CoinDesk Crypto

To the surprise of many, bitcoin (BTC) has been a breakout star in Ethereum’s decentralized finance (DeFi) moment. Taking the form of wrapped or tokenized bitcoin, the digital asset takes the best of both blockchains – bitcoin’s price value and brand along with Ethereum’s programmability – into one highly in-demand token. 

Last week alone, the supply of BitGo’s wrapped bitcoins (WBTC) topped 76,000 after setting an all-time record of nearly 21,000 wrapped bitcoins minted within one week. 

The week before held the previous record of over 12,200 tokens minted in a single week, according to Dune Analytics.

Related: Bitcoin Traders Say Options Market Understates Likelihood of Chaotic US Election

Overall, investors have made tokenized bitcoin one of the largest assets on DeFi with nearly 107,000 BTC worth some $1.1 billion minted from seven issuers, mostly lured in by high rates of return on lending when compared to other options such as BlockFi. 

Why use tokenized bitcoin?

What bitcoin on Ethereum does is simple: It provides liquidity for growing decentralized exchanges (DEX), such as Uniswap. Bitcoin’s current market cap is five times larger than the second largest cryptocurrency, ether (ETH), according to The CoinDesk 20. That money can be put to use making more money.

Tokenized bitcoin allows investors to bring large amounts of value over to the Ethereum network and its young DEX market in a few clicks. 

DeFi is considered vastly immature when compared to traditional or centralized exchange (CEX) markets. This can be seen in the large price spreads between orders on exchange books between different DeFi markets. 

Related: Bitcoin-on-Ethereum Token tBTC Relaunches Following Buggy Debut in May

Read more: What Is Yield Farming? The Rocket Fuel of DeFi, Explained

Price differences on markets can be exploited by traders in what is called arbitrage opportunities.

Wrapped bitcoin is often the asset of choice for investors seeking arbitrage. Bitcoin packs a large punch in terms of price value. More money on DeFi trading platforms makes the markets themselves stronger as additional buying and selling options are presented. 

But tokenizing bitcoin isn’t without risks, particularly software risk. Investors who want exposure to bitcoin’s liquidity pay higher interest rates to cover the risk of losing an asset in addition to getting exposure to the first cryptocurrencies liquidity.

How this works in practice has taken on a few different forms.

Security of bitcoin investments

Different tokenizing models represent different security assumptions for investor funds.

For tokenized bitcoin, security boils down to the type of custodianship and if the investment is collateralized. Three major models exist: a centralized firm like BitGo; a smart contract system with collateral, such as tBTC; or a complete, synthetic-asset backing employed by sBTC.

BitGo’s Wrapped Bitcoin (WBTC) is the breakout star of the last few months with some $808.5 million in circulation, according to Etherscan.

It’s centralized, meaning deposited bitcoin is held by BitGo. Parties wanting WBTC give BTC to BitGo and then receive an ERC-20 token-equivalent of BTC in return. That ERC-20 can then be sold on secondary markets or plugged into a DeFi application to earn yield.

Keep Network’s tBTC, which launched Tuesday, is similar to WBTC but replaces the centralized BitGo model with a network of nodes, wallets and smart contracts. This network aims at bringing more decentralization to BitGo’s process by allowing both parties – the bitcoin depositor and custodian – to interact trustlessly through software.

Read more: Bitcoin-on-Ethereum Token tBTC Relaunches Following Buggy Debut in May

A few features make this possible, such as the bitcoin depositors being able to choose who holds their bitcoin and a 150% security bond (held in ETH) pledged by the custodians on the off-chance they run to the hills with the deposits.

Ren’s rBTC that makes up about 20% of all wrapped bitcoin in the wild, according to Dune Analytics. It works in a similar manner to tBTC’s node network by having the Ren Virtual Machine, RenVM, act as a trustless agent between the Bitcoin and Ethereum blockchains.

Lastly, sBTC is an ERC-20 version of bitcoin. But this time it’s backed by another token, the Synthetix Network Token (SNX). Each sBTC is not backed by BTC, but 800% of a BTC’s value in SNX, the token for minting synthetic assets (Syns) on the Synthetix DEX.

An example of how wrapped bitcoin works

Take a recent transaction from Alameda Research (sister firm of the trading platform FTX).

FTX allows users to swap between BTC and WBTC. When users swap bitcoin for wrapped bitcoin, FTX pulls from Alameda’s pool of BTC/WBTC. Users may send BTC to FTX (Alameda) and receive WBTC. When Alameda’s pool of WBTC is exhausted, they replenish it directly with BitGo.

Read more: BitGo Weighs Building a Sidechain for WBTC as Ethereum Fees Climb

Alameda is a merchant and part of the WBTC decentralized autonomous organization (DAO), meaning it can initiate mints for new WBTC using BTC. They send BTC to BitGo and create a minting request on the Ethereum chain as a merchant. 

BitGo validates the BTC has been deposited to a preminted address and approves a mint of the number of WBTC equal to Alameda’s request. The WBTC can then be used on FTX or swapped with another token atomically (meaning via a peer-to-peer exchange) or even within a DeFi market.

To redeem, the process is reversed: The buyer will send the WBTC back to the merchant who will then provably burn the tokens. 

The future of tokenized assets

The wild success of BitGo’s WBTC and WETH (wrapped ether) may lead to more constructions of other coin holdings. Ben Chan, CTO at WBTC co-creator BitGo, told Coindesk in August that the firm was looking at wrapping other cryptocurrencies.

WBTC’s 2020 success has largely been thanks to DeFi, he said.

“What we’ve seen this year is that WBTC traction has been largely thanks to the highly composable DeFi industry,” Chan said.

Zack Voell contributed reporting.

Related Stories

• First Mover: Bitcoin’s Latest Sell-Off Gets Crypto Traders Mulling Election Chaos
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The November U.S. presidential election could be contentious, yet the bitcoin market is pricing little event risk. Analysts, however, warn against reading too much into the complacency suggested by the volatility metrics. 

Bitcoin’s three-month implied volatility, which captures the Nov. 3 election, fell to a two-month low of 60% (in annualized terms) over the weekend, having peaked at 80% in August, according to data source Skew. Implied volatility indicates the market’s expectation of how volatile an asset will be over a specific period. 

The one- and six-month implied volatility metrics have also come off sharply over the past few weeks. 

Related: Supply of Tokenized Bitcoin on Ethereum Now Tops $1.1B: Here’s Why

The declining price volatility expectations in the bitcoin market cut against growing fears in traditional markets that the U.S. election’s outcome may not be decided for weeks. Traditional markets are pricing a pickup in the S&P 500 volatility on election day and expect it to remain elevated in the event’s aftermath. 

“Implied volatility jumps around election day, pricing an S&P 500 move of nearly 3%, and the term structure remains elevated well into early 2021,” analysts at investment banking giant Goldman Sachs recently said. 

One possible reason for the decline in bitcoin’s volatility expectations ahead of the U.S. elections could be the leading cryptocurrency’s status as a global asset, said Richard Rosenblum, head of trading at GSR. That makes it less sensitive to country-specific events. 

“The U.S. elections will have relatively less impact on bitcoin compared to the U.S. equities,” said Richard Rosenblum, head of trading at GSR. 

Implied volatility distorted by option selling

Related: Bitcoin-on-Ethereum Token tBTC Relaunches Following Buggy Debut in May

Crypto traders have not been buying the longer duration hedges (puts and calls) that would push implied volatility higher. In fact, it seems the opposite has happened recently. “In bitcoin, there has been more call selling from overwriting strategies,” Rosenblum said. 

Call overwriting involves selling a call option against a long position in the spot market, where the strike price of the call option is typically higher than the current spot price of the asset. The premium received by selling insurance (or call) against a bullish move is the trader’s additional income. The risk is that traders could face losses in the event of a sell-off.

Selling options puts downward pressure on the implied volatility, and traders have recently had a strong incentive to sell options and collect premiums. 

“Realized volatility has declined, and traders holding long option positions have been bleeding. And to stop the bleeding, the only option is to sell,” according to a tweet Monday by user @JSterz, self-identified as a cryptocurrency trader who buys and sells bitcoin options.

Bitcoin’s 10-day realized volatility, a measure of actual movement that has occurred in the past, recently collapsed from 87% to 28%, as per data provided by Skew. That’s because bitcoin has been restricted mostly to a range of $10,000 to $11,000 over the past two weeks.

A low-volatility price consolidation erodes options’ value. As such, big traders who took long positions following Sept. 4’s double-digit price drop may have sold options to recover losses. 

In other words, the implied volatility looks to have been distorted by hedging activity and doesn’t give an accurate picture of what the market really expects with price volatility. 

Moreover, despite the explosive growth in derivatives this year, the size of the bitcoin options market is still quite small. On Monday, Deribit and other exchanges traded roughly $180 million worth of options contracts. That’s just 0.8% of the spot market volume of $21.6 billion. 

Activity concentrated at the front-month contracts

The activity in bitcoin’s options market is primarily concentrated in front-month (September expiry) contracts. 

Over 87,000 options worth more than $1 billion are set to expire this week. The second-highest open interest (open positions) of 32,600 contracts is seen in December expiry options. 

With so much positioning centered around the front end, the longer-duration implied volatility metrics again look unreliable. Denis Vinokourov, head of research at the London-based prime brokerage Bequant, expects re-pricing the U.S. election risk to happen following this week’s options expiry. 

Spike in volatility does not imply a price drop

A re-pricing of event risk may happen next week, said Vinokourov. Still, traders are warned against interpreting a potential spike in implied volatility as an advance indicator of an impending price drop as it often does with, say, the Cboe Volatility Index (VIX) and the S&P 500. That’s because, historically, bitcoins’ implied volatility has risen during both uptrends and downtrends. 

The metric rose from 50% to 130% during the second quarter of 2019, when bitcoin rallied from $4,000 to $13,880. Meanwhile, a more significant surge from 55% to 184% was observed during the March crash. 

Since that massive sell-off in March, the cryptocurrency has matured as a macro asset and could continue to track volatility in the stock markets and U.S. dollar in the run-up to and post U.S. elections. 

Related Stories

• First Mover: Bitcoin’s Latest Sell-Off Gets Crypto Traders Mulling Election Chaos
• Equity Markets Turmoil Could Push Bitcoin Below $10K, Say Analysts

The OCC published guidance clarifying that federally-regulated banks can work with stablecoin issuers, the ECB thinks stablecoin is a “misleading” term and a group of banking veterans has spun up a new crypto fund. 

Top shelf

Bitcoin funds
Banking veterans who have steered divisions at HSBC, Barclays, Citigroup and Merrill Lynch in the Asia-Pacific region are ditching traditional finance to invest in cryptocurrencies. Their new crypto fund, Liquibit Capital, will manage assets worth $50 million and will arbitrage a portfolio of bitcoin, bitcoin cash, ether, litecoin and eos, custodied with Fireblocks, with an eye to expand into derivatives trading. Elsewhere, tech legend and part-owner of the Golden State Warriors, Chamath Palihapitiya’s Social Capital invested in bitcoin (BTC) in 2013, when it was trading around $10. Palihapitiya disclosed the holdings in an investment call as he mulls taking the fund public. The exact amount of bitcoin Social Capital has bought and sold is unknown.

National security? 
The United States Space Force (USSF), the newest branch of the U.S. military, is looking to blockchain to render its computer systems, on earth and in space, unhackable. Xage Security, which is currently working with the U.S. Air Force, won a contract for a data-encryption system. Meanwhile, the Central Intelligence Agency (CIA) launched a new R&D laboratory on Monday to study blockchain technology, along with wireless telecommunications, quantum computing and artificial intelligence.

Related: First Mover: Bitcoin’s Latest Sell-Off Gets Crypto Traders Mulling Election Chaos

MicroStrategy effect
Coming on the heels of publicly-traded MicroStrategy’s multi-million dollar investment into BTC, financial services firm Unchained Capital has released an “advanced business account” for firms that want to hold bitcoin and handle their own private keys. “We have companies that you wouldn’t expect, like your local bakery or your local liquor store that hold bitcoin in treasury,” Parker Lewis, Unchained’s head of business development, told CoinDesk. “They are not Bitcoin-centric businesses, but they hold bitcoin and they hold their own keys; both small and large, like the MicroStrategies of this world.”

UNI unity
A group of anonymous Uniswap users is trying to unite the many small holders of the UNI governance token to deal with potential problems in the automated market maker’s (AMM) governance, CoinDesk’s Muyao Shen reports. The group, seemingly backed by unii.finance, is aiming to issue a community token called UNI Innamorare (or UNII). The idea is to create a faction of UNII token holders to counter the power from the founding team and investors, who still hold an outsized amount of control over the decentralized protocol despite a governance token distribution, the group alleges. “We are all minions in terms of voting power,” according to a pre-launched page by the anonymous group. It is unclear whether the proposal will catch on.

Wright’s move?
The District Court for the Southern District of Florida has denied Craig Wright’s request for summary judgment in a case that involves claims over ownership of about 1.1 million bitcoin (worth over $11 billion). In an order signed on Monday, Judge Beth Bloom at the Florida court denied the self proclaimed inventor of Bitcoin’s motion seeking summary judgment that would have prevented the matter from proceeding to a full trial. According to an order issued by the Florida court on Sept. 4, the trial involving Wright’s bitcoin fortune has now been moved to Jan. 4, 2021. 

Quick bites

• The Fast-Growing NFT Market Is Problematic Yet Promising (Leigh Cuen/CoinDesk)
• Here in Venezuela, Doctors Struggle to Access Aid From Crypto Platform (José Rafael Peña Gholam/CoinDesk)
• ‘We Blew It.’ Douglas Rushkoff’s Take on the Future of the Web (Daniel Kuhn/CoinDesk)
• A Top Crypto Exchange CEO Explains Why the 2020 Boom Is Different (Joe Weisenthal/Bloomberg)
• Bitcoin-Backed Ethereum Token tBTC Launches—for the Second Time (Adriana Hamacher/Decrypt)

At stake

Stablecoin junction
European and U.S. financial regulators independently have issued positive statements regarding the viability of fiat-backed digital currencies. 

Related: Blockchain Bites: DeFi’s Dividend, China’s ‘New Battlefield,’ the Big Banks’ ‘Suspicious Activity’

The U.S. Office of the Comptroller of the Currency (OCC) and the Securities and Exchange Commission (SEC) yesterday published official guidance clarifying national banks can provide services to stablecoin issuers in the U.S. 

This is the first instance of federal clarity around stablecoins, referring specifically to tokens backed on a one-to-one basis by fiat currencies rather than their algorithmically derived counterparts, CoinDesk regulatory reporter Nikhilesh De said. 

Acting OCC Comptroller Brian Brookes said that stablecoin services are responsible for “billions of dollars each day” flowing through the financial plumbing. 

The statements are also the first indication that certain stablecoins might not be securities under federal law.

Meanwhile, European Central Bank (ECB) President Christine Lagarde said the supranational bank is looking into the benefits and risks of a bloc-wide digital currency.

Rather than as a replacement for cash, a digital euro would “complement” traditional money and provide an alternative to “private digital currencies” for EU citizens. This, she told the EU Parliament on Monday, would “ensure that sovereign money remains at the core of European payment systems.” 

The comments come a month after Lagarde said Europe is losing ground in payments innovation and signals a continued skeptical line over private “stablecoins” like Libra. 

Elsewhere, ECB officials wrote the term stablecoin is “misleading,” adding the term “should be replaced by a choice of terminology to shift the emphasis away from the issuer’s promise of stability.”

Market intel

Follow the leader
Bitcoin (BTC) is once again taking cues from the stock markets and prices may fall below $10,000 if equities see further sell-off, according to analysts. The top cryptocurrency fell by 4.5% on Monday to register its biggest single-day decline since Sept. 4. That came as global stock markets nursed sharp losses and the safe-haven U.S. dollar gained ground on renewed coronavirus fears and uncertainty over the 2020 U.S. election. “Sustained risk-off in broader equity markets will lead to heavy offers across major cryptocurrencies,” Matthew Dibb, Stack Funds’ co-founder and COO, told CoinDesk. “Bitcoin may revisit September lows [around $9,870].”

Op-ed

Activism
Jeff Dorman, a CoinDesk columnist and chief investment officer at Arca, argues that activist investors can help the digital assets industry mature. “The digital assets ecosystem needs to adopt the best practices of traditional finance. A strong governance system is one element that will help keep companies in this space on track and will hold them accountable,” he writes.

Podcast corner

Banks care?
The FinCEN Files, a leaked cache of more than 2,000 suspicious activity reports (SARs) filed by banks with the U.S .Financial Crimes Enforcement Network, show that banks are happy to file their reports and then keep on banking likely money launderers, NLW argues.

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The startup formerly known as Nebulous has raised a $3 million funding round led by Paradigm with participation from Bain Capital Ventures, Bessemer Venture Partners, A.Capital, Collaborative Fund, Dragonfly Capital Partners, Hack VC, INBlockchain, First Star Ventures and others. 

The startup also rebranded, as Skynet Labs, to focus on promoting the namesake application hosting platform, which uses the token-fueled Sia network.

• Launched in 2014, the Boston-based firm has a staff of 11 and has raised over $9 million to date.
• CEO David Vorick said there are more than 100 applications and 10 web portals already using Skynet as a decentralized storage alternative, including the popular exchange Uniswap. Skynet launched in February 2020.
• “It’s just another means of accessing Uniswap, if Infura goes down people can still access the interface,” Vorick said, referencing Ethereum-friendly infrastructure options. “This offers the ability for anyone to run their own portal and get full trustless access to the network. If we turn off all our infrastructure tomorrow, Skynet still exists.”
• Paradigm partner Dan Robinson said in a press statement he’s keen to see decentralized storage lead to social networking without distinct silos, like YouTube and Twitter, adding, “The project has enabled a growing ecosystem of builders to quickly prototype censorship-resistant applications and interactive websites.”
• In reference to the Skynet app store that popped up following rumors that TikTok might get delisted from popular app stores, Vorick said, “This is a third-party app that comes from the community. … Quick responses to things like TikTok being banned don’t need to ask us for permission.”
• This rebrand comes nearly one year after the startup reached a $225,000 settlement with the U.S. Securities and Exchange Commission for an unregistered token sale in 2014. Skynet users now rely on those tokens if they run a full Sia node.

Read more: Sia Network Raises $3.5 Million From Bain Capital to Become Crypto Hulu

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A decentralized way to copy bitcoin (BTC) over to Ethereum is relaunching today after a smart-contract bug sunk the project in May.

Called tBTC, the Thesis-built protocol was first announced in April, and is now ready for a fresh start. BTC holders who want to use Ethereum but worry about censorship risk with BitGo’s WBTC are invited to deposit BTC and mint TBTC tokens.

Putting bitcoin on Ethereum gives the godfather cryptocurrency access to the yields of decentralized finance (DeFi) and has taken off in earnest since tBTC’s aborted launch. Over $1 billion in bitcoin is now tokenized on Ethereum.

Related: First Mover: Bitcoin’s Latest Sell-Off Gets Crypto Traders Mulling Election Chaos

According to Thesis strategy lead Carolyn Reckhow, tBTC already had $24.21 million staked as of early Tuesday morning ($22.69 million is in KEEP, $1.39 million in ETH and $0.26 million in BTC).

The tBTC protocol works on both the Bitcoin and Ethereum blockchains, with users locking up BTC on Bitcoin so that nodes in the Keep network can mint TBTC, staking 150% of the BTC’s value in ETH. 

The Keep nodes control the multisig that can re-release the BTC if a TBTC token is redeemed. The tBTC protocol has been audited by ConsenSys Diligence and Trail of Bits, Reckhow said. 

For additional security, the smart contract also is posting 1 million KEEP for insurance from Nexus Mutual, which Thesis estimates should be worth 200-1,200 BTC in coverage.

Related: Equity Markets Turmoil Could Push Bitcoin Below $10K, Say Analysts

“A decentralized version of tokenized bitcoin is key to catalyzing the next stage of growth in DeFi,” Scalar Capital’s Linda Xie said in a press release.

Read more: Bug Forces Shutdown of Bitcoin-Backed Ethereum Token tBTC

Supply caps will moderate participation over the first nine weeks of testing in production, starting at 100 BTC and rising to 3,000, until the supply cap is finally removed.

On May 22, following the emergency shutdown of the first version, Thesis announced that tBTC would move to a release candidate cycle. 

The team behind tBTC believes that certain BTC holders would like to access DeFi but are waiting for a trustless path to do so. Another alternative to WBTC is renBTC, which has minted more than 20,000 BTC worth of ERC-20 tokens since launching in May.

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The first exchange-traded fund (ETF) to broadly track the digital asset market has been accepted to list on the Bermuda Stock Exchange (BSX).

• BSX announced last week the Hashdex Nasdaq Crypto Index ETF had been admitted to list on its trading platform.
• The ETF is the brainchild of Hashdex, a Brazilian-based fund manager that has been registered with the Securities and Exchange Commission (SEC) since 2018.
• An ETF is a basket of different assets bundled together and traded as a single traditional instrument. The development of such a product for crypto is considered bullish as it makes the asset class more accessible to mainstream investors.
• This particular product, which will be denominated in USD, will track an index currently being developed by Nasdaq. Its composition is still under wraps, but CoinDesk understands it will give a broad exposure to the asset class.
• A total of three million shares are available via private placement at $1,000 apiece. At the time of the initial announcement, 10 shares had been sold.
• A number of companies have unsuccessfully tried to get the SEC to approve a bitcoin ETF for the U.S.
• The SEC has expressed concern that a bitcoin ETF remains vulnerable to market manipulation. Most recently, it rejected an application from Wilshire Phoenix in February.
• Like the neighboring Bahamas, Bermuda has expressed an openness to try digital assets. Earlier this month, the government announced a pilot program for a digital token that could quickly distribute financial aid to citizens.
• While small compared to either the New York Stock Exchange or the Nasdaq, the BSX says its market cap is just under $300 million.
• CoinDesk reached out to both Hashdex and BSX for comment but hadn’t had a response at press time.
• Nasdaq declined to comment.

See also: WisdomTree Proposes ETF With 5% Bitcoin Exposure Despite SEC’s Long-Standing Blockade

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Libra digital currency project co-founder Morgan Beller has left Facebook in a pivot back to her venture capital roots.

• Beller, 27, will become a general partner at early stage startup-focused VC firm NFX, according to TechCrunch.
• At Facebook, which she joined in 2017, Beller reportedly helmed the social media giant’s blockchain initiatives, working behind the scenes to bring Libra and its Calibra digital wallet (now rebranded as Novi) to life.
• “Shortly after joining, I realized there was no one focused full-time on blockchain, crypto, etc.” Beller said in an NFX profile. “So I made my full-time job figuring out what Facebook should do, if anything, in that space.”
• She assisted in talent recruitment, worked alongside David Marcus and pushed forward Facebook’s blockchain initiatives – sometimes alone, according to CNBC.
• Beller told TechCrunch she caught the “crypto virus” as a partner at VC firm Andreessen Horowitz and brought it with her to Facebook.
• That bug may now get squashed, however, as NFX currently does not focus on crypto or blockchain even though a handful of its portfolio companies intersect with the space.

Read more: Libra’s Long Road From a Facebook Lab to the Global Stage: A Timeline

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Helium’s plan to create a decentralized wireless network may be about to gain altitude.

The company, which aims to create a token-powered wireless network for Internet of Things (IoT) devices, announced Tuesday it’s no longer the sole manufacturer of Helium hotspots, which create the Helium network by mining the project’s HNT cryptocurrency. 

RAK Wireless, a China-based manufacturer of IoT hardware will begin selling a new, cheaper version of the hotspot, potentially giving the whole enterprise a lift.

Related: US Space Force Enlists Blockchain Firm to Deploy Hack-Proof Data Defenses

Quick refresher: Helium aims to create a new kind of wireless network, one that’s suited for data from low-power applications like tracking location, but also is completely separate and independent from existing telecom networks. While Helium maintains the network, it’s peer-to-peer, meaning it’s created by individuals owning and operating their own nodes.

Enter the Helium hotspot. For over a year, individuals have been able to buy and deploy one of the bologna-sandwich-sized hotspots, which both acts as a node in the network (via low-bandwidth wireless tech called LongFi) and rewards the owner by mining HNT crypto tokens.

Read more: Crypto-Powered IoT Networks Are on Their Way to Over 250 US Cities

Until now, the only way to get a hotspot was to buy one from Helium for $495 apiece. The RAK Hotspot Miner, available today in North America and coming “soon” to Europe and Asia, costs $249, or roughly half. It’ll be sold exclusively through Cal-Chip, an online vendor of IoT devices. The components are nearly identical to Helium’s model, according to the company, but RAK can offer a lower price since it can take advantage of economies of scale that Helium can’t.

Related: China’s BSN to ‘Localize’ 24 Public Blockchains by Making Them Permissioned

“This is the first of what we hope will be many third parties building compatible hardware,” Helium CEO Amir Haleem said in an interview. “It’s an enormous step for us because up until now, we’ve been the only manufacturer and we’ve been the bottleneck. We can’t be the only entity contributing to [the network], both from a price point of view but also it doesn’t speak well to the decentralization story.”

Helium hardware

The buyers of Helium’s hotspots have typically been enthusiasts who see the value in a low-power network or companies that want to leverage the technology itself. 

A company that wants to use the network to, say, track the location of its rental scooters can exchange HNT for data credits, which Helium also manages, and have a fixed price in dollars. The more hotspots in an area, the better the tracking – which also would likely fuel demand for HNT, which was trading at $1.75 as of press time, according to Messari.

You can see where this is going. With the RAK Hotspot lowering the bar to entry, more Helium owners may start to purchase them just to mine the cryptocurrency. If that happens, and those people are spread out in enough different places, Helium’s dream of decentralized wireless (which it calls, with a straight face, “DeWi”) might start to solidify, turning all those hotspots into valuable investments.

“Building wireless infrastructure this way and having access to the internet be decentralized and not controlled by one entity is a must-have step in the evolution of the internet,” said Haleem. The existing universe of low-power access points and gateways is, quite frankly, a clusterf**k. So it’s great to have a third party start to get involved in the foundational infrastructure.”

Read more: IoT App Nodle Moves From Stellar Blockchain to Polkadot

Helium’s technology is promising, but far from ubiquitous. The company says it’s sold about 12,000 hotspots, although public network stats say only 8,641 are active. And while that still sounds like a lot, it takes between 100-200 hotspots to bring a single city “online.” 

A few well-known companies, including Lime and Salesforce, have used Helium’s tech, but it’s early days.

In short, Helium needs to rise a lot further to reach its decentralized wireless utopia in the clouds, and its bubble could pop anytime. But at least with RAK Wireless coming on board, the weight of that journey is a little lighter.

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The U.S. government has made one of the biggest drug busts in history, with half a tonne of narcotics and millions of dollars in cash and cryptocurrencies taken from dealers that use the dark web.

• The Department of Justice (DoJ) announced the results of Operation DisrupTor on Tuesday – calling it one of the largest attempts to combat criminal activity on the dark web, and in particular opioid trafficking.
• Over 500 kilograms of drugs were seized worldwide, as well as approximately $6.5 million held in both cash and cryptocurrencies.
• One particular bust saw the seizure of 111 kilograms of fentanyl, which FBI director Christopher Wray said was enough for approximately 5.5 million lethal doses.
• In total more than 170 arrests were made worldwide, including Canadian citizen Arden McCann who is alleged to be responsible for smuggling more than 10 kilograms of fentanyl and over 300,000 counterfeit Xanax pills into the U.S.
• Agencies including the Secret Service, the DEA, Homeland Security as well as international bodies Europol and Five Eyes all participated in Operation DisrupTor.
• At a press conference, DoJ Attorney General Jeffrey Rosen said the operation had dealt a “powerful blow” to the criminal underworld.

Also read: US Treasury Sanctions Russians Using Crypto for Election Interference

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In seeking to explain Monday’s sell-off across traditional markets and cryptocurrencies, the digital-asset firm QCP Capital rattled off a list of seven major market events that occurred in Septembers past, from the 1929 stock-market crash to the Lehman Brothers bankruptcy in 2008. 

There might be some deep human connection with the fall equinox — when the days turn shorter than nights in the northern hemisphere and summer turns to fall, according to the firm. “The human nervous system typically undergoes major measurable perturbations” during this period, QCP wrote Monday in its daily market update. 

The outlook is cloudy but there’s a risk of a steep plunge similar to the sell-off in March that took bitcoin prices to their 2020 lows just below $4,000. One catalyst could be the upcoming U.S. presidential election, which has become more contentious in recent days following the death of Supreme Court Justice Ruth Bader Ginsburg. 

Related: Equity Markets Turmoil Could Push Bitcoin Below $10K, Say Analysts

Bitcoin (BTC) on Monday posted its biggest drop in three weeks, retreating from the psychological $11,000 hurdle that the cryptocurrency until just recently had seemed poised to eclipse. There was also an apparent unwind of the recent frenzy in decentralized finance, or DeFi, with associated digital assets from ether (ETH) to Aave (LEND ) and Curve (CRV) falling even harder.    

“It got to a point where the market demand just kind of got exhausted, and there wasn’t enough new capital flowing to sustain the push higher,” said John Todaro, an analyst for the digital-asset firm TradeBlock. 

Despite recent bets in foreign-exchange markets that massive money printing by the Federal Reserve and other central banks might drive down the value of the dollar, investors apparently sought refuge in the U.S. currency. The U.S. Dollar Index charted its biggest gain in a month. 

“The dollar’s not dead, the dollar’s a survivor,” Denis Vinokourov, head of research for the cryptocurrency prime broker Bequant, said in a WhatsApp audio interview. “It’s a real flight to quality, and cash is king, and cash is the dollar, nothing else. The dollar rules.”

Related: Uniswap Users Say Uniting Can Strengthen UNI

Monday’s sell-off nearly wiped out 2020 gains for the Standard & Poor’s 500 Index of large U.S. stocks, though ether, bitcoin and gold are still sitting on substantial 2020 gains. 

There’s a lot of major factors buffeting the global economy and geopolitical landscape, as the coronavirus continues to spread and the U.S. elections approach. President Donald Trump is pushing to nominate and confirm a pick to the high court prior to the election, even though Republican leadership had previously suggested such a step would be inappropriate. 

Gavin Smith, CEO of the cryptocurrency firm Panxora, says that if the election leads to political turmoil in the U.S., he could see the largest cryptocurrency trading as low as $7,000. 

“The danger to the crypto market is much the same as we saw in March,” Smith said. “If you get that big sell-off in risk assets, there will be that liquidation of bitcoin.”

He says central-bank money printing should eventually push up inflation, which could be a catalyst for higher bitcoin prices, though “that’s very much a 2021 story.” 

“When we’ve seen the election past, all of a sudden it’s going to become clear just how much money has been pumped into the system,” Smith said. 

A battle over confirmation of Ginsburg’s successor could derail any last-ditch efforts to revive any effort to provide new U.S. fiscal stimulus, even amid growing signs that the economic recovery is stalling. 

The Federal Reserve could step in to increase its pace of money printing, but any such decision would have to be made on an emergency basis, since the next regular meeting isn’t scheduled until Nov. 5, in the days after the election.

The Fed has already cut interest rates close to zero and is buying U.S. Treasury bonds and government-backed mortgage securities at a pace of $120 billion a month. Chair Jerome Powell reiterated in prepared testimony for a scheduled Congressional appearance Tuesday that officials “remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible.”

But Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm, Quantum Economics, told subscribers in a daily newsletter, said that the bar will be high for further action. 

“The Federal Reserve and other central banks have already injected quite a lot of stimulus and are already committed to keeping rates suppressed for a long time to come,” Greenspan wrote. “There doesn’t seem to be much in the way of action from them for markets to look forward to.”

Bitcoin Watch

Bitcoin fell by more than 4% on Monday, confirming a bear flag breakdown on the daily chart. 

The bearish technical pattern indicates the bounce from the recent low of $9,869 has ended, and the pullback from the August high of $12,476 has resumed. 

Analysts foresee a more significant decline in the cryptocurrency if the global stock markets extend Monday’s sell-off. 

“Sustained risk-off in broader equity markets will lead to heavy offers across major cryptocurrencies,” Matthew Dibb, Stack Funds’ co-founder and COO, told CoinDesk. “Bitcoin may revisit September lows” around $9,870.

Monday’s drop has boosted demand for put options or bearish bets. According to data source Skew, the one-month put-call skew has increased to over 4% from -3% on Sunday. The positive figure indicates that put options are drawing higher prices than calls. 

However, three- and six-month skews remain negative, meaning the long-term bias remains bullish. 

– Omkar Godbole

Read More: Equity Markets Turmoil Could Push Bitcoin Below $10K, Say Analysts

Token Watch

Uniswap (UNI): Arca Funds chief legal officer argues that tokens  probably aren’t securities under the SEC’s test. 

Swerve (SWRV): Liquidity in this three-week-old automated market maker for stablecoins has dried up following the conclusion of a “boosted reward period,” according to Messari.  

What’s Hot

U.S. regulator OCC says banks can provide services to stablecoin issuers (CoinDesk)

Chinese e-commerce giant JD.com is reportedly to help the nation’s central bank develop infrastructure for its cash-equivalent digital currency (CoinDesk) 

ECB President Christine Lagarde says digital euro might provide alternative to “private digital currencies” (CoinDesk)

Bitcoin miner Bitfarms leases 2K rigs from BlockFills, has options for 7K more (CoinDesk)

Analogs The latest on the economy and traditional finance

Bank shares plunge on reports Deutsche Bank, JPMorgan moved suspicious funds (CNBC)

Key Republican senators propose $28B in airline assistance to avoid job cuts (Reuters)

U.S. government debt seen hitting 195% of GDP 2050, up from 98% this year and 79% in 2019 (Bloomberg)

Fed Chair Powell says small businesses might need “direct fiscal support” (FT) 

Commercial mortgage bonds lag behind broad credit-market recovery (WSJ)

Unemployed cutting back on consumer spending as extra benefits expire (WSJ)

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BRD team is spearheading a new initiative: Blockset, a business-to-business blockchain technology stack with a bent towards compliance, surveillance and security for cryptocurrency companies and government agencies.

After its 2014 launch, Bread was the first Bitcoin wallet to land on Apple’s app store. A couple of years later, the wallet launched a $32 million ICO and changed its name to BRD in a bid to “unify” its brand. Since then, BRD has expanded its coin support, launched new features like payment IDs, and expanded in-wallet crypto purchases to a motley of fiat currencies. 

Now, for its latest initiative, BRD has recently partnered with blockchain analysis/intelligence companies Chainalysis, CipherTrace and Elliptic, along with security firm Unbound Tech. The latter has been instrumental in securing Blockset’s key management features, while the former companies will provide Blockset with regulatory compliance and blockchain monitoring tools. 

Blockset: A suit-and-tie tech stack

Related: The Future for Unregulated Bitcoin Exchanges

“Layering these crucial applications on top of Blockset allows us to offer a comprehensive, broad-use offering to financial institutions from a single platform. This also enables our enterprise customers to address many use cases across all their crypto projects from a single vendor,” BRD CEO Adam Traidman told CoinDesk.

Per a Blockset press release, the new tech stack will provide anti-money laundering (AML), fraud detection, and other compliance tools, along with key management, security measures and data feeds for “financial institutions, government agencies, and cryptocurrency businesses.”

Read more:  All Global Crypto Exchanges Must Now Share Customer Data, FATF Rules

For AML and compliance, the software combines Chainalysis’ know-your transaction tools with CipherTrace’s travel rule compliance software. These features, along with risk-management software from Elliptic, will create real-time alerts to flag suspicious or fraudulent activity and “tainted” transactions for Blockset clients.

Related: Researchers Expose Flaw in Bitcoin Wallets That Could Be Exploited for Double-Spending

Traidman told CoinDesk that BRD is marketing its Blockset services primarily to financial institutions and banks that need sound compliance and key-management solutions. Regulators and government agencies are another logical fit given Blockset’s partnership with leading blockchain analysis firms.

According to BRD, SBI Holdings, PayPal, KPMG, and Ripple’s developer initiative Xpring have all participated in a private pre-release of Blockset’s technology, along with some 16 other firms.

BRD, which reportedly has over six million downloads and 550,000 monthly active users, “is powered by Blockset,” according to BRD documentation shared with CoinDesk. A BRD representative claimed that the wallet will not use Blockset’s AML and compliance features; instead, Blockset is just used to quickly sync BRD wallets with Bitcoin’s (and other coins’) transaction histories.

Compliance comes to crypto

BRD’s new initiative is another tech stack in the fast-growing landscape of crypto-compliance software.

Some time ago, the Financial Action Task Force recommended that crypto transactions should adhere to the travel rule – a banking mandate wherein transactions greater than $10,000 must include fund-sourcing disclosure and payer/payee identity information. Since then, crypto companies have chased solutions to streamline compliance tools for exchanges, brokers, service providers and other market participants.

Read more: Less Than 1% of FinCEN’s Suspicious Activity Reports Since 2013 Mentioned Crypto

“Compliance is of utmost importance for any financial institution. It’s important for banks and enterprises to have the foresight to stay ahead of the regulatory curve. They need the knowledge and resources to protect their clients and themselves,” Traidman told CoinDesk.

Still, critics of the travel rule have weighed whether or not it hampers cryptocurrency business with undue burdens and even whether or not such a rule is sustainable at scale.

Indeed, the recently leaked “FinCen files” illustrate the failure of financial surveillance in the legacy financial system as some $2 trillion worth of money-laundered funds were pushed, sans renovation or consequence, through accounts held by criminals, oligarchs and other powerful persons at JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon.

As the same surveillance burden comes to the Bitcoin economy, perhaps the public nature of the blockchain’s digital ledger will make enforcing these mandates easier – if privacy preserving technology doesn’t keep up with the regulatory requirements, that is.

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The European Central Bank (ECB) has said the term “stablecoin” should be replaced with something less “confusing” or potentially “misleading”.

• The Eurozone’s primary financial institution said in a report Tuesday that a properly designed and well-regulated digital asset could live up to the name, but that existing examples fell short of the intrinsically stable money substitute that the term “stablecoin” implies.
• The ECB’s 30-page report says the growth of stablecoins in Europe could result in their increasing use as a new payment method or as an alternative store of value.
• The term stablecoins refers to digital assets that are designed to have minimal price fluctuations, generally by being backed by or pegged to assets such as fiat currency or gold.
• While the ECB says rock-bottom interest rates likely remove much incentive for users to hold value in stablecoins, at least for the foreseeable future, it suggests consumers are still in danger of being confused or misled by the name.
• “As regulatory principles are established and approaches are defined, the term ‘stablecoin’ should be replaced by a choice of terminology to shift the emphasis away from the issuer’s promise of stability,” the ECB said.
• Unambiguous phrasing would better distinguish stablecoins from fiat currencies and would serve to also differentiate various types of stablecoin – for example, collateralized stablecoins from algorithmic ones – the central bank said.
• It might also demarcate private initiatives from those of central banks – known in the industry’s lexicon as central bank digital currencies (CBDCs).
• Earlier today, ECB chief Christine Lagarde said a digital euro could become a viable alternative to existing cryptocurrencies and also prevent the Eurozone’s monetary sovereignty from falling into the hands of private companies.

See also: French Central Bank Chief Eyes Public-Private Partnership for Possible Digital Euro

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Bitcoin (BTC) is once again taking cues from the stock markets and prices may fall below $10,000 if equities see further sell-off, according to analysts.

• The top cryptocurrency fell by 4.5% on Monday to register its biggest single-day decline since Sept. 4.
• That came as global stock markets nursed sharp losses and the safe-haven U.S. dollar gained ground on renewed coronavirus fears and uncertainty over the 2020 U.S. election.
• Bitcoin is currently priced at around $10,460, down nearly 2% on the day, according to CoinDesk’s Bitcoin Price Index.
• “Sustained risk-off in broader equity markets will lead to heavy offers across major cryptocurrencies,” Matthew Dibb, Stack Funds’ co-founder and COO, told CoinDesk. “Bitcoin may revisit September lows [around $9,870].”
• European equities are reporting moderate gains at press time, however, futures tied to the S&P 500 index are down 0.3%, signaling scope for extension of Monday’s sell-off.
• Historically, September has been a weak month for the S&P 500 and the index performs poorly in October in the U.S. election years, according to crypto analyst Lark Davis.
• “As such, bitcoin could be in for some big bumps over the next six weeks,” Davis tweeted.
• A potential recovery in stocks may have a little positive impact on bitcoin, unless it is accompanied by an uptick in precious metals like gold, according to Dibb.
• “While Nasdaq recovered towards the end of Monday’s session, our concern in relation to bitcoin is its heavy correlation with gold and silver, which are trading further down [Tuesday],” he said.
• The 60-day positive correlation between gold and bitcoin strengthened to record highs earlier this month.
• Gold is currently trading near $1,900 per ounce, representing a 0.4% decline on the day, and fell nearly 2% on Monday. Meanwhile, silver dropped by 7.6% Monday.

• Bitcoin’s daily chart (above left) shows a “bear flag” breakdown – a sign the bounce from the recent low of $9,869 has ended and the pullback from August highs above $12,400 has resumed.
• “The cryptocurrency has breached the horizontal support of $10,500 (February high) and could slip to $10,000,” Patrick Heusser, senior cryptocurrency trader at Zurich-based Crypto Broker AG told CoinDesk.
• Gold’s descending triangle breakdown also suggests scope for deeper declines.
• Dibb is also keeping a close eye on the U.S. dollar index (DXY), which tracks the greenback’s value against major currencies.
• “A breakout of the USD from its two-month consolidation will likely lead to continued selling and pressure on Bitcoin,” Dibb said.

• The DXY has largely been restricted to a range of 92.00 to 94.00 since the end of July.
• A move above 94.00 would confirm a breakout and may weigh over bitcoin.
• Bitcoin’s big move from $9,000 to $12,000 seen in the second half of July was accompanied by a broad-based sell-off in the U.S. dollar.
• Federal Reserve Chair Jerome Powell will testify before the U.S. Congress on Tuesday and is expected to reiterate the central bank’s commitment to holding interest rates low for a prolonged period.
• Since the markets have already priced in low rates, stocks may not see a big relief rally.

Also read: Bitcoin Dips to $10.1K, Ether Drops to $330 on Sell-Off Session

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The service branch protecting U.S. interests outside the stratosphere may use blockchain to render its computer systems, on earth and in space, unhackable.

• Last week, Xage Security won a contract from the United States Space Force (USSF) to develop and roll out a blockchain-based data protection system across its networks.
• Called the Xage Security Fabric, the blockchain verifies data and protects the network from third party intervention, so confidential data sent from satellites to earth isn’t intercepted en-route.
• It also ensures security remains consistent across the entire USSF network, preventing hackers and other malicious entities from identifying and exploiting any weak spots.
• Per a release, Xage’s CEO Duncan Greatwood said blockchain allowed USSF to ensure effective domain resilience across all assets and data elements on its network.
• Xage inked a similar agreement with the United States Air Force last December, which wanted to evaluate the Security Fabric platform.

See also: US Air Force and Raytheon Are Studying How Distributed Ledgers Could Help Command the Skies

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The European Central Bank (ECB) is looking into the benefits and risks of a digital currency, according to its president, Christine Lagarde.

• Rather than as a replacement for cash, a digital euro would “complement” traditional money, she said in an introductory speech at the Franco-German Parliamentary Assembly on Monday.
• The central bank digital currency would further provide an alternative to “private digital currencies” for EU citizens, according to Lagarde.
• This, she said, would “ensure that sovereign money remains at the core of European payment systems.”
• The latter comment references fears from regulators and governments that a massively popular cryptocurrency could threaten the power of central banks to control monetary policy and even cause a shift away from the use of fiat money.
• Addressing this perceived threat from the as-yet-unlaunched Facebook-backed Libra payments project last October, France’s economic and finance minister Bruno Le Maire said Libra was usurping the sovereign right of states to issue their own currencies and could undermine the European project.
• “Do we really want to give private interests such power, given the consequences it would have on trade and financial stability?” Le Maire said at the time. “I cannot countenance one of a sovereign state’s most powerful tools, monetary policy, falling under the remit of entities not subject to democratic control.”
• Last month, in another speech, Lagarde said foreign providers had taken the lead on payments innovation due to the lack of integrated infrastructure in Europe, but a digital euro would allow the bloc to make up lost ground.
• She said then that a future digital euro might be used for retail payments and be “accessible to a wide audience.”

Also read: ‘Game-Changer’ Retail Digital Currency Now European Central Bank’s Focus, Board Member Says

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Chinese e-commerce giant JD.com is reportedly to help the nation’s central bank develop infrastructure for its cash-equivalent digital currency.

• Reported by local media on Monday, the People’s Bank of China has reached a strategic cooperation agreement with JD.com to co-develop mobile and blockchain technology platforms for the digital yuan initiative.
• The two entities will work together to develop on- and offline functionality for the products, which will include a digital wallet.
• JD.com will further use its group to promote the new services, per the article.
• The news comes as the latest instance of the People’s Bank working with commercial enterprises on the digital yuan project, more formally dubbed “digital currency electric payment” (DCEP).
• Six years in the making, DCEP is now reportedly being tested at state-owned banks, several companies backed by Tencent and “Chinese Uber” Didi.
• The digital currency is expected to act as cash in China, being used for retail payments via mobile apps.
• The central bank recently played down rumors of a property transaction settled with DCEP, saying that current testing has revolved around smaller transactions so far.
• The prime online retailer rival to Alibaba in China, JD.com is a NASDAQ-100 and a Fortune Global 500 company with revenue of close to $83 billion in 2019.

Also read: China Sees Advantages in Being First on New Digital Currency ‘Battlefield’

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A group of anonymous Uniswap users is trying to unite the many small holders of the UNI governance token to deal with potential problems in the automated market maker’s (AMM) governance. Yet that is what the launch of UNI last week was supposed to do.

The big initiative being promoted by this “union” is UNI Innamorare (or UNII), a token to be used by the Uniswap community. However, while Uniswap forks SushiSwap and SashimiSwap essentially took away Uniswap’s liquidity, this newly launched token promises to help Uniswap’s market to grow and potentially consolidate prices for UNI, which is held by more than 80,000 addresses at press time.

It is unclear who is behind the initiative. Its website said that the UNII is “backed by unii.finance.” A Silicon Valley-based investor familiar with the matter told CoinDesk that the group includes people from both UNI retail holders and some sub-communities of Uniswap. As press time, only around 20 people joined have joined its Telegram group.

Related: First Mover: Digital Gold Narrative Could Be Bitcoin’s Lone Ace as Ethereum Gains

The group is asking UNI holders to claim UNII tokens in order to form a party within the UNI community that can counter the power from the founding team and investors, according to a Medium post on Sept. 20.

The UNII token’s distribution will include two stages: after the initial airdrop of 15% of its total supply of 1 billion tokens, 30% of the UNII will be mined in the first staking pool, which requires UNI holders to stake their UNI and UNII at the ratio of 98:2. In a subsequent staking pool, UNI holders will only be required to stake their UNI and UNII at the ratio of 50:50 in order to mine 50% of the total UNII supply. The even split means that UNI holders are taking bigger mining risks compared with the first stage, which only requires a ratio of 2:98. As they stake more UNI tokens in this second pool, it could theoretically stabilize or even move up UNI’s price, said the same source who is close to the group.

The remaining 5% of the UNII will be reserved in what they are referring to as a “celebration pool” to reward UNII members if UNII becomes one or more of the token-pairs listed under UNI’s liquidity mining pool.

Prices for UNI were traded at $4.37 as the time of writing, down 48.4% from its all-time high at $8.40 on Sept. 18, according to CoinGecko.

When the hottest DeFi project has a decentralization problem

Related: DeFi Yield Farming Aggregator APY.Finance Raises $3.6M in Seed Funding

The launch of Uniswap’s governance token UNI on Sept. 16 was partly to tackle a long-existing issue for the venture capital-backed project: it is not 100% community-owned. After the decentralized exchange airdropped a share of its new governance token to everyone that had ever used it (up to Sept. 1), it received instant praise from both its users and the crypto community. However, as some took a deeper look at how UNI was distributed, they began to question just how much control the community will truly have.

Of the total supply of 1 billion UNI tokens, around 40% of them will eventually be allocated to team members, investors and advisors, according to a blog post on Uniswap’s website. That leaves 60% to the community.

While 60% may not sound too bad, the people behind UNII see a big hurdle in the fact that 1% and 4% of UNI total supply are required, respectively, to submit a governance proposal and to vote “yes” to reach quorum.

“We are all minions in terms of voting power,” according to a pre-launched page by the anonymous group, as they explained why a union within the Uniswap’s community is very much needed.

Uniswap is not the only decentralized finance (DeFi) project that uses such governance parameters. DeFi lending protocol Compound also requires 1% of its governance token COMP to submit a governance proposal.

UNII vs. SushiSwap, SashimiSwap and others

DeFi is still in its nascent stage, with many retail investors trading in this market. Returns for this unorganized group of people are impacted most by decisions made in DeFi communities on a decentralized basis. 

SushiSwap’s vampire attack on Uniswap became an immediate success as the popular fork touted its full decentralization since its birth. It was able to lure away more than $800 million of crypto assets from Uniswap.

As the so-called “Weird DeFi” projects continue to grow (for example, SashimiSwap) and take liquidity from their competitors, the group behind the UNII initiative is claiming an alternative approach to unite users while at the same time promising to keep the sustainability of the DeFi ecosystem.

“Form a governance community of UNI,” the initiative’s website wrote. “United, we stand, divided, we fall.”

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Silk Road programmer Michael R. Weigand pleaded guilty Monday to concealing his involvement in the once-sprawling darknet market’s backend operations.

• Prosecutors alleged that Weigand, 56, worked to shore up Silk Road’s vulnerabilities during its heyday and provided tech advice to site leadership. He also removed evidence from a London flat in 2013, prosecutors claimed.
• But with the infamous bazaar for illicit drugs and illegal services now nearly 7 years’ defunct, prosecutors in the hard-charging Southern District of New York chose to hit Weigand for the cover-up, instead of the crime.
• Weigand admitted that he lied to IRS and FBI special agents in January 2019 about his role on Silk Road, his pseudonym, his use of bitcoin on the site and his interactions with convicted Silk Road operator Ross Ulbricht’s online identity, Dread Pirate Roberts.
• The charge comes with a maximum statutory five-year prison term. Sentencing is scheduled for mid-December. No matter the outcome, it will fall well short of Ulbricht's life sentence.
• The charges may serve to illustrate how bitcoin’s enduring public ledger makes hiding one’s transaction history from law enforcement officials nearly impossible, even if they begin their search years after the transactions in question take place.

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Canadian cryptocurrency miner Bitfarms Ltd. will lease 2,000 WhatsMiner M31S rigs from market-maker BlockFills as the Bitcoin network’s ever-increasing difficulty rate turns up the heat on mining outfits.

• Bitfarms’ new equipment will add 360 petahashes of mining power by the end of October, according to a press release.
• The lease, set to last 24 months, comes with a 9.5% interest rate as well as a purchase option.
• BlockFills may furnish Bitfarms with even more miners by the the end of 2020, depending on equipment availability. The pair signed a non-binding letter of intent for up to 7,000 additional miners.
• Last quarter, Bitfarms mined 815 bitcoins – a high point among publicly traded miners. But it also lost $3.7 million as the entire mining market adjusted to COVID-19 challenges as well as the ramifications of the bitcoin halving.
• Bitcoin’s price recovery, repeated breaks above the $10,000 and $11,000 thresholds, and record-high network difficulty are forcing mining companies around the world to bulk up their computing power.

See also: Why Debt Financing May Be a Double-Edged Sword for Bitcoin Miner Bitfarms

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Bitcoin and ether both dropped Monday as global markets conducted a selling session.

• Bitcoin (BTC) trading around $10,492 as of 20:00 UTC (4 p.m. EDT). Slipping 3.6% over the previous 24 hours.
• Bitcoin’s 24-hour range: $10,179-$10,994.
• BTC below its 10-day and 50-day moving averages, a bearish signal for market technicians.

Bitcoin price fell sharply Monday, with a lengthy sell-off session starting around 07:00 UTC (12:00 a.m. EDT) and dropping to as low as $10,179 on spot exchanges such as Coinbase before gaining to $10,492 as of press time. 

“The market is still positioned short with persistent negative funding over the past month and under-allocation to BTC,” said Cindy Leow, portfolio manager for 256 Capital Partners, a market-neutral trading firm. ”At this stage, sellers are still in control of the market.”

Related: Bitcoin and Ether in Biggest Slump Since Sept. 3 as Stock Markets Sink

As bitcoin tumbled Monday, sell liquidations on derivatives exchange BitMEX picked up, putting pressure on price. In fact, over the past 24 hours, BitMEX liquidated over $34 million in long positions, the crypto equivalent of a margin call.

Darius Sit of crypto quant trading firm QCP Capital said the global equities markets are not faring well to start the week. “Stocks are getting hit,” Sit said. indeed, major indexes are all in the red Monday:

• In Asia the Nikkei 225 is closed for holiday Monday. Hong Kong’s Hang Seng slipped 2% as HSBC dropped 4.5% Tencent fell 1.7%.
• In Europe the FTSE 100 ended the day in the red 3.3% as potential fresh coronavirus restrictions in the UK led to major selling.
• In the United States the S&P 500 fell 1.8% as concerns about the coronavirus and uncertainty regarding fresh US government stimulus pushed the index lower.

Michael Rabkin, of crypto liquidity and market making firm DV Chain, said markets across the board are in “risk-off” mode, when asset holders unload for safer investments in the face of broader economic tumult. “Governments continue to print money and questions are left unanswered due to covid,” said Rabkin. “We’re seeing risk-off across all the markets right now which is having a direct effect on crypto.”

Read More: Bitcoin and Ether in Biggest Slump Since Sept. 3 as Stock Markets Sink

Related: Chamath Palihapitiya’s Social Capital Holds Bitcoin From 2013 Amid Talk of Public Listing

QCP Capital noted in its Monday investor letter that both bitcoin and ether were riding high just last week – ether hit $394 September 17, bitcoin topped $11,178 September 19.

Monday’s sell-off may prove to be an assessment of crypto’s resiliency, according to QCP. “We’ve had a retest of $11,000 in bitcoin and almost $400 in ether,” QCP’s note stated. “We think this week and next is where the rubber meets the road.”

Ether options shift on price drop

The second largest cryptocurrency by market capitalization, ether (ETH), was down Monday trading around $345 and slipping 7.2% in 24 hours as of 20:00 UTC (4:00 p.m. EDT). 

Read More: Did Ethereum Learn Anything From the $55M DAO Attack?

Implied volatility, the market’s expectation of ether’s future price movement, has dipped below realized volatility, ether’s current movement based on historical data. It’s a shift in the ether options market not seen since July.

William Purdy, an options trader and founder of analysis firm PurdyAlerts, said ether’s price descent, hitting as low as $330, Monday, is helping fuel the switch. “This recent discrepancy in implied volatility and realized volatility is due to the options market following the underlying asset price momentum in the short-term,” he said. 

Purdy said this means options premiums are likely undervalued and buyers can take advantage – at least for the time being. “Implied volatility will likely increase again when options buyers seek to close their positions,” Purdy added.

Other markets

Digital assets on the CoinDesk 20 are mostly in the red Monday. Two notable winners as of 20:00 UTC (4:00 p.m. EDT):

• orchid (OXT) + 28%
• ethereum classic (ETC) + 0.14%

Notable losers as of 20:00 UTC (4:00 p.m. EDT):

• chainlink (LINK) – 7.9%
• tezos (XTZ) – 7.9%
• zcash (ZEC) – 7%

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Commodities:

• Oil is down 3.1%. Price per barrel of West Texas Intermediate crude: $39.60.
• Gold was in the red 2% and at $1,910 as of press time.

Treasurys:

• U.S. Treasury bond yields slipped Monday. Yields, which move in the opposite direction as price, were down most on the 10-year, in the red 3.5%.

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