Dec 033, 2020 Briefing regarding current topics, current projects and coming releases
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In brief
A trio of Democratic lawmakers has introduced a bill that would regulate stablecoins, including Facebook’s Diem (formerly Libra).
Congresswoman Rashida Tlaib, along with Rep. Jesús “Chuy” García and Rep. Stephen Lynch, announced the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act.
The STABLE Act, as written, would require stablecoin issuers to have a banking charter and earn regulatory approval from the Federal Reserve, the FDIC, and other agencies before issuing that coin. They must also be FDIC-insured or maintain an equivalent number of dollars at the Federal Reserve.
That's a high threshold to meet.
Even the so-called "crypto banks" that have earned bank charters in Wyoming—Kraken Financial and Avanti—are going through state-level processes that aren't regulated by the Office of the Comptroller of the Currency, as national banks are. Moreover, the FDIC doesn't currently allow for insurance on crypto assets.
While the press release notes that the “COVID-19 Pandemic has exposed numerous barriers to accessing and utilizing mainstream financial institutions,” the authors are clear that they don’t want bad actors flooding in to take advantage of low- and middle-income Americans. It specifically namechecks “shadow banks”—financial firms that aren’t regulated as banks but can issue loans and other products.
Representative Lynch noted, “Stablecoins present a new and innovative way for consumers to use their money and I believe this technology can be used to make financial transactions more efficient while potentially increasing financial inclusion.”
But Lynch and his colleagues want to err on the side of regulation—lest cryptocurrency providers become too much like banks.
“Getting ahead of the curve on preventing cryptocurrency providers from repeating the crimes against low- and moderate-income residents of color that traditional big banks have is—and has been—critically important,” said Rep. Tlaib.
Rep. García adopted an equally wary tone: “The Trump administration’s deregulation of our financial system has opened the door for tech companies to consolidate their power by preying on people of color with products that promise inclusion but only undermine our banking system.”
The STABLE Act has not yet been assigned to committee, though Rep. Lynch chairs the Task Force on Financial Technology.
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In brief
Today, Forbes published its 30 Under 30 list for 2021, its annual curation of America’s most successful entrepreneurs and hustlers born after 1990.
The 30 Under 30 moniker is something of a misnomer—it’s more like 30 individuals/teams under 30 years old in 20 categories, resulting in over 600 awardees. Nonetheless, blockchain and crypto entrepreneurs made strong showings in categories like Finance and Venture Capital.
We counted 10 awardees who would be equally at home on a Who’s Who in Crypto list:
Soona Amhaz (Volt Capital); Sam Bankman-Fried (FTX); Joey Krug (Augur); Alexander Liegl (Layer1 Technologies); Jack Mallers (Zap Solutions); Flori Marquez (BlockFi); Charlie Noyes (Paradigm); Brian Tubergen (CoinList); Amiti Uttarwar (Bitcoin Core developer); and Athanasios Karachotzitis, Jeong Woo Park, and Andrew Yang (Authenticiti).
While many people on the list say it doesn’t matter, it was a team effort, they hadn’t really thought about it much…we asked four of the recipients what it really means to them:
The daughter of Argentinian parents who fled their country in the 80s as the economy spiraled into hyperinflation, Flori Marquez, co-founder of BlockFi, considers making the list proof that she’s made her mark on America.
“It's recognition,” she said, “and publicity for our products.”
Marquez, 29, co-founded BlockFi in 2017, but it really burst onto the crypto scene last year when it began offering crypto users interest on their Bitcoin and Ethereum holdings—all before DeFi had truly taken off.
As soon as she heard the news, Marquez called her mother, Cecilia, a Spanish teacher in Boston. “And this is the most ‘mom’ move of all time,” Marquez said. “She congratulated me, but I could tell she was kind of trying to hang up. And then I think she thought she had hung up the phone, but she hadn’t and I could hear her say to her entire class: ‘Guys, my daughter just won!’”
“It felt great.”
Joey Krug, 25, told Decrypt he had no idea he was in the running. Unlike his rivals, he hadn’t applied—Forbes journalist Michael Del Castillo snuck him into the competition after he penned a profile on Krug in July. Krug only discovered his success upon scrolling Twitter.
“It's cool; it's exciting, I guess,” shrugged Krug. “But the actual fun part is the day-to-day of actually doing that sort of stuff.”
That “sort of stuff” refers to a lot. Krug co-founded Augur, a platform for betting markets that is built on the Ethereum blockchain. It seeks to foster truly global markets on anything one might want to bet on–and lower the hefty fees that take the fun out of it.
But he also shares the role of Chief Investment Officer at Pantera Capital and serves as an advisor, investor, or developer on a handful of other projects.
“It's not that important in the grand scheme of things,” Krug said of the Forbes award. “It's great to be part of it. But it's not that I would try to use it for personal gain or anything like that.”
Now that Krug is on the way to solving online gambling, his goals are to “at least make a dent” in finance and healthcare, two other industries he considers broken.
At a practically ancient 29 years of age, Brian Tubergen, founder of crypto ICO platform CoinList, made it on the list in his last year of eligibility.
He’s watched as those around him won in years past. His co-founder, Andy Bromberg, made the list in 2016 for starting a (since shuttered) political news analysis app, Sidewire. And two of Tubergen’s close friends won the award. Nader Al-Naji, was honored in 2019 for making Basis, a (now defunct) stablecoin company that raised $133 million in a token sale, and Alex Pack, cofounder of crypto VC fund Dragonfly Capital, won it last year.
Now that it’s his turn, Tubergen said he feels “a little bit like a celebrity.”
“Certainly my friends outside the tech community seem to think it's one of the most awesome things in the world,” he told Decrypt.
“I'm sure it'll wear off tomorrow,” said Tubergen, who will return to the grind that won him today’s award. As Chief Product Officer at CoinList, a fundraising platform for crypto companies, he may be helping produce the next generation of 30 Under 30 entrepreneurs. “We got to keep working,” he said.
The award, he insisted, is “a distraction from what matters most, which is continuing to build this company and deliver value to our customers.”
But has Tubergen applied before? “It's possible in a previous year that I quickly filled it out,” he said. “But this was the first year that I put in effort.” So that’s how to make the list.
Sam Bankman-Fried, 28, founder of crypto derivatives exchange FTX, said the news broke while he was in a marketing meeting.
The entrepreneur informally known as SBF said he felt relieved and excited. But it’s daunting, he said. The plaudits add an extra layer—not much, but enough to notice—of responsibility to his job, where he builds systems people have invested “a lot of their time and life and money into.”
“I think that adding the incremental thing on doesn't change that feeling very much,” he said.
Still, he appreciates being noticed for the work he’s done—both at FTX and as CEO of full-service crypto trading firm Alameda Research. “These things tend to at least try to be reflections of what you've done,” he said. Does he think that the Forbes accolade reflects his achievements? “I think that I would feel a lot more weird about it if it didn’t.”
In brief
Bitcoin has historically been referred to by some as crypto’s answer to gold. Others have found Bitcoin’s behaviour loosely correlated with the precious metal. But ever since the world's largest cryptocurrency surpassed its previous all-time high yesterday, Bitcoin and gold are being seen less as bedfellows and more as potential adversaries.
According to an analysis on the precious metals market by JPMorgan Chase, 93 tons of precious metals have been dumped by bullion-backed funds, worth some $5 billion since November 6.
Meanwhile, Grayscale’s Bitcoin Trust, the on-ramp for institutional investors to gain exposure to Bitcoin, has doubled since the start of August. Grayscale has been hoovering up all the Bitcoin it can get its hands on — just this week, it added another 7,300BTC worth $140 million to its coffers.
“Gold was really the safe asset of the past world and baby boomer generation,” Jean-Marc Bonnefous, a former commodities hedge fund manager turned crypto investor told Bloomberg. “Now it’s being replaced by automated assets like Bitcoin.”
The 2020 Bitcoin boom has been characterised by an ever-growing list of Wall Street converts.
Most recently, BlackRock Chief Investment Officer for Fixed Income Rick Rieder told CNBC that the currency is “here to stay” and that it was “so much more functional than passing a bar of gold around.”
“I have changed my mind!” wrote Sanford C. Bernstein strategist Inigo Fraser-Jenkins in a report Monday. Bitcoin won’t replace gold, but there’s room for both, he said, especially if the future is one of inflation and extreme debt levels.
Even George Soros’ former money man thinks Bitcoin is an investment vehicle like no other.
Now, it would be churlish to think that the $5 billion less gold sitting in investment funds has been transferred straight to Bitcoin. If that were the case, BTC’s price would be up in the $30,000s.
Instead, most of the money has been moved into stocks that are recovering in light of a COVID vaccine looming on the horizon. Gold’s position as a safe haven traditionally dwindles when stock market prices are increasing. But for how long will gold be the safe, warm place for money to hide when it's cold outside? Now that’s a good question.
Speaking of stock markets, things are looking a lot rosier across Europe and the US. The European Stoxx 600 index is up 0.3%, the FTSE 100 opened 0.5% higher, the CAC 40 rose 0.5% in Paris, and the export-focused DAX was boosted 0.6%.
Over in America, US stock futures were also all in the green. S&P futures were 0.8% higher, Dow Jones futures was up 0.7% and the Nasdaq gained 0.8%.
As a vaccine rollout draws ever nearer markets are preparing themselves for a bull run according to analysts. Indeed, November was the best month ever for global equities since 1982, with many expecting records to be broken as life returns to normal.
But as we’ve said before, what happens on the stock market is drifting further away from what life is like on Wall Street. We’ll cover this idea in full in our Friday long read.
In brief
Global investment firm Guggenheim Partners is considering investing hundreds of millions of dollars in a Bitcoin trust.
The firm on Friday made a filing to the US Securities and Exchange Commission saying that it would reserve the right for its $5.3 billion Macro Opportunities Fund to put 10% of its net asset value in the cryptocurrency via the Grayscale Bitcoin Trust.
This means Guggenheim could invest up to $500 million of investors’ cash in the cryptocurrency.
“The Guggenheim Macro Opportunities Fund may seek investment exposure to bitcoin indirectly through investing up to 10% of its net asset value in Grayscale Bitcoin Trust (“GBTC”), a privately offered investment vehicle that invests in Bitcoin,” the note said.
GBTC allows investors to trade shares in trusts holding large pools of Bitcoin. As the world’s largest crypto hedge fund, it allows investors to trade these shares on the stock market. This way, investors don’t actually have to deal with holding the asset—they just hold shares that represent investments in Bitcoin.
Guggenheim’s Macro Opportunities Fund is one of Guggenheim Partners’ funds, handling $5.3 billion worth of investors’ cash.
The firm’s possible future investment means that they think Bitcoin could be a safe bet for their clients.
But the note to the SEC did mention the risks involved in investing in cryptocurrencies.
“In addition to the general risks of investing in other investment vehicles, described further below, the value of the Fund’s indirect investments in cryptocurrency is subject to fluctuations in the value of the cryptocurrency, which can be highly volatile,” the note added.
“Cryptocurrency is a new technological innovation with a limited history; it is a highly speculative asset and future regulatory actions or policies may limit, perhaps to a materially adverse extent, the value of the Fund’s indirect investment in cryptocurrency and the ability to exchange a cryptocurrency or utilize it for payments.”
The New York-based firm is the latest Wall Street institution to show interest in Bitcoin. Traditional finance big wigs, tech companies and institutional investors have all shown interest in investing in the cryptocurrency this year.
In brief
Bitcoin is having a good day: after some turbulence earlier this week, prices are now up around 6% over the past 24 hours. The price sits at $17,684, up from $16,800 yesterday.
Bitcoin looked like it was on track to break its all-time high on Monday and Tuesday, but dipped on Wednesday night.Industry analysts told Decrypt that that price drop had to do with nervousness in the market.
“The all-time high is a major psychological barrier—breaking it requires real momentum,” said Jason Deane, a Bitcoin analyst at the blockchain analysis company Quantum Economics.
What’s good for Bitcoin tends to be good for altcoins: XRP is over $0.60 right now, and Stellar spiked earlier this week; it’s up almost 100% over the past seven days. On November 23, XRP passed the $0.50 mark for the first time since 2018.
As for why the price of Bitcoin is heading back up, Eric Wall, Chief Investment Officer for crypto investment firm Arcane Assets, told Decrypt that it may just be par for the course. “It is quite common that it struggles to move past a previous ATH, and experiences a dip instead,” he said.
Wall attributes the rise to “market psychology,” rather than events like the recent OKEx withdrawals, or the expiration of about $1.3 billion in Bitcoin options.
"The OKex withdrawals were just pent up from when they were suspended. Regarding options expiry—it is very unusual that sudden mechanical effects on the market have any lasting impact—if they go against the broader sentiment they are almost always absorbed by the market," he said.
He added that “as the bullish catalysts that drove us this far are still very much there and in action, it's only a matter of time until the temporary selling pressure subsides and we continue our ascent.”
Dmitrii Ushakov, the CCO of the Russian mining services company BitRiver, suggested that the short-term rally may reflect Bitcoin acceptance on the institutional level, telling Decrypt that today’s increase “may be part of a bigger price rally as more institutions realize cryptocurrencies [are] a reliable store of value and medium of exchange.”
Analysts have chalked this year’s bull run up to large-scale investments from MicroStrategy, a tech company that put $425 million in Bitcoin in August and September, and Square, the payments service from Twitter’s Jack Dorsey, which invested $50 million in October. Since then, the price of Bitcoin has nearly doubled.
The surge kickstarted by those infusions is still ongoing, on the whole—Bitcoin started the year at around $7,000, fell to $4,000 in March, and has climbed steadily since then, with momentum building pretty significantly over the past few weeks.
If it holds, this week’s dip has the potential to remain a blip.
In brief
Bitcoin’s epic bull run was caught short yesterday as the coin plummeted in value by $3,000 in a single day.
Bitcoin’s bull run saw the price of Bitcoin rise from $12,900 to over $19,000 between October and November. But yesterday, Bitcoin’s price crashed all the way down to $16,400, marking a 15% decline in just 24 hours. But is there further pain on the way, or might the Bitcoin price rebound?
“The price of Bitcoin looks to have settled around the $17,000 mark for the moment, the sharp decline yesterday happened very quickly but levelled off just as quickly,” Lior Messika, managing director of Eden Block VC, a company focused on enabling a blockchain future, told Decrypt.
Where will Bitcoin's price go? Image: Shutterstock.
In other words, while hopes of an all-time high were quickly dashed, there might be reason to celebrate that Bitcoin isn’t about to embark on a price crash reminiscent of January 2018.
One reason for this optimism is that sophisticated investor interest in Bitcoin is still very young, and this interest promises to continue to grow.
“Bitcoin still has a lot more room to grow because it’s still early days of retail investor interest,” George Harrap, an early crypto entrepreneur, told Decrypt, adding that “a lot of this buying is not driven by small retail investors, it’s by sophisticated investors with a lot of money.”
That strong investor interest will not only serve to help Bitcoin recover a higher price, but it will continue to promote Bitcoin’s popularity as an asset.
Resting on the same logic of strong fundamentals buoyed by interest from wealthy investors, Tim Rainey, CFO of mining facilities provider Greenidge Generation, observed, “With institutional companies purchasing cryptocurrencies as a store of value or integrating them into their products or services, the current market rally has been driven by stronger fundamentals, unlike what we witnessed in 2017.”
Bitcoin is the number one cryptocurrency by market cap. Image: Shutterstock.
Mainstream adoption—a long term goal for most Bitcoin supporters—might lie on the road paved by big investors.
According to Charles Gonzalez, regional director for multi-chain platform Komodo, “In 2017 we were all talking about adoption but now It feels like Bitcoin adoption is actually happening. PayPal and other major Fintechs are dipping their fingers in the BTC basket.”
What’s more, as giants of the financial world continue to invest in Bitcoin—MicroStrategy and Square as two flagship examples—Bitcoin can benefit from increased scarcity. “As more BTC is bought up, its scarcity will drive the price upwards. It’s the complete opposite of FIAT currencies which are currently struggling to retain their purchasing power,” Gonzalez added.
However, not everyone remains convinced about Bitcoin.
Peter Schiff, CEO of investment company Euro Pacific Capital, didn’t mince his words when reacting to the Bitcoin price crash.
“Remember in every bubble those who don't participate always look like fools for missing out. It's only after the bubbles pop and the air comes out that the real fools are exposed,” Schiff said on Twitter.
Nouriel Roubini, professor of Economics at New York University’s Stern School of Business, went as far as to say that Bitcoin’s inequality coefficient is “worse than North Korea where Kim owns most of the assets,” adding that “2% of whales control 98% of Bitcoin.”
The one thing Bitcoin isn’t short on is controversy.
In brief
The Bitcoin balance on all major crypto exchanges has fallen to levels not seen since August 2018—hitting a 27-month low—according to data from Glassnode. The current balance on exchanges is 2.3 million Bitcoin.
The total amount of Bitcoin on exchanges. Image. Glassnode
The total amount of Bitcoin on all exchanges has been steadily increasing since 2014. It moved from about 350,000 Bitcoin to just under 3 million in January of this year, an increase of over 750%.
From that point on, it began to decrease. In August, the total amount of Bitcoin on exchanges fell to 2.6 million. This week, the number is all the way down to 2.3 million. This represents a total decline of 23%—a significant amount.
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As the balance on exchanges dropped, Bitcoin's price performed well. While it initially fell down to $4,000 (when the stock market crashed), it soon rebounded and moved above the $10,000 mark for the longest run in history.
In the last 24 hours, however, the price of Bitcoin has dropped significantly. It has fallen from $19,299 to $17,266—a factor that may affect the amount of Bitcoin heading to and from exchanges.
As the exchange balance continued to decline, Bitcoin's price rose even further—going on to witness a run up to $19,500.
There may or may not be a causal relationship between the two, but they do appear to be somewhat related.