CoinDesk Crypto

Japanese financial firm SBI Holdings is launching trading for a type of cryptocurrency derivative called contracts for difference, or CFDs.

• Already live on its foreign exchange trading platform, SBI FX Trade, the contracts come in bitcoin (BTC), ether (ETH) and XRP flavors.
• The firm said in an announcement Friday that traders can pair the crypto assets with both the U.S. dollar and the yen, meaning there are six CFD choices in total.
• Orders can be placed from around 15 yen ($0.14) to a maximum open position of 500 bitcoin ($5.73 million at press time), for the BTC/JPY pair.
• SBI Holdings said it also has a mobile app for the CFD trading and orders can be placed around the clock on any day of the week.
• Users can make use of leverage – in effect, borrowing from the platform – to make trades.
• CFDs are very short-term contracts that pay the difference in price between the open and closing trades.
• They are not without controversy and a U.K. financial regulator, the Financial Conduct Authority (FCA), has said it plans to ban these types of derivatives for retail traders.
• The FCA said last year that such financial products are “ill-suited” to retail investors “who cannot reliably assess the value and risks of derivatives or ETNs that reference certain cryptoassets.”
• SBI Holdings specifically said in its announcement it will be catering to both beginner and expert traders.

Also read: Financial Firm SBI Holdings to Offer XRP Cryptocurrency as Shareholders’ Benefit

Related Stories

• Binance’s Bitcoin ‘Bid-Ask Spreads’ Tighten as Cryptocurrency Markets Mature
• DeFi Studio Framework Labs Leaves Stealth Mode With $8M in Seed Funding
• Prosecutors Detail ‘Shadow Bank’ Accounts in Fowler Crypto Case
• US Files Suit Against Crypto Accounts Tied to North Korea

(RTTNews) - Elon Musk, CEO of Electric car maker Tesla, Inc., confirmed reports that concluded Tesla as the un-named U.S. company in an announcement made by the U.S. Department of Justice (DoJ) about a thwarted cyberattack.

Price point

Bitcoin was rising along with gold and U.S. stock futures early Friday as traders reacted to Federal Reserve Chair Jerome Powell’s plan to let inflation run hot in coming years as the economy heals from the coronavirus-induced recession. 

The largest cryptocurrency, seen by some investors as a hedge against inflation, changed hands around $11,451, staying in the range between $10,900 and $12,400, where it has been stuck since late July. 

In Asian markets, the Japanese yen jumped on haven buying after Prime Minister Shinzo Abe, who has pursued inflation-boosting policies, said he would resign due to an illness. 

Related: Bitcoin, Gold Recover After Jerome Powell Speech Shakes Markets

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

Market moves

Getting in and out of a large bitcoin trade on cryptocurrency exchanges like Binance or BitMEX isn’t costing as much as it used to. That might be a healthy sign that digital-asset markets are maturing. 

At Binance, the world’s biggest cryptocurrency exchange by trading volume, the daily average spread between buy and sell orders on bitcoin futures for $10 million quote size declined to a record low of 0.25% on Monday, according to data provided by research firm Skew. The spread, which typically narrows as an exchange’s order book depth increases, spiked to 7.95% during the March crash but dropped shortly after. It has been in a declining trend ever since.

The so-called bid/offer spread is the difference between the best available price to sell or buy something in a market. It essentially represents liquidity – the degree to which an asset can be quickly bought or sold on a marketplace at stable prices. 

Related: Winklevoss Brothers Say Bitcoin Could Reach $500K as the ‘Only’ Long-Term Inflation Hedge

A narrower spread implies a deeper market where there is sufficient volume of open orders  so buyers and sellers can execute a trade without causing a big change in the price. That’s in contrast to a weak liquidity environment, where large orders tend to move the price, increasing the cost of executing trades, and deterring traders – especially institutions – and, in turn, causing a further decline in liquidity. 

Binance and BitMEX offering record low spread on a $10 million quote is a healthy market development, according to Denis Vinokourov, head of research at London-based crypto prime broker Bequant. 

“The tighter the spread, the deeper the order book, the more the market is able to withstand shocks [price volatility],” Vinokourov told CoinDesk in a Telegram chat.

Bitcoin watch

Bitcoin and gold are reversing losses seen on Thursday following Federal Reserve’s (Fed) announcement of a more relaxed approach to fighting inflation. 

• The top cryptocurrency has recovered to levels above $11,450 on Friday, erasing nearly 70% of the post-Fed decline from $11,594 to $11,141, according to CoinDesk’s Bitcoin Price Index. 
• Gold, too, has risen back to $1,960, having dropped from $1,976 to $1,910 following Powell's inflation speech, as per data source  TradingView. 
• Both assets fell on Thursday, as the U.S. dollar gained ground despite the Fed unveiling an aggressive inflation strategy. 
• The greenback, however, is facing renewed selling pressure at press time.
• The dollar index, which gauges the greenback versus a basket of its main competitors, is currently trading at nine-day lows near 92.35, representing a 0.68% decline on the day. 
• “Powell’s speech suggests that there is no end in sight [for easy monetary policy]. In parallel, safe havens or dis-inflationary assets continue to offer investors an alternative from playing that central bank manipulated game, bitcoin among them,” John Kramer, trader at GSR told CoinDesk in a Telegram chat. 
• “Powell has shown that there is ZERO tolerance for deflation so they will do ANYTHING to stop it, and that is good for the two hardest assets – gold and bitcoin,” Raoul Pal, founder and CEO of Global Macro Investor and Real Vision Group tweeted early Friday. 
• Put simply, the speech strengthened bitcoin’s long-term bullish case.

Four-hour chart

• While bitcoin has regained some poise, it has yet to cross the descending trendline hurdle, as seen above. 
• A break higher would imply an end of the pullback from the Aug. 17 highs above $12,400.
• On the downside, $11,100 is crucial support. That area around that level has consistently restricted losses over the past two weeks. 

– Omkar Godbole

Token watch

Polkadot (DOT): With “protocol of protocols” weeks away from release of bridge to Ethereum blockchain, token’s market cap tops $5 billion, now in top 10 of all cryptocurrencies. 

Analogs The latest on the economy and traditional finance

Selected commentary on Fed Chair Jerome Powell’s Jackson Hole speech Thursday:

• Matt Blom, Diginex: “The initial market reaction was positive, but now the real fun begins. If stocks head south, the Fed will step up the printing machines.”
• Ian Shepherdson, Pantheon: “Powell and his colleagues have given themselves significantly more room to maintain zero rates and a swollen balance sheet over the next couple of years.”
• Mati Greenspan, Quantum Economics: “If their intention was to cool down the markets, then they failed miserably.”
• Bank of America: “Price action in the foreign currency market today reinforced to us that Powell’s speech marked no revolutionary policy change but rather a shift that, to an extent, has already been the Fed’s de facto approach for some time.”
• Simon Peters, eToro: “With interest rates not looking to move any time in the near future, the Fed’s new monetary policy could impact savers as they hold potentially fruitless investments such as fixed income assets.”
• QCP Capital: “Powell’s backpedaling and fuzzy inflation framework has disappointed the market that was hoping for a formalization of inflation policy in this speech itself.”

What’s hot

Bitcoin miners are hanging onto their holdings, possibly a sign of optimism that the cryptocurrency’s price rally will continue (CoinDesk)

Digital Currency Group (CoinDesk’s parent company) to put $100M into bitcoin mining (CoinDesk) 

Voyager to Pay Interest on DeFi Tokens to Gain Brokerage Clients (CoinDesk)

Critical software bug leaves 13% of Ethereum nodes useless (CoinDesk)

Turns out crypto might be the perfect asset for quant trading (CoinDesk Opinion)

Crypto lender BlockFi to use CF Benchmarks to value customer deposits and collateral (CoinDesk)

Inflation-Resistant Portfolio? No problem, here’s 3 assets to help you do that.(Hacker Noon)

Tweet of the day Related Stories

• Binance’s Bitcoin ‘Bid-Ask Spreads’ Tighten as Cryptocurrency Markets Mature
• Wasabi Wallet Is Revamping Its CoinJoin Design to Allow Bitcoin Mixing With Differing Values

Bitcoin and gold are reversing losses seen on Thursday after the Federal Reserve’s announcement of a more relaxed approach to tackling inflation sent a tremor across the markets.

• The top cryptocurrency rebounded back above $11,450 on Friday, erasing nearly 70% of the decline from $11,594 to $11,141 that occurred after a speech by Fed Chairman Jerome Powell setting out a new direction for the central bank.
• Gold, too, has risen back to $1,960, having dropped from $1,976 to $1,910 after the event, as per data source TradingView.
• The U.S. dollar gained ground Thursday, despite Powell unveiling a strategy to allow inflation to run higher than the 2% target before raising interest rates.
• However, USD is facing renewed selling pressure at press time.
• The dollar index, which gauges the greenback versus a basket of its main competitors, is currently trading at nine-day lows near 92.35, representing a 0.68% decline on the day.
• The Fed’s new approach means interest rates are likely to remain low for a prolonged period of time – a bullish development for bitcoin and gold, according to experts.
• “Powell’s speech suggests that there is no end in sight [for the Fed’s easy money policy],” John Kramer, trader at GSR, told CoinDesk in a Telegram chat.
• “Powell has shown that there is zero tolerance for deflation so they will do anything to stop it, and that is good for the two hardest assets – gold and bitcoin,” Raoul Pal, founder and CEO of Global Macro Investor and Real Vision Group, tweeted early Friday.
• Put simply, Powell’s speech looks to have strengthened bitcoin’s long-term bullish case.

• While bitcoin has regained some poise, it has yet to cross the descending trendline hurdle, as seen above.
• A break higher would imply an end of the pullback from the Aug. 17 highs above $12,400.
• On the downside, $11,100 is crucial support. That area around that level has consistently restricted losses over the past two weeks.

Also read: Bitcoin Pops and Drops After Powell Introduces Average Inflation Targeting

Related Stories

• First Mover: Binance’s Shrinking Trading Spreads and Bitcoin’s Jackson Hole Fizzle
• Winklevoss Brothers Say Bitcoin Could Reach $500K as the ‘Only’ Long-Term Inflation Hedge
• Binance’s Bitcoin ‘Bid-Ask Spreads’ Tighten as Cryptocurrency Markets Mature
• Wasabi Wallet Is Revamping Its CoinJoin Design to Allow Bitcoin Mixing With Differing Values

Tyler and Cameron Winklevoss, noted internet entrepreneurs and crypto billionaires, believe weakness in the U.S. financial system and other factors mean bitcoin could one day reach $500,000 per coin.

• In a post on the Winklevoss Capital blog Thursday, the two set out how, while historically strong, there are now “fundamental problems” with gold, oil, and the U.S. dollar as stores of value.
• The twins point to government money printing in the trillions and borrowing between government departments (as the Federal Reserve buys billions in debt from the Treasury), as factors that will ultimately lead to inflation.
• “Even before COVID-19, and despite the longest bull run in U.S. economic history, the government was spending money like a drunken sailor, cutting taxes like Crazy Eddie, and printing money like a banana republic,” the brothers write.
• Further, the arrival of the coronavirus epidemic is also expected to raise the U.S. debt-to-GDP ratio more this year than over the last 10 years.
• The available solutions to this debt – a soft default, austerity or a hard default – are not pretty, according to the post, and would all further bring inflationary pressure and other problems.
• “While COVID has hurled us further down the path towards a soft default, the greater culprit is the U.S. government’s permanent and unapologetic policy shift towards a debt-monetization model to finance its operations,” the brothers claim.
• Moving on, the post addresses that both oil and gold have issues too.
• Oil suffers from the fact that there is more supply than had been realized with the advent of fracking, while COVID has made it clear that the industry is vulnerable to “demand shocks.”
• Demand will also suffer from pressures to move away from carbon-based energy to more environmentally-friendly alternatives, they predict.
• And gold… The Winklevoss’ argument goes that, while currently a reliable store of value and” the classic inflation hedge,” commercial asteroid mining threatens that status in the future.
• More prosaically, the precious metal also suffers from being notoriously difficult to transport, especially during a pandemic.
• Bitcoin, aka “native internet money,” fixes such issues, they argue.
• “Bitcoin is not just a scarce commodity, it’s the only known commodity in the universe that has a deterministic and fixed supply,” per the article.
• This means the cryptocurrency is not prone to supply shocks that gold or other commodities might face.
• With other advantages like ease of portability and strong security, bitcoin is 10 times “better at being gold than gold,” they write.
• Since inception, bitcoin has advanced rapidly into gold’s territory and, if the current trajectory continues, “the bull case scenario for bitcoin is that it is undervalued by a multiple of 45.”
• This could mean a bitcoin price in the region of $500,000 per unit, they say, though no time frame is provided.
• Going further, the Winklevoss brothers suggest a price of $600,000 is possible if bitcoin should replace some of the $11.7 trillion in governments’ foreign exchange reserves.
• “Bitcoin is ultimately the only long-term protection against inflation,” they write.
• The cryptocurrency is trading at around $11,430 at press time.

Also read: Binance’s Bitcoin ‘Bid-Ask Spreads’ Tighten as Cryptocurrency Markets Mature

Related Stories

• Bitcoin, Gold Recover After Jerome Powell Speech Shakes Markets
• Binance’s Bitcoin ‘Bid-Ask Spreads’ Tighten as Cryptocurrency Markets Mature
• Wasabi Wallet Is Revamping Its CoinJoin Design to Allow Bitcoin Mixing With Differing Values
• Market Wrap: Bitcoin’s Powell-Induced Price Swing; Ethereum Still High on Gas

Getting in and out of a large bitcoin trade on cryptocurrency exchanges like Binance or BitMEX isn’t costing as much as it used to. That might be a healthy sign that digital-asset markets are maturing. 

At Binance, the world’s biggest cryptocurrency exchange by trading volume, the daily average spread between buy and sell orders on bitcoin futures for $10 million quote size declined to a record low of 0.25% on Monday, according to data provided by research firm Skew. The spread, which typically narrows as an exchange’s order book depth increases, spiked to 7.95% during the March crash but dropped shortly after. It has been in a declining trend ever since. 

The so-called bid/offer spread is the difference between the best available price to sell or buy something in a market. It essentially represents liquidity – the degree to which an asset can be quickly bought or sold on a marketplace at stable prices. 

Related: Bitcoin, Gold Recover After Jerome Powell Speech Shakes Markets

A narrower spread implies a deeper market where there is sufficient volume of open orders  so buyers and sellers can execute a trade without causing a big change in the price. That’s in contrast to a weak liquidity environment, where large orders tend to move the price, increasing the cost of executing trades, and deterring traders – especially institutions – and, in turn, causing a further decline in liquidity. 

Binance and BitMEX offering record low spread on a $10 million quote is a healthy market development, according to Denis Vinokourov, head of research at London-based crypto prime broker Bequant. 

“The tighter the spread, the deeper the order book, the more the market is able to withstand shocks [price volatility],” Vinokourov told CoinDesk in a Telegram chat. 

BitMEX and Binance aren’t alone as other exchanges have also witnessed a steady drop in spreads over the past five months. 

Related: Winklevoss Brothers Say Bitcoin Could Reach $500K as the ‘Only’ Long-Term Inflation Hedge

Spreads on Deribit and FTX have also declined from March highs, but still remain considerably higher than those on BitMEX and Binance. 

Bitcoin’s price rally may be one possible explanation for the exchange-wide decline in spreads. 

“Higher liquidity is largely a function of prices being higher,” said Richard Rosenblum, co-founder at GSR, a digital assets trading firm. “At the $12,000 price range, if you have the same amount of tokens on the bid/offer that’s three times as many dollars as $4,000 BTC, resulting in much tighter spreads.” 

Spread compressions in several markets

The bid/offer spread on perpetuals (futures without expiry) listed on BitMEX fell to a lifetime low of 0.17% on July 18 and was last seen at 0.25%.

Binance consistently offered a higher spread than BitMEX before the March crash. Since then, however, the spreads have converged and pretty much moved in tandem. 

“Bitmex’s lead has reduced over other exchanges, largely due to reputational risk, following a raft of outages and tech issues earlier in the year,” said Vinokourov. 

Seychelles-based BitMEX suffered an aggressive DDoS attack on March 13, which delayed and prevented requests to the platform. The outage was widely blamed for bolstering price volatility. It suffered another outage in May, but that did not create panic in the market. 

Sign of healthier market

An important driver of order book depth or liquidity is the rate of change in prices. In times of extreme price volatility, spreads tend to widen and exchanges’ ability to execute large orders is reduced. 

For instance, the spread for a $10 million quote on BitMEX, one of the largest derivatives exchanges by open interest, rose to 4.07% from 1.3% on March 13 – the day when bitcoin’s price crashed by 40%. Similar spikes were observed on other exchanges in mid-March. 

Exchanges that are perceived to lack order book depth are often worst hit during times of panic. That’s because both buyers and sellers fear that their trade will distort prices on an illiquid exchange. 

Sellers, therefore, leave offers at a discount to the fair price and buyers leave orders at a premium. That leads to further widening of the bid/offer spread and exaggerated price moves. In other words, weak liquidity begets illiquidity. 

Thus, the record low bid/offer spreads on Binance and BitMEX are a welcome development; the exchanges have a greater ability to face volatility shocks than they did before the March crash.  

Related Stories

• Wasabi Wallet Is Revamping Its CoinJoin Design to Allow Bitcoin Mixing With Differing Values
• Market Wrap: Bitcoin’s Powell-Induced Price Swing; Ethereum Still High on Gas

Framework Labs – a new “fintech studio” that incubates and supports projects in the decentralized finance (DeFi) space – has stepped out of the shadows with the announcement of a successful seed funding round.

• Announced Thursday, the $8 million dollar investment was led by Station 13, a sister entity to sports media and technology holding company JDS Sports.
• Framework Labs sets out to be a “full stack partner,” helping govern blockchain protocols, providing liquidity to decentralized exchanges, bootstrapping startups and building consumer apps, all with connections to DeFi.
• The firm – launched by the founders of DeFi investment fund Framework Ventures – claims to be the foremost staker on Synthetix and a key node operator providing data for Chainlink’s oracles.
• “DeFi is not a spectator sport. Active participation, governance, building of consumer products, and advanced trading strategies are all part of the complex process of making a DeFi protocol successful,” said Framework Labs co-founder Vance Spencer in a press release.
• The studio also claims to be the largest liquidity provider on the decentralized exchange (DEX) Uniswap.
• The seed funding will go towards expanding the firm’s research, trading and engineering teams, providing further liquidity to non-custodial DEXs and incubating startups among other pursuits.

See also: Multi-Chain DeFi Protocol Raises $750K in Token Sale With Framework Ventures

Related Stories

• Prosecutors Detail ‘Shadow Bank’ Accounts in Fowler Crypto Case
• US Files Suit Against Crypto Accounts Tied to North Korea
• Voyager to Pay Interest on DeFi Tokens to Gain Brokerage Clients
• ShapeShift Accuses Former Employee of Stealing $900K in Bitcoin

Over 20 bitcoin mining farms in China’s Inner Mongolia have been stripped of electricity perks after a clampdown by the local government.

A document issued by the Department of Industrial and Information Technology of the Inner Mongolia Autonomous Region on Aug. 24, obtained by CoinDesk, shows the government agency has required a local electricity trade company to disqualify 21 bitcoin mining farms from participating in energy trading.

Chinese crypto news source Wu Blockchain first reported the document, but did not provide the names of the farms on the list. Notable entities include two subsidiaries of bitcoin mining giant Bitmain in Inner Mongolia and another subsidiary of mining equipment manufacturer Ebang.

Related: Miners’ Bitcoin Holdings Reach Two-Year High to Almost 2M

Also on the list is the Inner Mongolia Branch of China Telecom, based in the city of Ordos. That suggests the telecoms giant may also be involved in cryptocurrency mining activities in the region.

The suspension means these mining farms will no longer be able to enjoy electricity discounts that come from a liquid energy marketplace provided by the Inner Mongolia Power Group, a state-owned energy trading firm in the region.

Kevin Pan, CEO and co-founder of China-based mining pool PoolIn, said the policy will have some impact on the industry, at least in the short term. The electricity for these farms will likely rise by 0.1 yuan, or $0.014, per kilowatt-hour (kWh), he said.

The current electricity cost for mining farms in the region is around 0.26–0.28 yuan per kWh ($0.037 to $0.040). With the new policy change, the upper side of the range could reach as high as 0.38 yuan per kWh ($0.054), Pan said.

Related: NYSE Can Allow Firms to Raise Funding Through Direct Listings, Says SEC

Such a seemingly negligible difference would, in fact, mean a significant increase of operational costs for energy-intensive crypto mining activities.

If a mining farm is running at a full capacity of just 10,000 kWh, considered relatively small scale in the industry, an increase of $0.014 per kWh means the farm will incur an additional $3,360 in operational costs per day.

The document, addressed to Inner Mongolia Power Group, said the suspension notice came after the government agency conducted on-site inspections at over 30 big data and cloud computing companies in the region and discovered 21 of them are actually crypto mining farms.

The region-wide inspections started late last year, as CoinDesk reported at the time. The aim was to close down bitcoin mining operations that were without proper business registrations. They further targeted firms attempting to get electricity perks by disguising themselves as eligible entities.

According to the Bitcoin Electricity Consumption Index compiled by the Cambridge University, China had over 65% of the global bitcoin mining computing power as of April this year. Inner Mongolia accounted for 8% of the network’s total at the time.

Read more: China’s Inner Mongolia to Shutter ‘Illegal’ Bitcoin Miners by October

Related Stories

• Brazilian Lawmaker Proposes Crypto Regulations for a Country Devoid of Any
• UK Watchdog Eyes Extension of Money Laundering Risk Reporting to Crypto Firms

A group of people pushed a man into a gray minivan on a dark street. The man yelled, “Help! Help! No!” and pushed against the van. Passersby shouted, “Let him go!” and tried to stop the van. The man was finally stuffed inside and the van left. 

This blurry video, apparently filmed by an unidentified witness Wednesday night in Kyiv, Ukraine, and circulated by local news publications Thursday morning, might mark a new chapter in the story of Bitsonar, a crypto investment firm that raised millions of dollars from investors in the U.S. and Europe, which they are now unable to access.

The Ukrainian media wrote that the man driven away in the minivan was ex-Bitsonar employee Yaroslav Shtadchenko. Shtadchenko’s wife Julia confirmed to CoinDesk her husband appeared in the video and had gone missing last night around 11 p.m. local time as he was coming home from work. She also said she found her husband’s personal belongings on the street after her neighbors told her he was kidnapped. 

Related: CFTC Denies FOIA Request for Bitfinex and Tether Subpoenas

The harrowing incident highlights the proliferation of risky investment schemes and dubious operators in the crypto industry, but also blockchain technology’s potential to help track missing funds.

Complaint to FBI in the works

According to Julia Shtadchenko, before going missing, Yaroslav Shtadchenko called Bistonar’s CEO, Marius Ziubka, and told him he was going to file complaints about Bitsonar to law enforcement in different countries, including the Federal Bureau of Investigation in the U.S. Then, on Wednesday, the lawyer of Bitsonar’s founder called Shtadchenko and suggested “settling the conflict peacefully,” his wife said. 

After that, Yaroslav Shtadchenko was kidnapped on his way home. Julia Shtadchenko said she filed a police report Wednesday night but hadn’t heard any updates on her husband’s whereabouts.

In July, Yaroslav Shtadchenko gave an interview to the Russian crypto news publication Forklog under the pseudonym Jan Novak, saying that Bitsonar was founded by former Ukrainian government clerk Alexander Tovstenko, and Shtadchenko worked for the company as a project manager. Both Forklog and Shtadchenko’s wife confirmed Shtadchenko used that pseudonym. 

Related: US, Canadian Regulators Launch Dozens of Crypto Scam Probes

In the interview, Shtadchenko claimed that Tovstenko stopped withdrawals from the platform in the beginning of 2020 and then got away with the money of investors. 

Shtadchenko told CoinDesk in July that Bitsonar received about $2.5 million from investors across the globe. On Aug. 6, the website went down and users lost access to their accounts. 

Read more: A Former Beauty Queen Raised $12M to ‘Revolutionize’ Cannabis. The Courts Can’t Find Her

CoinDesk was contacted by 11 people saying they haven’t been able to withdraw their money from Bitsonar since February, and one investor who couldn’t get his crypto out since May. According to them, Bitsonar would explain withdrawals were paused because of an audit, but the withdrawals were never resumed. According to the analysis of Bitsonar’s bitcoin wallets by CoinDesk, Bitsonar’s treasury is now empty. 

The users who spoke to CoinDesk are from the U.S., Canada, U.K., Denmark, Norway, Netherland, Finland and other countries. Some of them said they would like to pursue legal action but didn’t know where to start. According to Julia Shtadchenko, her husband was ready to file complaints himself, and had the drafts ready. She shared the draft of the complaint to the FBI with CoinDesk.

Legitimate-looking business 

Bitsonar looked credible, at least in the beginning. The project advertised itself as a startup that used trading bots to earn high profits on investors’ crypto. Pavel Lerner, a well-known crypto adviser with Ukrainian origins, worked with Bitsonar, which gave the enterprise additional credibility. 

Popular YouTube channels dedicated to crypto trading advertised Bitsonar, including MMCrypto, CryptoTV, CryptoJoker, and Ivan On Tech (he later reportedly deleted the videos).

Read more: YouTube’s Whac-a-Mole Approach to Crypto Scam Ads Remains a Problem

Lerner himself told CoinDesk he was introduced to the Bitsonar team by his friends and was hired in May 2019 to set up trading bots. “We launched bots for trading on Huobi and Bitfinex,” he said. Lerner said he was fired from Bitsonar in November.

“I’m not sure what was on their minds and how they raised money. They fired me because they were not satisfied with the bots’ profitability,” Lerner added. 

Bitsonar OÜ was registered in Estonia and had obtained a local crypto business license, according to the document published by Forklog. “I trusted Estonia (good startup scene) and licenses too much,” one of Bitsonar’s investors from Finland, who asked not to be named, told CoinDesk.

According to Shtadchenko’s July interview in Forklog, the company had been working normally throughout the summer and fall of 2019. But in December 2019, the team was told by Tovstenko to prevent clients from withdrawing funds by any means, Shtadchenko said. 

Then Tovstenko refused to pay annual bonuses to the Bitsonar employees and flew to Dubai to celebrate the New Year, Shtadchenko told Forklog. Later, Tovstenko posted a YouTube video of himself partying, he added.

There was no mention of Tovstenko on the Bitsonar website, but apparently he took an active role in the operations. One of Bitsonar’s investors, Ukrainian entrepreneur Vladimir Chaika, told CoinDesk he personally met Tovstenko and gave him $100,000 in cash in exchange for the paper IOU and a promise of up to 11% monthly profits. He never got his money back, he said. Lerner said he met Tovstenko several times and thought he was either an investor or the founder of Bitsonar.

Yaroslav Shtadchenko said he used his access to Bitsonar’s website to publish information about Tovstenko, who he claimed ran away with the investors’ money. He also published Tovstenko’s contact information, including email address, Telegram handles, Facebook and Instagram profiles, and mobile phones. 

CoinDesk tried all of the above but got no response. Two of the Telegram handles listed by Shtadchenko, @alexsky888 and @SkyAlex88, received the message but did not respond. One of the phone numbers belongs to a man who said his family name is not Tovstenko but Kovalenko. 

‘Mom and pop’ investor story

How did investors from across the world get involved with a company set up by an unknown founder in Kyiv? One telling example is Eli Taylor, a 42-years old United Parcel Service (UPS) worker from Portland, Ore., in the Pacific Northwest.

One evening in January, Eli was sitting in his condo watching YouTube videos. He became an avid viewer of videos by crypto influencers talking about making money from bitcoin. They were analyzing charts, talking about price movements, showing how to use different platforms – and, of course, advertising their sponsors. They looked professional and smart, and Eli liked them.

At that time, some of those channels were also promoting Bitsonar. Until the end of January, Bitsonar offered a “Christmas special,” with extra perks for larger investors. Eli decided to give it a try. 

“The first thing you learn about crypto is, if it’s not your keys, it’s not your crypto. Never give out your crypto, unless you’re paying for something or you’re trading. And I broke that rule with Bitsonal, but it was because they were so seductive,” Eli told CoinDesk via a WhatsApp call.

He invested 5 BTC and 114 ETH, worth about $100,000 in today’s prices, in Bitsonar, he said, which was most of the crypto he had. Now, that money is probably gone forever.

Eli Taylor is still not out of the woods. Working at UPS allowed him to accrue some savings and make some investments. He started with stocks and invested via an online brokerage, then got into crypto in 2018 via the Robinhood app, which had just added crypto at the time.

He seized the moment to buy bitcoin during the price lows of summer 2018, when one bitcoin cost around $3,000, Eli said, but then sold a lot of it and bought altcoins, which then performed very badly. “If I just would have HODLed I would do well,” he said. 

“I was doing pretty well until the end of last year, we were having a little bull market,” Eli said. “But then there was a decline, and I just started just to play around and do my own thing and watch videos.” 

He added: 

“I was watching a lot of videos on YouTube, and you can learn more on YouTube than anywhere else, if you have your wits about it and you are careful, and you can use other people’s advice to do your own strategy.”

Read also: Apple Co-Founder Steve Wozniak Sues YouTube Over Bitcoin Giveaway Scams

People analyzing price charts looked smart and qualified – and a bunch of them were advertising Bitsonar. Some even showed how they deposited some crypto with Bitsonar. Plus, there was this Christmas special offer. Eli decided to jump in.

At first, it went pretty smoothly, he said. “The customer service was very helpful and proactive, and I was able to even close one of my investments and cash out on my profits. Very professional emails, detailed, they looked very honest. Very detailed, vivid explanation, and it was convincing.” 

Withdrawals worked for Eli until late May – unlike most users, who couldn’t take their money out of Bitsonar since February. Eli was able to pull out about $5,000 worth of crypto out of Bitsonar before May, he said. Shtadchenko told CoinDesk that Eli was the largest investor in Bitsonar.

Following the coins

Bitsonar users provided CoinDesk with multiple bitcoin addresses that they used to send bitcoin to Bitsonar, along with the addresses Bitsonar sent funds from when users withdrew. All those addresses are now empty. 

According to CoinDesk analysis using Crystal blockchain-sleuthing software, there have been 564 bitcoin addresses associated with Bitsonar. All of them are now empty. The entire cluster of addresses received nearly 115.5 bitcoin, which is more than $1.3 million at the current price. 

According to Shtadchenko, Bitsonar accumulated up to $2.5 million in crypto, and more than half of it, up to $1.5 million, came from the retail investors who saw the promotion of Bitsonar by bloggers. About $650 million came from large investors who handed over physical cash.

Read more: Data Shows Millions Leaving Crypto Wallets Tied to Long-Troubled Exchange

To be sure, blockchain analytics tools like Crystal are never 100% precise and it’s hard to say if Bitsonar actually has anything left in its wallets. It’s also impossible to definitively confirm that all the addresses associated with Bitsonar in Crystal really belonged to Bitsonar, or that it’s a full list. 

“Given the pseudo-anonymous essence of most cryptocurrencies, blockchain analytics techniques (especially address clustering algorithms) have been mostly of a heuristic nature, meaning the results are obtained from probabilistic methods,” says Kyrylo Chykhradze of Crystal Blockchain.

Gaining 100% confidence in attributing bitcoin addresses to certain entities can only be done with off-chain insights, which means knowing exactly who is the owner of a particular address in the real world, Chykhradze added. 

As of Thursday night, the fate on Bitsonar investors money, as well as Yaroslav Shtadchenko’s whereabouts, remain unknown. CoinDesk will monitor the situation. 

Related Stories

• Louisiana Officials Probe Staffers for Bitcoin Mining
• Report: CFTC Sends Subpoenas to Bitfinex, Tether

Privacy-focused Bitcoin software wallet Wasabi is getting a major protocol overhaul.

The Wasabi team is working on a new protocol design, dubbed WabiSabi, in a bid to improve the user experience and privacy guarantees of the wallet’s CoinJoin transactions. The major design change would allow users to coinjoin with different values than their peers, a first for the privacy-minded technology that could lead to new (and more flexible) use cases. Wasabi has been conceptualizing the design in a research group since the beginning of 2020 and has hired team members to work on the implementation.

Out with the old

Currently, Wasabi’s CoinJoin – a mixing protocol that, when used correctly, can obscure a bitcoin’s transaction history – relies on the ZeroLink protocol and blind signatures for mixing. Under this scheme, users must spend a like amount of bitcoin with other users in a mixing pool for the CoinJoin to work successfully; these like amounts are shuffled together in a pool, after which each user receives the same amount of bitcoin back in a way that doesn’t reveal their original input.

Related: Market Wrap: Bitcoin’s Powell-Induced Price Swing; Ethereum Still High on Gas

For this to work effectively, each user in a CoinJoin transaction must all input the same amount of bitcoin to the pool (e.g., 0.1, 0.01, etc) or the transaction could be easily deanonymized by blockchain surveillance. 

This current scheme also gives the CoinJoin’s coordinator a spyglass into a user’s information. Wasabi contractor and contributor Max Hillebrand told CoinDesk that a coordinator “could link the input to the change output, and could link multiple inputs to the same user.”

WabiSabi won’t disintermediate this coordinator role, seeing as it is necessary to make the protocol as frictionless and low-latency as possible. But the new design, according to Wasabi’s team, will keep the coordinator from tracing inputs to ensure “as few privacy leaks as reasonable,” Hillebrand said. 

In with the new

The new protocol is a technical casserole that combines Pedersen commitments and keyed-verification anonymous credentials (KVAC), a feature used for group messaging on the encrypted chat app Signal.

Related: Bitcoin Pops and Drops After Powell Introduces Average Inflation Targeting

If WabiSabi works in practice as it does in theory, then users will be able to spend any amount, irrespective of the value spent by their peers – an improvement over the current design that demands each input equals each other input in the pool.

Wasabi co-founder and lead researcher Adam Ficsor told CoinDesk this new design could unlock new CoinJoin use cases, like “CoinSwapping with CoinJoins and open lightning channels with CoinJoins.”

Hillebrand continued to highlight that this implementation will not be limited to self-spends, where users can only send a CoinJoin transaction to themselves, like under the current model. Rather, WabiSabi would allow them to make payments in a CoinJoin transaction to another user as well. This process would operate in the background if it runs the way Wasabi envisions it, opening up the possibility to make “every spend a CoinJoin.” 

“The [old] Zero Link CoinJoins are mainly a self-spend, so the same user owns the input and the output. It’s not a payment; it’s like you are shuffling the bitcoin from your left pocket to your right pocket. This increases blockspace usage and thus incurs more expensive mining fees for the sender and verification cost for all Bitcoin full node users.”

‘Testing, testing, testing’

Of course, the protocol’s development is still in its early stages, and Wasabi lead developer Lucas Ontivero told CoinDesk the white paper, which was unveiled to the Bitcoin developer mailing list in mid-June, is “still being peer reviewed.”

The challenge now is structuring the actual transaction design, which is a different technical feat from designing the protocol itself. As Hillebrand explained, the WabiSabi protocol design sets the parameters for data transmission between end users and coordinators, while the transaction structure of inputs and outputs is a different problem entirely.

This “transaction structure is not 100% ready,” Wasabi cryptographer István András Seres told CoinDesk over email. He added that “it is a huge design [requirement]” and that the team will want a “proper audit” before feeling comfortable releasing it to the public.

So a working WabiSabi implementation may be some time away, though the next step in development is creating a transaction scheme that retains the privacy promises of the underlying protocol. The team did not make any promises about when the tech could be ready, as “there are many open research questions and unknowns,” Hillebrand said.

As independent Bitcoin privacy researcher Yuval Kogman put it, the next, challenging step is “going from theory to practice” in a way that keeps the protocol as user friendly as possible to maximize its adoption. 

“On the cryptography side, the theory is well developed and understood. Anonymous credentials as a concept go a long way back and are fairly straightforward to apply…a big part of the challenge is UI/UX [user interface/user experience], and in order to take full advantage of the credential scheme and the transaction structure, we will have to find some creative solutions,” he said, adding that the team has “already come up with some pretty promising and interesting ideas.”

Related Stories

• Chainalysis Report Shows Healthy Crypto Usage in Venezuela
• First Mover: Monetary Challenges Aren’t Just Virtual as Fed’s Powell Returns to Jackson Hole

Reginald Fowler, the ex-Minnesota Vikings owner accused by U.S. prosecutors of running a cryptocurrency “shadow bank,” stashed funds over a global network of bank accounts, according to a filing today. Prosecutors say the funds are subject to forfeiture.

• A Thursday filing New York Federal District Court lists 56 bank accounts at Citibank, Bank of America, Caixa Bank, HSBC, Bank of the Philippine Islands, Deutsche Bank and others, together holding an unknown amount of Fowler’s and associated companies’ funds.
• Prosecutors have previously alleged those bank accounts to be the linchpin in a real estate investments scheme Fowler orchestrated as a front for under-the-table crypto exchange dealings.
• Fowler’s legal travails are of acute interest in the crypto community given his company’s apparent ties to $850 million in crypto gone missing from the Bitfinex exchange.
• Crypto Capital, the “shadow bank” Fowler is accused of running, held those funds in now-seized bank accounts, according to lawyers from Bitfinex.
• The filing was first reported by Decrypt.

Related Stories

• US Files Suit Against Crypto Accounts Tied to North Korea
• Voyager to Pay Interest on DeFi Tokens to Gain Brokerage Clients
• ShapeShift Accuses Former Employee of Stealing $900K in Bitcoin
• More Than 95% of Crypto Futures Volume Is in Asia: Report

U.S. prosecutors are going after 280 cryptocurrency accounts allegedly tied to North Korea’s multimillion-dollar crypto heists and laundering networks with a new forfeiture suit filed Thursday.

• Justice department investigators say they traced the accounts to two cryptocurrency exchange hacks allegedly perpetrated by North Korea’a state-sponsored cyber hackers last year.
• The first, last July, emptied $272,000 in Proton, PlayGame and IHT Real Estate Protocol alt-coins from an unnamed exchange, according to prosecutors.
• They further allege that a second hack stole $2.5 million in crypto from a U.S.-based exchange two months later.
• North Koreans sloshed those funds through Chinese over-the-counter cryptocurrency traders linked to previous crypto laundering operations, according to prosecutors.
• The forfeiture complaint offers a detailed glimpse at the financial gears keeping North Korea’s alleged crypto laundering machine moving.

Read more: North Korean Hacker Group Targeted Crypto Firm Using LinkedIn Ad: Cybersecurity Report

Related Stories

• Prosecutors Detail ‘Shadow Bank’ Accounts in Fowler Crypto Case
• Voyager to Pay Interest on DeFi Tokens to Gain Brokerage Clients
• ShapeShift Accuses Former Employee of Stealing $900K in Bitcoin
• More Than 95% of Crypto Futures Volume Is in Asia: Report

Bitcoin’s rally lost power after a speech by the Federal Reserve chief; Ethereum gas usage hits another record.

• Bitcoin (BTC) trading around $11,251 as of 20:00 UTC (4 p.m. ET). Slipping 1.8% over the previous 24 hours.
• Bitcoin’s 24-hour range: $11,130-$11,596
• BTC below its 10-day and 50-day moving averages, a bearish signal for market technicians.

Thursday featured a highly anticipated speech by Federal Reserve Chair Jerome Powell highlighting U.S. dollar inflation. During the hour Powell spoke, spot bitcoin hit as high as $11,596 on Coinbase. However, it lost steam and dropped $466 to $11,130 before New York traders were eating their lunch. 

Read More: Bitcoin Pops and Drops After Powell Introduces Average Inflation Targeting

Related: Wasabi Wallet Is Revamping Its CoinJoin Design to Allow Bitcoin Mixing With Differing Values

Singapore-based QCP Capital wrote in an investor note that Thursday’s failed bitcoin rally was a result of the substance, or lack thereof, of Powell’s comments. “Powell’s backpedaling and fuzzy inflation framework has disappointed the market that was hoping for a formalization of inflation policy in this speech itself,” the firm wrote.

The Fed inflation framework, which in Powell’s words is “flexible,” is a positive sign, said Neil Van Huis, director of institutional trading at crypto liquidity provider Blockfills. “Although the market reacted to Powell’s comments, I have to believe anyone really thinking hard about it knew this was a likely response by him,” said Van Huis. “One in the digital asset space might be smiling even more now, saying ‘this thing we are building might actually be working,’” he added. 

Read More: Commentary: Fed Chair Jerome Powell Details Inflation Target Changes

The bitcoin market may see more exciting action Friday, when over 66,400 BTC in open interest options are set to expire. 

Related: Everything You Need to Know About Jerome Powell’s Jackson Hole Speech

William Purdy, an options trader and founder of analysis firm PurdyAlerts, expects volatility to rise as a result. “What large open interest means is that there is more money on the line by institutions and retail with strong financial incentives to move prices to or away from certain prices as we move into that expiration,” he explained. 

“The two strikes with the greatest open interest are at $11,000 and $12,000,” said Purdy. He thinks spot prices could further gyrate because buyers of options would have gains minimized inside that $11,000-$12,000 range.

Options traders had a small scare when Deribit, the largest bitcoin options exchange, went offline during early European trading hours. At one point, Deribit warned it was possible it wouldn’t be back online in time to handle the 2,000 or so bitcoin options that were expiring Thursday. However, the problem was resolved a few hours later.   

Gas at all-time high

The second-largest cryptocurrency by market capitalization, ether (ETH), was down Thursday, trading around $378 and slipping 2% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: Buggy Code Release Knocks 13% of Ethereum Nodes Offline

Total gas, a unit of account for transactions and smart contract usage on the network, used on Ethereum per day hit 79,294,223,632 units on Sunday, an all-time high. Wednesday was the second-highest gas day, with 79,255,713,214 used.

Marc Fleury, CEO of crypto asset brokerage Two Prime, says Ethereum-based DeFi could be a disruptive game changer for finance in uncertain times, if the network’s congestion problems can be solved by the community. “DeFi lending and yield creation in the crypto space has the potential to disrupt traditional banking,” said Fleury. “Let’s not squander this opportunity.”

Read More: DCG to Invest $100M in Bitcoin Mining Venture

Other markets

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

• qtum (QTUM) – 11.8%
• 0x (ZRX) – 9.9%
• cardano (ADA) – 9.1%

Read More: ShapeShift Accuses Former Employee of Stealing $900K in Bitcoin

Equities:

• Asia’s Nikkei 225 closed in the red 0.35% as the index was dragged down by losses in the real estate and manufacturing sectors.
• Europe’s FTSE 100 ended the day down 0.75% as traders digested the Fed’s remarks on U.S. monetary policy.
• The United States’ S&P 500 gained 0.40% as investors boosted the index on the Fed's long-term view keeping interest rates low.

Read More: Fidelity’s Chief Strategist Starts Bitcoin Index Fund

Commodities: 

• Oil is down 1%. Price per barrel of West Texas Intermediate crude: $42.99.
• Gold was in the red 1.2% and at $1,929 as of press time.

Read More: More Than 95% of Crypto Futures Volume Is in Asia: Report

Treasurys:

• U.S. Treasury bond yields all climbed Thursday. Yields, which move in the opposite direction as price, were up most on the 10-year, in the green 8.7%.

Read More: Mathew D’Souza, Crypto Entrepreneur and Hedge Fund Manager, Dies

Related Stories

• Bitcoin Pops and Drops After Powell Introduces Average Inflation Targeting
• Chainalysis Report Shows Healthy Crypto Usage in Venezuela

Growing institutional interest is helping to drive a recent spike in volume on Bakkt, according to its president, Adam White. But the U.S.-regulated crypto derivatives exchange is holding out hope its dormant options platform will eventually gain traction.

Trading volumes for physically settled bitcoin futures on Bakkt rose to $134 million on Tuesday from a previous high of $132 million on July 28, according to crypto derivatives data firm Skew. Bakkt went live last September.

“The market recognizes the value that a regulated physically delivered bitcoin future offers for hedging and risk management and speculation,” White told CoinDesk in a phone interview on Aug. 26.

Related: Bitcoin Options Open Interest Nears All Time High – But Rise in Puts Could Presage Drop

This has been part of the significant growth in bitcoin’s derivative market as a whole, after the cryptocurrency’s price went above $11,000.

Getting physical with bitcoin

Despite the recent surge on Bakkt’s bitcoin futures trading volumes, it still lags behind the Chicago-based CME Group, a bigger, U.S.-regulated exchange. Data from Skew shows the aggregated daily volumes of bitcoin futures on Bakkt and the CME were at $279 million and $1.5 billion, respectively, on Monday.

Compared with many offshore, unregulated exchanges that have taken the majority of the bitcoin futures market share, White said Bakkt has the advantage of being based in the U.S. and owned by the Intercontinental Exchange (ICE), which also owns the New York Stock Exchange.

“We are a fully regulated intermediated traditional futures market. Contrast that with the offshore unregulated markets that you see trading on a lot of crypto exchanges,” he said.

Related: Bitcoin Ends July at Highest Monthly Close Since 2017 Peak

The crypto derivatives provider launched its bitcoin futures contracts in late 2019 with the goal of serving its institutional clients, who range from market makers and proprietary trading firms to family offices and traditional hedge funds, according to White.

At the same time, unlike the CME, Bakkt’s bitcoin futures contracts are mostly settled with physically delivered bitcoin, meaning buyers receive tokens at expiration instead of cash. 

Some U.S. institutions are only allowed to trade on regulated exchanges. Thus, if they want to get into crypto, they have two choices: Bakkt or the CME, because exchanges such as Coinbase are licensed but unregulated in the U.S. For those who want to hold their bitcoin in their hands, Bakkt is basically the only game in town.  

White said the physical delivery of bitcoin puts Bakkt at advantage because the exchange is seeing more clients interested in receiving crypto assets.

Read more: It’s Too Soon to Write Off Bakkt, Wall Street Analyst Tells ICE Investors

“It’s not a bet on the price of bitcoin,” he said. “It doesn’t rely on an index price created from unregulated spot markets that are self-reporting their data.”

In addition, White said that as the market grows, more traditional institutional investors are becoming “comfortable” with holding and trading crypto assets, which is evidenced by Bakkt’s increasing market share.

However, other industry experts have said physical delivery of bitcoin could be the one factor that has been hindering Bakkt’s growth in the crypto derivatives market.

According to Norwegian cryptocurrency analysis firm Arcane Research, the number of bitcoin contracts held to expiry on Bakkt dropped sharply in July, to 58 BTC from June’s 221 BTC – the lowest amount held to expiry so far in 2020.

Compared with a cash settlement, physical delivery of bitcoin could impose a tighter margin, Vishal Shah, an options trader and founder of derivative exchange Alpha5, told CoinDesk via Telegram.

No options, for now

Despite the success with its bitcoin futures products, Bakkt seems to be still struggling with its options contracts. No volume or open interest have been logged since June 15 in Bakkt’s bitcoin options.

Both futures and options contracts on CME are settled with cash.

Meanwhile, CME’s bitcoin options contracts contributed about 10% to the total global open interest on Tuesday, second behind Deribit, who accounted for 80% of the market. Open interest is the number of outstanding contracts.

White shrugs off concerns about Bakkt’s options products, saying the crypto options market as a whole has a long way to go before it matures.

Read more: Bitcoin Options Open Interest Nears All Time High – But Rise in Puts Could Presage Drop

“When people ask, ‘Aren’t you worried about your options volumes?’ Absolutely not,” White said. “These are the early innings. Most of the options volume is happening offshore, unregulated, not cleared and, frankly, we’re not even sure how much of that volume is legitimate.”

White is banking on growing trading volumes and open interest Bakkt’s futures products to eventually draw customers to its options suite, and is therefore not planning on delisting options contracts anytime soon.

“As the institutions move into the futures, their hedging and risk management needs will evolve towards options, and we are going to be there ready to serve them,” White said.

Related Stories

• Expectations for Even Further Bitcoin Gains Keep Lid on Futures Contracts Liquidations
• No One Has Traded Bitcoin Options on Bakkt for Over a Month: Deribit Continues to Dominate

Bitcoin miners are holding more bitcoins than at any point in the past two years as the cryptocurrency continues to trade above $11,000, signalling increased bullishness about future gains.

According to wallet addresses tracked by Glassnode, miners are holding a total of more than 1.82 million bitcoins, setting a two-year high and continuing a noticeable upward trend that began in September 2019. In just the last year, aggregate holdings by miners have increased by roughly 2%, excluding growth from other bitcoin miners not tracked by Glassnode.

There are three possible causes for the increase in total bitcoins held by miners:

Related: Bitcoin Miner Layer1 Overstated Industry Vet’s Involvement in $50M Series A Pitch

First, potential optimism that bitcoin’s recent rally will likely continue.

• Miners’ holdings data appears to be a bullish signal, according to Thomas Heller, former director at leading mining pool F2Pool, who discussed it with CoinDesk in a private message. Miners seem to feel comfortable holding for a while, he said, possibly in anticipation of a higher price later on.
• Miners aren’t the only ones holding more bitcoins, however. The percentage of all bitcoins that have been inactive for at least one year continues to grow after reaching four-year highs in June.

Second, the rotation in hardware as miners order, receive and deploy new machines, according to Harry Sudock, vice president of strategy at GRIID, a data center and mining infrastructure company.

• This process, which Sudock described as the “hardware cycle,” can take up to six months depending on pricing and order size, he told CoinDesk in a private message. Ultimately, fewer coins need to be sold to cover operational expenses during this retooling period. In addition, with the price of bitcoin so high, relatively few coins need to be sold to pay expenses.
• As CoinDesk previously reported, two publicly traded bitcoin companies, Riot Blockchain and Marathon Patent Group, are both in the process of receiving and deploying hundreds of new machines over the next few months as they scale up their mining efforts.
• As miners deploy new machines, they also enjoyed a 7% monthly revenue increase in July, according to network data analyzed by CoinDesk, thanks to recent price appreciation and increased transaction fees.

Last, the total number of coins held by miners has increased as new mining pools accumulate uncharacteristically large amounts of bitcoin.

• Most notably, a significant percentage of recent overall growth comes from Lubian.com, a little-known mining pool that was largely inactive until March 2020, whose holdings are nearly on par with F2Pool, a mining pool founded in May 2013.
• Over the past few months, the pool’s bitcoin holdings have increased to 9,373 BTC as of Thursday, representing an almost equal percentage gain up from 1 BTC in mid March, according to Glassnode.
• The young mining operation controls the tenth-largest amount of the Bitcoin network’s hashrate, according to rankings by BTC.com.

Related Stories

• Marathon Brings New Bitcoin Mining Rigs Online, Sees Itself Becoming Cash-Flow Positive
• Riot Supercharges Mining Ops With 8,000 More Bitmain Rigs as Bitcoin Price Soars
• Top Bitcoin Mining Pools See 15% Hashrate Drop Amid Continuous Rainstorms in China

YouTube has long struggled with disinformation, misleading content and outright scams on its site. Despite lawsuits and Google’s own ad policies, cryptocurrency scam ads are still making it through the gates and circulating for days. 

In April the CEO of Ripple, Brad Garlinghouse, filed a lawsuit against YouTube, alleging the company’s inaction against fraudulent content on its platform has damaged Ripple’s reputation by not curbing scam “giveaways” of XRP. 

According to the complaint, in one instance a scammer stole $15,000 worth of XPR from a victim. 

Related: ‘It’s Part and Parcel of Crypto’: How Memes Drive Narrative and Value

Garlinghouse is not alone. Apple co-founder Steve Wozniak is also suing YouTube and its parent Google for allegedly “allowing bitcoin giveaway scams that use his likeness to thrive on its platform,” CoinDesk reported when the lawsuit was filed this summer. 

Read also: Apple Co-Founder Steve Wozniak Sues YouTube Over Bitcoin Giveaway Scams

Despite these lawsuits, scam ads are still circulating. Scammy ads featuring Ethereum founder Vitalik Buterin offering an ether giveaway were showing up on authentic crypto channels like Ivan on Tech (250,000 subscribers) and Venture Coinist (20,000 subscribers) just a couple of weeks ago. One user (who asked to remain anonymous) said this ad was reported to YouTube, but there was no quick action by the platform.

Content is content when it comes to growth

In the early days of YouTube, there was a plethora of pirated content that drove its growth, said Adam Helfgott, CEO of the programmatic advertising firm MadHive. 

Related: Brazilian Lawmaker Proposes Crypto Regulations for a Country Devoid of Any

“This is somewhat analogous to that situation,” said Helfgott in a phone call. “The more you start limiting a platform or content on a platform, when you don’t really know if something is good or bad but you have reason to suspect it’s one or the other, users will start to rebel and then you won’t have massive growth.”

In July, YouTube moved to dismiss the Ripple lawsuit, relying on Section 230 protections, which protect companies from content liability. 

Read also: Ripple Sues YouTube for Allowing ‘Scams’ That Promise Free XRP

“YouTube’s motion to dismiss the allegations boils down to the idea that the video-sharing giant did not willingly or knowingly engage in any of the scams or copyright infringement, and cannot be held liable for any third-party content on its website,” CoinDesk reported at the time. “The firm’s motion also adds that it shut down such scams whenever it was alerted to them.”

The part that’s still an open question is how much money YouTube – and its parent company – makes from scam ads, even on the margins, and the effectiveness of the mechanisms in place for removing them.

“Protecting users from ad scams and fraud is a key priority,” said a Google spokesperson in response to CoinDesk’s query about the YouTube ad. “We have robust policies prohibiting ads that attempt to circumvent our enforcement by disguising the advertiser’s identity and impersonating other brands. In this case, we quickly removed the ad and suspended the advertiser account.”

The ad ecosystem

The ad, which has since been taken down, ran from Aug. 12 to Aug. 17, according to Google.

Google has policies that lay out what kind of ads can run on its platforms, including YouTube. Under these policies, advertisers are not allowed to run ads, content or destinations that attempt to trick or circumvent the ad review processes, according to Google. Due to the complex and evolving nature of cryptocurrencies and their related products and services, Google only allows a limited set of advertisements for regulated exchanges in the United States and Japan. 

Yet, the scam ads persist. 

See also: YouTube Calls Crypto Purge a Mistake but Many Videos Still Missing

Helfgott said there are challenges when it comes to reviewing ads, given there is so much content out there, and that it would be hard for anyone to manage this volume. In 2019, Google took down approximately 2.7 billion bad ads. That means it removed about 10 million ads per day.

At the same time, he said, companies could be doing a better job. However, companies that rely on advertising on a massive scale, like Youtube and Facebook, aren’t necessarily incentivized to do so. 

Helfgott said because of the mass scale of YouTube, there is a large amount of ad inventory on the site and Google may be reluctant to cut that back. For every rule YouTube implements on advertising, the number of ads could drop, and that’s not in Google’s interest as a company relying heavily on ads to make a profit. 

These complicated dynamics and incentives may mean scammy cryptocurrency ads are potentially here to stay on YouTube, even if only for a few days. It’s a complicated game of whac-a-mole, with no end in sight despite the pending lawsuits. 

Responsibility: YouTube’s or the FTC’s?

“Scams and fake giveaways are pretty common over both YouTube and Instagram,” said Data & Society Researcher Robyn Caplan, who focuses on platform governance. “It’s something that falls under the jurisdiction of the FTC [U.S. Federal Trade Commission] – it would be reported to them, a state attorney general or the local consumer protection office.”

See also: Bitcoin in Cuba: A Local YouTube Influencer Explains How It Works

Caplan said YouTube’s Section 230 argument would likely work in its defense because it would be like someone suing the U.S. Postal Service over similar scams and giveaways through the mail. 

That doesn’t mean YouTube can ignore these scams, however.

“Platforms should definitely be honoring their terms of service, which means they need to be taking down scams in a timely manner,” said Caplan. 

Related Stories

• ‘Bitcoin Rich List’ Reaches All-Time High
• Bitcoin in Cuba: A Local YouTube Influencer Explains How It Works

Canadian cryptocurrency broker Voyager Digital is trying to woo decentralized finance (DeFi) investors by offering interest payouts on three surging DeFi tokens.

• The publicly traded fintech said it has added chainlink (LINK), kyber network (KNC) and the basic attention token (BAT) to its crypto interest program, offering clients 1% returns on BAT and KNC and 2.5% on LINK.
• Crypto investors are already pouring millions of dollars into DeFi projects this summer, especially LINK, which posted nearly $1 billion in 24-hour trading volume, according to CoinGecko.
• Polkadot’s native dot token, another heavily traded DeFi darling, was also added to Voyager’s exchange earlier this week.
• Voyager did not immediately respond to CoinDesk queries.

See also: Voyager to Offer Interest on Three Newly Listed Stablecoins

Related Stories

• Prosecutors Detail ‘Shadow Bank’ Accounts in Fowler Crypto Case
• US Files Suit Against Crypto Accounts Tied to North Korea
• ShapeShift Accuses Former Employee of Stealing $900K in Bitcoin
• More Than 95% of Crypto Futures Volume Is in Asia: Report

You can now send cryptodollars back and forth without paying a fee to the Ethereum network, according to the Centre Consortium in a Thursday blog post.

• Dubbed USDC 2.0, USD Coin (USDC) has integrated what are called “meta transactions” natively to the dollar stablecoin platform. Now, users do not have to pre-fund their USDC-bearing wallets with ether (ETH) in order to send a transaction.
• Meta transactions allow USDC wallets and compatible applications to act as virtual “gas stations” by paying the associated mining fee that accompanies every Ethereum blockchain transaction.
• “This [update] enables people to fund their non-custodial wallets with USDC and start using DeFi/dapps without also having to own ETH,” Coinbase developer Peter Jihoon Kim told CoinDesk.
• The update is backwards-compatible, meaning old USDC clients can continue using the network without upgrading.
• Centre also released a new on-chain signature schematic to help govern the project as new partners join the Coinbase– and Circle-founded project.
• USDC is the second-largest stablecoin by market cap at $1.4 billion.

Read more: Circle Gets $25M From DCG to Drive USDC Mainstream

Related Stories

• Coinbase Taps Marcus Hughes as New Eurozone Chief
• Blockchain Venture Capital Firm SPiCE VC Taps Coinbase as Digital Asset Custody Partner
• Sequoia-Backed Band Protocol Token Starts Trading on Coinbase
• Coinbase to Offer Bitcoin-Backed Loans to US Customers

Crypto exchange ShapeShift has sued its former senior engineer in Colorado Federal District Court for damages caused by his alleged theft of $900,000 in bitcoin.

• As detailed in the exchange’s Wednesday demand for jury trail, Azamat Mukhiddinov allegedly siphoned 90 bitcoin away from his employer via “malicious code and programs” he is accused of having installed on its servers.
• Executives said they discovered the $900,000 hole in the company’s balance sheet on May 21 and traced it to Mukhiddinov within days.
• Mukhiddinov has already made the company whole, the company said. He quickly paid it back via wire transfers, cash-packed “duffel bag” handoffs and bitcoin payments, according to the lawsuit.
• ShapeShift now wants Mukhiddinov to pay $5,000 in damages for the time and effort employees spent cleaning the exchange’s servers of his bitcoin-stealing code.

See also: ShapeShift Lost $230k in String of Thefts, Report Finds

Related Stories

• Voyager to Pay Interest on DeFi Tokens to Gain Brokerage Clients
• More Than 95% of Crypto Futures Volume Is in Asia: Report
• DCG to Invest $100M in Bitcoin Mining Venture
• Russia Is Blocking Bitcoin-Related Websites Again

Asian exchanges account for more than 95% of the futures volume in crypto, according to a new report by Switzerland-based Blockchain Valley Ventures (BVV).

Key findings from the report include:

• Huobi, Binance and OKEx have surpassed BitMEX as the leading exchanges in the spot and derivatives markets.
• From Q1 to Q2 in 2020, the total volume of crypto derivatives – the value tied up in bets on future price movements – increased by $60 billion to $2.16 trillion.
• Spot volumes decreased by 18% over the same time span, reaching $5.44 trillion.
• Because of how widely derivatives products vary among exchanges, BVV predicts there will be several acquisitions in the crypto exchange market in the next few months.
• BVV also predicts that the most likely acquisition targets are LedgerX, BitFlyer and ErisX; the firm ID’d Coinbase, Bitstamp, Huobi and Binance as the most likely acquirers.
• “Derivatives are the gateway for institutional investors,” BVV partner Sebastian Markowsky said in an interview. “The player that can enter the U.S. or European market in a regulated way is going to grab a lot of institutional capital.”

Read the full report below:

Related: ShapeShift Accuses Former Employee of Stealing $900K in Bitcoin

Read more: Crypto Derivative Volumes Hit Record $602B in May: Report

Related Stories

• DCG to Invest $100M in Bitcoin Mining Venture
• Russia Is Blocking Bitcoin-Related Websites Again
• Developers Eye Mid-September for Ethereum, Polkadot Bridge Proof-of-Concept