exchange has to reimburse.

CoinDesk asked KuCoin for comment, to which the exchange asked for questions to be emailed. There has been no response to the questions but a KuCoin representative did share some comments from KuCoin CEO Johnny Lyu comparing the hack to events like the Ethereum DAO compromise of 2016.

“Actually, in the history of crypto, token swap or hard fork situations emerged several times among Bitcoin and Ethereum communities at critical timings,” Lyu said in a live-streamed update on Sept. 30. “With that, communities survived from serious crises, and everyone felt thankful to those teams that made contributions.”

The irony and hypocrisy of such comparisons is stunning, said Richard Sanders, founder of blockchain analytics company CipherBlade.

“The important thing is that we’re dealing with decentralized tech,” said Sanders. “So setting a precedent every single time an exchange is hacked or somebody is negligent for some centralized action goes against the very foundation of what this technology is supposed to be about. Everything KuCoin is doing really boils down to them trying to save face.”

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The founders of digital payments processor Payza will serve year-plus prison terms and forfeit $4.5 million in seized assets for breaking federal money transmission laws, the U.S. Department of Justice said.

Brothers Firoz and Ferhan Patel, both Canadian, had pleaded guilty in July to a lineup of financial crimes stemming from Payza, their international payments startup. Prosecutors said the unlicensed firm processed more than $250 million, including funds known to be associated with crime, an allegation to which the brothers ultimately admitted.

On Tuesday, Firoz received a 36-month sentence and Ferhan an 18-month sentence from U.S. District Court in Washington, D.C. Their company Payza (aka MH Pillars) will be in corporate probation for the next three years.

Related: US Charges 6 With Laundering Mexican Drug Cartel Cash Using Crypto and Casinos

Read more: US Hits Crypto Buying Service Payza With Money Laundering Lawsuit

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Crypto lender Cred’s bankruptcy is more than it appears. Two publicly traded bitcoin mining firms reported this week: Neither are profitable. ECB President Christine Lagarde has a “hunch” about the digital euro. 

Top shelf

Chapter…12?
Cred’s Chapter 11 bankruptcy filing doesn’t tell the whole story. With $67.8 million in assets and $136 million in liabilities, the crypto lender called it quits last weekend, leaving hundreds of depositors worrying about their collected $100 million loaned to the company. Cred has officially blamed malfeasance on the part of an outside investor entrusted with 800 BTC, although corporate insiders also say a $39 million line of credit to a Chinese lender went south. “There’s a lot else going on,” Daniyal Inamullah, former head of capital markets at Cred, said. CoinDesk’s Nathan DiCamillo investigates.

Bleeding BTC?
Two publicly traded bitcoin mining companies are nearing profitability. Marathon and Hut 8, prominent within the sector, both narrowed quarterly losses, according to quarterly financial statements. Marathon bumped revenues to $835,184 in Q3, a 160% increase from the same period last year, while also recording a net loss of nearly $2 million. The company’s loss per share, however, dropped from 12 cents to 6 cents a share year over year. Meanwhile, Hut 8 saw C$5.3 million (about US$4 million) in Q3 mining revenue, down 43% from the previous quarter, but also managed to trim its losses of C$0.07 a share in Q3 2019 to C$0.01 this quarter.

Related: Money Reimagined: The US’ Kodak Moment

CBDC ‘hunch’
European Central Bank President Christine Lagarde has a “hunch” there will be a digital euro in two to four years. At a virtual panel yesterday, Lagarde said an European Union-wide central bank digital currency should be explored, “If it is going to facilitate cross-border payments.” The ECB previously said it is researching a CBDC. The latest statements are another indicator of what to expect and when: “A digital euro will not be a substitute for cash,” Lagarde said. “It will be a complement.” Separately, Benoit Coeure, head of the Innovation Hub at the Bank for International Settlements (BIS), said any potential CBDC for the supranational bank could involve blockchain. “Everything is possible,” he said.

Audited and attacked
Decentralized finance (DeFi) platform Akropolis suffered a $2 million loss following a sophisticated “flash loan” attack. According to the platform’s founder Ana Andrianova, the attacker pulled out tranches of $50,000 in DAI from the project’s yCurve and sUSD pools, leveraging derivatives platform dYdX. While much is said about the audit trails of novel DeFi protocols, especially after hacks, Akropolis’ code was in fact audited twice: once by CertiK and also by firms SmartDec and Pessimistic.

Exchange flows
Bitcoin flows to Binance from Huobi have reached an all-time high. According to data provided by CryptoQuant, some 18,652 bitcoins, worth nearly $300 million, were transferred from Huobi to Binance from Nov. 2 to Nov. 11. The bustling trade spiked ever since the Huobi chief operating officer, Robin Zhu, went missing at the beginning of the month. For months, Chinese regulators have been clamping down on crypto trading platforms, as part of a broader sweep of the fintech industry.

Quick bites

• Ant Group’s suspended IPO was the work of slighted CCP officials – but it also links back to China’s digital yuan experiments. (CoinDesk)
• Uniswap farming ends in four days, potentially freeing up $1.1 billion in ETH (Cointelegraph)
• Sythentix now has a Brent Crude oil future trading pool. (CoinDesk)
• “Severe” bug found in core library for Ethereum and Ethereum Classic has been fixed. (Decrypt)

At stake

Dignity and bitcoin
“The systems don’t always work,” Robby Gutmann, co-founder of Stone Ridge Holdings Group, told NLW in his first podcast interview since the company made waves by investing heavily in bitcoin. That’s why the $10 billion alternative asset manager has placed its “primary treasury reserve” in bitcoin.

Related: First Mover: Why the Fed Cares About Remote Working – And What It Means for Bitcoin

In short, bitcoin is an exit from an inflating monetary base that has failed to serve the public. Last month, Stone announced it would stash more than 10,000 BTC with its crypto subsidiary NYDIG. This follows other corporate firms like MicroStrategy and Square moving some of their cash treasuries into bitcoin, also citing monetary debasement.

“The expansion of the money supply in the U.S. hasn’t shown up in growth of CPI in a measurable way, but in other measurements of inflation,” Gutmann said. Notably, Gutmann considers the prospect of living a “dignified” retirement as an ideal marker for inflation.

“The idea of financial security is much broader in bitcoin,” he said, when claiming that only a “single-digit number” of fiat monetary systems are functional or scale. “Can I save my day’s labor in something I can spend tomorrow next week,” isn’t a question most U.S. workers are confronted with, but it may be a legitimate concern elsewhere.

That’s why a bitcoin-based world economy could better serve nations that weren’t part of the industrializing processes of the 19th and 20th centuries.

Gutmann further explained NYDIG’s thesis is in fostering the “long-term development of an open source monetary system.” This includes opening some of its in-house bitcoin infrastructure up to other companies – “we won’t be the last people that have this challenge” – and applying for New York State’s “BitLicense ” and a limited trust charter.

“To the extent we can move the bitcoin project forward, it feels like we can do something measurable in society today around this idea of financial security for people outside the first world,” he said.

The full, hour-long interview can be found here.

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Ethereum developers are weighing changes to publicly disclosing critical bugs following the Nov. 11 “accidental hard fork.” 

According to a technical write-up published by Geth – the largest Ethereum client written in the Go language – a denial-of-service (DoS) attack vector was intentionally triggered by a downstream user as a test, resulting in a 30-block sidechain.

Geth had fixed the bug in early October following a disclosure, but it still existed in prior versions of Geth. The bug temporarily caused 80% of the network that runs on Geth to go down a different path than other clients.

Related: First Mover: Bitcoin Breaches $16K as (Committed) Holders Diss Dalio’s Diss

Now, developers are reordering the disclosure process for security vulnerabilities in the aftermath of what some developers have called the biggest threat against Ethereum since 2016’s attack on The DAO. 

Read more: ‘Unannounced Hard Fork’ Was Trying to Prevent the Very Disruption It Caused

That question comes with baggage. A common ethos in open-source software (OSS) such as Ethereum is that vendors are tasked “to notify those affected by vulnerabilities in a timely manner,” Summa founder James Prestwich told CoinDesk in a message. In other words, Geth has a responsibility to give dependent users a heads-up on possible complications.

‘Disclosure is a complex topic’

Yet, blockchains, at their very core, are financial settlement mechanisms. The traditional methods of disclosing bugs in OSS can lead to undesirable outcomes for other players with money on the line.

Related: Israeli Firm Unveils Tech Allowing Users to ‘Undo’ Erroneous Ether Transactions

In Friday’s All Core Developers’ call, Ethereum developer Micah Zoltu and Geth team leader Peter Szilágyi both disagreed with the issuance of a notification list for critical vulnerabilities. Zoltu claimed such a list would create an uneven playing field for projects, while Szilágyi said that every bug disclosure creates a weak point in Ethereum’s infrastructure. 

For example, disclosing the bug early to service provider Infura – which most of decentralized finance (DeFi) uses to connect to the Ethereum blockchain – would be an unfair advantage against its competitors. Moreover, the consequences for the larger ecosystem could be severe if privileged information from the list leaked to adversarial parties.

Given the option again, Szilágyi said he would go about the recent disclosure in the same manner – meaning, keeping the consensus bug under wraps (although he said at one point during the call they should have let users know a past version of Geth held a vulnerability). Geth has done so for other consensus vulnerabilities, he said.

“Disclosure is a complex topic and user safety is paramount,” Prestwich concluded.

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Galaxy Digital, the crypto merchant bank headed by noted crypto evangelist Mike Novogratz, reported net income of $44.3 million in the third quarter of 2020, up from a loss of $68.2 million in the year-ago period.

• Galaxy Digital’s total assets eclipsed $536 million, nearly $225 million of which was in cryptocurrencies.
• Volume at subsidiary Galaxy Digital Trading (GDT) was up 75% year over year to a record $1.4 billion.
• Galaxy attributed the soaring trading volume to momentum in bitcoin markets.
• GDT on Friday acquired crypto trading firms DrawBridge Lending and Blue Fire Capital for an undisclosed sum.
• GLXY was trading up 30 basis points around $5.37 CAD (US$4.08) on the Toronto Stock Exchange at press time.

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• Galaxy Digital

Stealth-mode crypto custody specialist Shard X has claimed a breakthrough, being the first company to successfully run math-heavy, multi-party computation (MPC) on hardware security modules (HSMs).

So why does this alphabet soup of security tech matter? 

In summary, HSMs are a battle-tested way to store private keys, particularly popular in consumer products like Ledger and Trezor. MPC, which breaks up cryptographic keys into shards and distributes them, is growing in popularity with custody tech providers like Fireblocks and Curv. But one challenge with MPC has been where to store key shards: The whole process was thought to be too computationally heavy to run on hardware.

Related: US Representatives Rip OCC, Brooks for ‘Excessive Focus’ on Crypto

Solving this problem is important because banks, which are gradually edging towards crypto custody, generally like and trust HSMs. So a combination of battle-tested, bank-grade HSMs, combined with cutting-edge MPC is probably the type of tech those institutions will be looking for, says Yaniv Neu-Ner, co-founder and CEO of Shard X. 

Read more: MPC Explained: The Bold New Vision for Securing Crypto Money

Shard X has successfully run MPC tests with Entrust, a provider of nShield HSMs to major custodians, said Neu-Ner, and is now working on running MPC with a number of firms offering HSMs, such as Utimaco.

“Our big breakthrough is that we’ve managed to compress and optimize the MPC code so that it can run on bank-grade HSMs, something people in this space never thought was possible,” said Neu-Ner. “Now, you can take an MPC key fragment and store it on an HSM to make sure you don’t get breached.”

Related: Crypto Custodian Anchorage Gets SOC 1 Security Certification With Big 4 Auditor EY

There are a lot of smart people working on MPC, so how did nobody else solve this problem? 

Neu-Ner said the credit goes to his team, which managed to combine equally strong math and engineering backgrounds, in particular his CTO Nikita Lesnikov.

“[Lesnikov] is just an exceptional mind,” said Neu-Ner. “He was the one who figured it out. I imagine now that we are announcing it, the competition will start working on the same challenge, and I think they will get there. But it’s a big breakthrough to be first.”

Read more: Coinbase Ventures Joins $23M Funding Round for Crypto Custody Firm

Shard X likes to take a back seat, licensing its software to custodians. In terms of how this breakthrough is being peer-reviewed, MPC code auditor Trail of Bits has been selected to continually audit the work. 

For Neu-Ner, a combination of the best of both worlds is an essential step in the evolution of crypto custody. 

“As this industry grows, there’s going to be more and more value at stake, and right now we are seeing exchanges getting hacked fairly regularly,” he said. “So I don’t think one technology will be enough. The future I see is that you combine multiple technologies to create the most secure custody solutions.”

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Bank of England Deputy Governor Jon Cunliffe said it was not his central bank’s responsibility to protect banks from whatever impacts digital currency projects may bring.

• “Our job is not to protect bank business models,” Cunliffe said, according to Reuters.
• Politicians must fast-track their analysis of central bank digital currencies to stay ahead of the private sector, he said.
• The Bank of England is one of the many central banks currently studying digital currencies.

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Libra was the final wake-up call for central banks that prompted serious consideration of digital currency issuances, according to Benoit Coeure, head of the Innovation Hub at the Bank for International Settlements (BIS).

In an interview with French newspaper L’Express published on the BIS website Friday, Coeure acknowledged central banks had been resting on their laurels when it came to advances in payments. Thirty years ago, he said, “the banking world was innovative.”

But increasing digitization and the advent of tech such as PayPal, Apple Pay and smartphones payments brought a “revolution” to the sector. Even so, he continued, these advances were restricted to the user interface and didn’t offer a fundamental disruption to payment channels.

Related: US Company Now Lets Travelers Pay for Passports With Bitcoin

According to Coeure, the “real trigger” for the move toward central bank digital currencies (CBDCs) was the unveiling of the Facebook-initiated Libra project, which offered more than just an advance in the user interface.

“[Libra] is a global, closed and self-sufficient project since there is at the same time a means of payment, a storage mechanism with a wallet and a global network which makes it possible to ensure transfers from one place to another without going through the central bank settlement systems,” he said.

Acknowledging the project offers benefits to users, Coeure also cautioned that “the emergence of closed payment channels dominated by tech giants poses risks for both competition and data protection.”

Even so, as the public increasingly moves away from cash and online transactions soar (“especially with the COVID” pandemic), “we can see the figures, it is impressive.”

Related: Ripple Files Trademark for Possible New Payments Service

“Central banks must rethink their software and review their role in this new environment,” he said.

Citing a recent report published by the BIS along with seven central banks, Coeure said, “We must move forward on digital currencies, which are part of the solution” although individual nations should proceed at “their own pace.”

Also read: ECB’s Lagarde Has ‘Hunch’ Digital Euro Will Launch in 2-4 Years

As to whether such a launch would be on a blockchain, the technology is “not mandatory,” he said, raising the prospect of hybrid solutions in which “relations” between central banks and the commercial banks would use a blockchain but a digital currency would be available to the public “through more traditional channels.” 

“Everything is possible,” he said.

In a recent op-ed for CoinDesk, Coeure revealed the BIS Innovation Hub would launch its first wholesale CBDC proof-of-concept in collaboration with the Swiss National Bank. “This will pave the way for experiments on the building blocks of a retail CBDC, which might include interlinkages with existing payment systems, application programming interfaces for distribution, digital identity rails,” and more, he said.

In his interview with L’Express, Coeure said one day a CBDC will be “the safest currency there is, issued by a public institution,” but there will be other options, too. “If you want to pay in bitcoin, why not? If you and the trader understand and assume the risks associated with this active crypto.”

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Bitcoin was lower after surging nearly $600 on Thursday to climb above $16,000 for the first time in almost three years.  

“Investors should plan for volatility as well as price appreciation,” the blockchain analysis firm Chainalysis wrote in a newsletter. 

In traditional markets, European shares fluctuated and U.S. stock futures pointed toward a higher open as investors weighed prospects for a new stimulus package against record coronavirus cases. Gold strengthened 0.1% to $1,879 an ounce. 

Market moves

Related: Market Wrap: Bitcoin Hits $16.2K; Uniswap Crosses $3B Locked

Federal Reserve Chair Jerome Powell has been sticking with his talking points lately. It goes something like this:

• What the economy needs right now is for U.S. lawmakers to pass a fiscal stimulus package because ostensibly that money can go directly to people and businesses that need it most. (Instead of having to pump it into financial markets where it has to filter through the banking system and money markets before it can get to pocketbooks.) 
• The path of the economy depends on the path of the coronavirus pandemic. (Investors seem to agree, based on yesterday’s action in the U.S stock market.) 
• This year’s economic contraction was not due to excessive risk but simply the pandemic and related effects, such as shutdowns. (Even though analysts had been warning for years about ballooning federal budget deficits and a rapid and dangerous buildup in corporate debt.)  
• The banks are stronger than they were in the 2008 financial crisis. (This ignores the question of whether they would still be strong if the Fed hadn’t pumped $3 trillion into the financial system this year, a roughly 75% increase in the total amount of money created since the early 20th century, while the U.S. government plied businesses and households with another $2 trillion of emergency aid. Plus the fact that Fed officials have promised to do whatever it takes to keep markets functioning and the economy recovering, encouraging households and businesses to flood banks with deposits despite historically low interest rates.) 
• U.S. authorities shouldn’t hasten to rush out a digital dollar, because it’s important to go slowly and carefully to preserve the greenback’s status as the global reserve currency. (Even though China’s central bank is already in trials with a digital currency and European Central Bank President Christine Lagarde says she might be eager to get the process started because it will take two to four years until launch.) 

They’re all key themes cryptocurrency traders are following because a growing number of investors say extensive money printing could bolster bitcoin’s use as a hedge against inflation.  

But what was perhaps more interesting and new among Powell’s comments at a virtual forum Thursday hosted by the ECB was his acknowledgement that life as we know it – and by extension the economy – is probably never going back to anything like it once was. 

“You’ll see more telework,” Powell said at the virtual forum. “We’re not going back to the same economy. We’re recovering to a different economy.” 

Related: ECB’s Lagarde Has ‘Hunch’ Digital Euro Will Launch in 2-4 Years

It was more than just a talking point. It might have offered a glimpse into a key issue that Powell hasn’t said much about. The coronavirus will have a lasting and scarring impact on the economy, but remote working might be another massive factor to consider for monetary policy. 

The economy is in upheaval, and not just because people aren’t eating out or going to movies or traveling for leisure, or because so many businesses and households would be ailing right now without all the emergency aid. 

A secular transition to commuting-by-Internet might be taking place, perhaps one of the biggest labor force transformations since the industrial revolution, which lured people to cities.

If workers genuinely enjoy the remote setup, and many do, and employers are genuinely seeing just how productive their employees can be working remotely, and it costs a lot of time and money to commute, and it’s easier on many working parents to set up base at home, why would there ever be a return to the old office-based civilization? 

What would this mean for the airlines? Commercial real estate? Oil companies? Automakers? Theme parks? Cities?

Governments and central banks are probably going to have to provide a lot of aid and stimulus to assure the transition goes smoothly, that society holds together, that people can manage. And that widespread debt defaults don’t overwhelm the banking system. Even many people who think bankers take advantage of their enshrined role in the economy will acknowledge that banks play an essential role in the existing financial infrastructure. 

Dave Hendler, principal and founder at the bank analysis firm Viola Risk Advisors, says one implication is that the hand of governments and central banks could be heavy in the economy for a long time. 

He said in a phone interview he recently trekked from the New York suburbs into Manhattan for the first time since February for a wine-tasting event. While he was in town he visited his old barber. The barber, who has “one kid and another on the way,” told Hendler he’s down to one customer a day from a pre-pandemic level of about 20 a day. 

Imagine if many of the office workers never really come back. It’s an extreme but entirely plausible scenario.   

“It’s going to be a longer readjustment, and it’s going to be more harsh,” Hendler says. “There’s going to have to be assistance for the transition to the new world.”

Central bankers like Powell are only just now getting around to thinking about this, much less talking about it. As soon as more investors start to focus on it, the remote-working economy will probably demand a lot more attention – and possibly a lot more money.  

– Bradley Keoun

Bitcoin watch

Bitcoin appears to be holding above $16,000, and cryptocurrency traders are pondering the next move. 

The big market debate now is if and when bitcoin returns to the record high price of around $20,000 reached in December 2017. 

George McDonaugh, managing director and co-founder of the publicly traded cryptocurrency investment firm KR1, wrote Friday in emailed comments that he doesn’t expect bitcoin holders to sell until prices reach a new record, “given the comparatively small delta between $16,000 and $20,000.” 

Bitcoin has been known to surprise in the past with pullbacks that punish overly bullish bets. Alternative.me’s Crypto Fear & Greed Index has pushed into the “extreme greed” zone, from a reading of “neutral” just last month. 

“I expect we don’t reach $20,000 in this current move,” though it’s likely to happen in 2021, McDonough wrote. 

As noted last week by First Mover, bitcoin has spent so little time above $16,000 in its 11-year history that analysts eyeing price-chart patterns for clues have little to work with.   

Matt Blom, head of sales and trading for the digital-asset financial firm Diginex, wrote Thursday that the next key level of price resistance looks to be at $17,130, with downside support at $15,420.  

“New multi-year highs are fast becoming a dull headline,” Blom wrote. “The bias to the market is still firmly bullish.”

Bitcoin is now up an astounding 127% in 2020, versus 9.5% for the Standard & Poor’s 500 Index of large U.S. stocks and 24% for gold. 

What’s hot

Blockchain data show $300B of bitcoin moving to Binance from Huobi as the Chinese government cracks down on cryptocurrency exchanges (CoinDesk)  

PayPal removes waitlist for new crypto service, boosts weekly purchase limit to $20K (CoinDesk) 

Ant’s $35B IPO has roots in goals for digital yuan (CoinDesk) 

Uniswap farming ends in 4 days, potentially freeing up $1.1B in ether (Cointelegraph) 

ECB’s Lagarde has ‘hunch’ digital euro will launch in 2-4 years (CoinDesk) 

Hut 8 Mining Revenue Drops 43% in Q3 mining revenue from Q4 level (CoinDesk) 

Brent crude-oil futures now tradable on DeFi exchange Synthetix (CoinDesk) 

Chainalysis wants to help governmental clients sell millions of dollars in forfeited bitcoin (CoinDesk)  

Analogs The latest on the economy and traditional finance

Former Chinese finance minister Lou Jiwei said Friday that U.S.-China trade tensions may not necessarily ease under a Biden administration (Reuters)

Brazilian President Bolsonaro handing out $10B a month to poor as public debt heads toward 100% of GDP from 76% last year (WSJ) 

Writing off student debt is one way Biden can build Black wealth (Bloomberg) 

The deadline to divest U.S. operations  for video-sharing app TikTok has come and gone, leaving the social media giant in limbo (Nikkei Asian Review)

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Peninsula Visa, a firm providing passport and visa services in the U.S., says it now accepts payments in bitcoin.

• Peninsula said Wednesday that the payments will be processed through Coinbase Commerce, the merchant payments arm of the cryptocurrency exchange.
• Not all services are included; currently, customers can use bitcoin to fund passport renewals, name changes and second passports.
• Other passport and visa services will be included in the program over the next year, the firm said.
• “Never before has anyone been able to pay for a U.S. passport using a digital currency,” said Evan James, chief operating officer at Peninsula Visa.
• With the coronavirus pushing the world to be increasingly digital, bringing in the new payment options now “feels like the right move at the right time,” he added.

Also read: Coinbase’s Retail Payments Wing Crosses $200M in Transactions

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Ripple, the San Fransisco-based blockchain payments infrastructure provider, has registered a trademark for a possible new product called “PayString.”

• Filed with the U.S. Patent and Trademark Office (USPTO) late last week, the application is classified in the U.S. under the general categories “Advertising and Business” and “Insurance and Financial.”
• A logo for the branding takes the form of “a stylized circle design with four lines radiating from it” in multiple colors.

• It’s tempting, of course, to speculate as to what the new trademark will be used for, but there’s not a lot of information to go by.
• The filing describes use cases in “electronic financial services, namely, monetary services for receiving and disbursing remittances and monetary gifts in fiat currencies and virtual currencies over a computer network and for exchanging fiat currencies and virtual currencies over a computer network.
• All of which does fit in with Ripple’s existing business model of providing distributed ledger-based technology for payments between institutions such as banks and money senders, some of which use the XRP cryptocurrency.
• The USPTO filing for RippleNet, the firm’s primary offering, has the same description.
• CoinDesk reached out to Ripple for more information, but did not receive a reply by press time.

Also read: Ripple Opens Dubai HQ as Blockchain Firm Mulls Leaving US

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As the Chinese government cracks down on several crypto exchanges catering to traders based in China, many of those customers – and their bitcoin – have been making their way to Binance over the past few days.

Bitcoin flows to Binance from Huobi reached an all-time high since the Huobi chief operating officer, Robin Zhu, allegedly went missing on Nov. 2. According to data provided by CryptoQuant, a total number of 18,652 bitcoin, worth nearly $300 million, was transferred from Huobi to Binance from that day until Nov. 11.

“A lot of users went to Binance because Chinese users are more familiar with Binance and Binance’s executives are all overseas,” Colin Wu, a Chinese crypto reporter behind the Twitter account @WuBlockchain, told CoinDesk on a WeChat message.

Related: How Ant’s Suspended IPO Is Related to China’s Digital Yuan

A spokesperson from Binance declined to comment on any impact China’s crackdown could have on its business.

For months, Chinese regulators have been clamping down on many crypto trading platforms that cater mainly to Chinese clients. Some of these exchanges appear to have close, albeit informal, relationships with the Chinese government.

The whereabouts of Huobi’s Zhu remains unclear since rumors began circulating in early November that alleged he was arrested by “local officials.” Prices for Huobi Token (HT) dropped to as low as $3.744 on Nov. 3, down 11.3% from $4.22 on Nov. 1, according to Messari.

Over at rival exchange OKEx, with deep ties to China, all withdrawal services remain suspended after it said a holder of a private key needed to authorize withdrawals was out of touch while cooperating with public security investigators in China. OKEx’s native token OKB lost nearly 30% of its market value after the news broke. 

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

Other exchanges are also feeling the heat. On Nov. 9, the person running TokenBetter, another crypto exchange with mostly Chinese users, was reportedly “under investigation.” TokenBetter’s platform banned its withdrawal service on Oct. 16.

This is not the first attempt by the regulators in China to crack down on crypto exchanges. Bitcoin exchanges received orders to close their businesses in China after the country banned crypto trading activities in 2017. 

Huobi is now based in Seychelles, while OKEx is in Malta. It is unclear where Binance’s main business operations are located – Changpeng Zhao, Binance’s chief executive officer, told CoinDesk his company’s locations are “decentralized.”

Huobi did not answer CoinDesk’s question on where Zhu is currently, but in a WeChat message Ciara Sun, vice president of Huobi Global Markets, wrote that all operations at the company are “normal.” 

“Do not listen to rumors,” she continued. “Huobi reserves the right to pursue legal responsibilities for those who spread rumors.”

Many have associated OKEx’s lost contact with one of its key holders with the arrest of its co-founder Mingxing “Star” Xu. With Huobi’s executive allegedly being arrested, its users are afraid the same things will happen to the Seychelles-based exchange – even though Huobi has guaranteed its users many times it is maintaining normal operations.

China tightens its grip in FinTech

Multiple sources close to OKEx and Huobi told CoinDesk the new crackdown is associated with China’s efforts to fight money laundering and fraud, and it is unlikely to have any connection with China’s rollout of its central bank digital currency (CBDC), the digital yuan.

“[China] doesn’t want digital [renminbi] products to be disruptive to what’s already in the financial system,” Felix Wang, managing director and partner at financial investment research firm Hedgeye, told CoinDesk in an interview. “The government wants to encourage innovation and development. They only want to crack down on products that they think are misleading to the public.”

Crypto exchanges are not the only target of the Chinese regulators in recent months. Perhaps the most well known case was Ant Group’s initial public offering, which was suspended on both the Shanghai and Hong Kong stock exchanges after the company’s founder, Jack Ma, criticized China’s regulators in a speech on Oct. 24.

Is there an upside?

A possible, positive, long-term outcome of the crackdown for exchanges could be that it may encourage the regulators in China to eventually push some sort of a compliance process for crypto exchanges instead of banning them, according to Hao Wang, founder and chief executive officer of Hong Kong-based crypto brokerage CyberX.

“Most of these lost users from Huobi will eventually flow to the white-label exchanges because most traders [in Asia] do not currently have access to trading platforms with regulatory compliance,” Wang told CoinDesk in a WeChat message.

Nonetheless, as China increasingly tightens its grip on its fintech industry, others are also concerned that it will hurt the fintech industry as a whole – blockchain included – as such companies expand their business overseas.

“The sentiment is very bad for all countries outside of China looking to do business with China at this time,” Wang said.“People got worried when [China] introduced those micro financial regulations. They are thinking now this is going to be part of a little step of a bigger crackdown on fintech, finance-related payment and maybe blockchain.”

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Axelar, a decentralized protocol designed by the founding members of Algorand to allow cross-blockchain communication, has raised $3.75 million in seed funding.

Announced Thursday, the round saw participation from investors including Binance X, the investment arm and accelerator of cryptocurrency exchange Binance, as well as San Fransisco-based venture capital firm DCVC (Data Collective).

Other participants included crypto operator fund Divergence Ventures, serial entrepreneur Waikit Lau and AngelList founder Naval Ravikant.

Related: Market Wrap: Bitcoin Hits $16.2K; Uniswap Crosses $3B Locked

“This [seed funding] will be crucial to help us accelerate our roadmap and to scale cross-chain communication,” said Sergey Gorbunov, co-founder and CEO at Axelar. “Today, we are seeing more and more autonomous blockchain platforms emerge, with no unified approach for developers to communicate with the entire ecosystem.”

The protocol attempts to rectify this by acting as a communications bridge, connecting blockchain ecosystems that in effect speak different languages. In turn, this will save developers the hassle of rewriting their decentralized apps, or dapps, for each network by using Axelar’s universal protocol and API, according to the company.

The seed funding will go toward further developing the network’s technology, tools and API solutions, along with recruiting the engineers that will assist in the design of the underlying protocols, per the announcement.

See also: Algorand’s New Europe Accelerator to Boost Startups With Up to $500K in Funding

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Axelar, a decentralized protocol designed by the founding members of Algorand to allow cross-blockchain communication, has raised $3.75 million in seed funding.

Announced Thursday, the round saw participation from investors including Binance X, the investment arm and accelerator of cryptocurrency exchange Binance, as well as San Fransisco-based venture capital firm DCVC (Data Collective).

Other participants included crypto operator fund Divergence Ventures, serial entrepreneur Waikit Lau and AngelList founder Naval Ravikant.

Related: Market Wrap: Bitcoin Hits $16.2K; Uniswap Crosses $3B Locked

“This [seed funding] will be crucial to help us accelerate our roadmap and to scale cross-chain communication,” said Sergey Gorbunov, co-founder and CEO at Axelar. “Today, we are seeing more and more autonomous blockchain platforms emerge, with no unified approach for developers to communicate with the entire ecosystem.”

The protocol attempts to rectify this by acting as a communications bridge, connecting blockchain ecosystems that in effect speak different languages. In turn, this will save developers the hassle of rewriting their decentralized apps, or dapps, for each network by using Axelar’s universal protocol and API, according to the company.

The seed funding will go toward further developing the network’s technology, tools and API solutions, along with recruiting the engineers that will assist in the design of the underlying protocols, per the announcement.

See also: Algorand’s New Europe Accelerator to Boost Startups With Up to $500K in Funding

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Payments provider BitPay has launched a new service enabling businesses to pay employees, contractors, customers and vendors en-masse with cryptocurrency.

• Announced Friday, BitPay Send is a payout service with a focus on international and gig-economy companies looking to pay multiple recipients online simultaneously.
• “Blockchain payment adoption is growing because it offers an easy way to send and receive payments on a global scale,” said BitPay CEO Stephen Pair.
• With the new service, companies don’t need to buy, own or manage cryptocurrency, while the recipients receive payment more efficiently and at a reduced cost, Pair added.
• BitPay Send lets companies perform a variety of payment functions including payroll, customer cash-out requests, contractor payments, reward issuance and settlements with marketplace sellers.
• Recipients need to have a BitPay ID and cryptocurrency wallet in order to receive payment and companies are charged a 1% fee. There are no foreign exchange fees.
• With the launch, BitPay now provides a new alternative to crypto payroll services such as BitWage.
• BitPay launched in 2013 with a focus on enabling businesses to accept payment in bitcoin and has raised $72.5 million to date in investment, according to Crunchbase.

See also: After Years of Resistance, BitPay Adopts SegWit for Cheaper Bitcoin Transactions

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David Silver, a securities fraud and investment loss attorney known for pursuing lawsuits against cryptocurrency exchanges in the United States, has joined Coinfirm, the blockchain analytics and anti-money laundering platform company. 

The London-based Coinfirm announced Silver’s appointment to its board of directors in the U.S. on Thursday, saying the co-founder of the Silver Miller law firm will help defrauded investors recover their wrongfully taken cryptocurrencies. 

• According to the announcement, Silver’s interaction with crypto litigation started in 2014 when his law firm filed a lawsuit against cryptocurrency exchange Project Investors, Inc. d/b/a Cryptsy. He has since been involved in numerous litigations and arbitrations with platforms including Coinbase, Kraken and Xapo among others. 
• In a 2018 op-ed for CoinDesk, Silver said he enjoys filing lawsuits against exchanges because of his love for digital assets such as bitcoin.
• “I’ve been crazy about [crypto] for longer than you’ve known [about it]. And I’ll keep poking [it] with a stick. That’s how I show my love,” said Silver in the op-ed, paraphrasing a quote from the fictional character Amy Gardner on the TV show “The West Wing.” 

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Bitcoin was gaining amid positive institutional and retail adoption signs as the amount of crypto locked in Uniswap signals DeFi continues to be more just than a fad.

• Bitcoin (BTC) trading around $16,154 as of 21:00 UTC (4 p.m. ET). Gaining 2.9% over the previous 24 hours.
• Bitcoin’s 24-hour range: $15,454-$16,186
• BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin was trending upward Thursday, continuing a direction that started Wednesday. The price per 1 BTC was able to hit as high as $16,186, according to CoinDesk 20 data. However, Guy Hirsch, managing director for U.S. at multi-asset brokerage eToro, cautions choppy waters might be ahead. 

“Bitcoin’s struggle to consolidate above the $16,000 price level can likely be attributed to a number of factors including profit taking and capital rotation into some of the small-cap digital assets that have been recently surging,” Hirsch said. “If bitcoin can establish a base in the low-$16,000 range, there isn’t much resistance on the path to $17,000 and beyond.”

Related: ECB’s Lagarde Has ‘Hunch’ Digital Euro Will Launch in 2-4 Years

Jason Lau, chief operating officer of San Francisco-based cryptocurrency exchange OKCoin, echoed the sentiment. 

“Bitcoin cleared $16,000 for the first time in three years, confirming the existing bullish uptrend,” Lau said. “With minimal resistance until $20,000, it’s hard to tell how the next few weeks will trade into year end, but signs are positive.”

Read More: PayPal Removes Waitlist, Boosts Weekly Crypto Purchase Limit to $20K

Powerfully positive fundamentals in both institutional and retail adoption has Lau bullish. 

Related: Bitcoin’s Options Market Shows Strongest Bullish Mood on Record

“Strong institutional interest – BTC futures open interest is at all-time highs – and incoming retail flow – PayPal opened up crypto buys to all U.S. users today – is providing continued fuel for this rally,” Lau told CoinDesk.

Bitcoin futures open interest crossed $8 billion on major venues Wednesday, the highest data aggregator Skew has on record. 

“Aggregate bitcoin futures open interest continues to rise and, more importantly, it is not just the unregulated venues that are seeing this growth but also [open interest] on the CME is within touching distance of the $1 billion mark,” noted Denis Vinokourov, head of research at crypto brokerage Bequant. Total CME open interest for Wednesday was $912 million, according to Skew. 

Read More: 98% of Bitcoin’s ‘Unspent Outputs’ Are Worth More Than When Made

Spot bitcoin volume has also been strong Thursday. It was close to $1 billion as of press time, much higher than the past month’s $378 million average daily volume. 

Another trend to watch: How decentralized exchanges (DEXs) and decentralized finance (DeFi) impact the bitcoin market during this price surge. “The bulls are in charge of this trend and, as the old saying goes, do not fight the trend,” said Bequant’s Vinokourov. “With top DEX/DeFi venues such as Uniswap and Sushi trading cheap on price/sales ratio, it would not be surprising for them to lead to another wave of capital inflow into small- and mid-cap assets.” A price/sales ratio is common in valuing stocks, and a low ratio generally indicates a good buy.

“Large-cap assets (such as bitcoin) may be leading the charge now, but that will not stop the hunt for yield trade,” Vinokourov added.

Uniswap crosses $3 billion locked

Ether (ETH), the second-largest cryptocurrency by market capitalization, was down Thursday, trading around $458 and slipping 1.6% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Read More: Ethereum’s Hard Fork Was Trying to Prevent the Very Disruption It Caused

The amount of cryptocurrency “locked” in the DEX Uniswap crossed $3 billion Wednesday. Crypto investors place assets in smart contracts such as Uniswap’s to provide liquidity and, in turn, gain profits, or yield, for doing so in the form of the fees traders pay to use the DEX’s liquidity. 

The total locked slipped a bit Thursday but was still hovering around $3 billion as of press time. Brian Mosoff, chief executive officer of investment firm Ether Capital, said this metric shows that despite some calling DeFi a fad, it’s here to stay. 

“Many skeptics from traditional finance and the crypto community were quick to attribute the summer high trade volume on Uniswap to nothing more than yield farming and pump and dumps,” Mosoff told CoinDesk. “Now that much of that activity has simmered, Uniswap crossing this new milestone is further proof that DeFi and [automated market makers] are here to stay.”

Other markets

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

• kyber network (KNC) – 6.4%
• algorand (ALGO) – 6%
• orchid (OXT) – 4.7%

Read More: Chainalysis Wants to Help the Feds Sell Millions in Forfeited Bitcoin

Equities:

• The Nikkei 225 ended the day in the green 0.68%, boosted by news that foreign inflows into Japan’s stock market hit $10 billion in the past week.
• Europe’s FTSE 100 closed in the red 0.68% as positive sentiment regarding a coronavirus vaccine lost steam.
• The S&P 500 fell 1.4% as increasing numbers of coronavirus cases in the United States led investors to hit the sell button amid continuing economic uncertainty.

Commodities:

• Oil was down 1.1%. Price per barrel of West Texas Intermediate crude: $40.92.
• Gold was in the green 0.54% and at $1,875 as of press time.

Treasurys:

• The 10-year U.S. Treasury bond yield fell Thursday dipping to 0.883 and in the red 10.2%.

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Key cybersecurity officials are exiting (or expecting to be fired from) the U.S. government’s cyber threat protection agency as President Donald Trump’s post-election purge continues.

• Reuters reported Thursday the Homeland Security Department’s Cybersecurity and Infrastructure Security Agency (CISA) director, Christopher Krebs, expects to be fired by the president. His deputy, Assistant Director for Cybersecurity Bryan Ware, resigned under pressure Thursday.
• Krebs has been one of the few Trump administration officials pushing back against misinformation surrounding election security. White House staff bristled at his agency’s “Rumor Control” website, according to Reuters.
• CISA’s relevance to the crypto space comes most immediately through its occasional flagging of vulnerabilities and bugs on the Bitcoin network. Krebs has also spoken about the threats of ransomware.

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Decentralized finance (DeFi) platform Akropolis has suffered a $2 million loss following a re-entrancy attack utilizing a flash loan from derivatives platform dYdX, according to Akropolis founder and CEO Ana Andrianova.

• The attacker pulled out tranches of $50,000 in DAI from the project’s yCurve and sUSD pools, according to The Block researcher Steven Zheng and Andrianova. The attacker collected $2 million worth of the stablecoin before exhausting the pools.
• A re-entrancy attack allows a user to withdraw more funds from a contract than the contract holds. Ethereum’s 2016 The DAO hack was also a re-entrancy attack.
• Akropolis’ Delphi savings pool was audited twice, the team said in the Discord, once by CertiK and also by firms SmartDec and Pessimistic.
• Andrianova told CoinDesk an autopsy of the attack will be released Friday.

Update (November 12, 22:00 UTC): New communications from Akropolis including the type of attack have been added.

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Decentralized finance platform Akropolis’ yCurve pools have been drained, resulting in the loss of $2 million worth of DAI, according to the team’s Discord channel.

• The attacker pulled out tranches of $50,000 in DAI from the project’s yCurve pool, according to The Block researcher Steven Zheng. The attacker ended with $2 million worth of the stablecoin before exhausting the pool.

• Akropolis’ Delphi savings pool was audited twice, the team said in the Discord, once by CertiK and another by an undisclosed team. Akropolis has not responded to CoinDesk’s request for comment.

This is a developing story.

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